THE MCARTHUR TRIAL

Evening Post, Volume CXXII, Issue 32, 6 August 1936, Page 14

THE MCARTHUR TRIAL

ACCOUNTANT'S LONG EVIDENCE

REPORTED SALE OF TRUST BUILDING

For practically the whole of yesterday Arthur Eric John Anderson, a Public Trust Office accountant, occupied the witnessbox in the Supreme Court giving evidence for the Crown against John William Shaw McArthur, company director, formerly of Auckland, who is facing six charges relating to the issue of allegedly false prospectuses and reports of the Investment Executive Trust of New Zealand, Ltd. The witness, who entered the box on the previous day, was cross-examined by Mr. H. F. O'Leary, K.C., senior counsel for the defence, at some length and at times with considerable vigour. During the witness's re-examinatibh mention was made of a cable,to the Public Trustee announcing the sale of the Trust Building in Sydney, but to this Mr. O'Leary objected, contending that as yet the reported information was unconfirmed and inexact. The matter .was not pursued further.

The trial is taking place before the Acting' Chief Justice (Sir- John Reed) and a common jury. *•

The case for the' Crown is being conducted by Mr. V. R. Meredith, Crown Prosecutor at ..Auckland, and Mr. C. Evans-Scott, Wellington. Mr. H. F. O'Leary, K.C., with Mr. R. E. Tripe, is appearing for McArthur, and the defence has the assistance of Dr. F. Louat, a Sydney barrister.

Shortly after the Court resumed yesterday afternoon .Mr. O'Leary began cross-examination of the witness Anderson. Witness said ithat the Public Trustee had been Appointed liquidator arid receiver of the "Investment Executive Trust and all but .two of. the other companies. The Public Trustee had been appointed r under special legislation. .••■■' ■

Mr. O'Leary: And you have: really specialised in the dealings of this particular group of trust companies? .Witness said that was so.

Mr. O'Leary: Have you done anything . else for twelve months?—Oh, yes. (Laughter.)

In August, 1934, this special legislation was passed under which inspectors, liquidators, and so on could be appointed?— Just the inspectors, I think it was.

All right. As a result four inspectors, Mr. Griffin, Mr. Elliffe, Mr. Vickery, and Mr. Seaman, were appointed to investigate the affairs of the McArthur companies, were they not?— Yes.

And they:did so. Some of them weat to Australia to attend the proceedings of the Royal Commission that was investigating: the affairs of the companies in Australia?— Yes.

I suppose you knew of the rumours that were current throughout New Zealand that hundreds of thousands of pounds had been stolen and so on? —I didn't hear rumours of that i just read the papers. Out of all that investigating a charge was laid against McArthur that he had issued a false prospectus? That was the first' charge wasn't it?— Yes Do you know that that information was sworn about a year ago?—ln October, 1935. -• ■ That was 14 months after the inspectors had started on their inquiry iq^l^ 8' ? 0U know that in August] 1934, the whole of the available books of these companies were seized and taken out of McArthur's hands?— They inspected them. I don't know whether they were seized. solutelol *^ ThCy WCre Seized ab" Mr. Anderson said he knew nothing about thai. ; Mr. O'Leary: However, after fourteen months the charge of issuing a false prospectus under the Crimes Act was laid. Have you ever heard a charge of that kind being brought before in New Zealand against anybody? —I can't say I have. Am I right in saying it is the first charge of its kind in New Zealand?— I don't know. His Honour: It is not the first in the Empire. "I didn't say Empire, your Honour" replied Mr. O'Leary. "I was particularly careful not to say Empire or what is called the British Commonwealth of Nations." Mr. McArthur was returned to New Zealand and within the last two months you j personally swore three informations alleging theft against him?— Yes I did it at the request of the late Crown Prosecutor. I didn't initiate them, i ' You charged three informations alleging theft against him for an amount aggregating £ 1075—alleged thefts from the Sterling investment Co.?— Yes. .■;-.. In. reply to other questions witness said these charges had been investigated in the Magistrate's Court, and' that Mr. Mosley, the senior Magistrate, had dismissed them, holding that there was no case to answer in respect "of them. . . •.' ALLEGATION OF PREJUDICE. Mr. O'Leary: Now, Mr. Anderson, I put it to you that the laying of these informations was deliberately done to prejudice McArthur in this particular trial?— Certainly not, as far as I was concerned, Mr. O'Leary. I was asked to lay the informations and I agreed to do so. •-.>■ Mr. Meredith, addressing his Honour, said that the witness had told the Court what, his^ part was in the laying of the informations,, and counsel suggested that if Mr. O'lieary desired to make any comment, now was not the time to do so. His Honour said he supposed the witness had only done what he had been instructed to do in the matter. He suggested that Mr. O'Leary would agree that this line pf cross-examination had nothing.to.do with the case. Mr. O'Leary: -If I can show the motive behind all these proceedings His Honour interposed, asking what the motive had to do with it. Supposing, continued his Honour, a case was brought into the court that.was actuated entirely by spite it would not mal> ter how it was brought before the Court if the offence alleged was proved.

