ARMY SCANDALS

New Zealand Mail, Issue 1748, 6 September 1905, Page 56

ARMY SCANDALS

SALES AND REFUNDS IN SOUTH AFRICA. - REPORT OF THE BUTLER COMMITTEE. The Parliamentary Blue Book containing the report of the committee appointed by the Army Council to consider the question of sales and refunds to contractors in South Africa at the end of the war is to hand. The Committee of Inquiry consisted of Lieutenant-General Sir W. F. Butler, K.C.B. (chairman), Colonel C. A. Hadfield, Director of Supplies and Transport; Major C. B. Little, Somersetshire Light Infantry; and Mr H. J. Edwards, 1.5.0 1 . The committee was to make special inquiry into the following transactions : (a) Refund on forage contract to Mr Stepney; (b) sales to Mr Stepney; (c) Meyer refund and sales; (d) refund Wilson and Worthington (biscuits); (e) Wil- ' son, tinned meats refund; and (f) belated claims for Natal Brewery. It ,was also to report on the responsibility of those concerned. To understand the position clearly, it is necessary to state that in June, 1902, the military^authorities held immense quantities of food supplies in South 'Africa. These would have sufficed to have fed more than 300,000 men and 200,000 animals for four months. This food and forage was distributed among numerous depots in the Transvaal, the Orange River Colony, Cape Colony, and Natal. The chief depot was at Pretoria, where were also the military headquarters and the office of the Director of Supplies. Outside the military bases, the Transvaal and Orange River Colonies had been completely denuded of food supplies, whether of meat or cereals. The price of provisions, always high in South Africa, had become abnormally exhorbitant. Money, however, was plentiful, owing to the high rates at which labour had been remunerated, and to the wages paid to the irregular oorps. Its distribution was general throughout the*country. Under such economic conditions, the holders of the only food supply in a territory of great extent might reason- 1 ably have anticipated being able to dispose of their surplus stocks of food and forage at rates advantageous to the State. They held this food under conditions of cost price, freightage, and transport of a distinctly favourable character. O'n June 18th, Lord Kitchener, having expressed these anticipations, organised a Sales Department under Colonel Morgan, of the Army Service Corps, and in suggesting this course, said:—“l think this is advisable, as the money involved will reach probably some six or seven millions.” Lord Kitchener left South Africa on -June 23rd, and Lieutenarii-General Sir Neville Lyttelton assumed command. In July the War Office received strong telegrams from Pretoria urging a proposal to make local contracts, which the Director of Contracts approved, against the recommendation of the Quarter-master-General, who had urged that all contracts should be made in England. On August 23rd it was telegraphed that Colonel Hipwell would succeed Colonel Morgan in command of the Army Service Corps, and the latter officer was to return to England, which he did in November. In the meantime, and after Colonel Hipwell had arrived, Colonel Morgan continued in the office of the Director of Supplies, and a system of divided responsibility was begun, Colonel Morgan retaining in his exclusive charge all questions of sales, retrospective and prospective. Investigation proved that in the case of a line of chaff sold to Saunders and Hunter the chaff was from Australia, per the steamers St. Jerome, Manchester Merchant, St. Andrew, and Templemore. The line —consisting of 2,584,8451b —cost the authorities £2926, and was sold for £4Bl, a loss of £2445. Particular reference is made to the dual system —“a system under which the army would concurrently sell with one hand and buy with the other, the same article, or a similar description of the same article.” With reference to tenders for supplies received by Colonel Morgan, Marjor Long stated:—“l think Meyer and Company' were the principal and only ones (contractors).” The report states that there is a conflict of testimony as to their subsequent treatment. Colonel Morgan stated that he repeatedly urged Colonel Hipwell to deal with, these tenders. Colonel Hipwell says that he was advised by Colonel Morgan to accept Meyer’s tender. Allusion is made to various other offices and administrations held by Colonel Morgan in 1901-2—the Field Canteen Force, the various farms which -were established in the Transvaal and the Orange River Colony for the reception of captured cattle, etc., notably that known as Eloff’s farm (near Pretoria), the Sales Department (already mentioned), the detective system, the Native Labour Corps, and the Oorps of Cattle Rangers. These offices and administrations were all worked and controlled by Colonel Morgan, in

