McARTHUR CHARGES

Nelson Evening Mail, Volume LXX, 2 July 1936, Page 11

McARTHUR CHARGES

FURTHER EVIDENCE ACCOUNTANT IN THE BOX (Continued from Page 10) John Leslie Griffin, accountant of Wellington, said by warrant of the Governor-General dated Bth August, 1934, and issued under the Companies Special Investigation Act, 1934, he was appointed one of the four inspectors to investigate the affairs of certain companies., During his investigation he inspected the books of account and other records of the Investment Executive Trust, Sterling Investments Co. (N.Z.) Ltd., British National Trust, Ltd., except that he did not necessarily inspect all books and all the records of all those companies. As a result of his investigation he found

that the Daily Telegraph building,

Sydney, was purchased on Ist November, 1932, by the British National Investment Trust and the purchase price was £IOO,OOO. The sale was completed in December of that year and the whole £IOO,OOO was paid in cash. The British National Investment Trust obtained £50,000 in cash from the Investment Executive Trust and raised £50,000 on mortgage. The British National Investment Trust had in the bank at that date about £2OO. On 3rd February, 1933, witness said he found accused was allotted 190,395 2s shares in the British National Investment Trust. An objection by Mr O’Leary to this evidence was noted. On 2nd March accused acquired a further 9000 shares in the British National Investment Trust by transfer from the Investment Securities Association, making his total shareholding in" the British National Investment Trust 190,395 shares, all 2s. The British National Investment Trust resolved to purchase from the British National Trust three debentures of £IOOO each on terms of payment of £IOOO each cash for two and £4OO cash on account for the third. That came to £2400, equivalent to 22-5 d on the shares allotted to McArthur and Alcorn. Cross cheques were drawn and banked for that amount. As a result of those transactions the British National Trust had 249,743 shares in the British National Investment Trust out of a total of 250,000 ordinary shares in the British National Investment Trust. At the conclusion of the crossexamination of witness by Mr O’Leary the Court adjourned till 9.30 a.m. tomorrow.

WELLINGTON, This Day.

John McFarlane Elliffe, public accountant of Auckland, one of the four inspectors appointed to investigate the affairs of the companies mentioned in the Companies Special Investigation Act, in evidence said he specialised in a certain group of companies, viz. Sterling Investments Co., N.Z. Ltd.; Pacific Exploration Co., Ltd., and Wynwood Investments Ltd. He was also present at the sittings of the Royal Commission in Sydney. At the Royal Commission sittings, the books of Sterling Investment Company prior to 28th February 1934 were not presented. They were stated by various officers of the company to be lost. The balance sheet of the company as at 31st August, 1932. was found amongst the papers of the company and afterwards produced to the Commission. During j the adjournments of the Commission j he had discussions with accused relat- ' ing, in the main, to the reconstruction of certain books, which he attempted to make, with the. object of arriving at the value of certain assets taken over by the Wynwood Company and by McArthur personally at 28th February 1934. The Sterling Company balance sheet as at 31st August 1932, was always produced, and at no time did. McArthur suggest it was inaccurate. That balance sheet was the basis of his reconstructed books. In adition to the balance sheet there were available cheque book butts on the Sterling Ordinary Account from 31st August. 1932 to 28th February 1934, also there were available bank statements showing, in many cases, where the moneys had come from, and also a file of receipts and vouchers of the Sterling Company. As a result of his investigations he found that £50,300 had been paid by the Investment Executive Trust to the Sterling Company up to 31st March 1933. That figure was not entirely gained from the reconstructed books, but was verified from the Investment Executive Trust books, the Investment Executive Trust received in return, debentures from the Sterling Company, in denominations of £IOOO, which were purchased at £9OO. The debentures were charged upon all the assets of the Sterling Company. In order to cover the total payments of £50,300, fifty-five debentures, he said, had been given .by the Sterling Company. Subsequent to 31st March, further moneys were paid by the Investment Executive Trust to the Sterling Company, and were recorded in the Investment Executive Company’s books by direct charge to the British National Trust Ltd. Account. After 31st March 1933, no further Sterling Company debentures were issued, but to cover any money advanced, not only to Sterling but to other companies, British National Trust debentures were issued and payments were charged to British National Trust Account. Out of the total moneys paid by the Investment Executive Trust to the Sterling Company ,up to 28th 1934 ’ a total of aPProximately £60,000 was expended by the Sterling Company on assets set forth in the document annexure 111. at the Sydney Commission. To be produced later and included in that amount •were drawings by accused himself, and

