A law of Congress prohibited the government from selling the surplus vessels to foreign-owned or foreign-controlled companies, and prohibited any American company from purchasing them for resale to foreigners.
The purpose of the law was to guarantee that oil tankers (vital in times of war) would remain under the control of the United States government.
Julius Holmes conceived the idea of making a quick profit by buying and selling some of the surplus tankers.
Holmes was closely associated with Edward Stettinius, former Secretary of State, and with two of Stettinius' principal advisers: Joe Casey, a former U.S. Congressman; and Stanley Klein, a New York financier.
In August, 1947, this group formed a corporation (and ultimately formed others) to buy surplus oil tankers from the government. The legal and technical maneuvering which followed is complex and shady, but it has all been revealed and reported by congressional committees.
Holmes and his associates managed to buy eight oil tankers from the U.S. government and re-sell all of them to foreign interests, in violation of the intent of the law and of the surplus-disposal program. One of the eight tankers was ultimately leased to the Soviet Union and used to haul fuel oil from communist Romania to the Chinese reds during the Korean war.
By the time he returned to foreign service with the State Department in September, 1948, Holmes had made for himself an estimated profit of about one million dollars, with practically no investment of his own money, and at no financial risk.
A Senate subcommittee, which, in 1952, investigated this affair, unanimously condemned the Holmes-Casey-Klein tanker deals as "morally wrong and clearly in violation of the intent of the law," and as a "highly improper, if not actually illegal, get-rich-quick" operation which was detrimental to the interests of the United States.
Holmes and his associates were criminally indicted in 1954–but the Department of Justice dismissed the indictments on a legal technicality later that same year.
A few weeks after the criminal indictment against Holmes had been dismissed, President Eisenhower, in 1955, nominated Julius C. Holmes to be our Ambassador to Iran.