TRUST INQUIRY

New Zealand Herald, Volume LXXI, Issue 21921, 3 October 1934, Page 14

TRUST INQUIRY

m. McARTHUR'S ASSETS NEW ZEALAND -CUM LANDS COMPANY'S BOOKS EVIDENCE OF AUCKLANDER Evidence concerning gum lands assets was given by Mir... J. W. S. MoArthur in Sydney last week before the Royal Commission which is inquiring into the activities of certain companies. Amplified reports of the proceedings are contained in the latest Australian newspapers to reach Auckland. Mr. Justice liaise Rogers presided as Commissioner, Mr. W. W. Monahan, K.C., and Mr. J. 15. Collier api>eared as counsel assisting the commission, Mr. R. Windeyer, K.C., and Mr. B. Fuller for the Investment Executive Trust'of New Zealand, Limited, and the Southern British National Trust, Limited,'; and Dr. F. Louat for three other companies. Mr. McArthur tendered a report by a man named Petrie, dealing with a gum forest in New Zealand, which was part of witness 1 assets, and also submitted three samples. The first sample, he said, contained white kauri gum, of the highest commercial grade. The second sample was of a low-grade crude chalk; this was practically the lowest-grade gum produced, and it was this grade which formed a very large proportion of the deposits on the property. The third sample contained purified chalk, which had been produced from the low-grade product as a result of the experiments conducted by the Council of Scientific Research. This purilied chalk was said to be superior to first-grade kauri gum for making lacquer. High-grade gum was selling in Brisbane for £l6O a ton. Timber and Forestry Apart from the gum deposits, ;continued Mr. McArthur, the land possessed a value for timber and forestry purposes of at least 30s an acre. It possessed a harbour,, and the timber could easily be shipped. In the interior of the island similar land had been sold for £4 to £4 10a. an acre. There were 27,000 acres in the property, and he valued it for forestry purposes at about £40,000. in addition to its value for tree-growing, its value for gum production on a royalty basis would be £IOO,OOO. Cross-examined J).V 'Mr. Monahan, Mr. McArthur said ho bought the property, about November,: 3933, and at the tiuie he thoiight it w%s worth £IOO,OOO. That was before the purification process was known.. In the transaction he had with Mr. Alcorn this property was part of the assets he purchased for £6O,CH)O, He considered the transaction was, perfectly honest. He had intended to pass the benefit to the trust companies. His Honor: It is very difficult for ,me to accept your statement now as to your intentions when all this iug,gling of the books been going on. Witness: 1 think Mr. Alcorn can support, me. * Purchase ol Pxopecty Replying to. further questions, JVlr McArthu* said he had received a credit in the books of Sterling Investments, * Limited, for £6400 for the property. He had purchased the property originally from the National Bank/ by acquiring the option of a man named Deverall, hold in conjunction with Mr. Lovegrove, a solicitor, Mr.. Deverall's option cost £3600. Witnesa gave Mr. Deverail £IOOO in cash, which was supplied by-- Investment Executive Trust. This trust would get the benefit; of the transaction later, when it was amalgamated with the Southern British National Trust. The 1 money .was, advanced from Investment Executive Trust debentures. John Macfarlane EUiffe, public accountant, of Auckland, said he was an inspector appointed uitider special legislation in New Zealand. He had endeavoured to reconstruct the books of Sterling Investments, Limited, and had investigated the transaction of this company relative tci the payment of £60,000 to Mr. MoAithur and the position ol ! certain assets. In Auckland, he had been told that the books of Sterling Investments, Limited, were in Sj'dney, and in Sydney he had been informed they were in Auckland. Basis lor Se ! t ol Books Witness said he Jjiad fouud an unsigned balance-sheet of Sterling Investments, Limited, dated August 31, 1932. and had used it as a starting point. It formed the basis for, a set of books which he drew up. He also found a balance-sheet dated February 28, 1934. In attempting. to reconstruct the portion of the compauy'is accounts he made up the value of the assets of Wynwood Investments, which Mr. McArthur had taken over, as being worth £50,284. It would appear that the assets from Sterling Investments were worth ' £4fi,:356. It appeared from, the transactions of Wyn wood Investments and Sterling Investments, witness added, that Mr. McArthur acquired assets totalling £109,395 by handinc over 60 British National Trust debentures. Mr, Elliffe, in reply to a question by Mr. Monahan, said the accounts of the Investment Executive Trust showed that up to March 31, 1933, »tll the advances to Sterling Investments were charged to Sterling Investments account in the -Investment Executive Trust ledger. The cheque for £50,300 was paid back by Sterling Investments to Investment * Executive Trust and that account was closed. All further advances had been charged directly to the British National Trust account. His Honor: The state of the Investment Executive Trust books calls for grave comment in this particular matter. McArthur says that he will take the responsibility for these books, but that does not help much. Where did the money . go before the British National Trust came into existence? Commissioner's Comment His Honor asked Dr. Louat to nominate somebody with whom Mr. Elliffe could co-operate to trace certain transactions.: Dr. Louat suggested that Mr. Elliffe should say what information ho wanted. Mr. Elliffe bad said that an item of £22,000 was separate from one . of £50.000. This was riot the case. His Honor: Don't you see that if you knocked Mr. Elliffe's reconstruction to pieces and absolutely pulverised his figures, it would not matter one iota. I have already indicated that 1 think tips is a very serious matter. Dr. Louat attempted to reply, but His Honor continued: "I want to know how much McArthur made, if any, and it looks as if he made a good deal out of those devious transactions of diverting these Investment Executive Trusti, assets to his own account. He says he did . it, to stave off attacks on himself." Dr. Louat: We have given evidence of that, which we say is true and believe is true, but, in so far as it is incomplete, we want to know the point , on whi'ch it is incomplete, so that we nifiy amplify it. ... His Honor: The position is that, as the evidence now stands, about two i and a-half years ago McArthur was unable to pay certain debts, but, by ... the aid of the Investment Executive ♦rust, ho was able to weather £hat

