McArthur Explains Meaning of “Polab”

Manawatu Times, Volume 59, Issue 221, 21 September 1934, Page 7

McArthur Explains Meaning of “Polab”

“ Partly the Labour Party and Partly the Country Party ”

Meagre Shareholding in Overseas Companies

United Press Assn.—By Elc

itric Telegraph.—Copyright.

SYDNEY, Sept. 20. Tho examination of J. W. S. McArthur was continued before the Royal Commission on trust company activities to-day, Mr Justice Halso Rogers presiding. In answer to a question, McArthur said that an arrangement had been mado that Melnues should occupy offices in the Trust Building rent free until he was ablo to pay rent. The Commissioner: How much has ho made out of the Southern British? McArthur: Melnues tells me ho has not made any profit, He has made a loss. Mr Monahan: As a matter of fact lie has been overpaid .£IO,OOO up to June? McArthur: Yes. Mr. Monahan: He has retained £433-1 that belongs to the Southern British without making any attempt to pay it over. McArthur said that Mclnncs had made an attempt to pay it over. The debts had not been allowed to be extinguished. Melnues had to sell shares iu X. B. Alelnnes and Co. and pay the debt. That undertaking was given about two months ago. Tho Commission had then come along and ho had uot been able to do anything. Mr. Monahan: Had Mclnnes any justification for taking that money? McArthur: Ido not say he had. He disputes the amount. Mr. Monahan: He held money received on your account, and kept it for his own use? McArthur: I would not say that until ho has had the opportunity of explaining the position. The Commissioner: But he must have had the opportunity of explaining it. McArthur: Well, it was not explained to our satisfaction. The “Polab Plan.” Explaining the meaning of the “Polab” Association which has been frequently mentioned before the Commission, McArthur said that it was headed by Glover Clarke, of New Zealand, whoso plan had been to approach electors and ask them to induce their Parliamentary representatives to prevent a hostile report on the companies being forwarded to the New Zealand Parliament. He denied that there had been any attempts at bribery, saying that tho £IOO9 which had been mentioned had been for travelling expenses for Glover Clarke. “Nino months ago,” said McArthur, “I told Glover Clarke we would have or organise a movement to resist hostile attacks being made on us. Nothing was done until July, when Glover Clarke came to Sydney on urgent business. He told me that a biased and hostile report was being forwarded by the New Zealand Royal Commission and that it would bo very detrimental to the trusts’ interests. “He then said that he would form an association,” continued McArthur, “to interview electors in various constituencies throughout New Zealand.” Jlr Monahan asked why, if the £IOOO was for travelling expenses, mention was made in a letter of £SOO to be paid, if the report was discredited. Mr. Monahan: What about this? (reading from letter): “Regarding the ‘polab’ plan as personally discussed with you, a mutual agreement has been reached.’’ McArthur: It is not intelligible to me. Mr Monahan (continuing reading): “The case is being prepared by me. ‘Polab’ requires my presence in Wellington." Now, who is “Polab?” McArthur: I dont’ know. Mr Monahan: Do you seriously say “Polab" is some association of voters and not a political party in Parliament? McArthur: I understand, so. I don’t think it is a political party. Discrediting tlie Report. Mr Monahan continued reading: “I spoke of tho report and asked them to discredit it when it docs arrive. I am working on the case, and they say they should bo able to put. up a good barrage when necessary.” Mr Monahan; Would “they” not be in Parliament? McArthur: No. It would be done through the voters. Mr. Monahan: Who is Anchor? McArthur: One of two persons. They are not politicians, and I do not want to mention their names. I will write them down for the Commissioner. The Commissioner, after seeing the names, said that they need not be disclosed. Replying to further questions, McArthur said Glover Clarke was managing director of Financial Publications, Ltd. Financial Publications was known in code as “Guidance.” Mr Monahan said a fetter McArthur had received from Glover Clarke had stated “‘Polecat’ has received instructions immediately to start organising a plan of attack, whic.h will culminate in three years—a long term, which I anticipated and didn’t particularly relish. The first step is to put ‘Polab’ on the Treasury benches and keep them there by a group which hol'ds the balance of power.” Mr Monahan asked: “Do you still say ‘Polab’ is not a political party? Who is going to be put on the Treasury benches?” McArthur: The Polab Association. The Commissioner: Come, ■Mr McArthur! Mr Monahan: Do you realise' you are on oath? McArthur: I do.

