TOBACCO COY.

Auckland Star, Volume LXXI, Issue 197, 20 August 1940, Page 11

TOBACCO COY.

OFFICERS EXAMINED.

PENALTY BY CUSTOMS.

The public examination before Mr. Justice Fair in the Supreme Court of officers of the Loyal Ltd. Co. (in liquidation), with a view to investigating the affairs of a. m tobacco manufacturing concern, was continued yesterday afternoon. Mr. V. R. Meredith and Mr. N. I. | Smith conducted the examination for the liqiiidator, and Mr. A. H.' Johnstone. K.C., and Mr. R. Mackay represented the examinees.

Continuing his evidence, Edward Valentine Owen, who had been managing director of Loyal Ltd., said that he was aware in 1934 that more tobacco was sold than the quantity on which duty was paid. It represented the quantity of returned cigarettes, on which duty "had been paid, and which was exchanged, pound weight for pound weight, for cut tobacco taken out of bond. Ho argued that by this exchange he really paid duty on the tobacco taken out of bond, for the cigarettes returned were destroyed. The Customs Department did not take that view, and he assumed responsibility for the Customs penalty of just under £8000. In December, 1934, a deal was made for the company to purchase for £10.000 in shares his blends and formula. They had to raise more capital to do that, and an amalgamation was proposed. In January, 1935, the writ £SOOO penalty caine from the Customs Department., and lie assumed personal responsibility, proposing to get the money from the sale of his blends and formula. In February, 1935, at a meeting of directors, it was proposed to raise the company's capital from £30,000 to £100,000 in view of an amalgamation proposed. He then declined to sell his formula for £10,000, but agreed to sell for £20,000, maintaining it would have been worth that if he had retained control of the company. He signed the agreement in May, 1935. and later he got £14,000 or £15,000, from which the £8000 line was paid to the Customs. Witness personally got about £3000, about £2700 was paid to Mr. Maher. About £6000 of the £20,000 remained on loan to the Consolidated Tobacco 1 Company. When the Consolidated Company took over from Loyal Ltd., he was given the position of factory manager. The Consolidated Tobacco; Company showed a gross profit of' £20,224 and a net profit of £4938 in its balance-sheet to the end of April, 1935. The witness was examined at length on his stocktaking in April, 1935, and valuations of the leaf in stock. He said the valuations taken were not the invoice valuations. He explained the valuing of the stock at much above invoice prices by saying that it represented good buying and the leaf had become more valuable by treatment and grading. He admitted that a high value in stock helped the balance-sheet, and a good balance-sheet improved the chances of the company raising the capital to pay him for his blends and formula. The company, he said, paid a 10 per cent dividend. He held that it was paid out of the company's profits, and not as a result of over-valued stock.

The witness was under examination when the Court adjourned.