I. The Bookkeeping Issue

As you now, the deduction of saving money began in January 1968. Every soldier in the regular forces and in the regional forces each month had to contribute 100 piasters. With a force level of about one million persons, naturally, during the period, the amount of capital belonging to the association grew into a rather considerable fortune which no commercial or industrial organization or association in the country, now or in the future, can rival.

Charged with such a great fortune, with the capital increasing by several billion piasters every year, those with responsibility should, at the minimum, have paid attention to careful bookkeeping of receipts and expenditures, keeping structure, from the moment the deductions began.

Regretfully, this work was not done in a desirable way. Here is some concrete evidence.

Units received orders to make deductions beginning in January 1968; but essential instructions regarding how to carry out bookkeeping were not issued in time.

And, it was not until May 9, 1969--17 months later--that the Defense Ministry issued instructions giving the regulations for collecting savings contributions from the units and regulations for recording these at the central level.

That lateness, naturally, had the following consequences:

That situation has made the task of auditing the whole impossible to realize as of now--from the time we began until the present. The result is that we have been forced to accept the figures that were published in the account books of the two following years.

As every person can judge, once the accounts of SMASF are regularly compiled, from that moment, with procedures and continuity, without letting any article escape, once all the relevant books are carefully examined in a clear manner and regularly, are inspected and watched over to the limit by responsible authorities, and are adequately kept from beginning to end, then even though there are instigators of abuses it is also difficult for them to realize their desires; or, if losses have arisen, then those losses to the Association will not be of a serious degree.

On the other hand, if these actions are neglected, for some reason or another, then abuses and losses cannot be avoided, particularly when daily receipts and expenditures are so large.

When examining the accounting of receipts and expenditures for the units, the purpose of the Investigation Committee is to confirm the following two figures:

The former Defense Minister reported:

The above figures show a big difference between the first and last two years: The expenditure for 1970-1971 was 20 times that for the first two years.

To ascertain whether there was any loss involved in the two figures above, it is necessary to check with the units. But such an operation was not as simple as it would seem. Here are the reasons:

According to instruction No. 9.238 of May 9, 1969 of the Defense Ministry, the fundamental documents confirming the capital received are:

The Investigation Committee has conducted an audit operation at a number of units. It appears that nearly all of them no longer have the two above documents in their files, especially for the years of 1968 and 1969. Reasons given: The war situation, four years have elapsed, units have moved, etc., and above all, they did not receive instructions from the Defense Ministry as reported above.

The investigation teams also met with similar difficulties in checking figures related to reimbursements and assistance.

Consequently, there was only a solution: To find out the actual accounting situation at the central level. But the investigation also met with difficulty because of the lack of account books for the first two years.

Here is the proof:

In every kind of accounting, private or public, commercial or associative, the basic accounting documents is always the Journal of Receipts and Expenditures.

The Central accounting section of SMASF is administrative company No. 6. This company belongs to Administrative and Finance Service No. 6, Saigon. Its chief is also the Association's Treasurer.

The central accounting section has submitted to the Investigation Committee two Journals of Receipts and Expenditures of the Fund:

The first one was completely irregular and may be considered as having no value. Here are irregularities in the Journal of Receipts and Expenditures for the years 1968-69:

Let us go on to the second journal.

The second Journal show some improvements. It is paginated and signed by the Secretary General; there is a balance sheet for each month.

But as with the first journal, computation and verification were done by the two persons mentioned above just as during the first two years.

When asked about such an accounting situation, the concerned officials gave the following explanations:

When "Refunds" and "Cash Assistance" were examined, the Central Accounting Section submitted to the Investigation Committee alphabetical registers and two school exercise books.

But the alphabetical registers were also irregular because of added and altered figures.

In the two school exercise books, there were entries for the sums the Fund had sent to the units for refund and assistance purposes during the past four years. And the accounting section based on those two books its report to the Defense Ministry which submitted them to the Investigation Committee.

Let us have a look at these "Refund" and "Cash Assistance" books.

Of course, such a kind of accounting book cannot be authentic and sincere. Therefore, our committee can hardly ascertain their correctness or error.

Eventually there was only one way: to accept the given figures and the final balance sheet.

