[Inclosure.]

HEADQUARTERS DISTRICT OF ARKANSAS,
In Field, Monticello, September 29, 1864.

Honorable JAMES A. SEDDON,

Secretary of War, Richmond, Va.:

SIR: I have the honor to acknowledge the receipt of your letter of the 1st of August, 1864, in regard to the steamer Harriet Lane and her cargo of cotton.

I beg leave in reply to submit the following statement: By my orders some 16,000 stand of arms, which had been released in our favor by the French at Vera Cruz, in the spring of 1863, had been concentrated at Havana.

Before any steam blockade-runners had entered our harbors in Texas, I, finding that the Harriet Lane and other ships captured by me were useless as cruisers at sea, and after the building of the forts useless for the defense of the harbors, placed their guns in the forts; and having the arms above mentioned at Havana, which could only be procured by sending the cotton or specie for them, I proposed to General Kirby Smith, commanding the Trans-Mississippi Department, to send out these ships loaded with cotton, and to sell the ships and their cargoes for the purpose of buying these arms and a fast steam blockade-runner with which to bring in these arms. General Smith informed me that I could send them out in this way on my own responsibility. It was so obviously right that I did not hesitate a minute. The ships were lying useless, rotting, and in danger from the enemy. The arms were absolutely necessary, and we could at that time procure them in no other way than by sending cotton or specie abroad with which to purchase them. The Government had no cotton. Arrangements were made by me with Mr. T. W. House, a merchant of Houston, Tex., who advanced the cotton, paying the freight, and to save the ships on their arrival in a foreign port from the danger of a successful claim by the U. S. consul, they were passed through a prize court and were sent abroad as the property of a private individual, being as such protected by the Spanish authorities.

Captain Robert B. Scott, as special agent of the Government, was sent out, and was kept in ignorance of the real ownership of the Harriet Lane (the only ship yet out), and Mr. C. J. Helm, C. S. agent at Havana, was not informed of the transaction, lest he might be called upon in a Spanish court, as a witness, to testify as to ownership, and the claim of the United States be thus allowed.

Mr. Helm is still in ignorance and should remain so, until the ships are disposed of.

The U. S. consul did claim the Harriet Lane on her arrival at Havana, but in consequence of these prudential arrangements she has not been given up.

The plans, contracts, papers, &c., were all arranged on full consultation with the C. S. district attorney, Mr. George Mason, and with the approval of the cotton office-Lieutenant Colonel W. J. Hutchins, Mr. James Sorley, C. S. depositary, Mr. B. A. Sheppard, and Mr. Ball, of the firm of Ball, Hutchings and Co., Houston, Tex., being the members who compose what is called the cotton office for the District of Texas, &c., and which is under the exclusive control of General Smith.

The details of the transaction were arranged by Brigadier General J. E. Slaughter, then chief of my staff, and these gentlemen, after full and frequent consultation.