THE TRUST GROUP

Evening Post, Volume CXVIII, Issue 34, 9 August 1934, Page 8

THE TRUST GROUP

SOME TRANSACTIONS

DESCRIBED BY COMMISSION

: A description of some of the transae-, tions of the Investment Executive, Trust Group is given by the Commissio.il.

These are summarised as follows:- —

"(1) Sterling Investments' Co. (N.Z.), Ltd., seems to have been for years a kind of elearing-houso for.tran.sactions in w'luch J. \V. S. MeArthur and companies controlled by him are interested.! We have direct evidence of several transactions whereby threatened litigation or other adverse action against MeArthur or ono of the other companies, has been averted by a settlement effected by a payment by the Sterling Co. Several such transactions relate to McArthur's personal liabilities .in relation to : the Selwyn Timber Co., Ltd., in liquidation, and the New Zealand Redwood Forests, : Ltd-. At a time when the paid-up capital of the Sterling Investments Co. (N.Z.), Ltd., was only £50, it lent several thousands of pounds to the Selwyn Timber Co., Ltd., in liquidation. During 1931 and 1932 the Sterling Co.'s paid-up capital was £50 14s, while on September 1, 1932, it had registered with the Registrar of Companies, as mortgages "or charges, debenture issues totalling £165,000. ... . ■"The latest filed return of Sterling Investments Co. (N.Z.), Ltd., shows its paid-up capital at £2350, but it has subscribed' for shares of a nominal value of & 10,883 in other companies included in. the foregoing list. Of these, £99Z9 is in tho Pacific Exploration Co., Ltd. ; a company formed to finance tho " building of a luxurious yacht which is now registered in tho namo of J. W. S. MeArthur as owner.

"(2) The Transport Mutual and General Insurance Co;, Ltd., illustrates the typical methods of the group. It was incorporated iv November, 1933, and its memorandum of association and articles qf association were Signed by seven most obvious 'dummies.' Four of them are girl clerks in the offices of companies in the foregoing group. The articles of association provido that 'the first three subscribers to the memorandum shall be the first directors. They are: Margaret Muriel Dunn, Marjorie Hawley, and Henry Davenport Williamson, who each signed the memorandum for one share. Then, in February, 1934, the Investment Executive Trust of New Zealand, Ltd.,. was allotted 60,000 shares of £1 each in the capital of the Transport Mutual .and General Insurance Co., Ltd., and paid up 10s per share, or £30,000 in all. The three 'directors' named above filedtheir statutory report a month later, showing the receipt of this £30,000 from the ..Investment; Executive Trust, together with a further £1500 as'an atlvance in anticipation of calls,, and they showed as tho approximately corresponding assst: 'Sundry Investments, £ 30,500.' -Wo summoned, those three 'directors' to appear before us on June 6, 1934. Margaret Muriel ,Dunn. deposed that she was twenty-ono years of age; that she had no experience of the requirements and form of. an insurance company; that a Mr. "GloverClark had asked her to sign tho nienio-

