McARTHUR CASE

Manawatu Standard, Volume LVI, Issue 182, 3 July 1936, Page 2

McARTHUR CASE

DRAWINGS BY ACCUSED. ACCOUNTANT’S EVIDENCE. Per Press Association. WELLINGTON, July 2. Continuing his evidence at tho hearing of the charges against J. W. S. McArthur, John MeFarlano Elliffe, public accountant, of Auckland, one of tbe four inspectors appointed to investigate the affairs of tbe companies mentioned in the Companies Special Investigation Act, referring to the item, “all accounts due by J. W. S. McArthur,” said it represented payments or drawings to two different sources; firstly to accused personally, and secondly, to Hillsborough, Auckland. As far as liis investigations went in Sydney he estimated that accused had drawn personally £7897 3s 2d from the Sterling Company and that £GOOI 13s had been expended by the Sterling Company on the Hillsborough property. There were receipts available signed by McArthur for most of his personal drawings. He had discussed those figures with accused in Sydney and McArthur had agreed that they were approximutely correct. Witness said he had made some further investigations concerning the item of £7897 since tho Royal Commission in Sydney, and, giving McArthur the benefit of items which might be termed doubtful, he had made the amount £7130 9s 2d. Referring to the item “all accounts due by the Pacific Company,” he found that £20,689 14s Id had been paid by the Sterling Company to the Pacific Company up to February 28, 1934. Out of the moneys received by tlie Pacific Company from tho Sterling Company to February 28, 1934, accused had made personal drawings from the Pacific Company amounting to £4165 10s. Out of the same moneys £8931 9s was spent on the yacht Morewa which was registered in accused’s name. COUNSEL OBJECTS.

Mr H. F. O’Leary (for accused) objected to all this evidence, which, he said be could only think was being brought to prejudice McArthur. It had no relevancy, and lio lasked tor tlie protection of the Court. Mr Evans-Scott; in the passage that followed, said it was relevant in connection with alleged concealment of investments with intent to deceive or defraud the debenture-holders of the Investment Executive Trust. The Magistrate spoke to the effect that he realised that the position of counsel for the Crown was a difficult one. He presumed that the Crown had taken everything into consideration. Mr O’Leary said his real objection was that evidence to the effect that certain transfers were ma.de to McArthur was one-sided There was another side. Valuable consideration was given tor all these transfers. The Magistrate remarked that lire preliminary hearing was always apt to look one-sided when tho case for the defence had not been placed beiore the Court. . , Mr O’Leary; And it may be very prejudicial to accused. Witness said the yacht was never registered in the name of the iat-uic Company. Accused was neither a shareholder, debenture-holder nor creditor of the Pacific Company. • DIRECTOR’S EVIDENCE.

The next witness was Kenneth Curtis Aekins, solicitor, of Auckland. Witness said .be was appointed a director when tho Sterling'Company was moorporated and was the solicitor lor the company. He was appointed chairman of directors and acted as such at directors’ and shareholders’ meetings. Witness went on to give evidence regarding tbe power of attorney given to McArthur, dated January 12, 1932. On December 5, 1932, a resolution was passed that it be revoked and that a new one be executed in favour ot Charles Graham Alcorn. Shortly before the meeting of January 15, 1932, accused saw witness and requested that a separate bank account be opened with the National Bank of New Zealand at Auckland in tbe name of the Sterling Company Investments Account, which was to be operated upon by the managing-director of the Investment Executive Trust in pursuance of the power of attorney granted. At that time tbe Sterling Company s ordmaiy account was with the Commercial Bank of Australia at Auckland. On January 15, 1932, a resolution was passed giving authority to McArthur to operate tlie ftivestments account. Regarding the various transactions carried ouUnnd the resolutions passed by tbe directors of the Sterling Company, witness said be had got instructions from McArthur and Alcorn as to what was to be done. He was not aware that accused was making personal drawings from the investment account of the Sterling Company. In cross-examination, witness said he was not aware that was at any time credit in the name or McArthur s son in the Sterling account. He knew his son ; be would be about -1 or 22, and was at that time working as an employee in tbe Investment Executive Trust." He knew of no dealings which would result ill the sou having a credit of £SOOO. . _ , John Leslie Guinness, an officer ot tlie National Bank at Auckland, produccd the original authority in connection with the Sterling account, and said it was to be operated upon by J W. S. McArthur alone. To Mr O’Learv lie said the bank officials had satisfied themselves of McArthur’s authority.