In the face of such shortcomings, it must be acknowledged that the SMASF Managing Board has not in fact fulfilled its mission during the previous four years.

Even though we have sought explanations and have been accommodating, it is difficult to explain and defend these actions.

II. Legal Shortcomings

Let us pass to the second part, the organization's legal shortcomings, when it ventured into the world of business.

If the SMASF Managing Board had only been concerned about receiving contributions and deposing them in fixed deposit accounts, the loss or misuse of savings could not have occurred at the central level; any loss or misappropriation could have occurred at the unit level only.

The reason: All receipts and transfers are registered at the Treasury and banks, and they can be checked at any moment, even after a long period of time has elapsed.

Loss, abuse or embezzlement could only take place at the central level when the Board of Managers was allowed to cast money into construction, purchases, and the founding of a bank and companies.

It is an objective assessment which everyone has to accept.

Objectively speaking, that SMASF stepped into a new, so-called "business" phase with the following goals:

is not a program without significance.

We have to admit that this is a worthwhile plan if it is carried out with guarantees and in goodwill and if done solely in the interest of the soldiers, owners of the capital.

Regretfully, what took place was completely different.

The basic factor is the "legal" issue since when an organization lacks a legal basis, it cannot continue to carry out a firm and lasting operation.

If it has to use dodges and resort to disguised methods to avoid what the law forbids, the damage becomes greater and more easily inflicted, particularly when money mounts up in a huge sum as the case of SMASF.

Regarding the decision to go into business made by the SMASF Board of Managers, the Special Investigation Committee remarked that the Board had made two important mistakes, as follows:

1st mistake:

The Fund's purchase of shares in the two government-owned enterprises, COGIVINA and SICOVINA, and establishment of the Commercial-Industrial Bank and four new companies: VICCO, VINAVATCO, ICICO, and FOPROCO, for a total of VN$ 1,232,753,000 was against the law and ran counter to regulations for associations.

The former Minister of Defense explained that the above "business" decision was completely legal. However, we ask your permission to produce the following facts as evidence to confirm that it was against the law in force.

2nd mistake:

The second mistake which the former Minister of Defense and the SMASF Board of Mangers made when the decision was made to go into business was to disregard the above advice of the Prime Minister.

Having been given such advice, the Ministry of Defense and the Board of Mangers should have stepped new activities. On the contrary, after that, during a period of over seven months, the Defense Ministry and the Board of Mangers spent nearly VN$ 900 million of the Association's funds to buy shares in the Viet Nam Textile Company and indirectly set up four new companies. They are:

It must be admitted that it was an adventure undertaken in quest of profit without regard to higher authorities and the possible losses for the soldiers, owners of the capital.

I would like to move now to the main subject, that is, the discoveries about abuse, loss, and embezzlement of the savings fund.

Because the limited time available for today's report, I cannot go into all the details and deal with the entire problem.

The Investigating Committee has been able to consider only a number of cases of loss and abuse which occurred during construction projects and at some of the companies and at the Commercial Industrial Bank.

Its task has been performed not without difficulties and trouble, for the following reasons:

However ingenious precautions are, the dishonest intentions and absurdities cannot be denied. I'm going to report them one by one to you.

III. Construction of Buildings

This is one among many examples of embezzlement and misappropriation of the soldiers' savings and of breach of trust.

A loss of ten or one-hundred million piasters would not have been so important if the money had been contributed by a group of businessmen or industrialists for the purpose of doing business, which is a matter of risk. But, in this case, the money belongs to members of the regular and regional forces who have been risking their lives at the front. It is money saved by the needy soldiers and earned by their "blood and sweat".

For that reason, those who had authority to use that property and who were responsible for it should have displayed care and as much attention as necessary.

The office building which is locate at 8 Nguyen Hue Street was supposed to be the office of the Commercial-Industrial Bank and the four companies newly founded with SMASF capital.

Construction started in June 1969, and the RVNAF Engineering Directorate was put in charge of building the foundation by order of the former Minister of Defense.

Before dealing with cases of loss and embezzlement which have been discovered, let me mention some irregular and illegal actions noted during the construction of this huge building.

