COMPANY METHODS

Hawke's Bay Tribune, Volume XXIV, Issue 231, 12 September 1934, Page 9

COMPANY METHODS

THE SYDNEY INQUIRY

Statement by Mr. McArthur

MR. GLASSON RECALLED

By Telegraph—Press Assn.—Copyright Sidney, sept. 11.

The Royal Commission which is inquiring into the activities of certain trust companies continued its investigations to-day. The chief features were evidence in relation to the activities of the Investment Trust in connection with the Trustees, Exe«;tcx» and Agency Co. of New Zealand and a statement by Mr McArthur in defence of the actions of the companies in which he is interested.

Mr Justice liaise Rogers presided us Commissioner, Mr, W. W. Monahan, K.C., and Mr. J, B. Collier appeared as counsel assisting the commission, Mr. R. Windeyer, K.C., and Mr. B. Fuller for the Investment Executive Trust of New Zealand, Limited, and the Southern British National Trust, Limited, and Dr. F. Louat for three other companies.

.Major Jarvie denied having told Mr McJnnes that Dr. Hunter approved the name “British Medical Investment Trust.” Mr Melnnes’s evidence in that respect was inaccurate. Witness had merely asked Dr. Hunter for approval for Di. Colvin being on the board of this trust.

Major Jarvie said that he had retired from the board as he wanted, as a public man, to bo free and to vote in Parliament free from association with the. trust companies. Mr Monahan: It was in your mind that there would be Parliamentary action before you retired? Major Jarvie: Yes, 1 discussed the matter with the Premier. BOOKS MISSING. Mr. H. C. Glasson, secretary of the Investment Execeutive Trust of New Zealand, recalled, was questioned regarding the production of balance sheets. He said that Sterling Investment’s balance sheet was the kev to everything. Mr Monahan: And the books of Sterling Investments are missing? Mr Glasson: Y T es. Continuing, Mr Glasson 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 that without the books the truth will never be known? Mr Glasson: I wouldn’t say that. Mr Monahan: Is there any doubt that as a result of Mr McArthur's and Mr Alcorn’s dealings with the books of these companies some, or one, or all of them have made £340,000 profit in connection with the Trust building? Mr Glasson: I could not say. Mr Monahan; Isn’t it somewhere near that? Mr Glasson: On paper. Mr Monahan: Mr McArthur, as a result of these transactions, has a whole lot of assets of Wynwood’s? Mr 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 also has property that belongs to Pacific Explorations, including the yacht That is all paid for out of the profits of these transactions. Can you unravel it? Mr Glasson: I am afraid I cannot. Mr Monahan: If you had the Sterling Investment Co’s books would you be in a position to do it? Mr Glasson: Probably. BALANCE SHEET ALTERED. The Commissioner asked Mr Glasson whether he had altered the Southern British balance sheet on Friday afternoon as a result of Mr McArthur's directions. Mr Glasson said that he did not remember. The Commiesioner: I think you are inclined to fence with me. Mr Glasson: No, The Commissioner: Did you alter it on Friday? Mr Glasson: Yes. Mr Monahan then quoted specific alterations which Mr Glasson said had been made at Mr McArthur's suggestion. After further questioning witness said that an expense item had been converted into an asset. Asked to explain how he had originally shown it in the list of investments in the other companies as an expense and afterwards 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 the “X” and companies was made when Mr Monahan questioned Mr Glasson regarding the investments of the Invbstmeut Executive Trust. The Commissioner said he had to. consider the interests of companies. “When people try to get control of a company by secrecy .one suspects that there is something wrong,” he said. “It seems as if two well-established New Zealand companies may get into the hands of people employing such business methods as we have here." AGENCY CO. OF N.Z. Mr Monahan; What steps are being taken by the Investment Trust with

