At 11.01 hours on 16 May 1942 the unescorted William C. McTarnahan (Master John G. Leech) was hit on the starboard side by two torpedoes from U-506 while steaming on a nonevasive course at 11.1 knots about 35 miles east of the Ship Shoal Light, Louisiana. The torpedoes were spotted shortly before they struck at the #2 tank and the engine room, flooding the compartments, damaging the after peak tank, the steering room and the stern gun, stopping the engine and destroying the antennas. A fire broke out that soon ignited the fuel bunkers and killed everyone in the after part of the vessel. The U-boat began shelling the ship from the starboard bow after 15 minutes and scored three hits before the survivors among the nine officers, 29 crewmen and seven armed guards (the ship was armed with one 4in gun) abandoned ship in two lifeboats and three rafts. The Germans closed to 400 yards and fired 12 to 15 shells in half-minute intervals and then left the tanker in a sinking condition. A Hall PH-2 flying boat (V-170, USCG) located the survivors and directed several fishing vessels to them. They were picked up after four hours by the shrimp trawlers Defender, Pioneer and Viscali and taken to Houma, Louisiana where four of them died of burns in a hospital. Three officers and 15 crewmen were lost.

The badly damaged William C. McTarnahan was towed to the entrance of Southwest Pass by the US Coast Guard tug USS Tuckahoe (WYT 89) and the American tug Baranca. She arrived in Mobile for repairs on 23 June and returned to service as St. James for US War Shipping Administration in 1943. In August 1943 transferred on bareboat charter to the Sovietunion as Donbass, returned one year later and renamed St. James.