Extract from a letter from Vaughan Dempsey to Desmond FitzGerald (Dublin)
(Copy) (Unnumbered)

MR. KERNEY

A Chara:

As you probably anticipated the matter would not reduce itself to a simple question of presentation of authorization and consequent immediate handing over. Kerney refused to make any definite statement on the spur of the moment, but informed me that he must first communicate with what he calls his Government and act according to the instructions which they will give him. He regards the matter as similar to the case at present being conducted in America in connection with the Republican Funds, and considers that the Free State Government will probably have to institute proceedings against him in the French Courts.

As regards the balance in hands on the 31st December, Kerney is doubtful as to the validity of the Government's right to claim it, seeing that, as he informed me, the Consulate had not then come under the Ministry of Finance of the Free State, but was nominally still under the old Dáil at that date. In instituting proceedings therefore it will be necessary to remember this argument of the Irregulars, and to prove that the Free State has taken over the property as well as the responsibility of the old Dáil.

All these remarks are merely information as to Kerney's way of looking at this affair, gleaned in the course of conversation with him. The chief fact is that Kerney refuses to give any definite reply as to his line of action, and declines to hand over property, and balance until advised by his 'Government'.

Under the circumstances, there was nothing left for me to do on my own initiative, I await instructions as to the next steps to be taken. Either a prosecution can be commenced in the French Courts, or a bailiff can be placed in possession of his apartment acting under a judge de paix but in these two instances it would, it seems to me[,] be advisable to await a definite refusal on the part of Kerney to surrender the property of the Government. I would suggest as the best, least expensive, and more dignified method, that the Free State seek official recognition as a State by the French Government, and when this is accorded, official action can be taken supported by the Government of this country.