CROOKED DEALINGS

Nelson Evening Mail, Volume LXXI, 19 November 1937, Page 6

CROOKED DEALINGS

“AN AGENCY FOR ROBBING PEOPLE” ONE OF THE MoARTHI'R GROFF OF COMPANIES HOW THIS SCHEME WAS WORKED [From Our Own Parliamentary Reporter] WELLINGTON. This Day. “The history of this company shows some of the most crooked dealings in the history of the Dominion,” declared the Minister of Finance (the Hon. W. Nash) when moving the second reading of the Companies (Special Liquidations) Extension Bill in the House of Representatives yesterday afternoon. He was referring to the First Mortgage Freehold Security Company of New Zealand, Ltd., one of the McArthur group of companies, for which under the Bill the Public Trustee is to act a.s liquidator as in the case of other companies in the group. Mr Nash said that there were only two directors of the company specified in the Bill, a Mr C. T. Alcorn and a Miss Alcorn. The company was nothing but an agency for robbing people who did not understand what they should do with their savings. It was linked up to some extent with a number of other companies that had already been dealt with. It had issued debenturies to some 82 people and its original capital was £IOOO. Mr S. G. Holland (National, Christchurch North): Paid up? Mr Nash: No. Nominal capital. Then it was increased to £IO,OOO and the increase was based on 5000 £1 shares and 100,000 shilling shares. The actual capital subscribed was only £1205 and only £25 was paid up. Then they proceeded to issue debentures to the extent of £IOO,OOO. Four thousand debentures were offered at £25 each, and they were able to sell 7G4. bringing in £19,100. Another company, Investments Security, Ltd., was next organised to sell debentures, and it received about £I2OO in commission, Mr Nash continued. The ' company was authorised by its articles of association to advance money up to two-thirds of the value of properties, so : four other companies were formed for 1 the purpose pf buying properties and 1 they purchased properties from the 1 promoters of the original company. Fifty acres, part of a property of 414 acres which had been bought for £3512, by the wife of the man who promoted the original company, was purchased for £12,000. The original company, acting under its articles of association, could then advance up to £BOOO on the fifty acres. It did not matter that the land was worth only £3OOO or £4009. In another transaction 73 acres were a sold for £11,500. Ultimately 408 acres of the land for which £3512 had been t paid was sold and the total receipts v were £31,500. The profit was £28,347 c and there were still six acres left. I SAFEGUARDING THE PEOPLE'S f SAVINGS f

Something should be done to safeguard the savings of the people, particularly from the person who went from door to door selling debentures, as had been done for years, said Mr Nash. Something had been done in that respect in the Old Country. He suggested that at a convenient time the House should take steps to ensure that people who had no chance of being fully advised were protected from persons selling debentures on which they could not possibly get their money back. He thought the best course was for people with normal savings to leave their money in the Post Office Savings Bank or the trading banks. Those with.larger amounts should invest in Government or local body securities. If they wished for other forms of investment they should consult their bankers or Stock Exchange brokers. That did not mean that every security on the Stock Exchange was sound, but that crooked work of the type he had outlined would not have been possible if the people concerned had first thought of consulting a banker or Stock Exchange broker. LOOPHOLES IN THE LAW The Rt. Hon. J..G, Coates (National, Kaipara) said that the company under discussion was one of those companies in New Zealand and Australia that had been brought under the purview of earlier legislation, which made the Public Trustee liquidator in certain cases. The whole business was regrettable, but it was doubtful if anyone could have foreseen what was going to happen. The Bill was the final scene of a very unpleasant experience for all connected with it. The Leader of the Opposition (the Hon. Adam Hamilton) said that it was very difficult to legislate to prevent every “fool and his money being parted,” but it was their duty to make investments as safe as possible. He discussed trust business and said that loopholes through which investors could be deceived should be closed up wherever possible, He expressed the opinion that there were risks in the multiplicity of both public and private trustees in charge of funds, and said that it might be possible to formulate some scheme for the better regulation of trusteeships in the interests of investors. When replying to the debate the Minister said that it had to be admitted that there were still loopholes in the 1 ' law. While he was in England he had made some investigations into trustee legislation and it was possible that the Government might take action to achieve what had been suggested by the Leader of the Opposition. The Bill was put through its committee stages and passed.