First:

The initial decision concerning construction of the building was made not by the Board of Management of SMASF but by the Minister of Defense himself.

It was not until later that the Board met to validate this decision: This is in conflict with the rule of the Association according to which the Honorary Chairman, that is the Minister of National Defense, has no authority whatsoever concerning management of the property of the Association.

Thus we see that in reality it was the Minister of Defense who held all power and the Board of Management could do nothing but follow his order.

Second:

The Ministry of Defense instructed the Engineering Directorate to demolish the old building and lay the foundation; the work was started on October 5, 1969, and was completed almost eight months later.

The work was done in great haste, for only a little more than a month elapsed between the date when the verbal order was given by the former Minister of Defense to the Engineers to study the project and the day when construction actually began.

Because of that hastiness, the plans and cost estimates were not adequate.

Third:

It was illegal to have used military resources for the project; public funds and private property cannot be considered as one and the same.

The consequence was that a major share of the cost of building the foundation, including manpower, transportation, equipment, fuel, and unreimbursed materials, was financed by the national defense budget.

Fourth:

It was not until a year later that the SMASF Board of Management approved the construction of the building and validated the decision of the former Minister of Defense. But, while approving the project, the Board was not shown a cost estimate and was not informed of the level of spending for the project. This proves that the Board was only playing the role of a "screen".

Fifth:

It is quite difficult to understand why for a project of such a scale no work appraisal and costs estimate were made. Thanks to this contractors could propose contract prices which were easily approved.

The more detailed the estimates are, the more difficult it is to lose or embezzle funds; on the contrary, without a work appraisal and cost estimate, the savings of the Association could leak out.

Sixth:

On August 14, 1969, the former Minister of Defense issued Decision No. 1815-QP/TCTT/QD, governing formation of three committee named respectively the Works Committee, the Procurement Committee, and the Control Committee, responsible for the construction of the building.

The characteristic aspect of this decision was that the former Minister of Defense was granted all powers pertaining to the following:

Seventh:

According to the internal regulations, major expenses must be approved by the Board of Management which issues payment checks bearing the signatures of the Cashier, the Secretary General, and the Chairman of the Board of Management, the former Minister of Defense not being one of them.

On the other hand, the Association's funds must not go into personal accounts to be kept and withdrawn at any times.

Such an act would be subject to suspicion, even if the General were honest and well-intentioned.

With regard to procurement and installation, besides the contribution by the Engineers as stated above, the Procurement Committee set up over sixty contracts and purchase orders in all.

We have examined only two of those contracts and have discovered several sums of money which were lost and embezzled in a flagrant manner.

Necessary documents and manuscripts have been collected to be included in record of investigation but because of limited time, we cannot go through them one by one.

A. Procurement and installation of four elevators.

First of all, I would like to deal with the procurement and installation of four elevators for the building.

A businesswoman made the successful tenders, and her bids were as follows:

The contracts in question were made in January 1970.

Following are irregularities and losses:

Point 1:

Specifications of a very special type were drawn up by the responsible official with the intention of giving the contractor more privileges. They allowed the contractor to state the contract price of the work without having to furnish a detailed statement of the costs of procurement and installation of the four elevators. Therefore, the contractor could offer any price and this could be easily approved by the responsible official. The specifications also granted the contractor a down payment of 40 percent upon obtaining authorization to import the four elevators.

Point 2:

What is more important is that no criteria were set and details of the installation of the four elevators were not specified, nor were the contractors compelled to produce a technical plan for their installation when bidding for the contracts.

For this reasons, a price of 23 million piasters was asked for the contract to install the four elevators. And as a consequence of this, what are the technical factors that can be taken as a basis for approval after the contract has been carried out?

Such bizarre specifications may have never before existed in the annals of bidding in Viet Nam.

Point 3:

The former Defense Minister is known to have intervened with the Ministry of Economy for the import of four Hitachi elevators from Japan at the parallel exchange rate of 275 piasters for one dollar. The Ministry of Economy rejected the proposal of the Defense Minister and recommended that the latter request the ENGINECO Company to apply for import of Otis elevators from the United States at a lower exchange rate of 118 piasters per dollar, which would be much more beneficial for the Association

The superiority of Otis elevators over the Hitachi was stressed in a technical report as follows: .

