CORRESPONDENCE.

Auckland Star, Volume XIX, Issue 240, 11 October 1888, Page 2

CORRESPONDENCE.

THE REPORT SHAREHOLDERS' COMMITTEE BANK OF NEW ZEALAND.

(To the Editor.)

Sir,—The report has now been for some time before the public, long enough to enable the opinions of even the London press to be quoted to our newspapers. Of eourse i the strictures by our New Zealand prints h*ve readied us in fuller comment, and it may bo said the subject has been pro' uounced upon. /

It is to be regretted that no criticism as to the manner in which the report has been drawn up appeared in tirire to be transmitted with it to the colonies and England save the few remarks in Mr Murdoch's letter to the " Het<»ld T' of theSbh instant, and which dealt, with some of the unfair statements as set forth-by the Committee.

There can be no doubt that "either too much is disclosed or not enough," ins the Canterbury " Press" says ; and it further asks, " Who &ra the clique with whom we' are told there are certain Dransactions which have come under the notice of the Committee calling: for gravest censure, if not for more specific action 1 It is necessary that the guilty parties, whoever they are, should be exposed and followed up." Now, tho report justifies these Remarks, for it has gone forth darkly hinting that there has Wen little less than swindling goin^on. It is too late in the day, after the report has been circulated broadcast to shareholders and others, for tho Commit tee to give forth now that no such meaning was intended to be conveyed.. It has been conveyed only too 'evidently, as proved by the public and private comments now in circulation. It 'becomes necessary, therefore, to see -how this has arisen, and it may simplify the inquH'y by-ihaking a running commentary on the different paragraphs, enlarging upon those which appear to demand condemnation.

I. os. 1 and 2 paragraphs are perfunccory. No. 3. —"Involving losses which the directors bad not faced, but which, upon a rigorous examination, we feel convinced will absorb-not only the whole of the reserve fund, but also nearly onethird of the paid-up capital oi the Bank, £BUO,oOoinafl.:' From this wording an inference maybe di'firtVn that the directors had concealed, and but for the Committee would have concealed, and not faced the loss. I have not been on the directorate for a year, but on retiring by rotation it fell to my lot, as the then Prerident, to announce tho ":no dividend" for tbe half-year then concluded, and that an appropriation of £125,000.had been made from the reserve fund on-account ot losses. I understood that further appror priation would have to be made next; halfyear. Since that date the Board has certainly 'faced the necessity,.for it asked shareholders to appoint this very Committee to do so, and thus bringing from outside an unprejudiced report, so that those under whose management the losses had arisen should not have any say in the' assessment. The '^-conviction" in the closing sentence thai £800,000 will be absorbed remains to be verified, for it is fair to conclude that good care has been tak-an to make the margin so ample that by no probability will any supplementary demand ever require to be asked. And sound policy, too, to have done 60.

Nos. 4, 5, and 6 may pass without comment.

No. 7. —" The principal Australian losses have been made in Sydney and Adelaide, where the selection of managers was in ench case, to say the least, unfortunate. In Sydney, after "a gambling career long known to most peciple, the manager was convicted of embezzling the Bank's funds ; and in Adelaide money appears to have been advanced, ol" rather squanded, in a way which can only be characterised as reckless and disastrous," This .has been dealt with by Mr Murdoch; and I can only further remark that what is true and what is not true seems to be purposely mixed up in a manner to produce an unfavourable impression against tlie "directorate. No. B.—"The policy pursued is open~to (frave cenEure. "Inflated -schemes or proposals,1 coming from, or influenced by, certain persons, appoa'r to have met with ready support by lavish . advances to companies and individuals without adequate -security or warrantable prospect of advantage, or even safety to the Bank." . ! This may be accepted a 8 a sufficiently; wholesale "accusation and 'condemnation,' 'butit is only, after all, the'individual opin-; ions.of,the Committee ; but xt CtQes not fol-j low that what they chose thus to sot down! in-such -conelttsive language is <to be-ac-; tfeptod as an infallible judgment. If the accusations are to be read within their striofc ■meaninK, the most grave of them receives an extraordinary confutation in the report; itself. Thie grave accusationisagain repeated in .No. 12, ;in these significant words j—"Tbo'real control of tbe Bank* policy appears to hava been for nyiiny years" ■^emarK, ma.yyears*—'.'in 'Wo hands of a MM'fefcslV"ri*h' WhfCttift. &te:g&a*if_l

manager was intimately associated." How has this " policy pursued and open to grave censure" resulted—Outside the mi-, mediate losses discussed, and brought about; solely by the grave depression the colony has been labouring under ? It has resulted "in tbe goodwill of the B .hk's- business being of great value" (No. 18). Who built up the Bank's business to make it so, to make ib of such value that "firms and persons of the very highest financial standing- ■' (No. 15) in London come for.yard and say, Do you want money? here ib is lor you ; you have a splendid institution—the loE*es you have made ate only "like other banks, now strong and prosperous, and which have had trying episodes in .their history'•'(No. 18). And so much is the future c. the institution good, bhab "25,000 shares will be offered in London ab £1 premium." The report makes ib an accusation " that tfie teal control of the Bank's policy appears to have been for many years in tho hands of a limited circle with which the late manager was intimately associutcd." Happy accusation ! the .limited- circle and manager who guided this policy have handed down an institution "which commends itself to firms and persons of the very higiiesb financial standing" in the metropolis of the world. And the report seeks to damn the good repute of those who have done this.