storm, and has apparently collected all sorts of assets since, the value of which has. -not been, definitely determined. I would like to know the value of those assets, and how much he has collected personally. ' At a later stage in the proceedings Mr. Elliffe said he had conferred with Mr. McArthur, Mr. Glasson and an accouiiitiint named Griffith, and they had agreed. subject to certain reservations, that the total value of the assets* taken over bv Mr. McArthur in exchange for <:iO British National Trust debentures> was £90.002. Accepting as correct a pencilled memo by Mr. McArthur, the assets taken over by Wynwood Investments, Limited, from Mr. McArthur vrero worth £50,28-1. _ A second itom, amounting to £48.356, was taken from the reconstructed books and represented cash which had gone into assets, and there was a further item of money advanced amounting to more thart £3OOO. There was a credit of £11,439. Witness said Mr. McArthur had told him that he desired to bring evidence as to the value of the assets taken into the books of Wyn wood Investments, Limited. Mr. McArthur claimed that two items totalling more than £3OOO should have been included in the assets. Witness added that since Mr. MeArthur had taken over the assets personally, Sterling Investments had continued to advance money on account of the properties. Mr. Monahan: What security was Sterling Investments holding to cover those advances? —I did not go into that. _ In examination by Mr. Fuller, witness said some of the transactions he liad discovered might have been legally in order, but they were not morally right. Mr. Fuller: This is not a court of morals. Mr. Monahan: It is just as well for some people.. Dr. Loirat, (to witness): You are an impartial officer appointed by the New Zealand Government to investigate the McArthur companies?— Yes. And your evidence comes to this, that in the figures you previously gave to the' commission you charged £19,000 too much against-"Mr. McArthur? —It was not incorrectly charged at the time. It was only in the last day or so that we have been able to check the balance-sheet, , i When did you begin your investigation' in the" Trust building?— Some weeks ago. i < Witness said that officers of the Trust had given him all the information he desired, and had made available their books to him. . In the course of an argument with counsel, His Honor remarked: "Sterling Investments, Limited, sell £90,000 worth of assets for £60,000, and the British National Trust is the holder of shares in Sterling Investments. Whoever found the money originally, Sterling Investments, Limited, would have given away £30,000 worth of assets." Dr. Louat; At that time, British National Trust was not the holder, in Sterling Investments. It was Investment Securities, Limited. During argument as to the value of assets, His Honor said: "The gravamen of what is alleged is .that Mr. McArthur, being in a position of trust, speculated with funds in order to salvage his own private assets. As a matter of fact, it looks as if the activities of the Investment Executive Trust were started in order to salvage his assets." Winess said lie could definitely establish that £50,000 had gone out in cash.