But having disregarded the advantages offered by the use of Otis elevators, the former Defense Minister intervened again with the Ministry of Economy for issuance of an import license to a business woman, authorizing the latter to import four Hitachi elevators and exempting her from making a deposit for this import.

Finally, the Ministry of Economy had to yield to the Defense Minister's request.

But, there was a strange thing in this affair, because the name of another importer was put on the two import licenses for the four elevators.

This company imported the elevators and then sold them to the businesswoman who had won the contract bid.

As a consequence of this, SMASF had to squander about 18,000,000 piasters. This resulted from the difference between the two exchange rates and an additional commission charge paid to the other importer.

It must be concluded that the squandering of such a big sum of money had no other purpose than giving a helping hand to the successful contractor.

SMASF came from the sweat of the troops. It is then unthinkable that other person could squander their savings.

Point 4:

If the Defense Ministry had itself applied for the import license, or had requested the Central Logistics Agency to import the four elevators, a big sum of money could have been "saved" for the benefit of the soldiers.

The Central Logistics Agency is a Government agency. There is no reason for it to be considered less trustworthy or less reliable than a contractor. This shortcoming is extremely difficult to understand.

Point 5:

The end result of the affair above was the selling of the four elevators to the owner of the building with, according to investigation of the files, a profit of at least 17,000,000 piasters for the businesswoman. This amount did not include the commission charge paid to the importer of the elevators.

Although she did not have to make any deposit for the import of the elevators, nor was she the direct importer, that businesswoman was advanced 23,000,000 piasters eight months before delivery of the elevators. Although she was only an intermediary, yet she made a flat profit of 17,000,000 piasters. This cannot be accepted.

This was the consequence of a non-detailed contract.

Point 6:

With regard to the amount spent for the installation of the four elevators, the Investigation Committee is still unable to determine the amount lost, for the two following reasons:

In any case, the established fact was that the tender was too high in comparison with the market price at that time; moreover, when misappropriation of funds is so obvious in the supply end, similar irregularities are unavoidable in installation expenditures.

Who shared the above-mentioned huge sum of money? The investigation is as yet unable to determine this; but even if there had been results attained, it would not be convenient yet to disclose them.

B. Supply and installation of thirteen air conditioners for the building

The person who won the bid for the contract was also a businesswoman. The tender amounted to 106,000,000 piasters, the details of which follow:

Point 1:

With regard to the specification, just as in the supply and installation of four elevators, the contractor was paid in advance 40 percent of the total amount of this contract after he was issued an import license. There was no installation project nor detailed statement of the cost because all was calculated in a lump sum.

Point 2:

The investigation revealed that SMASF suffered a loss of about 19 million piasters in the matter of the contract to supply 13 air conditioners. The loss was confirmed by documents and instruments in writing found during the investigation. That huge sum of 19 million piasters was considered as having been "misappropriated" or "lost resulting from breach of trust".

Point 3:

Regarding the installation of 13 air conditioners and the four elevators, the Investigation Committee still has been unable to determine the exact amount of loss. However, indications of irregularities can be noted at once by a mere glance at the losses noted in supply and such a big total amount for the contract.

The 56-million-piaster cost incurred in the installation of 13 air conditioners at 1970 prices is difficult to accept, especially when there was no installation project that could be used as a criterion on which control of the operation might be based.

IV. Irregularities Noted in the VICCO Case

Now, we will deal with VICCO, the Viet Nam Industrial Construction Corporation. According to our investigation, this corporation may face bankruptcy if the section in charge of regularizing SMASF accounts does not intervene to straighten out the situation. Following is a typical case of the losses and irregularities which have occurred in the management of VICCO. Because of time limitations, we cannot present all the problems involving this Corporation; we will raise only a number of major cases here.

Case 1: Purchase of a stock of aluminum doors known to be stolen goods and violation of the customs law.

Following are the results of the investigation with regard to VICCO in the purchase of 2,069 aluminum doors for 17,240,500 piasters, now considered as a loss suffered by SMASF.

Point 1: Origin of the stock of doors.

