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<img loading="lazy" src="https://cdn.kahimyang.com/resources/macarthur-bataan.webp" alt="General Douglas MacArthur in Bataan" />
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(General Douglas MacArthur in Bataan)
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It all started way back to 1935, when MacArthur accepted the offer of Philippine Commonwealth President Manuel Quezon to become his country's top military advisor. Before he left, MacArthur convinced the War Department to make an exception to the rule forbidding U.S. officers from receiving compensation from the countries they advised. Quezon then promised MacArthur a bonus of 46/100 of 1 percent of Philippine defense spending up to 1942. When MacArthur retired from the U.S. Army in 1937 (but remained as advisor in the Philippines), Chief of Staff Malin Craig suggested to Franklin Roosevelt that he renounce the exception, but the President declined to do so. 
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On January 1, 1942,  Army Chief of Staff George Marshall sends a cable making it depressingly clear that Washington would be able to do little for General MacArthur's beseiged forces and advising that President Quezon leave Corregidor as soon as possible to set up a government in exile in the United States. Two days later, on January 3, 1942, after discussing it with MacArthur and his cabinet, Quezon issued Executive Order #1 of the Philippine Commonwealth, awarding General MacArthur $500,000, with lesser amounts going to his chief of staff, General Richard K. Sutherland; his deputy chief of staff,  General Richard K Marshall; and his personal aide, Colonel Sidney L. Huff.  Totalling to $640,000.00, this amount was conveyed by the Philippine Treasury to personal bank accounts of MacArthur and his staff.
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The grandly worded order called the payment <i>"recompense and reward"</i> for the <i>"magnificent defense"</i> engineered by MacArthur's Mission, whose "record of services is interwoven forever into the national fate of our people." MacArthur, feeling abandoned by Washington, surely welcomed both the words and the reward. 
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President Quezon's reasons for offering, and General MacArthur's reasons for accepting, the fruits of Executive Order #1 will always remain something of a mystery, but Carol M.  Petillo offers a compelling explanation. Regarding Quezon's offer, she cites the Filipino concept of <i><b>"utang na loob"</b></i>,  a kind of reciprocal bond of obligation between family or close friends. From his Asian/Filipino perspective, Quezon was cementing an already close bond that existed on two levels: on a personal level, between MacArthur and himself; and on a national level, between their two countries. Thus the money was both a reward for MacArthur's past service to the Philippines and a further guarantee that MacArthur (and by extension the U.S.) would do everything in his power to help the Filipinos in the days ahead. MacArthur, having spent many years living in the Philippines, could easily have seen the situation the same way. Yet his acceptance of the gift is more problematic. 
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<img loading="lazy" src="https://cdn.kahimyang.com/resources//camp-murphy-ma.webp" alt="A ceremony at Camp Murphy (now Camp Aguinaldo) in 1941.  Richard K. Sutherland is on the left behind MacArthur" />
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A ceremony at Camp Murphy (now Camp Aguinaldo) in 1941.  Richard K. Sutherland is on the left behind MacArthur.
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As MacArthur biographer Geoffrey Perret has demonstrated, the payment was almost surely legal. And it's also true that given the dire situation on Corregidor, MacArthur might have assumed he'd never live to spend the money (although he had been informed as early as February 4, more than a week before the money was wired, that President Roosevelt was considering ordering him out). Nevertheless, MacArthur would have known that for any American military officer to accept such a large amount of money from a foreign government would cast doubt on his motivations and actions, particularly in a time of war. 
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General Dwight D. Eisenhower seemed to understand this when Quezon offered him $60,000 later that year. He refused, later writing:
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"I explained that while I understood this to be unquestionably legal, and that the President's motives were of the highest, the danger of misapprehension or misunderstanding on the part of some individual might operate to destroy whatever usefulness I might have to the allied cause in the present War." 
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MacArthur either failed to see or chose to ignore the fact that accepting such a gift compromised him, and left him open to accusations -- true or not -- of being bought off. 
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Perhaps the most telling proof comes from the general himself. MacArthur assiduously avoided mentioning the award, even in his "Reminiscences", where he names practically every other award he ever received. 
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Only because his aide Richard Sutherland left a copy of the order in his papers was Petillo able to break the story. 
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Sources:
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<ol class="article-sources">
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People and Events, The Secret Payment, American Experience, pbs.org
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<li>
Douglas MacArthur and Manuel Quezon: A Note on an Imperial Bond,  Carol M. Petillo, University of California Press, 1979
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Photo credit:  Wikipedia Commons
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President Quezon rewarded General MacArthur half a million dollars as "utang na loob" for magnificent defense against Japan