Evening star. [volume] (Washington, D.C.) 1854-1972, 1963-12-17
PANAMA
Continued Prom Page Al

pa Va NAAN WI Az - AAON AAAd NEA i
al to me" Senator Smathers
said. What We want is hous.
ing"
He said his door to open tC
Mr.. McGrath as it is to any
one else.
$40 Million Project
The project, known as the
Khe l-Gilbane development
calls for building 1900 houses
costing 1888 each. The cost Of
the project is estimated at SIC
million. of which S8,750. 00C
would be put up by the Bakers
and Confectionery Workers
and the photographers Union
AID would insure the union
loans up to S8.l million.
The plan originally called
also for the Panama govern
ment to put its credit behind
the project. Panamanian au-
thorities approved the plar
originally but later the govern.
ment withdrew its backing
because of a question of wheth.
er it could participate legally.
While the project was con.
ceived by Mr.. McGrath. it get.
its name from Theodore w
Kheel. a New York lawyer anc
labor mediator who repeatedly
arranged for the loans from
the unions. and the Gilbant
Construction Co. of Providence
r. l., which would build the
houses.
Insurance by McGrath Firm
Mr.. McGrath's insurance
company would be the sales
agent and would handle all the
required insurance. At one time
Mr.. Grath's company also was
suggested to serve as the fidu-
ciary to service the individual
home-owner mortgages, but
this was turned down by AID
The fiduciary's fee was to be
S100,000-1 per cent of the
cost.
The original plan was for the
unions to make the loans to
the government of Panama
instead of the builders and
that government would issue
bonds to secure the loans. In
addition to this security, the
AID would guarantee up to 90
per cent of the loans.
The Panama government
later decided it could not
participate in the project
legally. In view of this, a
spokesman for AID said the
project is being reconsidered.
The character of the finan-
cial risk has changed substan-
TALLY since the government Of
Panama has said it doesn't
want to place its credit on the
line" said Herbert Adelman, ar
attorney in the office of the
AID general counsel.
Kept in Dark
Former Ambassador Farlanc
said he was kept in the darl
on the project and was asked
tor okay it without ever having
seen it,"
"This is the type Of projecr
which is supposed to be report.
ed to the embassy" he said. II
was not reported to the embaS.
sy. 1t was kept strictly in the
AID"
Mr.. Adelman said the House
Foreign Affairs Committee got
interested in the Panama
project because someone said
said he was being treated un-
fairly"
The House Committees staff
report has been labeled con
dental" by the chairman
Representative Morgan, Demo.
crat of Pennsylvania.
However. a Government source
said the report criticizes All
for not considering plans o.
several other companies apply
ing for loan guarantees fol
Panama housing projects.
The report also said it il
strange that the Kheel- Gilbant
application makes no mention
that Mr.. McGrath's company
would be sales agent for the
houses and was otherwise
involved. 1t also claims AID die
not keep other interested
officials advised on the nature
and status of the project.
slack of Communication"
Mr.. Adelman said there
probably was a lack Of COM
munication between the fielc
and Washington headquar-
ters." But he said this wa;
because the loan guaranty
program was new and guide
lines for processing application
hadn't been set up adequately
He said the Kheel-Gilbant
project was procesSed frs
because it was the first re-
ceiVed for a housing project il
Panama.
Mr.. Adelman said eigh
projects in other Latin Ameri
can countries have been ap
proved for loan operations.
He said he had no knowledge
of pressure being brought b!
Senator Smathers on behalf o
the Kheel-Gilbane application
Senator Smathers told re
porters yesterday that at var
ious times he talked abou
housing in Panama to Franz
Coffin. deputy administrato
for operations at AID; Teodor
Moscoso, assistant admins
traitor for the Latin American
Bureau and co-ordinator TO