COMPANY FINANCE

Gisborne Times, Volume LXXXIV, Issue 12904, 3 July 1936, Page 2

COMPANY FINANCE

McArthur before court. ALLEGED FALSE REPORTS AND PROSPECTUSES. INSPECTORS’ EVIDENCE. INVESTMENT EXECUTIVE TRUST TRANSACTIONS. ACCUSED COMMITTED FOR TRIAL ON FIRST CHARGE. ("Press Association V. WELLINGTON, July 2. Evidence on the charges aga-inkt J. W. S. Ale Arthur alleging the publication of- false - prospectuses and reports in relation to company affairs was continued before Mr E. D. Mosley, S.M., to-day. John McFarlane Elliffe, public 'accountant, of Auckland, one of the four inspectors appointed to investigate tine affairs of the companies mentioned in the Companies Special Investigation Act, gave, evidence that he specialised in a. certain group of companies, viz., Sterling Investment Company (N.Z.)', Ltd., Pacific Exploration Company. Ltd., and Dynwood Investments, Ltd. He was also present at the sittings of the Royal Commission, in Sydney. At the Royal Commission sittings, the hooks of the Sterling Company, prior to February 28, 1934, were not presented. They were stated bv var ious officers of the company to he lost. A. balance sheet of the company as at August 31 1932, was found among the papers or the company and afterwards produced to the commission.

During adjournments of the commission, he had discussions with the accused relating in the main to the reconstruction of certain boolds which he attempted to make with the object) of arriving at the value of certain assets taken over by the WvnWood Company and by McArthur per s,onally in February 28, 1934. . The Sterling Company’s balancesheet as at August 31, ISB2, was always produced, and. at no time did McArthur suggest that it was inaccurate. That balance sheet was the basts of Ills reconstructed books.- In addition to thru balance sheet, there were available cheque hook butts on the Sterling Company’s ordinary account- from August 31, 1932, to Feb--ntary 28, 1934. Also, there were available bank statements showing, in many eases, where the moneys had come from and also a file of receipts ifind vouchers of the Sterling Company.

£50,000 RAID TO STERLING CO

As a result of his, investigations lie found' that. £50;300 . had been paid by the Investment -Executive'Trust to the Sterling Company up to March 31, 1933. That figure was not entirely gained from the reconstructed books, but was verified from the Investment Executive Tmst hooks. The Investment Executive Trust .received in return debentures from the Sterling- Company in denominations of £IOOO, which were purchased at £9OO. The debentures, were charged upon all the assets of the Sterling Co. In order to cover the- total payments. of £50,300 5-5 debentures had been placed on the market. Subsequent to March 31, further mon evs were paid by the Investment Executive Trust to the Sterling Company and were recorded in the Executive Company’s hooks by. a direct ebaarge to the British National Trust Ltd. account.

After March 31, 1933, no further Sterling Company debentures were issued, hut to cover any money advanced, not only to Sterling's, but also to other companies, British National Trust debentures 1 were issued and payments .were charged to the British National Trust account. Out c-f the total moneys: paid by the Investment Executive Trust to the Sterling Company up to February 28, 1934, a total of approximately £60,000 was 'expended by the SterlingCompany on the assets set forth in a document- produced, at Sydney commission to- be produced later, arid included in that amount were; drawings by the accused -himself and mon-

eys spent on his house at Hillsborough, Auckland. r OBJECTION TO EVIDENCE • Mr TI. F. O'Leary objected to all this evidence which, he said, lie could only think was being brought to. prejudice Me Arthur, it: had no relevancy and he asked for the protection of the court.

Tire magistrate spoke to tho effect that lie realised.- that, the Crown’s position was a difficult one. He ..presumed. that the Crown had- taken everything into consideration. . Mr O’Leary s-aid his real objection was that evidence to the effect that certain transfers were made to McArthur w-ais- one-sided. There- was an-, other isidp. Valuable, consideration was given for all those transfers. Tho magistrate remarked that a preliminary hearing was always apt to look one-sided when the casjj for the d-ufence was not placed before the court.

Mr O’Leary: And it may he very prejudicial to the accused. V

The next witness wak Kenneth Curtis Aekins, a, solicitor, of Auckland. The witness said: lie wan . appointed a dirbetor when the Sterling Company was incorparated and was solicitor for the company. Regarding the various transactions carried out and the resolutions- passed by the directors of the Sterling Company, the witness said he got instructions from McArthur and Alcorn as to- what was to- -bo done. He was not aware- that the -accused was making personal drawings frqm the invest incuts- account of the Sterling Co. CREDIT IN NAME OF Mce ARTHUR’S SON

In cnv.vS T oxaminatioii, the witness ■said lie was not aware that there-, was at any Time a credit-in the name of McArthur’s .son in the Sterling ac-

count. He knew the.son. He would beabout 22. and was at the time working as an employee iii the Investment Executive- Trust. He knew of . no dealings which would rc-sult in the son Having ,oi credit of £SOOO. John Leslie Guinness, an officer of the National Bank at Auckland, pro duced the original authority in, connection with the Sterling account, and said it wan to be- operated upon by J. Mb. S. McArthur alone. ACCUSED- PLEADS NOT GUILTY ■ADVISED MAGISTRATE IS UNABLE TO TRY CASE At the- completion of evidence, McArthur pleaded; nob guilty. He said he was advised that tho magistrate was unable to try the- ease. - so that the giving of evidence in that court would: servo no useful prupose, hut should the case go to the Supreme. Court, he would give evidence in answer to all charges. The- magistrate -said lie quite understood that accused was probably very well'advised, to adopt that attitude. McArthur was committed to The Supremo Court for trial at the next sitting, which commences on Juy 20. Bail was renewed. The Court- then proceeded to hear evidence on tho remaining three charges. WHY AN AUDITOR RESIGNED John Anderson, public accountant, of Auckland, said that from the time the Investment Executive Trust commenced business in 1931, till he- resigned on May 29, 1933, he acted as auditor.lor the company. He audited the accounts for the years ending December 31, 1931, and 1932. For theyear ending December 1932 he had completed the audit by March 30, 1933. He was handed a. balance sheet produced by.the secretary (Mr G 1 assail). The balance sheet did not meet with his approval in the form in which it-was handed to him. Included in the: investments were two investments of £36,358 for Sterling Investments' and £52,000 for British National Investment Trust. Witness said he gavel McArthur Iris views- on the associated companies and asked that the account be properly stated. Witness was invited to meet the directors about tho middle of. May. Tic- position of the , associated companies was discussed. The gist of discussion mainly revolved round the question of

whether or not witness, was interfering by his action, with the policy of the board; . The directors,: expressed the view that these- companies were not associated with the trust. ; Witness held'lai different view.'They -suggested, that witness;-was • interfering with the-, policy of the company. His answer was that li:« duty wws clear as auditor. Finally witness sent in his resignation on May 29, 1933. It was accepted on July 26 by the board. The hearing of evidence on tho three-other charges, which is practically identical with That on the first taken, was commenced. It will be con tinued wheal the com t resumes in the morning.