randum for ono share and to act as a diroctor pro tern.; that at a 'meeting of directors' the solicitor of the company, Mr. M. G. McArtliur (a brother of J. W. 8. McArthnr) brought a list of investments, and tho 'directors' were asked to sign their approval, and did so, exercising no choice or judgment of their own; that, later, Mr. GloverClark, Mr. C. G. Alcorn, and Mr. T. 11. Macky, becamo directors . and took over. Marjorio Hawley is nineteen years of age, and corroborated Miss Dunn's evidence; she simply did what she was told by Mr. Glover-Clark and Mr.■■ Me Arthur.' Henry Davenport Williamson described himself as an agent, sixty-one years of age; he admitted his signature to the filed documents, inchiding a statutory declaration that he had made a reasonablo investigation and inquiry \as to the requirements of tho company and was of opinion that tho capital subscribed was sufficient to justify tho company in commencing business; but-lie disclaimed all responsibility, and said that he had no voice in the matter, and that he was not in any sense in charge nor was he, at any time, asked his opinion on any point. SPECULATIVE PURPOSES. "Taking the least serious view of this whole transaction, it enables the common controllers of the two companies, by the intermediate investment in shares of the Transport Insurance Co. to invest tho funds of the Investment Executive Trust in investments which tho auditor of the latter, company would not pass. A more serious possibility is that tho funds may be used for speculative purposes designed to secure collateral advantages to the directors of the companies.' Wo have, in this connection, ascertained facts which demand a close inquiry. "(3) The Various Investment' Trust Companies.—The focal centre of this group in New Zealand has been tho Investment Executive Trust of New Zealand, Ltd., of which J. W. S. McArthur is the managing director. It may be repeated here that this company has a paid-up capital of £30,000, and has issued a prospectus for the issue of mortgage debentures to a, total of £4,000,000.. . . . ~ -.'■'■ "FANTASTIC" OBJECTS. "(4) Pacific Exploration, Ltd.—Tho 'objects clause' of this company's memorandum of association can only bo described as fantastic. The main object is: 'To seek for and secure openings for the employment of capital in the Pacific or in any other part of the world.' Its other objects include subsidising laboratories and experimental work; scientific and technical research; supplementing the remuneration of scientific "or , technical professors _or teachers; to carry on as farmers,. dairymen, and as tiutehers and' sausage manufacturers, and to : produce, construct, charter, or hire wharves, ships, etc. It lias been extremely difficult to get any information. about this company, although it' is commonly reported that it was formed to finance the building of a yacht which MeArthur has used as his own. ... _ "It is also a fact that tho yacht is registered on Ythe books of tho Royal New Zealand Yacht Squadron at Auckland in-the name of J. W. S. McArthur, and, the entry, is-- supported by an: affidavit of McArthur that it is his own property. It is also registered in McArthur's name with the Customs Department. These facts should be considered in the light of tho evidence, cited later, as to McArthur's unfinancial position a few years ago. McArthur now signs documents as sole attorney for Pacific Exploration, Ltd. "5. Farms and Farnilets, Ltd. —This is a private company. The shareholders aro W. C. Hewitt, solicitor,, and his wife. Hewitt is largely occupied in legalwork for McArthur and his companies. He is now in Sydney, New South Wales, with McArthur. Tho company has registered: with tho Begistrar of Companies at Auckland an issue of bearer debentures-^-SOO of £200 each: total, £100,000. It is the largest shareholder in the British National Trust, Ui., of Canberra, by virtue of itsholding of 51J200 shares of £1 caclv ••■ , FINANCIAL PUBLICATIONS. '."6. Financial Publications, Ltd.—-This company publishes a monthly magazine, The Investment Review, t0 Sive financial advice to investors and to disseminate information on financial matters. Its directors are: 0. J. Lovegrove, E. S. Abel, and Kichard GloverClark. One or other of these men is interested in each of the New Zealand investment trusts described herein. Its balance-sheet, as at March 6, 1934, shows a paid-up capital of £54, but its 'sundry creditors' appear as £6101. The year's profit, and, loss account shows that its total revenue from 'subscription's, sales, and advertising and inquiry fees was £171.'- It nevertheless' completed its year with revenue disbursements of £5739/ including '£350 directors' fees, 1 the result being a net loss of £55C8. •

,"7. Transfers of Shares in Affiliated Companies.—Transfers of shares, between members of tho foregoing group are fairly frequent, and sometimes for large parcels. As illustrating the possibilities in this connection, we would refer to the following facts culled from official records in the offices of. the Registrar of Companies and Stamp I Duties Department:—ln company registration offices—Return of allotments filed March. 3, 1933, by British National Investment' Trust, Ltd. (New Zealand), ordinary shares of 2s each allotted to: C. G. Alcorn 49,598, J. W. S. MeArthur 190,395 —paid up to 2 2-5 d per ' share (twopence and two-fifths of a penny)— 239,993. . , ~ ' ■.. . "On March 2, 1933, Me Arthur bought 9000 such shares from' Investment Securities Association, Ltd., for' £100. In Stamp Duties Office, March 26, 1933— . ' . '■■■..'' Requisition Np. ,21221 for stamping transfer of shares in British National Investment Trust, Ltd. (New Zealand)— ' . : -■ , . . . ' ' Stamp ■ Duty ■~ paid. ,S s. From C. G. Alcoru 49,5-!S shares'3s each, sold at over £1 each ;-... 200 19 Prom 3. W. S. MeArthur 199,395. slmrsSj 2s cftcli sold tit ovor £1 j cacli ■ 803 12 Tho transferee in each' case is the British National Trust (Canberra). "The, consideration money was oxpressed as £287,000,'0r over ten times the nominal value, and over eighty times the -paid-up ;value,of shares allotted three weeks, .previously. . ','lt is noteworthy that at .tho .date of this transfer,'J. W. S.. Me Arthur; was managing director of tho purchasing company (domiciled in Canberra), which is an investment trust operating in Australia. The latest', return filed by this purchasing company "in New South Wales'.', shows its total paid-up, capital as £65,007, or lea's';.than one-fourth of the consideration money for these shares.'' .-'■-.- • , ■