The investigation revealed that 2,069 aluminum doors were stolen from US Special Forces in Nha Trang. A private first class and a militiaman, both Vietnamese of Chinese origin, confessed that they bought the stock of doors for 6,700,000 piasters, transport fees included. The doors were shipped to Saigon and, according to a Mr. Trinh Truong Binh, they were sold to him for 14,950,000 piasters. These figures were given in testimony by the concerned persons, but in reality a stock of goods stolen and violating customs laws could not be bought and sold at these prices. The stock of doors had no legal documentation.

Point 2: Ties between Mr. Trinh Truong Binh and former Defense Minister LTG Nguyen Van Vy.

Mr. Binh is the brother-in-law of LTG Nguyen Van Vy. Mrs. Binh, whose maiden name is Nguyen thi Chuyen, is LTG Vy's younger sister.

Point 3: How it was that VICCO disbursed over 17 million piasters for the purchase of the illegal stock of doors.

According to the assistant to the Director General of the Corporation, the purchase of the stock of doors was an irrational act, as seen from the following:

The stock of doors was sold by Mr. Binh to the Corporation for 17,240,500 piasters.

The assistant to the Director General of VICCO affirmed before the Investigation Committee that according to written documents and to what he knew, it was former Defense Minister LTG Nguyen Van Vy who gave LTG (retired) Le Van Kim, Director General of the corporation an order to purchase this stolen stock of doors at the price mentioned above.

Point 4: Profits resulting from the purchase and sale of the stock of aluminum doors.

According to the testimony of the persons concerned and the above mentioned figures:

Point 5: Heavy losses suffered by VICCO must also be SMASF losses including 180 million piasters spent for the establishment of VICCO on March 11, 1971. According to a report made by the corporation on March 22, 1972, only 336,308 piasters out of the original 180-million-piaster starting capital remain on current account. The majority of what remains of the corporation's capital is comprised of goods stored in warehouses, among them the stolen stock of doors.

The situation at SMASF can be considered as really pessimistic.

As a consequence of this, who will be the victims of the loss, if not the personnel of the regular army and regional forces who must be considered the shareholders of the 180,000,000-piaster capital of VICCO?

And the Government officials accountable for this shady affair are no other than the former Defense Minister and members of VICCO's Board of Directors.

B. Case 2: Purchase of 650 tons of steel from Hung Nam Company.

Following is the second typical case of misuse of funds committed by the VICCO Corporation managed by LTG Le Van Kim:

On May 13, 1971, Mr. Kim signed a contract with Hung Nam Company for a purchase of 650 tons of steel. Losses for VICCO resulted from this, or in other words, losses for SMASF.

Point 1: VICCO's need for steel.

According to a colonel, an assistant to the Director General of VICCO, about 10 tons of steel were used monthly by the Corporation.

Before the 650-ton steel contract was signed with the Hung Nam Company, VICCO still had in stock 300 tons of steel that might have covered the corporation's needs for at least three years. For this reason, a new supply of 650 tons of steel might meet the demands of the Company for another six to nine years. Thus, it is evident that this new supply did not make sense. This is from the testimony of the assistant to the Director General of VICCO.

Point 2: VICCO runs out of operation funds, because of excess stock-piling.

Excess stock-piling, including the stock of aluminum doors, led the Company into a 50-million-piaster debt, which the Company had to ask for from the Bank in order to continue in operation.

Thus, the Company lost this sum and also had to pay additional interest to the Bank.

Point 3: Unreasonable interest rate.

If VICCO had made a direct contract with the LUCIA Company for the delivery of 650 tons of steel products, it would not have had to pay over three million piasters in commission charges to the Hung Nam Company.

The assistant to the Director General of VICCO has confirmed this loss.

Point 4: The price of the structural steel was bout ten piasters higher per kilogram than the market price.

The Hung Nam Company, besides a commission of over VN$3,000,000, also had the opportunity to receive a further large sum of money from sales at a higher price to the Company.

Figuring from the amount of steel sold, the Hung Nam Company made an extra profit of VN$6,000,000.

In summary, by $9,000,000; this sum of money was lost due to the arrangements of the Director General of the Company and the Director himself.

