MISSING BOOKS

Dominion, Volume 27, Issue 297, 12 September 1934, Page 9

MISSING BOOKS

Sterling Investments Company SYDNEY INQUIRY McArthur Presents Lengthy Statement «MONEY FULLY PROTECTED’ By Telegraph.—Press Assn. —Copyright. (Received September 11. 8.40 p.m.) Sydney, September 11. Before the Royal Commission which is Inquiring into the activities and methods of a number of trust and other companies, Mr. Justice Haise Rogers presiding, assisted by Mr. Monahan, Major M. L. F. Jarvie, M.C., M.L.A., made a statement regarding his association with a previous witness, Victor Mclnnes. He said that he met Mclnnes through a member of a firm of accountants. He had never been associated with a man mentioned in the evidence, Foster, who, it had been alleged, had a criminal record- 1 Jarvie explained that after ac eompanying Mclnnes on a business tour of the country, he had been offered a directorship with the British Medical Investment Trust, and had accepted it. He had approached Dr Colvin, chairman of the Hospitals Com mission, who was a lifelong friend, and had, suggested that he, too, become a director. Dr. Colvin agreed, and both applied for 500 shares, paying £5O ap-. plication money, as provided in the prospectus. Later Dr. Colvin resigned for health reasons. His place was taken by C. J. Alcorn. Jalvie said that after further association with Mclnnes and McArthur he had been offered a position with the British National Investment Trust at a salary of £5OO a year, the appointment taking effect from April 1, 1034 ' The £125 he had been paid in June was for three months' salary. Change in Company’s Name. When the British Medical Association objected to the name British Medl cal Investment Trust, it had been resolved to change it to the British Vocational Investment Trust. He did not know whether the change had been effected because he resigned on August & * Mr. Monahan: The commission was appointed on August 8. Did you not resign after Parliament had taken action? Jarvie: No. Jarvie added that he knew the Government intended taking action. Replying to Mr. Monahan, Jarvie saifl that his appointment was in aii advisory capacity, but he was not ex pected to give advice in business matters. Mr. Monahan: So the only thing you did was to give advice regarding persons invited to attend the opening of the Trust Building? Jarvie: I attended at the Trust’s, offices dally. Jarvie added that there had been nothing to do during July, though he had drawn his salary. He had actually never taken any part In the business transactions. Jarvie denied having told Mclnnes that Dr. Hunter, secretary of the New South Wales branch of the British Medical Association, approved of the name British Medical Investment Trust. McInnes’s evidence in that respect was inaccurate. Witness had merely asked Dr. Hunter for approval for Dr. Colvin being’ on the board of this trust. Major Jarvie said he had retired from the board as he wanted as a public man to be free and to vote in Parliament free from association with trust companies., > 1 Mr. Monahan: It was in your mind there would be Parliamentary action before you retired? Major Jarvie: Yes. I discussed the matter with the Premier. Disappearance of Books. H. 0. Glasson, recalled, was questioned regarding the production of bal-ance-sheets. He said that the Sterling Investments Company’s balance-sheet was the key to'everything. Mr. Monahan: And the books of Sterling Investments are missing? Glasson: Yes. Continuing, G.asson said that the books had been left by him in Auckland but had disappeared. Apparently they had been removed from the office. Mr. Monahan: I suppose without the books the truth will never be known. Glasson: I wouldn’t say that. Mr. Monahan: Is there any doubt that, as a result of McArthur’s and Alcorn’s dealings with the books of these companies, some or one or all of them have made £340.000 nrofit In connection with the Trust building? Glasson: I could not say. Mr. Monahan; Isn’t It somewhere near that? Glasson: On paper. Mr. Monahan: McArthur, as a result Of these transactions, has a whole lot of assets of Wynw’ood Investments, Ltd.? Glasson: Yes, he has a charge over the assets. Mr. Monahan: Such a charge that It makes him virtually the owner of the lot. He has also property that belongs to Pacific Explorations, including a yacht That is all paid for out of the profits of these transactions. Can you unravel it? Glasson: I am afraid I cannot. J Mr. Monahan: If you had Sterling Investments books, would you be in a position to do 1 ? Glasson: Probably. Balance-sheet Altered, The commissioner asked Glasson whether he had altered the Southern British National Trust’s balance-sheet on Friday afternoon as a result of McArthur’s directions. Glasson said he did not remember. The commissioner: I think you are inclined to fence with me. Glasson: No. The commissioner: Did you alter it on Friday? Glasson: Yes. Mr. Monahan then quoted specific alterations which Glasson said had been made at McArthur’s suggestion. After further questioning, witness said an expense item had been converted into an asset. Asked to explain how he had originally shown a list of Investments in other companies as an expense and afterward put it on the other side as an asset, witness said that on reconsideration it was realised that it was an asset in effect. Further reference to "X” and “Y” companies was made when Mr. Monahan questioned glawm the.