addition to his own business as Director of Supplies. The working and results of these various offices were peculiar. Thus a Mr Saunders, an Army Service Corps sub-ordinate, who is described as a “personal clerk” to Colonel Morgan, was the accountant at Eloff’s farm after it became the property of the Sports Club. Mr F. O. Morgan, brother of Colonel Morgan, is' described in the same paper as civil adviser and treasurer of the Sports Club at ELff’s farm, while he also appears to have been the holder of various agencies and occupations in the companies or firms which tendered for the supply and purchase contracts. He is said to have been a frequent visitor to the office of the Director of Supplies both before and after Colonel Morgan leii Pretoria, and in the former period appears to have resided with his brother. He was agent for Meyer and Company, for- English and Company, was apparently a partner in Wilson and Worthington, and was connected with the Field Force Canteen in the purchase of cigarettes in Egypt. Of the six cases specifically referred to the committee, t-hat known as “Meyer sales and refund” is the only one which is a direct connecting link between the office of the Director of Supplies under Colonel Morgan and Colonel Hipwell. Meyer entered Pretoria with Earl Roberts as agent for the first v Cold Storage Company, and is described by witnesses in different terms, and. various nationalities are ascribed to him, but all are agreed that he was a person possessing a remarkable grasp of the necessities of a financial situation. The company, outside Mr Meyer was not so easily described. A person named McGee, mentioned as belonging to the company, was described as “a racing man,” “not reliable,” “not a man of much substance,” “decidedly addicted to drink.” - Meyer was “a very difficult man to get money from,” “who generally slipped out of his undertaking,” and who was “in danger of going into liquidation.” This was the company that finally became the contractors for supplying our troops with several hundred thousand pounds’ worth of food and forage, and that at the same time was declared the purchasers of our supplies to the extent of more than a quarter of a million sterling. Meyer’s tender for the supply of forage was formally accepted by Colonel Hipwell in the name of the General on November 25th. His tender to buy forage was formally submitted on December 4th. It is admitted that for weeks before these dates Meyer was a frequent visitor at the office of the Director of Supplies. It is also' admitted that Meyer was permitted to amend his formal tenders to buy, a privilege not given to others. The tender of Meyer to purchase the army supplies was not formally accepted until January 10th, 1903, when the Director of Supplies ordered that all sound oats were to be handed over to Meyer, Ltd., at 11s per 1001 b. Other orders followed. The following shows the working of the dual system, and how the public were affected:— Commodity. What Meyer What Meyer paid. was paid.

As already stated, on or about January 10th, 1903, Meyer was formally declared the purchaser of a vast quantity of forage throughout the Transvaal and the Orange River Colony. Ten days earlier he had already begun to supply the troops at rates which probably made him the readiest reckoner of profit of whom the history of military contracts has any record. Taking the item of oats as an example, the conditions of his double deal left him approximately a gainer of £1 sterling upon every 3001 b of oats sold him, and which he transferred back. The evidence given by Colonel Lewis and others shows the actual method or machinery of exchange which followed. The authorities still continued to store and issue practically as before the contract had been made, and some 60,000 animals became the machines by which Meyer was made-the daily gross gainer upon oats alone of something over £2OOO sterling. Just before the date upon which this consummation had been reached, Mr F. Morgan had quitted the employment of that contractor. The report goes on to deal generally with the six charges, and states that these cases emanated from and returned to the single office of the Director of Supplies in Pretoria. The Stepney forage refund, the Wilson and Worthington biscuit refund, the Wilson and Sons preserved meat refund, the Meyer oats payment, the double concurrent sales to and purchase from Meyer, loosely-worded contracts, . . . were the work of the office of the Director of Supplies and the military personnel concerned in them. Then we have a long series of manipulated tenders—the many visits of a few favoured contractors to the office of the Director of Supplies; understandings, and conversations many, documents few, loose, and inconclusive; underhand tenders they are called by the highest legal authority in the Transvaal. Behind these elusive companies we catch occasional glimpse of

