Intercontinent and the sale of P-40s to China
Since 1933 Intercontinent had been the exclusive agent for Curtiss-Wright aircraft exports to China and received a 10 percent commission on any sale of planes to China regardless of the circumstances.
In January 1941 when Morgenthau engineered the reallocation of a hundred P-40s from the British to the Chinese, Intercontinent was within rights to demand its commission, especially if the British were to sell the planes back to C-W which would then turn around and sell the planes to the Nationalist regime.
Furthermore, any C-W planes sold to China had to be assembled and maintained by CAMCO, its joint venture with the Nationalist government in line with the 1933 agreement between Intercontinent and the Chinese government. Therefore it was understandable that Mort Deyo had asked Leighton to take care of the P-40s once they had arrived in China. The unusual element in their discussion was to ask Leighton to personally handle the hiring of advanced flight instructors from US air bases: they were to go to China and teach the Chinese pilots how to fly their new P-40s.
On January 6 1941 Morgenthau arranged for Curtiss-Wright to start shipping batches of P-40s to the Far East. At the same time his staff started negotiations with Bill Pawley, the president of Intercontinent about the firm’s sales commission. By the end of January, Pawley had agreed to receive a fee of $250,000 instead of its customary sales commission which would have amounted to $450,000 on this contract: the contract for a hundred P-40s came to $4.5 million which the Chinese paid for out of a loan recently received from the US government.
On January 25, 1941 Intercontinent came to a further agreement with T.V. Soong, the brother in law of Chiang Kai-shek and his personal envoy in Washington: Intercontinent was given the task of recruiting volunteer air personnel designated as instructors in their employment contract:the recruits were to have the same terms as the American staff that worked for CAMCO in China.
New evidence was overturning old verdicts. The correspondence in Bruce’s AVG folder, documents in Morgenthau’s diaries and published correspondence between Soong and Chiang came together to produce a new narrative that contradicted the standard version of events. AVG chroniclers had always marked early April 1941 as the start of Intercontinent’s involvement in Chennault’s plans for hiring volunteer pilots for China. But the archival record made clear that by the end of January 1941 Leighton, Knox and Soong had paved the way for Intercontinent to recruit pilots as flight instructors. These revisions changed chronology but did not clear up all the mysteries surrounding the air program for China.