Mr. O'Leary: Very well, we shall leave that aspect. ■ --.-• ■ .

, Counsel next referred to the statement he said had been made by counsel for the. Crown to the effect that "money filtered into there and money went there to the benefit of McArthur." He suggested to witness that if in these transactions there had been a semblance of .crime :on McArthur's part'proceedings would have been taken in respect of it. "You were looking all the time, were you not for crime'on his part?" Mr. O'Leary asked. Witness replied "No." THE YACHT MOREWA.

Apart from these proceedings the Public Trustee has taken proceedings against McArthur claiming £10,000 in respect of the yacht (the yacht Morewa), has he not?— Yes.

'That is down for hearing in a fortnight's time, isn't.it?— Yes, that is so.

So I take it that the Public Trustee is not other than alert .of his.responsibilities and that if there is any other civil liability on Mr. McArthur's part —if you think there is, appropriate proceedings will be taken?— Yes:

Can I put it that in respect of the present indictment the real sting is that he did not, what you call, diversify?— Yes.

His Honour: Of course, that is apparently a question of law, isn't it, because that is not really the charge? The charge is -that'- he misrepresented:

that his alleged representation was such' as to give the impression- that there was diversification of securities.

Mr. O'Leary: I put it to you, Mr. Anderson, and' you agreed with it, that, the real sting y in the charges is that there was not . diversification?— That is the way it appears to me—that there wasn't • the diversification there should have been. • ' • •

; At the request of Mr. O'Leary, witness was 'supplied -with the prospectuses/and reports on which the charges-are founded. After reading from these documents and questioning witness on them, Mr.. O'Leary asked him why he used the heading "English.investments" in the statement he had produced of the.debenture capital and. investments of the Investment Executive: Trust of New. Zealand, Ltd., if he .was unable to point to any English' . investments :in ' the other documents.:1 • ." ' . -•■..'

Witness said he was asked to prepare the statement of debenture capital and investments to shbw what had been done with the , available cash that the: company had for investment The purpose of the column, "English investments," was to get ah idea as to how much had been invested in the English companies referred to in a letter. He was asked .to do it.

Mr. O'Leary: You have a fairly general knowledge of the securities that were held, Mr. ' Anderson?—Only at the end. I haven't, examined in detail the schedules of investments held at various dates right through the proceedings. Our chief interest was what was left./ Of course you concede this,-that if debentures were purchased with vstock —with shares in other companies—so long a's these shares-were retained that w.as an dnvestment?-:-Yes.