substantial financial persons, moving in •a background we cannot pierce. There are anomalies everywhere. In a country replete with money from the lavish expenditure of war, and. where food, save ours, is almost entirely absent, the Government can get but a scanty sale for their supplies. When we sell a consignment to a random purchaser, he resells it for a profit of from 50 to 500 per cent. Food and forage, for which there is no apparent demand in the interior, are continually forwarded from the coast at high cost for railage. They come forward apparently only to be sold on arrival for a nominal price, their sale rendering the Government liable for Customs duty, which, in some cases, is alone greater than the total price they have realised. Through all this maze of seeming ineptitude, the figure of Mr Frank Morgan, the brother of the Director of Supplies, moves . continuously—the agent of “ mushroom companies,” t/he salaried servant of favoured firms. It was a matter of public knowledge that Mr F. Morgan’s share in the profits arising out of the single case of the sale of chaff reached the sum of £613. One by one the reasons given for the dual dealings with Meyer have been dissipated under the scrutiny of the committee. The anticipated and asserted savings had no foundations in fact. The supplies were still being poured in to increase congestion and deterioration, to diminish values by adding to the Government loss through railage rates and Customs duties, and to render generally our position more hopeless until finally the overweighted ship of Government supplies drifts to shore a derelict in the contractors’ hands. One channel of safety lay open all this time. It was simple, and needed no effort of administrative steering to reach. We had only tq refuse the tenders offered, and to continue to use our own stuff for our own animals on our own ground. They were both together at our stations. Nothing need have been altered or added to. We preferred to buy our own forage from a man to whom we had just sold it at some 60 per cent, more than he had given us for it. We were still to store it—to carry it to our animals—and it was to stand in our forage yards at our risk of deterioration. The committee cannot refrain from adding that they have never been able to understand why a method of meeting all the civil and military requirements at the end of the war was not adopted, viz., handing over to the Repatriation Department the whole surplus army stock at a joint valuation. This simple stroke-of-the-pen method between two departments of the State would, the committee think, have saved -much money, and placed an effective barrier against the various activities alluded to ill this report. The committee have it in evidence that Captain Hipwell was not himself aware of the dual system until after Meyer had been accepted as contractor on November 25th, 1902. . . . Taking the entire situation in South Africa during the six months following the war, as it has coane before the committee in oral and documentary evidence, and reviewing all the circumstances, they are agreed that it is impossible to absolve Colonel Morgan of having produced and foreseen the situation which was subsequently reached, and which was already in sight when tie quitted South Africa. The committee hold Colonel Morgan entirely answerable for the grave scandals which have arisen through his brother’s connection with (contracting firms, anid even accepting the explanation that he lias given, and his correspondence with Meyer attached, they consider that in allowing his brother to enter into agencies or connections with contractors or army purchasers in South Africa he contravened not only the letter of the regulations defining the conduct of officers, but that he acted entirely in opposition to the spirit and "tradition of the army. Referring to another point, the committee asks: Are the taxpayers of this country to continue to be the sport of the many questionable contractors who are as ready to follow their several avocations in the wake of a war as they are also willing to be its pioneers? In the face of such transactions as the committee have dealt with, a note of irony seems to run through the clauses in the War Office contract-forms, which relate at length to the pains and penalties visited upon the contractor who has been found practising the arts of corruption, or attempting collusive operation with some military underling in the course of an army contract. One is disposed to ask: Are the civil offenders who are the object of so much precautionary precision in the armyform ever brought to hook in the substance? Where does their punishment come in? For it seems to the committee that they, or the nebulous civilian personalities behind them, are the chief offenders against the nation to which, by birth or naturalisation, they belong. (Some clumsy pantaloon in putties—even some agile harlequin in a helmet —<may occasionally be caught, but the oldest member of the committee has informed his colleagues that in the course of many years’ experience he can only call to mind one case where the civil practitioner in a military scandal has been brought to justice, and in that

