Statements by two Jeffs brothers read to Court

Press, Volume CXVI, Issue 34103, 16 March 1976, Page 2

Statements by two Jeffs brothers read to Court

GX’eir Prm AtiWicilton)

AUCKLAND, March 15. I • James Edward Jeffs was completely sincere and satisfied about the solvency of the JBL group when he signed a declaration of solvency on April 4, 1972. according to a statement read in the Auckland Magistrate’s Court today. Forty-nine days later th e group went into receivership.

The statement was j taken from .Jeffs in London by Detective Inspector C. E. Sturt, .who read it in the court I today. Before the Court are Hugh Buchanan Jones. Rex Evans, Francis William Ralph. Peter (Kenneth Leneve Arnold, Philip Paul Sargent, Michael Bruce Gurney Thomson. Barrie Phelps Hopkins, Hugo Stephen Fanning, and Eric Walter Thompson. They are charged, wilh James and Vaughan Jeffs, in their absence, and JBL Consolidated. Ltd. with conspiracy to defraud and fraudulently promoting. The lower court hearing is before Mr T. G. Maxwell, S.M., in a special courtroom at Durham House, Auckland.

Evidence from 100 The officer in charge of the police inquiring into the JBL collapse, Detective Inspector C. E. Sturt, began giving his evidence today. He was the one hundredth witness called during the hearing.

London interview

Mr Sturt said that on January 14. 1974, he and Sergeant W. W. Whyte, accompanied by Detective Chief Inspector Thompson, of New Scotland Yard, interviewed J. E. Jeffs at his home at Henley on Thames, England.

The interview began at 10 a.m. and finished about 6 p.m. Jeffs’s daughter recorded it on a typewriter.

Mr Sturt said that he referred the defendant to his memorandum of August 9, 1971, entitled “philosophy of syndication.” J. E. Jeffs, he said, claimed that moneys paid by syndicate members were to be regarded as available to be applied by JBL for whatever purpose JBL might decide.

Memorandum

J. E. Jeffs said in the memorandum: “We admittedly take the funds in advance and use them to best advantage pending the construction of the building, by which time the roll-over of further sales replaces those funds. And they are transferred to their particular investors.’’

Mr Sturt said he asked Jeffs: “Would you agree that syndicate deposits were used by J.B.L. in accordance with the principal enunciated in your memorandum?” Jeffs: “This was a normal discussion paper in line with my concept of management. If further clarification was required I would prepare a full report.”

He said that, in selling 'properties to institutions and [others, a condition of sale I was that the money be paid directly to JBL, and under no circumstances be retained in a solicitors’ or estate agents’ trust accounts.

Mr Sturt said he asked Jeffs: The directors have stated that thev . . . ob-

tamed an undertaking from you in mid-1971 that all j syndicate members would sign an acknowledgment that they knew their money iwould be used by JBL pending settlement of the syndicates and thus earn interest. Did you give such an undertaking to the directors? Jeffs: No. and the directors had ample evidence and were aware of how the funds jwere being used. Jeffs said that he believed the investment division always made investors aware of the fact the funds went into the general account. He said he most believed Jt was being made clear to investors that their money was being so used. He believed this further spelled out by interest’s being payable from commencement. with cheques payable to JBL directly with the knowledge of the syndicates’ auditors and solicitors. Mr Sturt said that in land syndicate brochures under the heading. “Application moneys,” it stated that investors’ deposits would be used as advance payment towards the purchase of the land and on account of construction costs. He had asked Jeffs: Would you agree therefore that the procedure outlined to investors was not followed? Jeffs: I have not had access to any JBL papers since April, 1972. and I cannot answer. This was the responsibility of local management.

Liquidity position

Jeffs was asked if he was fully abreast of the liquidity position, which showed considerable deterioration, especially in the last six months before receivership. The defendant said he was aware that something seemed to be wrong with the New Zealand activities and he took action.

First, though, he had sought advice in Australia, about what constituted insolvency and was told it was impossible to state a point of insolvency and that commercial experience and judgment had to be used. He was told group insolvency could not be judged through the liquidity problems of one part of the group, particularly if the remainder of the group was 100 per cent ! owned. ' Mr Sturt: On February 26. 1971. you applied to the Reserve Bank to transfer personal assets to Australia. You were asked to explain the assets and you stated that your brother, Vaughan, had paid you $150,009 cash for the ontions to purchase 50,000 JBL Consolidated shares which you held. Did you sell such options to your brother for $150,000 cash?

Jeffs: If the question is to ascertain if I took $150,000 out of New Zealand for my personal use or anv part of that $150,000 then the answer is emphatically. “No.”

Solvency declaration

| Mr Sturt asked Jeffs why.'i when it must have been j I obvious from October, 1971, < that the group was in serious!’

(financial difficulties, could not meet debts as they fell due. and the position was deteriorating rapidly. he signed a declaration of solvency on April 4, 1972.

