FACING OPEN INQUIRY

Northern Advocate, 4 September 1934, Page 5

FACING OPEN INQUIRY

TRUST COMPANIES

MR ALCORN’S VERSION

JIGSAW OPERATIONS

CHEQUE FOR £50,000.

REVELATION OF BANK AFFAIRS.

(United Press Association—By Electric Telegraph.—Copyright.) (Received 9 a.m.) SYDNEY, September 3. The Royal Commission which is inquiring ■ into the activity of 17 trust companies ■continued, its investigations today. Mr Justice Halse Rogers presided as Commissioner, Mr W. W. Monahan, K.C., and Mr J. B. Collier appeared as counsel assisting the commission, Mr R Windoyer, K.C., and Mr B. Fuller for the Investment Executive Trust of New Zealand, Ltd., and Southern British National Trust, Ltd., and Dr. F. Louat for three other

companies. A letter from the accountant was road, in which he repeated his assurance that he had not revealed any information relating to the affairs of the blinks.

The commissioner (to Mr Cummings): “There was no doubt in your mind that the giving away of information regarding the state of accounts of depositors in the banks to anybody outside the employ of the banks a breach of trust?” —“Yes.” Mr Monahan: “If you had suspected that Mr MdTnncs had been guilty of conduct of that sort you would have cut him right off?” —“Certainly.”

Mr C. G. Alcorn, recalled, told Mr Monahan that previous evidence he had given concerning the purchase by Alcorn, Trower and Company, Limited, of shares in the Investment Executive Trust of New Zealand, Limited, was not intentionally misleading. His company had no cash at the time of the purchase, -but there were debts owing to it. Witness said he did not stand by the statement that the shares were bought in the ordinary way from Mr McArthur for cash.

Dr. Louat: “In fairness to Air Alcorn, I mpst point out that he said he hsd no personal recollection of the transaction.”

The Commissioner: “Surely this is a transaction of which there should be some personal recollection.” Air Alcorn: “Wi had just been discussing transactions in share and debenture exchanges, and I regarded this as quite different and a cash transaction/ ’

The Commissioner: “Yes, this is far different from a cash transaction, but it was different from other transac-

tions.”

Dr. Louat informed the commissioner that the balance sheets for two of the lesser companies had been prepared, but the remainder could not be completed before Wednesday. Mr Alcorn, in reply to further questions by Mr Monahan, said that the shares of the Investment Executive Trust were valued at £1675. Mr Monahan: “You took the shares at first as security for a debt of £SOO. What did you think their value was?” —“I thought they were worth par value.”

“How long did you have them?”

“About six months.” .Mr Alcorn said that Mr McArthur had reminded him- at the luncheon adjournment that he had paid witness by cheque. \ Mr Monahan: Do you suggest that the shares were held in the name of Alcorn, Trower and Company?”—“l think so. There was an arrangement between Alcorn, Trower and Company and myself.”

“I take it that you paid Mr McArthur the difference between the £SOO and the share value?”

Mr Alcorn made no reply. “On these figures you made a profit of £1100?”—“Yes.” “You say Mr McArthur has given you a cheque for £500?” —“It -was paid into the Investment Securities Association, Limited, a New Zealand company.” A One-Man Concern. “What did they want with these securities?” —“That company is really myself. My sister and I are the only shareholders in Alcorn, Trower and Company. ” In reply to further questions by Mr Monahan, witness said he did not transfer all the shares from Alcorn, Trower and Company to himself. He left 500, It was not intended to sell them to anybody outside. They were sold subsequently to the Southern British National Trust. Mr Monahan: “How soon afterwards? More or less at the same time?”—“Yes.” “At the same instant that you bought them, you sold them to the Southern British for £7000?” — “Yes.” “How did you come to get about £7OOO for shares worth £1675? Does it appear honest?” —“Quite honest,” In reply to the commissioner Mr Alcorn said: “We sold the shares to the Southern British because wo were thinking about an amalgamation. If was for our mutual benefit. No one else could have bought them on the market.”

Witness was questioned about the acquisition by the Sterling Investment Company of New Zealand, Ltd., of British National Investment Trust debentures. He said lie adhered to the evidence he had previously given. The Commissioner: ".Do you know

why you were given a cheque for £50,000 on Mi’ Hewitt? Who decided to buy British National Trust debentures? Hr Alcorn: “I discussed it with Mr Hewitt, I think I was told by Mr Glasson that we owed the money.” Is it a fact that in this matter you had no personal discretion?” —“We were ift the hands of the Trust.” You mean Mr McArthur?” —“Yes.” | “You did not know much about this transaction?” —“Oh, yes. Sterling Investments owed the British Nation:-.! Trust a large sum of money for debentures they had delivered to either Sterling Investments or the Investment Executive Trust. ” Mr Monahan: *“Was it decided to buy out the people who had invested in i the Investment Executive Trust, and I your company was made the stool to j carry on the transactions?” “Notorious” Case. Mr Alcorn: “No. Most of the Investment Executive Trust debentures had been bought on a Now Zealand stock exchange. They were trying to discredit them, and Sterling Investments was to buy them at a low market value,”

‘‘ Do you remember the case of Miss Smith, to whom £IO,OOO was paid?”— “Yes. The case was notorious,”

“On April .10, £20,000 worth of shares of Sterling Investments were held by the Securities Investment Association, that is, by yourself. You transferred these shares to the British National Trust. Did you get anything for them?” —“I am to get something.” The Commissioner: “Did you pay £20,000 for the shares?”—“They were paid up to 2/- in the £.”