moneys spent on his house at Hillsborough, Auckland. On 28th February 1934, the assets in the document, mentioned were transferred in part to the Wynwood Company, and in part to accused. Accused held £9900 of the capital of Wynwood Company at that date. The total value of debentures issued by the Wynwood Company at that date was £40,000 and the debentures were held by McArthur. Pursuing further transactions, witness said that on 28th February 1934, McArthur held all the debentures issued by the Sterling Company. In order to redeem these, the Sterling Company paid McArthur a cheque for £60,000, which was paid in to the Wynwood Company and the Wynwood Company paid a cheque to the Sterling Company for £60,025 in exchange for assets which were then transferred, a list of which accused produced at the Sydney Commission and which were always referred to as Annexure 111. He discussed with accused certain values which he had assessed from the reconstructed books. Opposite each item, he placed what he considered from investigations had been expended on respective items. The total of those amounts was just over £90,000. In the Wynwood Company’s books accused entered assets taken over from the Sterling Company at a certain book value and the total value of the assets taken over as entered was £50,284 15s 7d.

Referring to the item “All accounts due by J. W. S. McArthur,” he said it represented payments or drawings to two different sources, firstly accused personally, and secondly, to Hillsborough. As far as his investigations went in Sydney, he estimated accused had drawn personally £7897 3s 2d from the Sterling Company and that £6OOI 13s had been expended by the Sterling Company on Hillsborough. There were receipts available signed by McArthur for most of his personal drawings. He discussed these figures with accused in Sydney and McArthur agreed they were approximately correct. Witness said he had made some further investigations concerning items of £7897 since the Royal Commission and, giving McArthur the benefit of items which might be termed doubtful, he made the amount £7130 9s 2d. Referring to the item “All accounts due by Pacific Company,” he found that £20,689 14s Id had been paid by the Sterling Company to the Pacific Company up to 28th February 1934. Out of moneys received by the PacificCompany from the Sterling Company, to 28th February 1934, accused made ■ personal drawings from the Pacific Company amounting to £415 10s out of the same money £8931 9s was spent on the yacht Morewa which was registered in accused’s name. Mr O’Leary objected to all this evidence which he said, he could only think was being brought to prejudice ■ McArthur. It had no relevancy and | he asked for the protection of the • court.

Mr Evans-Scott in a passage that followed, said it was relevant in connection with the 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 the Crown counsel’s position was a difficult one. He presumed the Crown had taken every-

thing into consideration. Mr O’Leary said his real objection was that evidence to the effect that certain transfers were made to McArthur was one-sided. There was another side. Valuable consideration was given for all these transfers. The Magistrate remarked that a preliminary hearing was always apt to look one-sided, when the case for the defence was not placed before the Court.

Mr O’Leary: “And it may be very prejudicial to the accused.”

Witness said the yacht was never registered in the name of the Pacific Cqmpany. Accused was neither a shareholder, debenture holder and not a creditor of the Pacific Com: pany. The next witness was Kenneth Curtis Aqkins, solicitor, of Auckland. Witness said he was appointed a director when .Sterling Company was incorporated and was solicitor for the company. He was appointed chairman of directors and acted as such at directors’' and shareholders’ meetings. Witness went on to give evidence in regard to the power of attorney given McArthur, dated 12th January, 1932. On sth December, 1932, a resolution was passed that it be revoked and a new one executed in favour of Charles Graham Alcorn. Shortly before the meeting of 15th January, 1932, accused saw witness and requested that a separate bank account be opened with the National Bank of New Zealand at Auckland in the name of Sterling Company Investments Account, which was to be operated upon by the managing director of Investment Executive Trust, in pursuance of the power of attorney granted. > At that time, said witness, Sterling

Company’s ordinary account was with the Commercial Bank of Australia at Auckland. On 15th January, 1932, a resolution was passed gim.Tg authciity to McArthur to operate on hives’ments Account.

Regarding various transactions carried out and resolutions passed by the directors of Sterling Company, witness said he got instructions from McArthur and Alcorn as to what was to be done. He was not aware that accused was making personal drawings from Investments Account of Sterling Company. In cross examination, witness said he was not aware there was at any time credit in the name of McArthur’s son in Sterling Account. He knew his son. He would be about 21 or 22 and was at that time working as an employee in Investment Executive Trust. He knew of no dealings which would result in the son having a credit of £SOOO.

John Leslie Guinness, officer of the National Bank at Auckland, produced the original authority in connection with Sterling Account and said it was to be operated upon by J. W. S. McArthur alone.

To Mr O’Leary: “The bank officials satisfied themselves of McArthur’s authority. ' (Proceeding)