Evidence on JBL cash transfers

Press, 25 May 1977, Page 27

Evidence on JBL cash transfers

Cash transferred from JBL development companies to the trading companies was used by them to cover overheads and their general running. Detective Inspector Perry' Brian Kilvington said in the Supreme Court at Auckland. The trial, now in its sixth week, is before Mr Justice Somers and a jury of 10 men and two women.

Nine former executives or directors of the group have pleaded not guilty to charges of conspiracy to defraud the public. They are James Edward Jeffs, Vaughan Joseph Jeffs, Philip Paul Sargent (company directors), Hugh Buchanan Jones, Rex Evans, Hugho Stephen Fanning (chartered accountants), Michael Bruce Gurney Thomson, Barrie Phelps Hopkins (solicitors), and Peter Kenneth Leneve Arnold (company executive). Mr Kilvington said that in October. 1970, the liquidity situation was tight. By October, 1971, it had become acute. At that time receivership was inevitable not a matter of if. but when. Large intercompany transfers of cash had taken place. The trading companies, with the exception of Seafoods, were trading at a loss. They were not generating funds to meet their own needs. Between October I, 1970, and September 30. 1971, $1.19M had gone from the development companies to the trading companies, and $117,200 of that had gone back to the development company.

Mr Kilvington said that the trading companies, with the exception of JBL Seafoods, al! showed they were trading at a loss. They ere not generating funds sufficient to meet

their own needs and cash was transferred from the development companies to meet these.

Money transfered into the trading companies was used by them to cover their overheads and general running. They were obviously not able to pay back these advances and would be dependent on the development companies for further advances.

Mr Kilvington said some of the loans made by the development companies to JBL Seafoods were treated as share capital. The money was there locked into Seafoods. He said that the funds for the development companies came from loans sch as short-term depos-

At October 1,197 J. S2.IM had been borrowed from mortgages and almost 53.5 M had come in from syndicates. Of this about SIM had been advanced to the trad-

ing companies and SI.SM had been used up by the development companies on their own overheads. Mr Kilvington, said it appeared the group had a tight liquidity situation in October, 1970. This gradually got worse and became extremely acute in October, 1971. At this stage the group could not pay its creditors and was insolvent in his opinion, said witness. From October, 1971, to January. 1972. $618,000 went from the development to the trading companies and $16,009 went back the other way. It was borrowed money that was “keeping the show afloat” and receivership was inevitable. “It was a question of time,” said witness. Referring to property syndicates between October 1, 1971, to May, 1972,

he said that generally the money came into the group and was initially recorded in as investment register. It was then deposited in an account called the JBL Consolidated Trust Account. On almost every occasion the money came out of this account on exactly the same day. All moneyended up in the general account of JBL Consolidated. Mr Kilvington said that the money was utilised by the group for purposes including overheads of the group and possibly the completion of previous syndicates whose funds had already been used. Money to off-set this flow of cash out was not coming from the profits of the group as it either was not making any or it was not being realised. To offset the short-fall, syndicate money had to be used or further borrowings made.