investments of the Investment Executive Trust. The commissioner said he had to consider the interests of the companies. "When people try to get con trol of a company by secrecy,’’ he said, “one suspects there is something wrong. It seems as if two wellestablished New Zealand companies may get into the hands of people employing such business methods as we have here.” Mr. Monahan: What steps are being taken by the Investment Executive Trust with regard to the Trustees, Executors and Agency Company of New Zealand? Glasson; I know nothing about it. Mr. Monahan-: It is a company with assets of three or four millions com prising deceased persons’ estates, is it not? Glasson; I believe so. Mr. Monahan: Why are you trying to get control of those funds? Are they to be invested as these others have been? Glasson: I know nothing at all about it. Mr. Monahan: How much debenture capital has the Investment Executive Trust allowed the Transport Mutual for the purchase vof the Trustee Company's shares? Glasson: About £14,000. McArthur’s' Statement. McArthur presented a lengthy statement to the commission. He said every penny of debenture-holders' money was fully protected and secured by sound investments which exceeded in value the sum charged upon them. The total amount subscribed by the public for debentures in the Southern British'National Trust and in the Investment Executive Trust amounted to £648,194, while the book value of investments at cost was £649,153. The present market value of investments held on behalf of debenture-holders was much higher than the value set against them In the company’s books. Debentures of the British National Trust were supported by a great deal more in the way of substantial assets than the trust building alone. After dealing with the general plan of the Investment Executive Trust and the Southern British National Trust. McArthur said that one clause of ths debenture provided that 95 per cent, of the annual net earnings should be set aside for the holders of debentures as interest. The security given to subscribers to these trusts was first mortgage debenture, which must* always take precedence over creditors of every class, no matter what kind of charge or mortgage the directors of a trust might attempt to create over any of the assets. He had attempted to plan the operations of the trusts In such a way as eventually to return to deben-ture-holders a rate of profit exceeding that of interest on an ordinary investment trust debenture. ■ Success Claimed.

An indication of the success which the trust had achieved was that, after less than 31 years’ activity, the Investment Executive Trust had been anle to pay debenture-holders a total of 26 per, cent, by way of return on capital invested by them. , McArthur contended that the affairs of the companies were being investigated at an incomplete stage in their development. He admitted that on a general view the relations of the various companies one with another might seem to have been needlessly, even purposelessly, Involved. Many matters bad their explanation in the condition under which the Investment Executive Trust had been compelled to operate. It was necessary to understand the nature of the forces working ".gainst this trust since Its inception. There had been "strong Influence at every, point of the financial and political life of New Zealand against the trust companies” and “deliberate attempts to injure the Investment Executive Trust by making It appear that Its debentures had been bought below'par value.” Suggestions Denied. Suggestions had been made during the inquiry that the financing of the trust building Involved some misuse of money subscribed by the public, and that a portion of that money had been transferred from the debenture fund to Alcorn and himself. There was not the faintest foundation for any such suggestion. McArthur said that the primary function of the Sterling Investments Company had been to conserve the Interests of debenture holders by doing what the Investment Executive, Trust was not able to do for Itself. The Sterling Investments Company in the early stages of the life of the main company had been used to purchase certain assets of his, and, at the game time, to take over liabilities secured on them in order to frustrate those who desired to strike at the Investment Executive Trust by accomplishing his own financial ruin. A further purpose for which the Sterling Investments Company had been employed on behalf of debenture holders had been in a few cases to purchase debentures from Individuals who, for one reason or another, were threatening action against the Investment Executive Trust. The hostile condition with which the trust w„s surrounded had made it even more important that no weapon should be given to opponents with which they could stampede debenture-holders. Referring to the case of Miss Smith, Christchurch, McArthur said that the Guardian Trust and Executors Company of New Zealand had obtained control of her estate, and a writ bad been issued against Investment Executive Trust seeking to recover securities which had been transferred -by Miss Smith to the trust in payment for debentures. The directors knew that whatever the issue of the trial might be the ultimate result would be to injure the company and debentureholders. The claim accordingly had been settled for £29,000 and which represented substantially the value of the securities originally transferred to the Investment Executive Trust and the amount by which they had appreciated. McArthur said that the Guardian .Trust was connected with companies with which he had had to contend during the Redwood Forests negotiations. Accounts Said To Be In Order. Continuing, McArthur said that Mclnnes, during three years’ service as director of the selling system in New Zealand on behalf of the Investment Executive Trust, had carried out his duties faithfully. McArthur declared that the accounts of all the companies were now in order. Referring to the assets of the Pacific Exploration Company, he said it possessed 27,000 acres of freehold land in the northern part of the Auckland province which contained rich and extensive deposits of kauri gum. On a conservative estimate the quantity of gum on the area was worth £3,000,000 gross. This asset was set down In the

books of the company at £4700, being the cost of the land to the company. The commission adjourned till tomorrow.

DOMINION COMPANIES Reference in Evidence Dominion Special Service. Dunedin, September 11. There is reason to believe that the two New Zealand companies to which reference is made in the proceedings before the commission are tlie Perpetual Trustees and Agency Company and the Trustees, Executors and Agency Company, both with headquarters m Dunedin. I The Perpetual Trustees Company has never been approached with any proposal that it should sell its business, and the company states that if any such proposal had been made it would have been flatly rejected. The directors of tlie Trustees, Executors and Agency Company state that thev have known for some time that a movement was on foot to buy its shares, but, acting under legal advice, they have exercised power given to them by the articles of association to refuse to register transfers. Only three transfers of shares sold, comprising altogether 125 shares, have been passed by the board within the last 1tnontbs, and the transferee was in each case a member of the legal profession In Dunedin.