solitary instance the offender, when released from a period of fifteen months incarceration, was received - by his fel-low-townsmen with many manifestations of civic triumph. Taken individually, the “refunds’* appear of importance, but in reality they are only a few isolated instances or abnormal out of the long sequence of events we have been dealing with. The refund to Stepney (£1672), that to Wilson and Worthington (£739), that to Wilson and Company (£1542), and the very anuicfh larger . payment to Meyer (£21,2-32), on the contract described, heretofore, are, in the opinion of the committee, devoid of claim either in equity or in reason. The committee have grounds to think so far from these particular refunds being the only cases of this nature which have occurred in South Africa since the war, that there are other instances which have not yet appeared in the public account. THE MEYER CASE. Meyer having become our contractor o;i January Ist, 1903, and being also the purchaser of our surplus stock of supplies, began his dual operations. In Pretoria he took over some 15,000,000 or 16,000,0001 b of oats in our Army Service Corps yards. Debit vouchers for tlhe whole quantity were passed in January, 1903, to the contractor for settlement, when the oats were struck off army charge. Meyer’s tender (dated December 4th, 1902), specified that his offer was made “ for such goods as may be in sound and good condition.” The method of delivery to the contractor is stated by the general officer commanding at present in South Africa to have been that “ a board of officers was convened to count and witness the transfer of these supplies. The quantities were enormous, and there was no means at the disposal of the supply officer to ascertain the quality of the inner component parts of these stacks. When that firm started to take delivery they refused to take that portion which was unsound, and,- therefore, not in accordance with their agreement. This portion never left our custody.” In April, 1903, Meyer claimed an abatement in respect of the rejected forage amounting to £21,232, of which £20,323 was for oats. The point really at issue was—Had Meyer accepted delivery or not? He was to pay us 11s, and to receive from us 17s ll£d per 1001 b. While the contract specified “sound oats,” it also stated “all goods to he subject to our inspection before sale and delivery, after which ,we accept all responsibility.” The question, is whether, when the debit voucher was passed, Meyer had not accepted delivery, and the oats did not then properly belong to him The voucher has no authority for payment quoted, upon it except the signature of a subaltern officer in charge of supplies in the Army Service Corps. Neither Colonel Hipwell, Captain Limond, Major Walton, nor Lieutenant-General Sir Neville Lyttelton have any recollection of having ever seen the document upon which the payment was sanctioned nor heard of the subject itself. Yet the document was the sole authority for issuing a cheque for £21,232 sterling payable to Meyer on demand, and this cheque was given by the Army Pay Department, apparently without question asked or countersignature required. But the transaction does not seem to have ended here. The 3,500,0001 b of oats are brought on Army Service corps charge again in April, 1903, and, as far as the accounts show, the quality of the oats is in a large proportion good. It may be asked, if this was so, wherein was Meyer the gainer, because if the oats were sound, he could have sold them at his original price ? But that is not evident. Another firm, Wilson and Worthington, appear to have purchased some 2,000,0001 b of this consignment at the reduced price of 6s per 1001 b, and there is a good deal of evidence to suggest the supposition that portions of these oats were re-sold to Meyer, so that he would thus have gained a further four or five shililngs upon every 1001 b so returned and resold. The wheels of South African contracts can be made to grind quickly when necessary, and each revolution may be said in a double sense to bring grist to the contractor’s mill. Meanwhile, as far as the committee learn, the War Department paid the railage. The committee do not consider that this payment can be properly described as a refund, because it is clear that the moneys had not at the time been paid by Meyer. This conclusion only compels the committee to regard the transaction in a more serious aspect, which is that the money paid to Meyer by cheque on May 18th (amounting to £21,232) was really of the nature of an accommodation, such as a man might receive from his bankers. There can b® little doubt that the payment of so large a sum to Meyer would at one® have established his credit, which, so far as can be judged from the evidence, was not at that time flourishing. The facts before the committee further show that the oats became he property of Meyer in January, 1903, and the total payments in respect of them were allowed to fce extended over a period of fifteen months, so that at the commencement of March, 1904, there was duo

