TRUST INQUIRY

New Zealand Herald, Volume LXXI, Issue 21913, 24 September 1934, Page 12

TRUST INQUIRY

m. McARTHUR'S EVIDENCE i MISSING COMPANY BOOKS \ EAND AND GUM DEPOSITS ; DETAILS OF BANK ACCOUNTS Additional details or the evidence given by Mr. J. W. S. McArthur last Tuesday before tlio Royal Commission in Sydney which is inquiring into the activitics of certain companies arc contained in. Australian newspapers which reached Auckland on Saturday. Mr. Justice False Rogers presided r.s Commissioner, Mr. W. W. Monahan, K.C., and Mr. J. B. : Collier appeared as, counsel assisting tho commission, Mi'. R. Windeyer, K.C., and Mr. B. Fuller for ,the Investment 3" Trust of * New Zealand, 3,united, and tho Southern British National Trust, Limited, and Dr. F. ],ouat for three other companies. Cross-examining" Mr, McArthur, Mr. Monahan asked: I suppose Pacifie Exploration Company shares ha*e no .value? Witness:. They are . worth about £200,000. , That is tho one that owns the gum jforest ? —Yes. Mr. Monahan: Where did the money ipume from that you got out? Theie •was £553,000 which came out of my personal assets. Where did tho money come from ? It came from the debenture-holders, didn t it ? —No. They got cash. Where did Sterling Investments get the money from 3—Timberlands Wood l'ulp. ' Mr. McArthur said the matter would appear in tho Sterling Investment books. Search Made For Books Mr. Monahan: Those are the books that are missing?— That would bo so. You say they put in cash that could lie traced through the banks? —Yes. So far as I know the books were left in the office in New Zealand. I directed the office there to see if tho books were at my home in Hillsborough. I have, just got advice that they cannot trace them. / Witness added that, unfortunately for him, the missing books contained information, which, if not obtained, would involve him. in a personal loss. Mr. Monahan: Is there any reason why you should have taken those looks into your home? —I don't say 1 did take them. I don't know.

Can you give any reason why you might havo taken thein, the most im]>ortant books of all, to your home?— I took other books there sometimes. You said a/moment ago that Pacific

Explorations had assets running into £200.000? —That is what they are worth. / Why are they not shown in the balance-sheet? —They are taken in at cost. / 7

.What did they cost?—£64oo. "Valuable Chalk Gum"

How much did this deposit of gum cost?— That was included with the land.

How much- did. the land cost? — £4700. , ' ~ You say now that that £IOOO odd is worth close on £200,000? —Yts. We bought it for a song. ' His Honor: Was it known it had a Tauri gum deposit?— The process of dealing with chalk gum was not then known.

Mr. Monahan: It had already been worked over' and much of the gum taken? —Some of it had been. There

, has been very little taken out and what is left is what was considered lowgrade chalk, which is now very valuable.

At a later stage witness explained that a cheque paid to Frank Cridland, Limited, carriers, of Sydney, was for payment of duty on a motor-car he brought from New Zealand. It was paid cut of British National Trust money,

that trust having charged £IOOO to his account. He thought that tlio charge was put through the books of the British National Investment, Trust. He had brought over £SOO to pay procuration fees and had .not yet been credited with the amount. This No. 2 account was his personal account. His Honor said the account started In February, 1933, with £2500. * Opening of Account

Mr, Monahan: How was it opened? Witness; I tbink it was with a cheque from the British National Trust. 1 am not certain. Did you just order them to supply you with money?— Yes, that is what it amounted to. That amount has been paid. I have a credit now for £23,000. Didn't the fund come from some source—the debenture account of the Investment Executive Trust? —It would he money belonging to the British National Trust: I have hero a letter, apparently written by you, showing that two cheques for £IOOO went through tho Investment Executive Trust about February 2, 1033. i\t that time there were no British National Trust debentures in existence? —No. They were authorised. His Honor: The first meeting of shareholders was on February 9. How

can you say they were authorised on February 2? —I may have been mistaken. /

Mr. Monahan: You had an account with the Commercial Bank in Sydney ? ■—Yes. I do not know if it was my pri-

yate account. It was an Investment Executive Trust account. The cheque was to be charged to tho British National Trust. 'At that time the British National Trust had no directors or anything. So,

at that stage, you calmly took £IOOO out of the Trust's moneys and paid it to your account?— Yes. "No Intention to Mislead"

Mr. Monahan (referring to a memorandum): You intended this to be a record for your secretary, that this was a British National Trust account to be opened in your name?— Yes, arid that has been done. I had no intention to mislead' the secretary. His Honor.said the sum put in tho Commonwealth Bank was £2500. Witness said he could not explain what the extra £SOO was for.

Replying to further questions con-

corning tlio £2500 account, Mr. McArthur said that £IOOO of it wont to bn.v debentures in the name of his wife, and £IOOO was paid for ordinary shares nubsoribed in the memorandum. He thought £hat Messrs. Pilkington and Pollard were the persons who benefited. He made them a present of the shares which were paid for with his money. His' Honor: I cannot understand how money from the Investment Executive Trust should bo put into debentures in the Southern British National Trust in the name of your wife.

Witness: Yes. I paid for them afterwards. / His Honor: There was no security at all.

Mr. Monahan: You wrote that note to mislead tho secretary and you made fi. present to your co-directors and your wife out of the money?— Yes.

Did ymnthfiik that was honest?— !Ses, because I had sufficient money to pay for them.