Mr. Anderson, if, ah investment trust got £1000 in, the first year and stated its policy was to diversify the investments, if it put £500 into one security and £100 in each of five other securities, would you object to that as being a failure to come up to. the.policy of diversification?—l • wouldn't say that •was proper diversification. . The. hew. Companies Act came into operation in 1933^ said witness; in re-, ply ' to other questions, and he knew that" Act required, much more information to be given in a prospectus than had previously jbeen the case. Mr. O'Leary: Can you see any other reason for the issue of-the .second prospectus than a desire to comply with the Companies Act? —I-know of ho other reason. ENGLISH INVESTMENTS. •, Mr. O'Leary went through with witness a list, taken out' by the defence, of investments which counsel said the Investment Executive ,Trust held in English companies as at December 31, 1932. Witness agreed that in round figures the total amount of the investments at that date was £17,000, and that in addition there were Australian companies and New Zealand companies. Mr. O'Leary next produced ■!a schedule prepared by the defence; of the investments held by the Investment Executive Trust at various dates. Counsel also went through this with witness, and said that the figures would be proved by witnesses later. THE TRUST BUILDING. The witness agreed with Mr. O'Leary that the purchase price df the ; Trust-building was £100,000 and that soon after its purchase a considerable sum of money was spent on extensive alterations to it. Mr. O'Leary: And the position now is that the amount that debenture holders will get by way of return on their capital from the liquidation to a great extent will depend en what the ■ Trust building brings?— Yes. That will have_;jl substantial .effect on it. I suppose you know that apart from what was spent on the building, subsequent valuations of it given to the Sydney Commission indicated that it was a very good bargain?— Yes, it was quite a good speculation. " j I think the present position is, subject to anything we may hear, that the Supreme Court in New South Wales has put a reserve price of £273,000 on it?— Yes. ■" . Do you know that valuations were given at the Commission of various amounts from £300,000 to more than £400,000?— Yes. I suppose you know that the Commissioner said generally that £300,000 would be too low and £400,000 too high a price?— Yes. Anderson was re-examined by Mr. Evans-Scott on the amount of the Investment Executive Trust holdings iin British companies and in its associated companies. Witness said that . the special legislation dealing with the Trust building had vested it in the Public Trustee of New South Wales and the equity was to be divided between the Investment Executive Trust and the Southern British National Trust in the proportions of two-thirds and one-third respectively. He understood that the amount spent on the building since it was bought was £102.000, of which £50,000 had been raised by increasing the mortgage to its present amount of £100,000. SALE OF BUILDING? Mr. Evans-Scott: Is rt a fact that the building has how been sold?— Yes. Mr. O'Leary objected to the question, stating that, although there was some cable, the sale of the building was at present unconfirmed and at this juncture was not capable of proof. It might be possible to .get something before the case finished, but at present they did not know the exact terms.

Mr. Evans-Scott said that if Mr. O'Leary objected the Crown would not press the point. ,

His Honour: To whom has the "cable come?

The witness:; To the Public Trustee.

In reply to further questions by Mr. Evans-Scott the t witness said that about the. time of'the purchase of the building in 1932 securities held by the company were being sold to get cash, and he gave details of shares sold by the company in the months of October, November, and December, 1932.

Cross-examining Anderson for a second time, Mr. O'Leary asked whether there was not a special reason for the securities having to be sold at the end of 1932 or the beginning of 1933—t0 pay back capital to a debenture holder, a Miss Smith. Was not the position that the Guardian Trust ,Co. was managing the estate of Miss,

Smith under the Aged and Infirm Persons Act and that Miss Smith, a very wealthy woman, had invested a substantial amount of money in debentures of the Investment Executive Trust? .■'■■■;■;■■;•■ > The witness agreed that that was so, and that the Guardian Trust Co. had commenced an action against the Investment Executive Trust for the return of Miss Smith's investment. • Mr. O'Leary: And the Investment Executive Trust paid her out or paid the Guardian Trust?—l think they returned some of the" scrip. The witness said he did not know how much was returned in scrip or cash to Miss Smith. . . Mr. O'Leary: You can say this: that £30,000 had to be provided either in cash or in scrip?— Yes. ..'• , The money was not paid put directly by the Investment Executive Trust, but it provided money for Sterling' to buy the debentures?— Yes. -'. John Leslie Griffin, "a"public accountant, of Wellington, said that by Gover-nor-General's warrant of August, 1934, he was appointed one of four inspectors to investigate the affairs of certain companies. He inspected the books of account and toth'ef records*'of a number of companies but more particularly the British, National Investment Trust and later the Investment Executive Trust. '..".■ The Court adjourned until today, McArthur again being allowed bail overnight POPULAR WRESTLING BROADCASTER IN ENDURANCE CONTEST. The large army '■ of wrestling fans listening in to. a recent contest broadcast from Christchurch: heard the ■ announcer' apologise" for.:still.having a rather throaty, cold. This did-not. detract from the" effectiveness of the broadcast, but obviously the announcer was not a little distressed. ■; He mentioned that one "listener-in" had sent him a sympathetic note and suggested that he take, a well-known brand of dog medicine fqrhis bark. A far, more -helpful. suggestion, however, was made by another^'wrestling fan who sent the announcer.a bottle, of Baxters-Lung Preserver. ='■ A : All who wrestle with a cold should enlist the' assistance of good'old "Baxter's." :Pne of "Baxter's" star performances;, is in breaking the; hold "of a iwell-estabjished- cold when- nothing else seems to.do any.good. No other remedy is so pleasant. to take and -so prompt in-giving relief, while "Baxter's" is, of course, unique for its marvellous tonic properties. 4s 6d, 2s 6d, U 6d. All chemists and stores.—Advt.