TRUST INVESTIGATIONS

Hawera Star, Volume LIV, 19 September 1934, Page 7

TRUST INVESTIGATIONS

One Man Uses Several Names to Shroud Identity

EXAMINATION OF McARTHUR NO RECORD OF DEALS CUniwo Pres* Association —By Electric Telegrapli »:*, Copyright.) SYDNEY, Sept. 18. When the Companies Commission resumed to-day J. W. S. McArthur admitted to Mr Monahan, counsel for the commission, that the settlement with Miss Smith had cost £90,000, involving a loss to the company of £13,000. There was no record of the transaction, as every detail was not Shown. The losses were counterbalanced by profits made on other transactions, and the lump sum was all that appeared on the balance sheet.

Replying, to further questions by Mr. Monanan, McArthur said he had dravi-n' £7OOO inth© last four months from the Sterling Trust. The money was in. payment for Sterling Trust, debentures he had cancelled. In the last three', years Sterling Trust had sold assets of his valued at £28,000 to the Timberlands Woodpulp Company. Payment had been in cash. Mr Monahan: So this £7OOO drawn by you did not come from debent ureiioluers’ money,’ but from cash belonging to the Sterling Trust?—Yes. O'here are the records of these cash payments from Timberlands Wood, pulp?—lp. old books that were loist. McArthur said that as far as he knew these books were in New Zealand. Pie thought he might have left them at his home there, but a search had failed to discover them.

McArthur was questioned regarding debentures of his and Alcorn’s.

Mr Monahan: You parted with your debentures to the Investment Executive Trust, for shares?—Yes.

Then you sold your shares to the Southern British National Trust for £77,ooo?—Yes. But that did not increase our profits. You paid £22,000 to the Investment Executive Trust for property which you purported to sell to the Southern British for £77,000. —Yes. That got you credit with the Southern British for’ £77,000? —For which we were taking deferred shares. • You then turned back that £77,000 into British National Trust debentures which you say were worth £IOOO each ? —Yes.

Until this Commission started you had.got back £75,0(J0 in the shape of debentures ?-—That was part ot the transaction.

WITHOUT ANY .RECORD. ; v '*■ *. r The Commissioner : Did you deal with the £75,000 without any record ? Supposing you had died in the meantime, was there anything to suggest that. the £75,000 belonged to your estate ? —Thet© was nothing, but that was out intention. .Questioned by the Commissioner regarding the,sale of Investment Executive Trust shares to the Southern British, McArthur said the transaction was for £77,600. Of that £75,000 was to be in British National Trust debentures and £2600 in cash. Of that £75,000 worth of debentures they had handed back £63,000 worth free of cost. The Commissioner: That has all happened since th© Commission started. What Mr Monahan is trying to get at is why you should for £77,000 transfer to the Southern British shares that cost you £22,000. McArthur: That price enabled us to take that number of debentures. We wanted to release sufficient do-, bentures to meet the whole of the establishment charges in- connection with the two trusts. We still hold twelve debentures to meet any further charges that may be required by the trust. Questioned about a document, McArthur said the directors knew about it. The Commissioner: If there was an arrangement made, you would expect to find it minuted in the books of the company. Arrangements involving £30,000 to £40,000 were made by word of mouth without minuting them. The irresistible inference is that no agreement was made until th© Commission started. McArthur: The business has grown tremendously and I admit the books were not kept up as they should have been.

COMMISSIONER’S COMMENT. The Commissioner: But this is a transaction involving £40,000, and there is not a. scratch of a pen anywhere, and this purports to confirm an arrangement as to which there is no minute anywhere. I don’t think you can reasonably ask me to accept that evidence. McArthur: All I can say is that it was generally understood. When the arrangements were made originally the directors all knew about it and knew the bulk of the profits were to go. to the debenture-holders’ accounts. The Commissioner: From the moment that the idea of the building was conceived every step taken by the principal parties was a step to cover and not a step to make over. McArthur, replying to Mr Monahan, said that in June, 1933, they actually transferred from the shareholders’ account 16 debentures in the Investment Executive Trust to the debentureholders’ account without cost. Mr Monahan: That was because Mr Anderson objected?—No. I suggested that myself. He suggested that it be capitalised, but I went one better. Questioned by Mr Monahan about the transfer of debentures, MrArthur said he was to get the credit for £39,000. Replying to the Commissioner, McArthur said that of £2B7,(XX) nominal profit made by Alcorn and himself in connection with the trust building they had intended to keep about £lll,OOO for themselves. The Commissioner: Would you not have shown your bona fides if you had transferred this amount without all V these involved transactions ?—Well, frankly, there was a question of in-

come tax involved. The profits cannot be taxed now. McArthur said he and ; Alcorn were not liable to taxation in New Zealand on the profits from sale shares. PERSONAL ACCOUNT. Questioned regarding the opinion of a personal bank account for £2500, McArthur said b© thought be opened it with a cheque from the British National Trust. He had repaid the money to the trust. Of the £2500 McArthur said £IOOO had been used to buy debentures in the name of his wife and £IOOO was paid for ordinary ■shares described in the memorandum. He thought Pilkington and Pollard were the persons who benefited. He made them a present of the shares, which were paid for with this money. Th© Commissioner: I cannot understand how money from a trust should be put into debentures in the Southern British in the name of your wife. McArthur : I paid for them afterwards.

After further questions relating to bank accounts the Commissioner asked; “Supposing this Commission had not been appointed, when were you proposing to clear up all these matters ?”

McArthur: We were just about to start. I accept the responsibility for the chaotic condition of these companies.

The Commissioner: In fact you must accept the responsibility for everything?—Yes. McArthur said a separate account of the Sterling company at Auckland had been started with Investment Executive Trust funds and was operated by him. During 1932 £22,000 had passed through, it. M/ost had been used for the purchase of his personal assets. That was done to protect him from the attacks of hostile companies.

The Commissioner: Everything that has been done in these companies in the last three years has been entirely to your own personal benefit? —No. They have always been protected and received good interest. They had my personal assets as a security. The Commissioner; One of the matters that become apparent at this inquiry, and one that I hope will be rectified, is this practice of one man being able to carry on under fire or six names, shrouding his real identity and preventing people knowing with whom they are dealing.

McArthur said the Redwood Timber Company had been carrying on with assistance rendered by the Sterling Company. Of 40,000 shares in the Redwood company he held 28,000. During his absence in India his codirectors had made a. 10s call on the shares, making him liable for £14,000. That and other subsequent moves had been directed against him personally in an effort to oust him from his position. He had given three blocks of land in lieu of payment. The Commission then adjourned.