B-121946, JAN. 5, 1956

TO HONORABLE WHITNEY GILLILLAND, CHAIRMAN, FOREIGN CLAIMS SETTLEMENT COMMISSION OF THE UNITED STATES:

THERE HAS BEEN FORWARDED TO OUR OFFICE FROM THE DEPARTMENT OF STATE A NUMBER OF CLAIMS DUE THE UNITED STATES WHICH ARE CONSIDERED UNCOLLECTIBLE IN THAT DEPARTMENT. THESE CLAIMS OR DEBTS ARISE BY REASON OF FINANCIAL ASSISTANCE HAVING BEEN RENDERED BY THE DEPARTMENT TO INDIVIDUALS ABROAD. SUCH ASSISTANCE GENERALLY CONSISTS OF PAYMENTS OF SPECIFIED SUMS FOR SUBSISTENCE, ETC., PURCHASE OF PASSAGE ABOARD VESSELS SAILING FOR THE UNITED STATES AND IN THE FORM OF DIRECT LOANS. THESE PAYMENTS ARE SECURED BY DEMAND PROMISSORY NOTES. THIS EMERGENCY LOAN PROGRAM WAS FINANCED BY THE DEPARTMENT OF STATE FROM THE APPROPRIATION "EMERGENCIES IN THE DIPLOMATIC AND CONSULAR SERVICE.' NO STATUTORY AUTHORITY EXISTS AT THE PRESENT BY WHICH THESE OBLIGATIONS MAY BE CANCELED OR WAIVED.

IT HAS COME TO OUR ATTENTION THAT YOUR COMMISSION HAS AT PRESENT BEFORE IT THE CLAIMS OF TWO INDIVIDUALS FOR DETENTION BENEFITS FOR WHICH AWARD HAS BEEN DETERMINED DUE PURSUANT TO THE PROVISIONS OF SECTION 5 OF THE WAR CLAIMS ACT OF 1948, AS AMENDED, 50 U.S.C. APP. 2004. THESE INDIVIDUAL ARE DR. STANLEY C. MCNULTY, 218 MATHESON STREET, HEALDSBURG, CALIFORNIA, AND MR. DOMINIC ENCERTI, 480 ORANGE AVENUE, EL CENTRO, CALIFORNIA, WHO ARE REPORTED TO BE INDEBTED TO THE UNITED STATES BY REASON OF FINANCIAL ASSISTANCE HAVING BEEN RENDERED TO THEM BY THE DEPARTMENT OF STATE. THE QUESTION HAS ARISEN AS TO WHETHER IT IS LEGALLY PROPER TO APPLY AMOUNTS WHICH HAVE BEEN DETERMINED BY YOUR COMMISSION TO BE DUE THESE INDIVIDUALS AGAINST AND IN SATISFACTION OF THEIR INDEBTEDNESS. ON THE MATTER GENERALLY, THE RIGHT OF SET OFF IS INHERENT IN THE UNITED STATES AND IS GROUNDED ON THE COMMON LAW RIGHT OF EVERY CREDITOR TO APPLY MONEYS OF THE DEBTOR IN HIS HANDS TO THE EXTINGUISHMENT OF CLAIMS DUE HIM FROM THE DEBTOR. SEE MCKNIGHT V. UNITED STATES, 98 U.S. 178; BARRY V. UNITED STATES, 229 U.S. 47; 26 COMP. GEN. 907.