from the contractor on his total account a balance amounting apparently to over £20,000. Thus the £21,232 paid to Meyer by cheque in May, 1903, was a cash advance given to him instead of. his running account with the Army Pay Department being credited with that amount (which method of adjustment would have made it only a paper transaction, whereas, as it stood, Meyer had the use of this money for ten months). As the matter stands,the committee can only record their opinion that responsibility rests upon—(a) Captain De la Pryme, who signed the voucher as supply officer; (b) the officers of the Army Pay Department, Pretoria, who made the payment thereon; at least until they can explain their action more conclusively than they have done to the committee. WILSON AND WORTHINGTON. The refund to Wilson and Worthington (£739) is another case rising out of a glaringly loosely-worded contract. The original contract is extremely simple in its effectiveness. The tender and the acceptance are made on two sheets of War Department paper. They are contained in half-a-dozen lines. The first—the offer—is as follows: —“I have the honour, to lay before you the following offer to clear all sound biscuits at Pieterburg Old Supply Depot, viz., 1001 b 75.” The acceptance is—- “ Your offer for the whole of the biscuits lying in Pretoria for 7s per 1001b' is hereby accepted.” The signature of Wilson and Worthington on one side and of Captain Limond on the other, are not witnessed. The contractors are apparently alone in the room, the room being the office of the Assistant-Direc-tor of Supplies. In the half-dozen lines a gross error is made. On one side the Word “sound” is mentioned, on the other the acceptation is “for the whole of the biscuits lying in Pretoria.” From this striking discrepancy arises the subsequent claim for refund. Captain Limond leaves the station the day before the claim is put in. Another officer, Major Walton, has taken up the duties of Assistant-Director of Supplies, and grants the claim. But already immediately after tlie date of acceptation in March, delivery had begun, and by 24th April about a million and a half pounds of biscuits had been removed apparently without any question being raised or complaint made by the purchasers. On the same date a Board is assembled, which condemns as bad 7-| per cent, of the stock of biscuits in the supply depot, including the biscuits which were by this time the property of Wlilson and Worthington. This condemnation not only applied to the stock remaining on the ground, but was accepted as. extending to the one and a half million -pounds which the contractors had already removed from the ground. It has been admitted that Wilson and Worthington’s biscuits should not have been brought under the examination of the Board. “It was Army Service Corps supplies upon which the Board had been ordered to sit; but by some extraordinary mistake Wilson and Worthington’s stuff, in an adjoining yard, was also dealt with.” Six weeks later the contractors claim a refund, -which is granted. . . The committee attach responsibility for this refund, which appears to them to have no justification (a) to 'Captain Limond, who made this loose contract, out of which a claim for a refund became possible, (b) to Major Walton, who authorised the refund.

WILSON AND ISONS, CAPETOWN. The refund to Wilson and Sons, Capetown—£ls42— on account of preserved meat purchased by them, has features which differentiate it from the other refunds. The local Army Service Corps officer at Capetown, Colonel Wyncoll, writes, in forwarding the claim for refund, to Director of Supplies, Pretoria:—“This firm had every opportunity, I consider, to inspect the meat before taking delivery of same into their stores at Maitland. They were given permission to open what they liked. The officer in charge of the Supply Depot gave them every facility to do so, by my order.” Despite the local opinion, a favourable decision was given by Major Walton, and the contractors’ claim granted. The responsibility for this refund rests, in the opinion of the committee, primarily with Major Walton, who has, however, informed them that he consulted General Lyttelton on the subject, but the latter has no recollection of any of these refunds. STEPNEY REFUND AND SALES. The ease known as the Stepney refund may be briefly dealt with. It presents the usual features of contract to supply, and subsequent claim for refund consideration. Forage had to be Tent this man to enable him to fulfil his contract at Krugersdorp. It was first charged against him at “sales” rates (20s 3d per 1001 b oats). He appealed, and claimed to be charged at “surplus stock” rates (11s per 1001 b). His claim is allowed by Major Walton, and it is to be noted that the item of oats, for which £1394 is paid (out of a total refund of £1672), is not even mentioned in the contractor’s original claim for a reduction. The committee consider that the responsibility in this case attaches to Major Walton, who granted the re-

