GIRL "DIRECTORS"

New Zealand Herald, Volume LXXI, Issue 21874, 9 August 1934, Page 13

GIRL "DIRECTORS"

CLERKS AS "DUMMIES" ACTING FOR THREE MONTHS MR. McARTHUR'S YACHT RELATION TO ONE COMPANY [BT TELEGRAPH —SPECIAL REPORTER] WELLINGTON Wednesday Some transactions of the Investment Executive Trust group are next examined in the commission's report which continues as follows: — "Sterling Investments Company (N.Z.), Limited, seems to have been for years a kind of clearing house for transactions in which Mr. J. W. S. McArthur and the companies controlled by him are interested. We have direct evidence of several transactions whereby threatened litigation or other adverse action against Mr. McArthur or one of the other companies has been averted by a settlement effected by the payment by the Sterling Company. Several such transactions relate to Mr. McArthur's personal liabilities in relation to the Selwyn Timber Company, Limited (in liquidation), and New Zealand Redwood Forests. Paid-up Capital of £SO "At a time when the paid-up capital of Sterling Investments Company (N.Z.), Limited, was only £SO, it lent several thousands of pounds to the Selwyn Timber Company, Limited (in liquidation). During 1931 and 1932, the Sterling Company's paid-up capital was £SO 14s, while in September, 1932, it had registered with the Registrar of Companies as mortgages or charges debenture issues totalling £165,000. The latest filed return of Sterling Investments Company (N.Z.), Limited, shows its paid-up capital as £2350, but it has subscribed for shares of a nominal value of £10,883 in other companies. Of these, £9979 is in Pacific Exploration Company, Limited, a company formed to finance the building of a luxurious yacht which is now registered in the name of Mr. J. W. S. McArthur as owner. Typical Methods Illustrated "The Transport Mutual and General Insurance Company, Limited, illustrates the typical methods of the group. It was incorporated in November, 1933, and its memorandum of association and articles of association were signed by seven most obrious 'dummies.' Four of them are girl clerks in the offices of the companies in the foregoing group. "The articles of association provide that the first three subscribers to the memorandum shall be the first directors. They are Margaret Muriel Dunn, Marjorie Hawley and Henry Davenport Williamson, who each signed a memorandum for one share. Then in February, 1934, the Investment Executive Trust of New Zealand, Limited, was allotted 60,000 shares of £1 each in the capital of the Transport Mutual and General Insurance Company, Limited, and paid up 10s per share, or £30.000 in all. "The three 'directors' named above filed their statutory report a month later, showing the receipt of this £30,000 from Investment Executive Trust, together with a further £ISOO as an advance in anticipation of calls, and they showed as an approximately corresponding asset, sundry investments, £30,500. Evidence of Girl Clerk "We summoned these three 'directors' to appear before us on June 6, 1934. Margaret Muriel Dunn deposed that she was 21 years of age; that she had no experience of the requirements and form of an insurance company; that a Mr. Glover-Clark had asked her to sign a memorandum for one share and to act as a director pro tern; that at 'a meeting of directors,' the solicitor of the company, Mr. M. G. McArthur (a brother of Mr. J. W. S. McArthur) brought a list of the investments and the 'directors' were asked to sign their approval and did so; exercising no choice or judgment of their own; that later Mr. Glover-Clark, Mr. C. G. Alcorn, and Mr. T. H. Macky became directors and took over.

"Marjorie Hawley is 19 years of age and corroborated Miss Dunn's evidence. She simply did what she was told by Mr. Glover-Clark and Mr. McArthur.