Do you think you were faithful to your trust in this?— Yes. They have not lost anything from it. You had not become possessed of tho £287,000 at the time?—No, but the British National Investment Trust had bccorno possessed of the property. \\c had assets. It was in the frit tiro. At that time tliero was none? —I had very substantial personal assets. ; In reply to Mr. Monahan, Mr. AleArthur said ho would produce his wife's bank account. It had not been operated lon vory much. An amount of £IOOO was paid in for a debenture, and compa rati vol v small amounts since. Mr. McArthur said, in reply to a further question by Mr. Monahan, that lio could not say without making an examination of liis books A\hcre a credit of £IOOO in his account in November last camo from. _ When Mr. Monahan pointed out that there was an entry in the books of the Southern British National .Trust of a pavment of £IOOO for one debenture, Mr. McArthur said tho position probablv was that ho had sold one of his debentures for cash to meet Ins personal expenses. Personal Assets Mr. Monahan: T suggest you have been selling your debentures and using tho monev for your private expenses. —I think'thab is the explanation. Witness said that a separate investment account was opened in Auckland for Sterling Investments and £-2,000 was put through it. Mr. Monahan: Who operated on that account? —I should say I would bo operating. . Solelv?—-I could not say just now. But where did the money go that you drew out? —Most of it went toward purchasing my personal assets to protect me from attacks. His Honor: That means that the investment Executive Trust was protecting your private interests? —Yes. As a matter of fact, you have about five or six names for your business purposes?— Yes. To protect your own personal interests through a somewhat involved manner? —Yes, and in protecting my own interests I maintain that I was protecting tho interests of the trust. Mr. Monahan: As a matter of fact, they insured your life against risk? Several of the companies did. Dr. Louat pointed out that from evidence already given Sterling Investments made about £17.000 profit out of the assets of Mr. McArthur. Commissioner's Comment "I am going to say now," said His Honor, "that one of the matters which arises out of this commission, and ono which I hope somebody will bo able to evolve some scheme to meet, is this business of one man carrying on in business under the names of five or six companies, getting money from the public, and preventing the public knowing properly with whom they are dealing. I think that is ono of tho outstanding evils which is shown in this commission."

Mr. Fuller: It is a world-wide practice.

His Honor: There is no doubt whatever about it being a world-wide practice, and it appears to bo . now a menace to straightforward business in the community tli.it a man may be able to hide himself under different n'ames and carry on business. I quite realise it is a world-wide practice anil difficult to deal with, because it is within the Companies Act. But being a world-wide practice does not prevent it being an evil in certain circumstances. I realise that you cannot legislate hastily to meet the position, but it does seem to me that some steps will have _to bo taken to prevent people carrying on under different names and hiding their identity from the public. Witness: I had no intention of maintaining that position. I had these several companies to prevent myself and the trust being attacked, and I had hoped and intended that the directorate of the proposed amalgamated company should be enlarged, and that there should b'o Representatives of the deben-ture-holders' «n it. My one aim was to see that it did v not get into the hands of powerful interests. I am quite willing to agree to anything that will provide for a powerful directorate. "MOST COMICAL THING" PROCEEDINGS AT MEETING \ COMMENT BY COMMISSIONER Giving evidence before the Royal Commission in Sydney last Tuesday, Mr. J. W. S. McArthur said he was responsible for the flotation of Wynwood Investments, to take over certain assets of the Selwyn and Redwood timber companies. The Commissioner, Mr. Justice Halse Rogers: Then, on April 11, 1932, you, as representing Sterling Investments. Limited, which had no holding in this company, and Mr. Alcorn, representing Investment Securities, Limited, which had no holding in this company, together held a shareholders' meeting of W ynwood, Limited, and proceeded to accept transfers from people who aro shareholders, and you elected yourselves directors. Did you ever hear of anything more fantastic than that? Witness made an inaudible reply. His Honor: Don't you think it was absolutely the most comical thing ever recorded ? Witness said it did not seem so to him.

His Honor: Can't you see the utter comicality of it? —Yes, it does appear so on the surface. On the'surface! But how do you get beneath the surface? You would not even bother to get your companies or yourselves registered as shareholders before you became directors! —The ctfect is just the same. Tho effect is that no act that has since been done by Wynwood is in order, and every act of Wynwood sijico then can bo set aside—l have not gone into that. . Jt strikes me as tho absolute limit of indifference to forms and ceremonies provided by law that you should simply set aside these things and calmly appoint yourselves directors. —Ihere was no one affected but ourselves. His Honor: But there may be now. Even the minute remains unsigned. Has Wvnwood Investments any assets now? —Yes. It would he very interesting if Messrs. Forrest, Coffey and Grdyson claimed thein, because all the transactions you have had with that company have been without their consent, and they are still shareholders.

NEW ZEALAND LABOUR CABLEGRAM TO LEADER MR. McARTHUR'S STATEMENTS (Received September 2.'1, 5.5 p.m.) SYDNEY, Sent. 23 Mr. J. W. S. MoArthur has cabled to Mr. M.. J. Savage. I vendor of the New Zealand Labour Party, saving it had been reported that Mr. Savage had denied that his party had endeavoured, with the help of the Country Party, to savo Mr. MoArthur from the consequences of his actions. The cablegram from Mr. MoArthur continued: "I said that efforts had been made to induce political parties to move on behalf of the trust companies to resist unjust attacks. I did not say that those parties had helped the companies.

"I emphasised that no .improper methods of approach to members of Parliament wero either used or contemplated."