A LOSS OF £8000

New Zealand Herald, Volume LXXI, Issue 21911, 21 September 1934, Page 11

A LOSS OF £BOOO

FINANCIAL PUBLICATION HOW POSITION WAS MET INVESTMENT TRUST'S FUNDS JUDGE CRITICISES USE By Telegraph—Press Association—Copyright (Received September fO. 9.35 p.m.) SYDNEY. Sept, 20 At to-day's sitting of the Royal Commission which is investigating the affairs of certain companies, Mr. Monahan questioned Mr. J. W. S. McArthur about the increase of the capital of Financial Publications, Limited, under which, according to cabled advice from Mr. Glover Clark, the latter was to bo given financial assistance by the Sterling Investments Company (N.Z.), Limited, in order to wipe off the loss of £BOOO incurred in the first year of publication. Asked by Mr. Monahan if the transaction was to cover up the loss of the £BOOO, witness said: Every newspaper must incur losses at the start of its existenco, and it is quite right that establishment charges should be capitalised. He said the mone.V was to be found by the debenture-holder* in the Investment Executive Trust. Ability or Integrity? The commissioner said it seemed that the money of the Investment Executive Trust was being used in the widest sense in any way that Mr. McArthur, as managing-director, determined. You used it in any way you liked? he asked. Mr. McArthur: That is so. The commissioner said his present view was that legislation should be introduced to ensure that those who controlled trust companies put a good proportion of real money into them. In this case money subscribed by de-benture-holders was being managed by people who did not put one penny 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 are allowed to control it, simply because they have ability to control it. Interest Paid Out of Capital Mr. McArthur: The newspaper is paying its way, and believe is showing profits now. Mr. McArthur then was questioned about balance-sheets. Mr. Monahan: 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. Mr. McArthur: I presume so.

How was it paidP—Out of capital until we can get revenue, which will be coming in next year.

To date, people have been paid out of capital ?—Yes. * Dr. Louat: The English Court says that is quite all right. Mr. Monahan: I think it will be most interesting to the people who p.ut the money in. Dr. Louat: It may be quite a sound business method. Resignation of an Auditor Mr. McArthur was questioned at length regarding the resignation of the New Zealand auditor, Mr. Anderson. He denied that the latter had taken exception to a balance-sheet issued at the end of 1932.

Sir. Monahan submitted that the balance-sheet had not shown that of a lump sum of £31,000 Mr. V. B. Mclnnes had reoeived £12,000. Tho auditor thought this should have been shown.

Mr. McArthur said that was not the position. Mr. Monahan: The auditor drew attention to this doubtful item of £12,000 and in the meantime wanted it shown as a payment to Mr. Mclnnes? —I do not think there was any objection to that.

You never disclosed that Mr. Mclnnes had received it? —You do not say in a balance-sheet who gets money. What we disclosed was that it was paid out. Removal of Books to Sydney Continuing, Mr. McArthur said the amount originally paid out of debenture capital to Mr. Mclnnes had been replaced by the British National Trust debentures. He did not attribute Mr. Anderson's resignation to the fact that the directors had failed to agree to his suggestions. Replying to Mr. Monahan, Mr. McArthur said the books of tho companies had been brought to Sydney from New Zealand about May last because the directors had intended to create a head office in Sydney. Mr. Monahan: Were you advised by your solicitor, Mr. Wiseman, that you were committing a breach of the law in doing so? j Mr. McArthur: No. Mr. Monahan produced a letter which he said had advised Mr. McArthur that unless the books were available in New Zealand for inspection by "the directors the consequences might be grave. Mr. McArthur said he did not regard the position as serious. He had given instructions that some of the books should be brought to Sydney.

POLITICAL REFERENCE "TOO ABSURD FOR WORDS" COMMENT &Y MR. SAVAGE [by telegraph—press association] WELLINGTON, Thursday The statements made by Mr. J. W. S. McArthur at the Sydney lloyal Commission to-day regarding the Labour and Country Parties were given an emphatic denial by the Leader of the Labour Party, Mr. M. J. Savage, tonight. "The suggestion that the Labour Party is endeavouring, with the help of the Country Party, to save Mr. McArthur from the consequences of his actions is too absurd for words," said Sir. Savage.