RAILWAYS BOARD IN REPLY.

Horowhenua Chronicle, 7 April 1936, Page 8

RAILWAYS BOARD IN REPLY.

A COMPLETE DENIAL. CLOSING OF MAMAKU MILL. (By Telegraph —Press Association.) CHRISTCHURCH, Last Night. A complete denial that the commercial interests of members of the Railways Board had conflicted with their work on the board was made in a statement issued by Mr. I). Reese, a member of the board. Mr. Reese dealt at length with criticisms made of the board, its members, and their actions by the Minister of Railways (Hon. D. G. Sullivan), and dealt categorically with the Minister's statements. Ho also traversed at length the position about the Mamaku .Mill, which was owned by the Railway Department.

Mr. Reese said that the .Minister of Railways was reported to have stated that there were two or three men on the Railways Board who had sent in tenders for railway supplies. Mr. Sullivan had added, “These men sit there and obtain information not only about their own linns, but also about their competitors. They have all the details. I wonder what the commercial people of the country think of that?” Mr. Reese declared, “What are the facts? The board consists of live members, Messrs H. H. Sterling (chairman;, L. Newman, a farmer, G. Reid, a public accountant, and Sir James Gunson and myself, engaged in commerce. Notwithstanding the fact that before my appointment to the board I did considerable business with the Railway Dcpaitment I have, during my five years as a member of the board, scrupulously refrained from any business dealings with the Railway Department. Neither my own linn nor my own firm ”s sawmilling company has either directly or indirectly either tendered for or supplied materials to the Railway Department. M.y colleague, Sir James Gunson, acting chairman of the board, though the holder of important company chairmanships, has retired from active commercial life. Sir James’ reputation, in my opinion, places him above Uie necessity of replying to any such charges as have been made.

“The Minister, while disclaiming any casting of aspersions, aiid asserting that in his criticisms of tnc miara tie was to be understood as strictly impersonal, is also reported to nave said, ‘The original suggestion, to close down the Mamaku railway mill came rrom a gentleman on the board who is deeply interested in the timber trade. How can one square that kind of situation with the best interests of the State?’ “Not the Whole of tne Truth.”

“ This is not the whole ox the truth,” said Mr. Reese. “I did suggest that the Mamaku Mill should be closed down, but not for any reason such as is suggested or in the circumstances stated by the Minister, i will explain what I did suggest and why. “About 1933 the Railways Board asked me, as being the only membe. with a knowledge of the timber industry, to make a report on the Mamaku Miil. from the mill 1 personally ob tained all information regarding tut cost of production and the rates at which timber was issued to the workshops. From the head office I received balance-sheets covering several years. This is what I found. First, the cost of production far exceeded that of pri-vately-owned mills; secondly, the price, of timber as being invoiced to the Otahuhu, Wanganui and Fetone workshops was far in excess of the price at which the timber could have been purchased on the open market. Despite the enormous price drop that had taken place, the invoicing to the workshops was still being based on the 1930 yawniillers’ Association price-list.

“Year after year the balance-sheets, instead of showing the Josses regular'sbeing incurred, showed mill profits by the simple process of charging the workshops more than the prices at which they could ha.ve bought on the open market.

“The Minister of Railways will be able to tell the House the Jigure at which I estimated the losses that should have been shown. No great amount'of knowledge of accountancy or of timber trading is necessary to determine whether balance-sheets based on such a principle are or are not true balancesheets. Another irregularity which made returns from the mill appear greater than they were was the crediting of the sawmill account with a profit on all lirewood for locomotive depots purchased from sawmills throughout the North Island. Outside the matter of irregular costing it became obvious during my investigating, that the mill could not possibly supply the amount of heart timber required by the Railway workshops. ”

Alternative Courses. Mr Reese said lie was forced to the conclusion that the Mamaku mill, as operating, was not a business proposition, and he reported accordingly to the board. “My report submitted alternative courses of action; (.1) to let the..mil] on contract and purchase timber for Mamaku at prices which would approximate to market rates, preference of tender to be given to the Mamaku mill staff; (2) to call tenders for the lease of the mill and plant carrying with it the right to supply the railway workshops' rimu requirements and the right to sell the balance of the mill output outside; (3) to close down the mill and purchase timber supplies on the market; (4) to offer the mill for sale as a going concern. “I recommend that the above courses of action should be considered by the board in the order to which they are placed. I favoured the contracting

course because a mill in the South Island in which I am personally interested was at that time, and is still, running successfully on a similar contract basis. Unfortunately, the Department reported that this course was impracticable on the ground that no contractor would tender. The Department not only reported adversely, but questioned the accuracy of my ligures ; ns to market prices. Because of the Department’s attitude tenders were called to test the open market. Statement in House. “Before the mill was closed down the Minister of Railways stated in the House, in reply to an interjection by Sir Alfred Ransom, ‘that tenders were called to find whether supplies could be got cheaper from our own mill than from the outside market. The balancewas in favour of our own mill, yet in face of that the Mamaku mill was closed down.’ How could Sir Alfred Ransom accept as true a statement forwhich no proof was forthcoming? I challenge the Minister to disclose to the House and to the country my reports on the Mamaku Mill and/or details to enable a comparison of the tenderers’ prices on which the board acted in deciding to close

the mill. “The Minister of Railways said in the House; ‘From the moment I became Minister I have had extended r,o mo every possible courtesy at the hands of the board.' Mr mllivan’s reciprocation of this courtesy has been what he is pleased to call impersonal attacks upon members of the board. One at least of those members is compelled to consider that these statements are not impersonal. I feel that the Minister, possibly being ill-informed, may have overlooked the implications of his statements.

'"I can hardly believe that the Prime Minister will refuse to do my colleagues and myself the justice of separating his party’s legitimate advocacy of a change in the system of railway control, based on election pledges, from attacks in the House on the reputations of absent men. If rewards for the type of service expected from members of such bodies as the Railways Board are to be such as those meted out by Mr Sullivan, the country’s call for men to fill such positions will be likely to fall on deaf oars.

“Any omissions, any irrolevancies, and any seeming want of consideration that may - bo found in this hurriedly prepared statement I regret. I hope I they will be debited to my limited time and to my finding it impossible to accept the Minister’s charges as philosophically as, according to him, my colleagues and I accepted the abolitionof the Railways Board.’’

The Minister’s Comment WELLINGTON, Last Night. When the report of Mr. Reese's complete denial of the allegations that the eomniereial interests of members of the Railways Board had conflicted with their work as board members was brought to the attention of the Minister of Railways (Hon. D. G. Sullivan) to-day, the Minister said: “The Bill is before the House and all the statements made about it will be covered in the ordinary way on the floor of the House. ’ ’