Assets But No Cash

Manawatu Times, Volume 59, Issue 220, 20 September 1934, Page 7

Assets But No Cash

What McArthur Has Put Into Companies Since 1922

New South Wales Commissioner ■ Asks Many Pointed Questions

United Press Assn.—By Electric Telegraph.—Copyright

Received Wednesday, 10 p.m. SYDNEY, Sept. 19. Bofore tho Royal Commission inquiring into tho affairs of certain trust companies oil its resumption to-day, Air. Justice liaise Rogers presiding, J. W. S. McArthur was further questioned regarding tho issue of British National Trust debentures. Air. Alonalian said that 410 debentures for £IOOO each had boon issued, j but 18 were not accounted for in the i balance-sheets of the other companies. Furthermore, the Southern British Trust’s balance-sheet showed its holdings as 115, while the British National Trust had the figures as IGG. AlcArthur said that he was unable to explain thc_ discrepancy, but thought that'the IS missing debentures were probably those owned privately by Alcorn. Tho Commissioner said that he had 1 repeatedly asked how much money AlcArthur had ever put into any of the companies sinco 1922. AlcArthur replied that his activities had begun long before that date, the Selwyn Timber Company having been started in 1907. That had been his “life’s work." Air. Monahan: How much actual cash have put put in since the Investment Executive Trust started? AlcArthur: I have put in assets. Air. Monahan: But how much of jlour own personal property in cash? AlcArthur: No cash, bur many assets. AlcArthur added that the assets lie had put into the Sterling Company had realised £28,000. He had been credited with a “nominal consideration.’’. Air. Alonalian: How much? ' AlcArthur: £OOOO. Questioned regarding Redwood Forests, Wynwood Investments, Ltd., and Alodern Homes, Ltd., AlcArthur said that he had been troubled financially when Alodern Homes was floated in 1931. He practically controlled Alodern Homes, but could not explain how 19,000 shares had been acquired in Redwood. Tho sum of £60.000 he had received from British National Trust represented part of the profit made on the sale of the Trust Building. The money had come from Investment Executive Trust, which had purchased Sterling debentures. Rescuing Own Private Assets. Air. Monahan: You used Investment > Executive Trust capital to rescue your own private assets? AlcArthur: They protected me, but they had a good investment. They got 14 per cent, interest altogether. Air. Alonalian: But I suppose you admit a considerable amount of debenture interest was paid out of capital? AlcArthur: Yes. Whilst Air. Monahan was questioning AlcArthur about the Investment Executive Trust, Dr. Louat took exception to a statement by Mr. Monahan that this tangled skein was to be worked out so that AlcArthur would get the whole of the assets back to himself. The Commissioner remarked that it had been a tangled skein for days past. One of the points of difference between AlcArthur and tho New Zealand Stock Exchange was that ho refused to make available his investment schedule. ‘lt seems likely,” added the Commissioner, ‘‘that I shall report that the whole of the transactions of the Investment Executive Trust were subsidiary to ATeArthur’s personal interests, and if I do not report that way, ho will have to help me to form a different conclusion.” AlcArthur replied: “I can show you that the interests of the debenture-hold-ers arc protected.” “Tor Private Speculation.” The Commissioner retorted that the debenture-holders’ interests were only protected secondarily and because AlcArthur had made a very advantageous deal, although that depended on fho Value of the former Daily Telegraph building. Apparently McArthur had j used Investment Executive Trust money for private speculation, his first object being to make a profit for himself. AlcArthur interjected: “No; I had no idea of making a profit for the debenture-holders, but my main object was to build up a strong trust.” Tho Commissioner: Your method of hiding yourself behind aliases docs not insx>irc confidence. At a later stage the Commissioner said ho had ample evidence that AlcArthur was an export in company matters, but there was no evidence that ho was an expert in real estate in Sydney. AlcArthur said he came into business association with Alcorn in 1931, when he placed him on tho directorate of tho Investment Executive Trust. Hewitt at that time was Alcorn's solicitor. AlcArthur admitted that about that time ho received a letter from the Alcorn, Trowcr Company, Ltd., in connection with a debt he owed them, amounting to £6147, which was contracted some time prior to the formation of the Redwood Company. Alcorn had helped considerably in the formation of tho company. The demand came through an agency of which Alcorn was the principal, and a 'writ was threatened. Air. Alonalian: At that time you had nothing at all? > McArthur: I had very little. I had assets, however, which turned out ,to be substantial. Air. Alonalian: Wasn’t it pretty rough on you for him to make a demand on you through a solicitor?