MESSRS. ENCERTI AND MCNULTY ARE TYPICAL OF A GROUP INTERNED OR IMPRISONED BY THE JAPANESE IN JAPAN, CHINA AND THE PHILIPPINES DURING WORLD WAR II AND TO WHOM RELIEF WAS EXTENDED BY THE DEPARTMENT OF STATE THROUGH THE SWISS GOVERNMENT BY MEANS OF PURCHASING SWISS CURRENCY WITH AMERICAN DOLLARS WHICH IN TURN WAS CONVERTED TO THE APPLICABLE CURRENCY BEING USED BY THE JAPANESE AUTHORITIES. BECAUSE OF ARTIFICIAL RATES OF EXCHANGE AND OTHER MEANS OF COERCION EMPLOYED BY THE JAPANESE AUTHORITIES, IT IS RECOGNIZED THAT THE STATED DOLLAR VALUE OF THESE OBLIGATIONS DOES NOT REPRESENT A TRUE STATEMENT OF VALUE OF THE BENEFITS RECEIVED BY SUCH INDIVIDUALS. IN THIS CONNECTION, YOU ARE ADVISED THAT THERE WAS INTRODUCED IN THE LAST SESSION OF CONGRESS H.R. 1589 AND S. 1836, BOTH OF WHICH BILLS IF ENACTED WOULD PERMIT THE SECRETARY OF STATE WITH THE APPROVAL OF OUR OFFICE TO REEVALUATE THESE CLAIMS IN AN AMOUNT COMMENSURATE WITH THE TRUE DOLLAR VALUE OF THE SUPPLIES AND SERVICES RECEIVED BY THE INDIVIDUALS.

IN THE CASE OF MR. ENCERTI, IT IS CLAIMED THAT HE HAS NEVER RECEIVED THE BENEFITS FROM WHICH THE INDEBTEDNESS ARISES. ACCORDINGLY, WE DO NOT INTEND TO PRESS FURTHER COLLECTION ACTION AGAINST HIM PENDING THE ENACTMENT OF LEGISLATION SIMILAR TO THAT REFERRED TO ABOVE. THEREFORE, ANY AMOUNTS FOUND DUE MR. ENCERTI BY YOUR COMMISSION MAY BE PROCESSED FOR PAYMENT IN FULL WITHOUT REGARD TO HIS REPORTED INDEBTEDNESS ARISING UNDER CIRCUMSTANCES SET OUT ABOVE.

HOWEVER, DR. STANLEY C. MCNULTY HAS INDICATED A WILLINGNESS TO HAVE HIS INDEBTEDNESS OF $959.08 SATISFIED FROM THE AMOUNTS FOUND DUE HIM IN HIS CLAIM WITH YOUR COMMISSION, NO. C-146051. IN VIEW OF THE WILLINGNESS OF DR. MCNULTY TO SATISFY HIS INDEBTEDNESS IN THIS MANNER, IT IS REQUESTED THAT PROPER ACTION BE TAKEN IN YOUR COMMISSION TO SET OFF THE AMOUNT OF $959.08 FROM AMOUNTS OTHERWISE DUE HIM.

ON THE SUBJECT GENERALLY WITH RESPECT TO COLLECTION OF DEBTS ARISING OUT OF THE EMERGENCY LOAN PROGRAM OF THE DEPARTMENT OF STATE WHERE THE DOLLAR VALUE OF SUPPLIES AND SERVICES FURNISHED IS NOT IN DOUBT, IT IS THE VIEW OF OUR OFFICE THAT THESE DEBTS GENERALLY ARE PROPER FOR COLLECTION BY MEANS OF SETOFF. AN EXAMPLE OF THIS TYPE IS WHERE DOLLARS OR THE DOLLAR EQUIVALENT IN THE APPLICABLE FOREIGN CURRENCY UTILIZING A PROPER RATE OF EXCHANGE ARE PAID DIRECT TO THE PERSON OR ARE PAID BY THE DEPARTMENT OF STATE FOR PASSAGE MONEY. IN THESE CASES, THERE IS NO QUESTION AS TO THE DOLLAR VALUE OF THE SERVICES RECEIVED AND NO GOOD REASON SUGGESTS ITSELF AS TO WHY THESE AMOUNTS SHOULD NOT BE SET OFF FROM SETTLEMENTS MADE BY YOUR COMMISSION. IT IS RESPECTFULLY REQUESTED THAT YOUR COMMISSION ADVISE WHETHER IT WOULD HAVE ANY OBJECTION TO THE COLLECTION OF THESE CLAIMS OF THE UNITED STATES BY MEANS OF THE SETOFF PROCEDURE.