fund, and to Staff-Sergeant Mills, who admits to having prepared the voucher, including in the claim oats which had not been mentioned by the contractor; and to StafESergeant-Major Honeyball, whom the committee hold to be equally implicated in the matter. NATAL BREWERY CLAIMS. Seeing that the purchases in question all took place before the conclusion of the war, and there is no prima facie evidence of fraud or other circumstances bearing on the main subject; of their inquiry, the committee do not consider that this case falls wituin the scope of the first paragraph of their terms of reference. CHAFF SALES AT PRETORIA. A loss of £2445 is shown on a line of Australian chaff sold to Saunders and Hunter, and a considerable disci'epancy is shown in the amount railed to Pretoria and the actual amount sold to that firm. The quantity paid for by . Saunders and Hunter amounted to 641,4001 b, whereas the actual quantity railed from Durban to Pretoria was 660,9431 b, the whole of which disappears from the accounts between October, 1902, and January, 1903. The cost cf the railage from Durban to Pretoria works out at Is lOd per 1001 b, or 4d more per 1001 b than was realised by tbo sale to Saunders and Hunter at Pretoria. In this deal it has been possible for the committee to trace one authentic transaction in time, place, and circumstance, carried through the labyrinth of distance, less of documents, and general obscurity which now surrounds these questions. SUMMING UP. There can be little doubt that an extensive loss or destruction of documents has oeoifrred, and it is to he noted that in the evidence given by the officers and non-commissioned officers who'were connected with the Director of Supplies’ office in Pretoria that defective memories are more the rule than the exception whenever the salient or critical points of any question are reached. Meyer’s connection with the second or Imperial Storage Company has already been mentioned. The committee consider that Colonel Morgan’s part in the management of the contract which produced that company in January, 1902, must be taken in connection with the operations which subsequently produced the agent of that company (Meyer) as the chief forage contractor to the army in South Africa towards the close of that year. The committee have no doubt that Meyer was a “favoured ” contractor in relation to both his supply to> us and his purchases from us. As an instance of the loss to the public which occurred in some of these sales in the single item of Customs duties alone, the committee have noticed that on sales in Natal producing a total credit to the public of £13,084, the Customs claims alone amounted to £16,902. As regards the responsibilities which the committee consider belong to Colonel "Hipwell in relation to all these cases, they are of opinion that that officer was entirely unfit for the position of Director of Supplies, South Africa, that he had failed to control the working of his office, and that he permitted the subordinate officials an undue freedom in the exercise of functions which properly belonged to himself. In-these respects the committee must hold him answerable in a large measure for the various irregularities in procedure and losses which subsequently occurred. As regards Captain Limond’s responsibility. the committee must take a very serious view. To hvm more than to any subordinate officer. Colonel Hipwell appears to have delegated authority. Several of the gravest of the irregularities brought to light before the committee have been the work of Captain Limond. He was the main connecting link in administration between Colonel Morgan and Colonel Hipwell. To him belongs the responsibility for loose wording of contracts upon which refunds were subsequently claimed. Finally, his action in regard to dealings with the contractor, Meyer, so far as disclosed by documentary evidence, leaves a distinctly unfavourable impression on the mind of the committee. /

per 1001b per 1001b s d e d Oats 11 0 17 11£ Oat hay and hay 10 0 17 8i Bran 9 3 . 14 3 Mealies 9 6 16