CIVIL ENGINEER’S EVIDENCE. Owen Moricy Hope, civil engineer, of Hamilton, said the accused bad discussed with him bis (witness) acting as a director. There was a suggestion there might be quite an amount of engineering in it, and witness was to advisory director. He bad never been asked to give any advice as an cimincer to tbe Investment Executive Trust. Ho was never consulted regarding investments of the company. McArthur was responsible for investments made, and, as far as witness knew, the same man controlled tbe company s affairs. Witness resigned in 1933. In April 1933, witness was concerned by an article in tlie Investors’ Journal showing a list of shareholders in the various companies. He thought that it hinted that those companies were connected with the Investment Executive Trust. It was enough to make him suspicious, ami be went to Auckland to make inquiries. Hope said be was concerned with tbe question of whether the Investment Trust money was in tbe Sterling Company, and be bad discussed it with McArthur, who bad assured him that there was no debenture capital in tbe Sterling Company. Subsequently, lie said, be bad bad very I it Do knowledge of tiie Sterling Company at all. having severed all connection with it. I bis occurred in April nr May, 1933. At a meeting on May 29, 1933, Hope said, Pilkington, ' as chairman, proposed a resolution that no director of tlie trust should give any information to anyone but a fellow director relating to tlie internal workings and investments of tbe trust unless authorised by a resolution of the directors to do so. 'Hie voting on that resolution was: For, Messrs Pilkington, Pollard, and McArthur. Witness refrained from voting.

Witness’s wish to know what all the investments were had led to the passing of that resolution. Ho mentioned that he had discovered that big amounts were invested in the British National Investment Trust and British National Trust. McArthur refused to divulge the investments unless witness undertook to take no notes and not to divulge any information, even to his solicitor. The meeting adjourned that day until the evening because witness would not agree to the resolution nor to the conditions imposed on him. He had obtained legal advice prior to the meeting. At the evening session he was asked whether he had reconsidered his decision, and he replied that he was still of the same opinion. McArthur then read a list of the company’s investments.

Witness said that he had asked for an explanation about tho investments in the British National Investment Trust and the British National Trust. McArthur had replied that it would be very hard to explain it exactly, so that witness would understand it. Witness had asked if he would put it on paper, and McArthur had replied that he would think about doing that. At that time McArthur explained that two particular investments had something to do with the Daily_ Telegraph building in Sydney. Witness could not understand it. Subsequent to the meeting ho had discussions with McArthur concerning tho Daily Telegraph building. He was able to ascertain that the British National Investment Trust had bought the building, and that the Investment Executive Trust debenture money was put into the British National Investment Trust to purchase the building. Witness said that on July 19, 1933, he resigned from the directorship. Cross-examined by Mr O’Leary, Hope said that he remembered getting shares in the Southern British National Trust in January, 1933, but did not know that that issue had anything to do with tho Trust building. He had requested that his solicitor should be allowed to he present at the directors’ meeting. McArthur would not hear of it, saying that he would like the company’s solicitor there if Hope had his. McArthur stated that ho was anxious lest knowledge concerning tho Investment Executive Trust business should reach big opposing financial interests in Auckland. That was the reason for the passing of ,a resolution against tho giving of information by directors. AUDITOR’S TESTIMONY.

John Anderson, public accountant and auditor, Auckland, said that lrom the time the Investment Executive Trust commenced business in 1931 until lie resigned on May 29, 1933, lie had acted as auditor for tho company. During his audit lie was handed a bal-ance-sheet. The form of balance-sheet did not meet with his approval. Included in investments were two investments of £36,358 lor the Sterling Investment Co. and £52,000 for the British National Investment Trust. He had ascertained those investments from the ledgers. The total of these investments was approximately £BB,OOO, and, at that time, the total investments of the company were £243,075. These two investments, thereiore, exceeded one-third of the total. Witness required that an account defined as “Statistics Records and Establishment £31,970 8s 9d” should he shown in detail. His reason was that, included in that sum was £12,700 odd representing an extra 5 per cent, given to Alehins, Ltd., brokers of the trust, which was over and above that permitted by the prospectus. That amount was- held in abeyance as to whether it he treated as administration costs or otherwise. No portion of it was charged against revenue. In a report, to debenture holders dated March 16, 1933, it was stated that interest was paid to A debenture holders, for the year ended December 31, 1932, ol 5.5 per cent., and to B debenture holders of 9.25 per cent. If items for administration expenses and genera] expenses in advertising had been charged against revenue that interest, in his opinion, could not have been paid to debenture holders. The effect of paving this interest without charging items for administration expenses, general expenses and advertising was to create a fictitious asset of no present value. Tn these circumstances interest, he did not think, could have been paid in whole out of the rovenue of the eom--1)111''' PLEA OF NOT GUILTY.

At completion of the evidence AfcArthur pleaded not guilty. He said that he was advised that the Alagistrato was unable to try the case, so that the giving of evidence in that Court would serve no useful purpose, hut should the case go to the Supremo Court lie would give evidence in answer to ail the charges. ’file Alagistrnte said that lie quite understood and that accused was probably very well advised to adopt that attitude.