regard to the Trustees, Executors and Agency Co. of New Zealand? Mr Glasson: I know nothing about it. Mr Monahan: It is a comphny with assets of £3,000,000 or £4,000,000, comprising deceased persons' estates, is it not J Mr Glasson: I believe so. Mr Mouahan; Why are you trying to get control of those funds! Are they to be invested as these others have been? Mr Glasson: I know nothing nt all about it. Mr Monahan. How much debenture capital has the Investment Executive Trust allowed the Transport Mutual for the purchase of the Trustee Co. ’« shares? Mr Glasson: About £14,000. Mr McArthur presented a lengthy statement to the commission. He said that every penny of the de-benture-holders’ money was fully protected and secured by sound investments which exceeded in value the sum charged upon them. Tho total amount subscribed by the public for debentures in the Southern British and in the Investment Executive Trust amounted to £648,194, while the book value of the investments at cost was £649,153. The present market value of investments held on behalf of the 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. INVESTORS’ SECURITY, After dealing with the general plan of the Investment Executive Trust and the Southern British National Trust, Mr McArthur said that one clause of the debenture provided that 95 per cent of the annual not earnings should be set aside for holders of debentures as interest. The security given to subscribers to these trusts was a first mortgage debenture, which must always take precedence over creditors of every class no matter what kind of charge or mortgage the directors of the 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 the de-benture-holders a rate of profit exceeding that of the interest on an ordinary investment trust debenture. An indication of the success which the trust had achieved was that after less than 3j years’ activity the Investment Executive Trust had been able to pay debenture-holders a total of 26 per cent by way of return on capital invested by them. Air McArthur contended that the affairs of the companies were being investigated at an incomplete stage of their development. He admitted that, on a general view, the relations of the various companies with one another might seem to have been needlessly, aven purposelessly, involved. Many matters had their explanation in tbe condition under which the Investment Executive Trust had been compelled to operate. It was necessary to understand the nature of tbe forces working against this trust since its inception. STRONG INFLUENCE. There has been “a strong influence at every point of the financial and political life of New Zealand against trust companies”, and ‘‘deliberate attempts to injure tbe Investment Execu. hive Trust by making it appear that its debentures had been bought below pur value.” Suggestions had been made during tho inquiry that the financing of the Trust building involved some misuse of the money subscribed by the public and that a portion of that money had been transferred from the debenture I fund to .Mr Alcorn and himself. There was not the faintest foundation for any such suggestion. Mr McArthur said that the primary function of the Sterling Investment

Co. had been to conserve the interests of debenture-holders by doing what the Investment Trust Co. was not able to do for itself. The Sterling Investment Co. in the early stages of its life was the main company aud had been used to purchase certain assets of his and, at the same time, take over the liabilities secured on them in order to frustrate those who desired to strike at the Investment Trust by accomplishing his own financial ruin. HOSTILE CONDITION. A further purpose for which the Sterling Investment Co. was 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 tho Investment Executive Trust. The hostile condition with which the trust was surrounded had made it even more important that no weapon should be given to their opponents with which they could stampede debenture-holders. Referring to the case of Miss Smith, of Christchurch, Mr McArthur said that the Guardian Trust and Executors Co. of New Zealand had obtained control of her estate and a writ had been issued against the Investment Executive Trust seeking to recover securities which had been transferred by Miss Smith to the Trust m payment for debentures. The directors knew that, whatever the issue of the trial might be, tho ultimate result would be to injure the company and the debenture-holders. The claim, accordingly, had been settled for £29,000, which represented substantially tho value of the securities originally transferred to the Investment Executive Trust and the amount by which they had appreciated. Mr McArthur said that the Guardian Trust was connected with the companies with which he had had to contend during the Redwood Forests negotiations. Continuing, Mr McArthur said that Mr Mclnnes, during three years’ service as a director of the selling system in New Zealand on behalf of the Investment Trust, had carried out his duties faithfully. ACCOUNTS NOW IN ORDER. Mr McArthur declared that the accounts of all the companies were now in order. Referring to the assets of the Pacific Exploration Co., he said it possessed 27,000 acres of freehold land iu the northern part of the Auckland province, which contained rich, extensive deposits of kauri gum. On a conservative estimate the quantity Qi gum on the area was worth £3,000,000 gross. This asset was set down in the books or the company at £4,700, being ths cost of the land to the company. The commission adjourned till tomorrow.