Jeffs said that he had first jasked a solicitor, probably >M. Thomson (one of the defendants) what a declaration of solvency was. He believed ihe also telephoned B. P. Hopkins (another defendant) I with the same question. They had told him so.livency constituted the ability [of a company under existing |circumstances being able to meet the total of its current liabilities within 12 months or some reasonable period of time. He, Jeffs, had also instigated various investigations to assess the liability of the group as a whole. Reports on the Australian activities were most favourable. Jeffs said he also had an independent accountants’ report showing the net assets! of the group in Australia as s4m.

He also had a report from Ihis own accountaing staff showing Australian profitability in the vear at probably between slm and s2m before tax. “I was therefore completely satisfied and sincere in signing a declaration of solvency.” he said. After reading the statement, Mr Sturt gave evidence of what happened after the interview.

He said Jeffs took the statement into another room and went over it with a solicitor who had been present.

After about 20 minutes thev . returned. Jeffs handed over the statement, but said he would not sign it.

“He said he had telephoned a ‘top London criminal lawyer,’ and on his advice he was not to discuss the matter further with the police, nor was- he to allow me to peruse documents he had, or take away any of his personal files.” Mr Sturt said.

He telephoned Jeffs twice later, but he refused to sign the statement or to allow documents to be borrowed !for photo-copying.

Vaughan Jeffs

! Mr Sturt said that on July 11, 1973. Vaughan Joseph Jeffs asked to see him. They met the next day and Vaughan Jeffs told him he intended to leave New Zealand to join his two brothers in London. On October 2, shortly before Jeffs left, an interview was arranged. Mr Sturt read what was taken down to the Court. Jeffs said that he had been unaware of new accounting methods adopted in the accounts for the period ended October, 1971. Mr Surt: The auditors reported that as a result of[ the methods profits were] overstated and the accounts did not give a true and fair view of the state of the affairs of the group. Jeffs: Well, it naturally

came as a blow. 1 honestly 'think that the auditors beicame totally disillusioned Iwith the company.

Mr Sturt said that Jeffs told him that he (Jeffs) had no recollection of the company’s professional directors' expressing concern about the use of syndicate moneys. Mr Sturt told Vaughan Jeffs that the professional (directors had said that thex lrefused to accept .1. E. ■Jeffs’s philosophy on the use [of syndicate moneys, and that they obtained an undertaking from him and the 'general manager in mid-1971 that “all syndicate members, 'would sign an acknowledgement that they knew that itheir money would be used [by JBL pending settlement lof the syndicate.” Vaughan Jeffs said that he did not know of the undertaking.

Trust accounts

Referring to trust account !receipts received by investors, Jeffs said that he might have been aware before receivership that such receipts w*ere being issued. “I was definitely aware after receivership,” he told Mr Sturt.

Asked by the detective to justify the use of moneys from the date of receipt in view of statements made in unsettled syndicate brochures coupled with the setting up of trust accounts, Jeffs said it was his understanding that investors were receiving 10 per cent, entitling JBL to use the funds at its discretion. Mr Sturt: I refer you to ;Jim’s (J. E. Jeffs) “philosophy of syndication” as outlined in his memo dated August 9, 1971. I refer in particular to the third paragraph which in essence is the basis of his “philosophy [of syndication.” Was this the view held by yourself, other directors and executives of the JBL group? Jeffs: I remember the memo quite clearly, and can only acknowledge that this philosophy was practised within' the group.”

‘Transfer of assets’

I Mr Sturt questioned Vaug-! han Jeffs about? an alleged' transfer of personal assets' by J. E. Jeffs to Australia. I Mr Sturt: On February 26,: 1971, Jim Jeffs, applied to! the Reserve Bank to transfer' personal assets to Australia. He was asked to explain the! assets, and he stated thati you had paid him $150,000 cash for the options to pur-! chase 50,000 JBL Consoli-i dated shares which he held,] Did you buy such options' from him and pay him?

Jeffs: I have no recollec-! lion of paying a personal I cheque for that amount . . . jl do not recall ever having [that amount of cash. I have ■no recollections of receiving! the options from my. 'brother, Jim.

Move to citv

Jeffs told the detective [that the Jeffs brothers had come to Auckland in the 1960 s because they had outgrown the Ruawai area in Northland and they could, see opportunities and potential in Auckland.

In August, 1970, Vaughan Jeffs moved to Legal House and became deputy managing director of the New Zealand activities of the group. He held this position until receivership. Mr Sturt said Vaughan Jeffs acknowledged the statement was an accurate account of the interview but, acting on legal advice, he refused to sign it. He had, however, initialled a mistake that was corrected on one of the pages. (Further evidence. Page 18)

A.A. post.—A new assistant general manager of the [Automobile Association [(Canterbury), has been ! appointed. He is Mr J. A. Strachan, the present I secretary-manager.