Point 5: The family relationship between the two entities contracting to sell the structural steel.

The Director of the Hung Nam Company is Mrs. Le Thi Thuong, the younger sister of retired LTG Le Van Kim, the Director General of VICCO.

The main office and telephone of the Hung Nam Company are the private residence and private telephone of Mr. Le Van Kim.

For that reason, the supplier and the orderer are one and the same.

With a business arrangement like that, how can there remain sufficient capital belonging to the soldiers? How can SMASF be guaranteed a level of profit higher than the interest received from depositing funds in a bank?

The answer is left to those who took the initiative in investing the money to carry on the affair.

C. Case 3: VICCO has used military facilities to enable it to outbid civilians.

The investigation has revealed that in drawing up a contract to set up six Diesel engines in Bien Hoa, the VICCO Company used many facilities belonging to the RVNAF Engineers.

This abuse has generated many expenses for the National Defense budget. But, the benefits certainly do not accrue to SMASF.

Naturally, the new Minister of National Defense had to stop that business, because it was contrary to regulations and caused losses to the national budget.

V. Losses in the Purchase of 35,000 Shares of Stock in the COGIVINA Corporation

We wish to mention another important loss, which resulted from the purchase by SMASF of 35,000 shares of the Viet Nam Paper Corporation (COGIVINA) at the end of 1969, VN$142,561,540.

The affair developed as follows:

On December 26, 1969, the amendment of the by-laws of SMASF giving SMASF permission to purchase corporate stocks, had just been approved. Only three days later, SMASF spent VN$142,561,540 to purchase 35,000 shares of COGIVINA stock owned by an American company.

The affair show us how hurried and how little preparation there was.

Although the work was cleverly done in every formality, when we consider the principle of defending the "savings" funds of SMASF we cannot possibly see it as an action that received the consideration and concern normally required of the people who have administrative responsibility for the property of the soldiers.

Point 1:Approving the purchase for a sum nearly three times the current market price.

The price per share at that time was only VN$1,400. But the new Minister of Defense approved the purchase of 35,000 shares in COGIVINA at a price of VN$4,000 per share.

If you want to interpret the matter, you have to base yourself on the principles of the people who have sacrificed so much to save that money; but you cannot base yourself on the position of the government or of the Ministry of Economy.

The above action caused the Society to lose VN$91 million because of the difference between the two prices.

How many soldiers must save over how many months and years to save that VN$91 million? We must ask this question before we can decide on and approve business adventurism like that.

Point 2: The additional fees paid to the sellers of the stock.

Having approved purchase at an additional cost of VN$91 million they also agreed to pay an additional VN$1,561,540 to the sellers of the stock to cover the expenses of transfer and postage.

Given actions like that, regardless of the clarifications or explanations offered, it would be difficult to establish any real feeling of defending the interests of the people whose money this really was.

Point 3: At present, how is it possible to have enough capital remaining?

In theory, the value of the stock has risen to VN$4,000 per share.

But this is only a theoretical sum. And what assurance is there that the Liquidation Committee which has just come into existence will be able to resell a number of shares for the sum that the Society spent nearly three years ago (VN$142,561,540)? Who will buy them?

Point 4: Understanding the true current value of each share of stock.

According to the former Defense Minister, SMASF made big profits by purchasing shares in COGIVINA, thanks to the rise in value of each share to 4,000 piasters.

In order to ascertain the number of 4,000-piaster COGIVINA shareholders, the Investigation Committee looked into the list of shareholders of the company on April 26, 1972.

This investigation revealed that as of April 26, 1972, there were 63 shareholders registered at SMASF.

This means that as of the above mentioned date, there had been no purchasers of the new 4,000-piaster shares.

For this reason, the purchase of 4,000-piaster stock shares still remains in its theoretical phase.

Point 5: Illegal subscription to shares by Col. Do Tung.

Col. Do Tung was also appointed to COGIVINA's managerial board. This appointment was not valid because he was not a member of SMASF's managerial board. Normally, a member of the managerial board of a Corporation must come from the Corporation itself.