AlcArthur: I suppose he was forced to do it. Air. Alonaban: He sort of.forced himself to threaten you with a writ? AlcArthur: Yes. Air. Alonalian: Docs it ring true to you all this business? AlcArthur: lie was protecting me as well as himself. Requested to Write Letter? • Air. Alonalian: It was a stagemanaged affair, wasn’t it? You got him to write that letter? McArthur: 1 did not request him to write the letter. Air. Monahan: Tho position was that you had made up your mind that you were going to take up a big block of shares in the Investment Executive Trust and you feared your creditors would seize on them. Is that not so? AlcArthur: That is so. Air. Alonalian: And you got this letter and arranged to transfer youi shares to Alcorn? AlcArthur: That is so. Air. Alonalian: Y'ou now admit that the whole of this arrangement was to protect your interest in the Investment Executive Trust from your creditors? AlcArthur: It was. Questioned about £1650 allotted him by the Investment Executive Trust for services Tendered, AlcArthur claimed that the information he collected was worth more than £1650. Questioned by Air. Alonalian, AlcArthur said lio had transferred certain shares to protect himself against unfair attacks. Air. Alonalian: Was it an unfair attack for the Crown to ask you foi money due to it? AlcArthur: It was an absolute swindle by the Crown. Continuing, he said he had asked for time to pay, but had told the Crown it was a swindle. The Commissioner said AlcArthur might have been quite justified—as he claimed —in stripping himself of his assets, but he had not been quite frank with .the Crown Solicitor of New Zealand. Justified in Making Untrue Statement. Asked by the Commissioner why he had. not revealed that he, as Alodern Homes, had £2375 worth of assets, AlcArthur said lie thought he was perfectly justified in making an untrue statement so that he could postpone payment of a debt which he regarded as unjust. The Commissioner: Then you think untrue statements arc justified iu business dealings? AlcArthur: They made an untrue statement to me. Air. Alonalian: You took certain steps through your companies against any chance of your assets being taken by your creditors? AlcArthur: That was against unfair attacks. After further questioning, AlcArthur admitted that ho had paid the debt to the Crown through Sterling Investments out of Investment Executive Trust debentures. The Commissioner: As far as I can see the investments of tho Investment Executive Trust were gambled on your solvency. It was all being used to protect your interests, and if you could not be protected, the money put into that vanished. AlcArthur: The assets at that time were worth many times the valuo of the debentures. Tho Commissioner: Unless it is shown to the contrary, I shall report on this transaction that you gambled with the debenture-holders’ money. Y’ou paid the Crown Solicitor a private debt of your own with Investment Executive Trust money. AlcArthur subsequently said he had had an opportunity of looking at tho share register of Alodern Homes and had found that he had only a nominal holding. j! The Commissioner: The point is that ► you thought you had made a false statement and considered it perfectly justified. Considerably Heated at Time, AlcArthur said he was considerably heated at tho time, because he considered he had been badly treated by the Crown. The main shareholder at that time had been his son. McArthur was questioned about a transaction with Sterling Investments. Air. Alonahan (holding some papers): This is a memorandum in your own name of tho assets taken over from Sterling Investments. Were they fair valuations at the time you made them? AlcArthur: They would bo later. They were the prices at which they were taken by Wynwood Investments. I was Wynwood Investments. . Air. Alonalian said the property ‘had been taken over for £50,000 odd. He asked whether the assets taken out of Sterling Investments had been, worth McArthur: No; not at the price at which they stood in Sterling Investment’s books. Replying to .further questions, AlcArthur said he had transferred debentures in exchange for the other assets to better the position of the Investment Executive Trust debenture-holders. Ho was giving them revenue-producing assets for non-revenue-producing assets. The Commissioner: It will take a lot to convince me that was your motive. Debenture-holders’ Position. McArthur: I can assure you it was. I wanted to strengthen tho position of the debenture-holders. Witness admitted that a substantial

•State Forests debt had been wiped out in the transaction. Tho Commissioner: What holdings had you in Sterling Investments at that time? McArthur: I held debentures. I wanted to leave Sterling Investments in a position where only they were connected with the trust. The Commissioner: But ultimately the result was that they retired the debentures and you got assets belonging to Sterling Investments. Who conducted tho transactions on behalf of Sterling Investments? McArthur: Alcorn, I think. The Commissioner: But he says he knows nothing about it. Sterling Investments were making a sale to you and you got those assets. Didn’t you send Alcorn a list of the assets you W'cro to take over and tell him to sign the necessary documents. McArthur: It may have amounted to that, but it was quite an equitable transaction.

The Commissioner: How could it be from Sterling' Investments’ point of view. Nobody on their behalf considered whether it was a fair value or not. What interests mo is that every transaction in the ease appears to have been done entirely at your dictation. McArthur: Yes; most of it. The Commission adjourned till tomorrow. Timberlands’ Purchase Per Press Association. AUCKLAND, Sept. 19. In a statement to-day referring to the evideneo given by J. W. S. McArthur before the Sydney Royal Commission, the secretary of Timberlands Woodpulp, Ltd., said that in April, 1931, his company agreed to purchase about 21,000 acres known as the Matahina block, between To Toko and Murupara. The price was £33,350, payable by instalments. By direction of the vendors the balance of the purchase moneys was payable to one only of the vendor companies, viz., Edgecumbo Forests, Ltd. The other vendor company was Ivotahi Lands, Ltd., Several instalments had been paid to Ldgecumbe Forests, but in April, .1933, the company received advice that Edgecumbo Forests was being wound up, and that it had sold its assets to Sterling Investments Co. (N.Z.), Ltd., to whom the remaining payments were to be made. Accordingly the balance of the purchase money was paid to Sterling Investments. Timberlands Woodpulp bought the Matahina block for afforestation purposes and had already planted about 10,000 acres.

Bill for Amendment of Company Lav/

MEASURE IN AUSTRALIA TO PROTECT INVESTOR SYDNEY, Sept. 19. The Sydney Morning Herald says that the State Cabinet is drafting an amendment of the Company Law and a Bill will be introduced in Parliament when it meets at the ond of this month. There will be drastic alterations in the present law.

Ample protection will be given the investing public and the hawking of shares will bo prohibited or restricted. There will bo restrictions on statements in prospectuses. There is a proposal to place certain control over the financial arrangements of companies and to make it impossible for profits to be absorbed in unreasonably high directors’ fees and salaries. It is probable that when the capital of a company exceeds a certain amount, the company will be required to employ a qualified secretary. Similar legislation is contemplated in other States to make the law uniform throughout the Commonwealth. The Federal Government has not the power constitutionally to legislate on company laws.