"Henry Davenport Williamson described himself as an agent, 61 years of age. He admitted his signature to filed documents, including a statutory declaration, that he had made a reasonable investigation and inquiry as to the requirements of the company and was of the opinion that the capital subscribed was sufficient to justify the company in commencing business, but he disclaimed all responsibility and said that he had no voice in the matter and that he was not in any sense in charge, nor was he at any time asked his opinion on any point. Possible Speculative Use

"Taking the least serious view of this whole transaction, it enables the common controllers of the two companies, by intermediate investment in shares of the Transport Insurance Company, to invest the funds of the Investment Executive Trust in investments which the auditor of the latter company would not pass. "A more serious possibility is that funds may be used for speculative purposes designed to secure collateral advantages to the directors of the companies. We have in this connection ascertained facts which demand a close inquiry. "The various investment trust companies' focal centre of this group in New Zealand has been the Investment Executive Trust of New Zealand, Limited, of which Mr. J. W. S. McArthur is managing-director. It may be repeated hero that this company has a paid-up capital of £30,000 and lias issued a prospectus for the issue of mortgage debentures to a total of £4,000,000. " Fantastic " Objects

"Pacific Exploration, Limited. 'The objects clause' of this company's memorandum of association can only be described as fantastic. The main object is 'to seek for and secure openings for the employment of capital in the Pacific or in any other part of the world.' Its other objects include subsidising laboratories and experimental work, scientific and technical research, supplementing the remuneration of scientific or technical professors or teachers, to carry on as farmers, dairymen and as butchers and sausago manufacturers, and to produce, construct, charter or hire wharves, ships, etc. "It has been extremely difficult to get any information about this company, although it is commonly reported that it was formed to finance the building of a yacht, which Mr. McArthur has used as his own. It is also a fact that the yacht is registered on the books of tlie Royal New Zealand Yacht Squadron at Auckland in the name of J. W. S. McArthur. and the entry is supported by an affidavit of Mr. McArthur that it, is his own property. It is also registered in Mr. McArthur's name with the Customs Department. These facts should he considered in tho light of evidence cited later as to Mr. McArthur's unfinancial position a few years ago. Mr. McArthur now signs documents as sole attorney for Pacific Exploration, Limited. "Financial Publications, Limited. This company publishes a monthly magazine, the Investment Review. Its balance-sheet as at March 6, 1934,

ishows a paid-up capital of £54, but its 'sundry creditors' appear as £6lOl. The year's profit and loss account shows that its total revenue from subscriptions, sales and advertising and inquiry fees was £l7l. It nevertheless completed its year with revenue disbursements of £5739, including £350 directors' fees, the result being a net loss of £5568. "Transfers of shares between members of the foregoing group are fairly frequent and sometime# for large parcels. As illustrating the possibilities in this connection, we would refer to the following facts culled from official records in the offices of the Registrar of Companies and the Stamp Duties Department. In the company registration office's return of allotments filed on March 3, 1933, by the British National Investment Trust, Limited (New Zealand), ordinary shares of 2s each were allotted to C. G. Alcorn, 49,589: J. W. S. McArthur, 190,395; total, 239,993; paid-up to 22-5 d per share. £BOO in Stamp Duty "On March 2, 1933, Mr. McArthur bought 9000 such shares from Investment Securities' Association, Limited, for £IOO. In the Stamp Duties' Office, March 26, 1933, requisition No. 21,221, for stamping transfer of shares in the British National Investment Trust, Limited (New Zealand), from C. G. Alcorn, 49,848 shares, 2s each, sold at over £1 each, stamp duty paid, £2OO 19s; from J. W. S. McArthur, 199,395 shares, 2s each, sold at over £1 each, stamp duty paid £BO3 12s. "The transferee in each case is the British National Trust (Canberra). The consideration money was expressed as £287,000, or over 10 times the nominal value and over 80 times the paid-up value of the shares allotted three weeks previously. "It is noteworthy that at the date of this transfer, Mr. J. W. S. McArthur was managing director of the purchasing company (domiciled in Canberra), which is an investment trust operating in Australia. The largest return filed bv this purchasing company in New South Wales shows its total paid-up capital as £65,007, or less than onefourth of the consideration money for these shares."