Now, we will tackle the problem of misusing military saving funds in the two following fields:

VI. Special Detachment of Military Personnel.

The special detachment of a large number of military personnel to the Commercial Industrial Bank and to six other military-managed business corporations (COGIVINA, SICOVINA, VICCO, VINAVATCO, ICICO, and FOPROCO) entailed many misuses of funds in various fields. It brought about much injustice, and gave birth to much misappropriations of funds and losses to SMASF.

Point 1: Detailed soldiers.

The total number of detailed soldiers at the seven companies was 385 men as of April 28, 1972, broken down as follows:

Point 2: There were a number of irregular situations.

The investigation revealed the following abuses:

By and large, there have been many abuses and underhand operations.

To be certain about the degree of these abuses, it is necessary to check the dossiers of every detailed man; a job the Liquidation Committee has not yet been able to undertake.

Point 3: The salaries and allowances of every kind were too high in relation to military pay.

Most of them received very high salaries and allowances especially at the Commercial Industrial Bank.

In addition to their basic salaries equivalent to military pay, they were also entitled to all kinds of allowances, including pay for the 13th and 14th months.

For instance, at the Commercial Industrial Bank, the lowest salary was VN$15,000 (for single clerk) and the highest was VN$75,500 (for captains exercising the function of Director). At the remaining companies, the rate of compensation, including salaries and allowance, was similar.

Besides, a 13th month salary was paid, and even a 14th month pay, as in the case of the Commercial Industrial Bank.

Point 4: Part of the salaries was financed by the defense budget, yet so far no reimbursement has taken place.

Payment by companies was effected in two stages:

At present, the companies still owe the Ministry of Defense a rather large sum.

Point 5: Due to too many privileges, the members of the Association lost a considerable amount of profit.

In general, the total of differentials and allowances of various kinds considered as privileges for detailed servicemen amounted to over 60 million piasters.

This amount is the profit obtained, and they should have reserved it for the soldiers who were risking their lives on the battlefield rather than to secure their own peaceful enjoyment of life at those companies.

Now we would like to pass on to the question of losses and misuse of power the investigation has detected in the management of Commercial Industrial Bank.

VII. How Corrupt officials Have Misused Their Authority While Managing the Commercial Industrial Bank (CIB)

The foundation of the CIB was legal.

Through the figures for deposits and loans by the Bank, we can see the intense activity of the Bank if we examine its purely commercial side. If we examined the aspect of bringing appropriate and full profits to the soldiers who have contributed to the initial capital bank of the Bank, and if we make thorough investigation of the Bank's management, we will easily see the fishy and sophisticated tricks of a clique of powerful officials who have used the capital of others for their own profit.

A. Capital and dividend

SMASF paid VN$249,300,000 (99.72 percent of the capital) when the Commercial Industrial Bank was founded in March 1970.

Legally speaking, SMASF is a private organization. By virtue of Article 1 of Decree No. 10 dated August 6, 1950, all operations aiming at dividing its dividends are forbidden.

For this reason, to use the capital of SMASF to set up a Bank camouflage under whatever name, is a blatant misuse of power no matter what individual runs the Bank. If the Bank managers had succeeded in getting adequate profits for the contributors it would have been good. But on the contrary, we can say the soldier gets only one piaster as benefit while the profiteers get ten!

Now, we make mention of dividends. Following is Report No. 004-QP/TCTT/NCKH of April 28, 1972 (it was the last one) from Major Pham Van Chung, Chief of Section 6 of the Defense Ministry on the question of dividends.

Of the $1,232,753,051 capital invested, only small dividends were generated by the CIB. The capital disbursed specifically for the establishment of this Bank, which amounted to some 250 million piasters, only brought in 15 million to the soldiers. This certainly did not meet the expectations of the contributors.

B. Personnel and operational costs

The misuse of personnel and financial resources at the CIB is one of the topics that merits special attention.

The 1971 report of the Industrial and Commercial Bank discloses the following figures:

As mentioned above, many inequitable acts and abuses were committed with regard to the detailed servicemen's status. The military contributors had sustained much loss because of these abuses: One party had "invested" all its savings and the other party merely enjoyed and wasted the fruit of "the investment."

To give an example, according to the CIB's report, the fees paid to the Management Committee (the Managers) amounted to VN$16,149,398 for 1971. The sum even exceeds the 1971 dividends given to SMASF (VN$14,958,000).