No. 9 requires no comment, which is more than can be said for

No. 10.—" And, final ly, we find that advances have been made to some of the directors upon Insufficient security, and from these a< .vjioces heavy loss has arisen, estimated by us as over £160,000, while certain transactions have come under our notice calling for the gravest censure, if not for more specific action," This certainly of all tbe paragraphs is the one calling for " gravest censure," to use its own language. The way this paragraph is horded justifies the interpretation which has been put upon ib, and simply reads thus : — " Advances have been made to some directors upon insutiicient security, that is, upon security known by them to be insufficient, and these advances were sanctioned bybheßoard; knowing the securities to beinsufficient." That the paragraph is so read by the public, the press comments prove, for the question is asked, " Is it ndt possible to recover sohte of the money thus improperly got hold of?" The Committee may no doubt pronounce, now, thab the securities are' insufficient, bub were they insufficient at the value of the day when the advances were made? It is easy to sib in judgment and be wise after the event; we can all do that, with oi- without virtuous indignation '; but lot the Commit tec boldly state that the securities and position of the applicants did not warrant tho particular advance, individualise thorn, and then judgment can be pronounced whether a duo precaution was exercised, or whether it was that a diroctor wanted an advance thab it was given, and would nob have been given to another applicant on said security. The closing sentence of this same No. 10 is certainly tho head and front of the offending, and well merits " grave censure," because it forms part of the whole para* graph without break, aud therefore must be read as a concluding charge against the " some directors." These are the words :-*■ " While certain transactions have come under our notice colling for the gravest censure, if nob for more specitic action," and which words follow those stating that £160,000 was estimated as the loss arising upon the advances on insufficient security :--- so, besides thab loss, there was something touch worsebehied, even requiring "specific action." lb is difficult to find fitting words in which to condemn the putting these two statements iv juxtaposition, and it will be ecpially difficult to believe it was not done with malice aforethought. And what was this "transaction?" I do not write' with authority, but have reason to believe that all thte vthitutii fulrheh is in allusion to a transaction which, from its inception, was altogether in the Bank's interest, and for the Bank's profit, which w&s confidently expected would be large. Unfortunately, it resulted in a loss, and because, in the course of the transaction, the bounds of the Banks Act had been inadvertently overstepped, the " specific action " intended is bo rnulcb the manager and Board. Would anything have been heaad of it had the prolit arisen ?

No. 11.— "The connection between the Bank and the New Zealand Loan and Mercantile Company." Everyone asks why is this dragged into the report ?

No. 12.-Question of responsibility, and Hvben did late manager's cease, and present manager' 6 begin. Like the last paragraph, it is asked why was this dragged in ? Why was this gauntlet thrown down to create a probable cuntroversy '! The remainder of Che report deals solely with the proposed future policy, and sneaks for itself informing the world generally that it cannot do better^than invest in an institution the policy of which "appearsfor many years to have been in the hands of the limited circle and manager,'' and the result of that policy warranting the Committee in making tho recommendation !

It is deeply to be regretted that the report, otherwise valuable and able, should bo so utterly wanting in a characteristic which is held in estimation by all rightmi'nded men—manliness ; and it must have ■boon a cruel position if any of tho Committee deemed it so and yet had to sign with the majority.

Had the colony continued on what was supposed at the time to be a legitimately prosperous career, the Bank's securities w.oiild have sproved ample cover for the sums advanced. But it may be said that tho bottom of the colony has dropped out in so far as land being a saleable commodity is concerned, and honce the straits, which have fallen upon not only the Bank, but the whole 'community. But for this the Bank would have continued its prosperous course, and no shareholders' committee would ever have existed. Things have gone, the, other way, hinciUae lachrymae. While deploring the loss which has fallen upon shareholders, I would ask them to distinguish between error of judgment, which is one thing, and wrong doing, which is a very different thing. I have no wish to evade any share of lesponsibility which attaches to mc whilst holding a seat at the Bank's Board, and, forthermore, I-am prepared to justify all my acts while one of its members.—l am, &c,

J. Logax Campbell.