[CONFIDENTIAL.] HDQRS. THIRTEENTH ARMY CORPS,

Bronswille, January 2, 1864.

Major General N. P. BANKS,

Commanding Department of the Gulf:

I have a painful report to make to you, of an act of duty I have been compelled, however delicate, to perform. You will remember that when you left here you placed in my hands a communication, which I was to read and deliver to the U. S. consul at Matamoras, stating to the demand upon the Mexican authorities that the rebel cotton and other goods on their side, which were evidently for use against our Government, with which Mexico is on terms intimacy, should be seized and delivered to us, or at all events, that an embargo should be laid on its present removal, and a stop put to the unfriendly trade for the future. Since your departure the consul and myself have in conversation several times alluded to the entire silence of Governor Serna on that subject, and wondered at and were unable to account for it. I confess my suspicions were aroused that certain Mexican official were maneuvering to convert the larger quantity of rebel cotton, in some way, to their own enrichment. This did not appear strange to me, but I never imagined that in my own camp I was cursed with the presence of officials, both civil and military, who could be so base and treasonable as to enter into collusion with such people in wholesale robbery and plunder. I have been aroused to the truth of this, but have been shocked by the discovery that, to accomplish their ends, they were not unwilling to bargain for the sale of human life and blood, to the great dishonor of the flag which has never failed give protection to honest and unfortunate political refugees.

About two weeks, whilst in consultation with the consul during a call he made at my quarters, the subject of the cotton and of the rendition of criminals and contraband property, &c., was

again alluded to, and among other matters certain civico-military officers from this place were attempting some secret business with him daily, and frequently during the day; that he suspected some filibustering, and that, If I thought it advisable, he could without great trouble, ascertain fully what plans were being concocted in order that he might, inform me, and if necessary, put me on my guard. I requested that he would do as he proposed, and I did not see him for ten days. On the 29th ultimo he called, again, and informed me that he had fully discovered the work which was being attempted, and made me a verbal report, the substance of which was to this effect:

Captain Herbert, assistant adjutant-general to Brigadier-General Hamilton, military governor of Texas, after very frequent interviews with the de facto governor in Matamoras, had approached him (the consul) with the direct position to take part and interest tin their plans and operations. The consul did not absolutely refuses, and the plans were disclosed by Herbert. He had agreed to manage so that a number of the political refugees, now residing here, friends of General Ruiz and President Juarez, of the Crinaline party, should be delivered into the hands of Serna. A requisition had formerly been made upon General Hamilton for some of these men and was him referred to me, and I declined to act on it. A new set of papers was to be tried and a direct requisition upon me for the