The servicemen's capital is quite different from normal bank deposits, and the Management Committee should not have put the two on the same footing, had it only had some common sense or really cared about the soldiers.

The question is how long it took for some thousands of soldiers to "save" VN$249,300,000 spent in the end on commercial transactions by the decision of a small group of people who received the greatest benefit.

Had the CIB's Management Committee and Board of Directors been thrifty (as the fund contributors were), the dividends collected by the Fund would have been much higher.

This caused a serious leak in the Fund's budget.

C. Deposit and loan

According to the report, as of March 15, 1972, the status of deposits and loans at the CIB was as follows:

At first sight, the deposit figure gives one the impression that the Bank has gained a big clientele, if deposits by SMASF, the 6th Administration and Military Services Company, and the ARVN Commissary are subtracted from the figure, however, the remaining ratio representing deposits by private individuals would be only 3:5.

Thus, the total amount deposited by private individuals is: 3,964 billion piasters;

and that deposit by military agencies is: 2,921 billion piasters.

With regard to loans, the total of unsecured loans reported as of March 15, 1972 was 1,375 billion piasters.

Although it is true that bank loans involve risks, that the action depends on the decision of the board of directors and pertains to its power, and that it is not prohibited by statute, by-laws, and regulations of a bank, confusion between the two following types of business should be avoided:

This is the soldiers' bank.

In the event of profit, the soldiers would benefit from only a small part of it, even less than the interest from 250 million piasters of deposits each year.

The rest is composed of expenses for personnel, general expenses, remuneration received by managers, etc., and that is the great dividend!

If there was a commission on the loan (everybody knows that there was that profit), the Board of Managers, the intermediaries, etc., received all of it while the soldier did not receive one piaster.

If the loan was not paid because of a certain reason or event, no one would suffer besides the soldier who lost both capital and interest.

In short, the two cases are quite different from each other for the above mentioned reasons. Everyone knows that on the present business market, any loan without security gives rise to a commission:

From that unofficial commission that amounted to hundreds of millions of piasters every year, how much has the soldier, the owner of the capital, received two years after the creation of the CIB?

Ma Hi, the Commission Affairs Director at the CIB affirmed that he had introduced or stood as guarantor for loans amounting to 1.2 billion piasters. As Director for Commission Affairs, he received commissions for introducing borrowers. The official commission received by him amounted to 15 percent of the total interest the borrower had to pay to the Bank. On the other hand, since he stood as guarantor for the borrower if for a certain reason the borrower could not reimburse the Bank, he would have to pay compensation amounting to 20 percent of the total loan. He was averaging 15 to 30 million piasters in official commissions yearly.

He has further stated that of the total loans he only handled about 30 percent of Vietnamese clients of Chinese descent. As for the remaining 70 percent, they dealt directly with the Board of Managers (Messrs. Nguyen Chanh Ly and Huynh Van Dao). Mr. Ly himself asked the Defense Ministry to detail a Vietnamese serviceman of Chinese descent named Huynh Sieu to serve as interpreter for the Board of Managers.

He confirms that the Managing Committee received as a matter of course some commission for these direct transactions.

In conclusion, during its two years of activity, the CIB has gained "dividends" for SMASF.

But the profits are insignificant, and there has been nothing which can be called noticeable "achievement". Meanwhile, several cases of abuse "as reported" have occurred or might have occurred, but all of them, as Ma Hi has said, have been difficult to discover because all the papers are legal.

Anyway, such large, unsecured loans cannot be regarded as an action worth encouraging and aimed at absolutely protecting "the rights and interests" and the "capital" of the soldiers.

Fortunately, everything has been smooth; had funds been misappropriated because of some event or for any other reason, who would have incurred the loss?

Such a Managing Committee and such a Board of Directors cannot be regarded as "ideal" for the interests of the soldiers who have contributed the funds.

The records of investigation of the first phase carried out by the Special Investigation Team will be submitted to the President of Viet Nam with recommendations for necessary sanctions for his final decision.

(English translation provided by American Embassy, Saigon, copied from document kept at President Ford's Library).

generalhieu