THE KYLSANT CASE

Otago Witness, Issue 4038, 4 August 1931, Page 26

THE KYLSANT CASE

LORD KYLSANT SENTENCED. LONDON, July 30. Lord Kylsant was found guilty on the charge of issuing a prospectus in June, 1928, false in a material particular. He was sentenced to one year’s imprisonment in the second division. He was found not guilty on the first two counts. Morland was acquitted. THE JUDGE’S SUMMING UP. LONDON, July 30. Mr Justice Wright, summing up, said the practice of keeping secret reserves had been followed by many concerns of high standing, but the system might be subject to serious abuse, and used to cover up irregularities and negligence. It would be serious if the world came to think that the balance sheets of English companies could not be relied on. Referring to the prospectus, Mr Justice Wright said that although the statement of the company’s real position left much to be desired, letter by letter, it was accurate, and could only*be a fraud if the jury were satisfied that there was criminal intent to concoct a false and misleading document. Morland’s position was different. He had no motive for deceit. The jury was absent for three hours. Mr Justice Wright, in sentencing Lord Kylsant, said: “ You have held the highest positions and had an honourable career, but the offence of which you have been found guilty is a very grave one, especially in the commercial community, and there is the fact that the prospectus you issued invited the public to subscribe money. lu view ■of your past career, the sentence I pass rnav be the least part of the punishment before you.” Sir John Simon gave notice of appeal. VERDICT CAUSES SENSATION. LONDON, July 30. The verdict in the Kylsant case caused a sensation in London. Not one in 10 business men expected a conviction, though the tone of the judge’s summing up was unexpectedly severe. Much sympathy is expressed for Lord Kylsant by city men, who remember that he commenced life as a humble clerk at Newcastle. When he purchased the Australian Commonwealth Line he bad the greatest shipowning combination in the world, and was chairman of no fewer than 32 companies. Lord Kylsant was obviously shaken by the verdict and the sentence. The judge’s voice was so low that it was scarcely audible. Previous convictions of peers include Earl Ferrers in 1760, Lord Byron in 1765, Earl Russell in 1901, and Lord I Terrington in 1928. Morland was the recipient of many congratulations, and was cheered in the streets. Lady Kylsant and her daughters waited for the verdict all day long. One daughter is married to the Earl of Coventry and the other to Lord Suffield. Later there was a pathetic meeting between Lord Kylsant and Lady Kylsant at the Old Bailey, the latter leaving the court in tears. Warders took Lord Kylsant in a taxi to Wormwood Scrubs, where the sentence will probably be served if the appeal does not succeed. Comment on the case is necessarily restricted in view of the appeal, but mainly it stresses the importance of the issues to the business world—the necessity of safeguarding the interests of investors, clarifying balance sheets, and strengthening the authority of auditors. HEAVY LEGAL COSTS. LONDON, July 31. The costs in the Kylsant case arc be lieved to be the heaviest for years onboth sides, as a result of the taking of skilled evidence and documentary searches. It is estimated • that the defence alone cost £50,000. BAIL GRANTED. LONDON, July 31. Lord Kylsant was granted bail at £lO,OOO. The charges against Lore Kylsant, who at all material times was chairman and managing director of the Royal Mail Steam Packet Company, were that in May, 1927, and May, 1928, he made, circulated, or published, or concurred in so doing, annual reports of the directors of the company for the years 1926 and 1927 which he knew to be false in a material particular, with intent to deceive the shareholders of the company.

Mr Harold John Morland, chartered accountant, was alleged to have aided and abetted him.

A further allegation against Lord Kyslant was that on June 29, 1928, he made, circulated, or published, or concurred in so doing, a prospectus which he knew to be false in a material particular, with intent to induce persons to entrust or advance property to the company.

It was alleged by the Crown that it was pretended that there had been a trading profit in years when there had really been a loss and that transfers from secret reserves were made to give the appearance of profit.