COMPANY METHODS

Hawke's Bay Tribune, Volume XXIV, Issue 237, 19 September 1934, Page 9

COMPANY METHODS

THE SYDNEY INQUIRY

Responsibility for Chaos

ACCEPTED BY McARTHUR

By Telegraph—Press Assjj.—Copyright SYDNEY. Sept. 18.

The questioning of Mr J. W. S. McArthur continued all day at the Company Commission, the Commissioner himself frequently taking part. Mr McArthur said that hs accepted full responsibility for the chaotic condition of the companies involved. Earlier the Commissioner liad commented on statements that £30,000 had been transferred with no written authority, saying that it was unreasonable to ask him to accept such evidence. Mr Justice Hulse Kogers presided as Uoipuiiseioner, Mr W. W. Monahan, K.C., and Mr J. B. Collier appeared as counsel assisting the commissioned, Mr R. Windcyer, K.C., and Mr 13. Fuller for the Investment Executive Trust of New Zealand, Limited, aud the Southern British National Trust, Limited, and Dr. !•’. Louat for three other com panics CREDIT FOR £77,C00. , Air Ale Arthur was questioned regarding debentures of his and Air Alcorn’S. Mr Monahan; You parted with your debentures to the Investment Executive Trust for shares? Mr McArthur: Yes. Mr Monahan; Then you sold your shares to the Southern British National Trust for £77,000? Mr McArthur: Yes, but that did not increase our profits. Air Monahan: You paid £22,000 to the Investment Executive Trust for property which you purported to sell to the Southern British for £77,000? Mr Ale Arthur: Yes. Air Monahan: That got you credit with the Southern British for £77,000? Air Ale Arthur: For which we were taking deferred shares. Mr Monahan: You then turned back that £77,000 into British National Trust debentures, which you say were worth £lOOO each? Air Ale Arthur: Yes. Air Monahan: Until this commission started you had got back £75,000 iu the shape of debentures? Air McArthur: That was part of the transaction. NU RECORD KEPT. The Commissioner: Did you deal with this £75,000 without any record? Supposing you had died meantime, was there anything to suggest that the £75,000 belonged to your estate? Mr Ale Arthur: There was nothing, but that was our intention. Questioned by the Commissioner regarding the sale of Investment Executive Trust shares to the Southern Brit ish, Air Ale Arthur said that the tran saction was for £77,600. Of that, £75,000 was to be in Southern British National Trust debentures and £2600 in cash. Of the £75,000 worth of de bentures they had handed back £63,000 worth free of cost.

The Commissioner: That has all happened since the commission started. What Air Monahan is trying to get at is why you should for £77,000 transfer to the Southern British shares that cost you

£20,000. Mr Ale Arthur: That price enabled us to take that number of debentures, We wanted to release sufficient debentures to meet the whole of the establishment charges in connection with the two trusts. Wo still hold 12 debentures to meet any further charges that may be required by the trust. Questioned about a document, Air Ale Arthur 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 t.o £40,000 were made by word of mouth without minuting them. The irresistible inference is that no arrangement was made until the Ooiumissiou started. Air- Ale Arthur: The business has grown tremendously and I admit that the books were not kept up as they should have bceu. UNREASONARLE E VIDENCE. 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 an v where. I don’t think you can reasonably ask me to accept that evidence. Air 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 that the bulk of the profits were to go to the debenture-holders’ accounts. The Commissioner: From the moment that idea of the building was con reived every step taken by principal parties was a step to cover aud not r. step to make over. Air Ale Arthur, replying to Air Alona han, said that in June, 1933, thoj actually transferred from the share holders’ account 16 debentures in the I.E.T. to the debenture-holders’ aecoun* without cost. Air Monahan; That was because Mr Anderson objected.

Mr Ale Arthur: No. I suggested that myself. He suggested that it should be capitalised, but I went one better.

Questioned by Air Atonahan as to the transfer of debentures, Air Ale Arthur said he was to get credit for £39,000. PERSONAL PROFIT. Replying to the Commissioner, Air McArthur said that of £287,000 nominal profit made by Air 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-iides if you had transferred this amount without all these involved transactions? Mr McArthur; Well, frankly, there was the question of income tax involved. The profits cannot be taxed now. Air Ale Arthur said that ho and Air Alcorn were not liable to taxation in New Zealand on profits from 'the sails of shares. Questioned regarding opening a personal bank account for £2500, Mr AlcArthur said he thought he opened it with a cheque from the British National Trust. He had repaid the money to the Trust. Of the £2500, Air Ale Arthur said £lOOO had been used to buy debentures in the name of his wife.and £lOOO was paid for ordinary shares described in the memorandum. He thought that Air Pilkington and Air Pollard were the persons who benefited. He made them a present of the shares, which he paid for with this money.

The Commissioner: I cannot understand how money from a trust should be put into debentures in the Southern British in the name of your wife. Air Ale Arthur; I paid for them after wards.

After further questions relating to bank accounts, the Commissioner asked: Supposing this Commis-

sion had not been appointed; when were you proposing to clear up all these matters?

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

The Commissioner: Iu fact, you must accept responsibility for everything. Air McArthur; Yes.

PERSONAL BENEFIT.

Mr Ale Arthur said the separate account of the Sterling Investment Co. at Auckland had been started with Investment Executive Trust funds and was operated by him. During 1932 £22,000 had passed through it. Alost 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 j has been done in theso companies iu . the last three years has been entirely for your own personal benefit. Air McArthur: No. They have always been protected and have received a good .interest. They had my personal assets as security. The Commissioner: One of the matters that have become apparent, at* this ’nquiry—and one that I hope will be rectified —is this practice of one man being able to carry on under five or six names, shrouding his real identity aud preventing people knowing with whom they are dealing. Continuing, Air McArthur said that ; the Redwood Timber Co. hid been ' carrying on with assistance rendered by i the Sterling Investment Co. Of 40,000 I shares in the Redwood Co. ho held 28,000. During his absence in India his co-directors had made a ten-shilling ' call on 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. Ho had given three blocks of land ia lieu of payment.