Secret Out at Last

Air Alonahan; Then what was meant? .Ale Arthur: I think it was partly the Labour Party and partly the Country Party. That was what I understood, but I do not know any individuals. Air Alonahan: What is the group that holds tho balance of power? Ale Arthur: I can’t remember. Air Monahan: But this was fast month —August. Continuing, Ale Arthur told Air Alonahan that in code “Virens” was Redwood Forests, Ltd., and Wiseman” a solocitor. Air Alonahan questioned witness regarding an increase of the capital of Financial Publications, Ltd., under which, according to cabled advice from Glover Clarke, the latter was to bo given financial assistance by Sterling Investments in order to wipe off the loss of £BOOO incurred in the first year of publication. Asked by Mr Alonahan if tho transaction was to cover up tho loss of the £SOOO, witness said every newspaper must incur losses at the start of its existence, and it was quite right that establishment charges should bo capitalised. Ho said the money was to be found by the debenture-holders iu the Investment Executive Trust. Tho Commissioner said it seemed that the money of tho Investment Executive Trust was being used, in the widest sense, in any way that AfcArthur, as managing director, determined. ■ “You used it any way you iiked?” he asked. Ale Arthur: That is so. Solid Money Backing The Commissioner said Ms present view was that legislation should be introduced to ensure that those who controlled trust companies put a good proportion of Teal money into them. In this case the aiioncv subscribed by debenture-holders was being managed by people who did not put' a penu'y into the concerns. Dr. Louat said it seemed more important to know whether the men controlling the company had ability. The Commissioner:' I think integrity comes first. Dr. Louat: It often happens that men who put very little money into a company arc allowed to control it simply because they have the ability to control it. _ Ale Arthur: The newspaper is paying its way and I believe is showing profits now. Ale Arthur was then questioned about tire balance-sheets. Air Alonahan: You showed in . the Southern British balance-sheet an item of £6802, representing interest and dividends. I suggest that £4483 of that is interest on British National Trust debentures? Ale Arthur: I presume so. Air Alonahan: How was it paid? Ale Arthur: Out of capital until we can get revenue, which will be coming in next year.

Air Alonahan: To date people have been paid out of capital? Ale Arthur: Yes. Dr. Louat: The English Court sajs that is quite all right. Air Alonahan; I think it will be most interesting to the people who put money in. Dr. Louat: It may be a quite sound business method. An Auditor’s Resignation Ale Arthur was questioned at length regarding tho resignation of tho New Zealand auditor, Anderson, and denied that the latter had taken exception to a balance-sheet issued at the end of 1932. Air Alonahan submitted that the balance-sheet had not shown that, of a lump sum of £3.1,000, Alelnnes had received £12,000 and that the auditor thought this should haws been shown. Ale Arthur said, that was not the position. Air Alonahan: The auditor drew attention to this doubtful item of £12.000 and in the meantime wanted it shown as a payment to Alelnnes. Ale Arthur: I don’t think there was any objection to that. Air Alonahan: You never disclosed that Alelnnes received it. McArthur: You don’t say in a bal-ance-sheet who gets money. What w r o disclosed was that it was paid out.

Continuing, Ale Arthur said the amount originally paid out of debenture capital to Alelnnes had been replaced by British National Trust Debentures. He did not attribute Anderson’s resignation to the fact that the directors had failed to agree to his suggestions. Replying to Air Alonahan, McArthur said the books of tho companies had been brought to Sydney from New Zealand about Alay last because the directors had intended to create their head office in Sydney. v

Air Alonahan: Were yon advised by your solicitor, Wiseman, that you were committing a. breach of the law in doing so? McArthur: No.

Air Alonahan produced a letter which, he said, had advised Ale Arthur that, unless the books were available in New Zealand for inspection by tho directors, the consequences might be grave. Ale Arthur said he did not regard the position as serious. He had given instructions that some of the books should be brought to Sydney. Overseas Investments Mr Alonahan read a letter which, ho

said, McArthur had scut to 22 agents in towns in New Zealand, which gave a list of holdings in overseas companies, but did not discloso tho extent of the holdings. Mr Monahan (turning to McArthur): You.refer to the Canadian Pacific Railway, with a capital of £95,000,000. I understand you had £lO2 in that? McArthur: Ye.s Mr Monahan: You refer to Lever Brothers, with a capital of £59,000,000. You had £l4O worth in that? McArthur: Yes. Mr Monahan: Then you mention the International' Nickel Company. Y r ou had £HS pounds in that? McArthur: Yes. Mr Monahan: How much did you have in Imperial Chemical Industries? McArthur: About 100 shares. Mr Monahan: Do you think that honest? McArthur; I admit we had a small holding at that time, but we intended to increase it. Mr Monahan: l r onr debenture capital is now £400,000, and all that you had invested in these companies when you dangled them before the investors’ eyes was £1100? ‘ McArthur: That was at that time, but the exchange went against us. The Commissioner: What did you tell the investors to expect from these companies? McArthur: From six to seven per cent., perhaps more. At a later stage McArthur said he had taken exception to some statements made by salesmen who were selling trust debentures, with the result that about 30 agents were brought to Sydney from other States and New Zealand to attend a sales convention, at which he gave certain instructions. Ho also learned that certain salesmen were representing themselves as officials of the Primary Producers’ Bank, and he instructed Hewitt and McInnes that, if misrepresentations were proved, those who wanted their money back could have it. Mr Monahan: As a result of litigation or voluntarily? McArthur: Voluntarily? The Commissioner: I suppose that, if the hawking of shares is prevented in this State, it would very seriously interfere with your business, would it not? McArthur: I do not think it would Wo have no objection to wiping out business methods which are not right. The Commission adjourned till tomorrow.

Prompt Denial by Mr. Savage

Per Press Association,

WELLINGTON, Last Night,

The statements made by McArthur at the Sydney trust inquiry • to-day regarding the Labour and Country Parties were given an emphatic denial by the leader of the Labour Party (Mr. M. J. Savage) to-night. “The suggestion that the Labour Party is endeavouring, with the help of the Country Party, to save McArthur from tho consequences of his actions is too absurd for words,” said Mr. Savag'e.