Mr Monahan: “Why should you and Mr AlcArthur divide up in the Investont Executive Trust and the Southern British National Trust? Bid you put one shilling in?” —“I got a fifth share for assisting Mr McArthur with ideas. There is no Investment Trust of this kind in the world.” Mr Monahan: “The difference between English trusts and this trust is that English trust debentures are backed by real capital, while your trust was backed by nothing.” ‘ ‘Hopelessly Incorrect.”

When Air Alcorn was asked why, according to the books produced in court, £90,000 which was owing to the British National Trust at the time of the August transfer was not shown in the July balance sheet as a liability, witness said the balance sheet was prepared by Air Hewitt and Air Glasson. and ho had signed it, assuming it to be correct.

Air Alonahan: “But was it not hopelessly incorrect, to the tune of £50,000?” —“It would appear so*, although I understood it to be perfectly correct at the time.”

The Commissioner: “Do you really understand the books?” —“No.”

While being questioned about Farms and Farmlets, Ltd., Air Alcorn said certain parties in New Zealand had started a public investors journal and dug up things which had been twisted about in a way detrimental to the interests of the Trust.

The Commissioner: “What have you to fear if everything is in order?” — “The matter was misconstrued by interested parties.”

Mr Alcorn was then examined about the purchase of the former “Daily Telegraph ” building in King Street, Sydney. He said that Mr iMcArthur and himself had especially benefited by the enhanced value of that building.

The Commissioner: “How much did you get?”

Mr Alcorn; “One fifth of what Mr McArthur received. I think between us we got. £105,000,”

At this stage the sitting was adjourned until tomorrow.

TODAY’S PROCEEDINGS COLOSSAL PROFIT ON PAPER AT LEAST AMOUNTING TO £287,000 (Received 2 p.m.) SYDNEY, This Day. The Royal Commission which is investigating the activities of the Investment Trust companies group this morning resumed its examination of Mr C, G. Alcorn, who late yesterday was questioned about the purchase of the former “Daily Telegraph” building in King 'Street, Sydney. He said that Mr McArthur and himself had specially benefited by the enhanced value of that building. This morning Mr Monahan asked Mr Alcorn whether the former “Daily Telegraph” building was bought on Mr McArthur’s own capital. Mr Alcorn said the capital was ( borrowed from the Investment Executive Trust.

Mr Monahan: “Is there any record in thp books of the Investment Executive Trust that Mr McArthur could purchase the building for his own personal profit?”—“He used the company as the instrument of purchase.” “So that he could put £287,000 in his and your pockets?”

The commissioner: “The outcome of the transaction seems to be that, without putting in a penny piece, Messrs Alcorn and McArthur have, on paper at least, made £287,000 profit.” Mr Alcorn was questioned regarding a list of his personal drawings that he had compiled at the commissioner’s

request. Mr Monahan: "These book entries detailing your drawings have been entered since the commission started. There was no book record until then?”—" No." Big Actual Gain. Referring to £15,000 lie had made in dune, Mr Alcorn said lie and Mr McArthur had sold Investment Executive Trust shares to the Southern British National Trust in order to give the latter control of the former. There had

been money owing to Air AlcArthur and himself for establishment charges in the Southern British.

Mr Monahan: “So actually you made £15,000 personal profit?” Mr Alcorn said that though he was a personal friend of Mr McArthur, he did not knoAv particulars of the bankruptcy proceedings in which Mr McArthur had been involved in New Zealand. Mr Monahan: “ Don’t you know that such proceedings resulted from his non-payment of a debt to tiic Government” Mr Alcorn: “Yes, Mr McArthur took up a timber contract, and when he began operations he found there was no timber there. It was all part of the campaign being directed against the Investment Executive Trust.” Mr Alcorn said that on the formation of the Investment Executive Trust in 1931, he, Mr McArthur and Mr McArthur’s son had been the original directors, and each had received 250 shares, which had never been paid for. Mr Monahan: “Have you ever put one shilling’of your own money into any of these companies?—“No, but I have put back into them all the money I received for my services.” The Commissioner; “As far as I can sec, you find it hard to detail what your services were.”—“Mr McArthur and I put in many months of hard work in drafting ideas for these companies.”

Mr Alcorn said he was later allotted a further 4750 shares, for which he had paid the money received for his two years' service. He had subsequently resigned from the board in order that the names of better-known men might appear on the prospectus about to be issued. He had introduced Mr McArthur to Mr Mclnnes, and it was arranged that Mr Mclnnes and Mr Bridgewater were to sell Investment Executive Trust debentures in the South Island of Now Zealand. Another firm had charge of the sales campaign in the North Island, but Sterling Investments were allotted the Auckland district. (Proceeding). WOMAN~INVESTOR.

APPLICATION FOR RESTRAINT

INTERIM INJUNCTION,

(Received 9 a.m.) SYDNEY, September 3

In the Equity Court, Sydney, today, Mrs Maud Nott, of Neutral Bay, applied for an injunction against the Southern British National Trust, Ltd., to restrain it from transferring - , or otherwise dealing - with, certain shares and Commonwealth bonds now in the possession of the company. Mr F. Lonat, for the company, denied that any misrepresentation had been made by the company or its agent in the course of dealing with Sirs Nott.

■Counsel added that the public would discover very shortly that the whole of the debenture-holders were fully covered by security, and there was no cause for anxiety by plaintiff. An injunction by consent was granted until the hearing of the suit.