MEAT WORKS COMMISSION

Poverty Bay Herald, Volume LI, Issue 16719, 2 May 1925, Page 12

MEAT WORKS COMMISSION

EVIDENCE BY WITNESSES

YESTERDAY’S PROCEEDINGS

Otto Hansen, fat stock buyer, of Kx.iltaratahi, stated that be bad been asked by Mr G. M. Bowen to give liis experience of the conduct of the works under Mr Lysnar’s management. As soon as Waipaoa was built, Mr Lysnar asked him to take his stock .there,, and he did so. During Mr Elliott’s management everything was very satisfactory, but when a new, inexperienced manager was appointed things were different. This new manager appointed two. brothers to executive positions. The manager's wife’s cousin was put in the office, as also was the wife’s sister, the works becoming a family concern. Witness would book stock for a certain date—this being in 1916-,-ibave it railed in, and I lien find it could not be handled, with the result that lie would have to hold it tor as long as a fortnight. Even when there had been space" lus sheep were overlooked. The company owned 60 of 70 ocrcs of laink adjoining the works, Pom which no revenue was derived. Witness asked Air Lysnar to utilise the ground, and received llio reply that there, was no money to Imy stock.' Witness suggested l'hut, (lie two gardeners should be discharged and the money used for stock.! Farm plant owned, by the company was used by one ol the employees to run liis own farm, tips continuing throughout the existence of (be works. When the receiver took over this man bad taken the horses and implements |o‘ liis farm, and witness informed the bank manager. During the slump, period the company advanced 1115,700 to a few. clients on their meat. This was not made public, but one of the employees informed witness of wliat was occurring. Witness saw the manager and arranged for an advnee, sending the stock in immediately. Five days later be was advised they could not make an, advance. When lip saw the. manager,the latter showed him a. telegram from Mr Lysnar, advising him to cancel all advances. The mutton wap | disposed of, but. the beef was held for II or 12 months, and then shipped to j Manchester against witness’s instructions. After the meat was sold ivifnses was ±llls in debt. The, manager's house at. the works lpul been burnt down, and although it had only been insured for half its value, and the company was on the verge of bankruptcy, a new house was erected, the fact that there were empty houses there at tlj.Q time beipgi overlooked. In 1922 Mr Lysnar wps paying, butchers 2s 6d over the award rate, without the shareholders being informed. This caused a strike tliO week after Vesteys took over the works. In regard to the valuation of (lie works, witness, said he had .seen them erected, and had objected to the valuation in the first'balance-sheet. Two works managers were employed and did not, know Jiow to get out 'of one another’s load. Witness had no trouble in regard to grading, but Mr Lysnar was always in trouble, and had actually got Dr. Reakos up from Wellington to try to over-rule the Government graders, and get Iris rejects passed for payment. He contended that, even without the boat, the works, under Mr Lysnar’s management, must have gone bankrupt. The works were extravagantly and inefficiently run,, and. could -dot have succeeded. ,At the meetings anyone wh,p attempted to get up against Mr Lysnar was howled down. A manager had, bec-n sacked without notice, and when the new one was appointed he told witness that. Mr. Lysnar controlled the whole works. Mr Lysnar had stumped the country against trusts, and yet he ran to Armours for assistance. He bad lost the confidence of the shareholders by his inconsistency and could not be relied upon at any time or ’in any connection. > ■ To Ml* Lysnar, the witueW said he, was a. shareholder in the. white

How many shares have you?—2o, Have you nob five At J was forced to take £IOO Worth.;

How many have you?—l don’t ki ow how many, but it is, £IOO, worth. You summonsed me and Mr. Bowen first of

You were summonsed by the receiver, You don’t suggest that 1 had anything to do with it?— l think you must havif, , Was not your, grievance against the works that your livo sops were discharged?—Oh, don’t bring that up. Is fhat a fact?—Don’t bring family matters ijnlo it, or else. I. might nay things ah,opt your family. Your two boys got the sack from the works,? —I wou’t. discuss it with you. My boys arc capable of looking after themselves. Two days after I stood up against you at u meeting my son was discharged.' .In answer lo the chainnau, the witness said that he was not ‘bitter on account of liis boys. One of the boys had to leave because he had his wrist broken.

To Mr Lysnar the witness sgid one man had had flic use of the plant and horses. It was a fact That .Jic wuis being summoned by the receiver for the £ll4 ho lost op his beef, but the receiver had pot proceeded with the case. The question iof Mp Eustace Lane’s evidence was then discussed, Mr Lysnar saying that Mr Lano was mot his witness. ,

Mr Lane said lie had been asked to give. evidence by Mr Lysnar, and although at first lie had riot been keep, lie thought there were certain matters which should be made public. • Mr Lano was called and examined by Mr Lysnar. He said lie bad slopped beef through the Wairoa works, and had an unfortunate experience', *OO, carcases being stored in . Waivoa, for nine months and for six months pt Home, with the result that fie .got a debit account for £146. He could get no explanation of the matter, and so gave Mi* Jones an opportunity to distinguish himself, the Meat Board having just been formed. Mr Jones, however, did not distinguish himself, but advised witness to see the bank, which he had done long before. When he did get information ho found that the. beef bad been stored in Vesteys for six months after being instructed to sell. “Vesteys,” said Mr Lane, “held my meat while they pushed their stale stuff on to the. public. I don’t blame them. They’re businessmen, and they are educating the people of New Zealand.” ,

Mu* Myers: They are some good, thin

Mr Lysnar: Are Vesteys operating in your district?—Yes, they offered me 50s’ a head for the same 'beef if I sent it on .to Gisborne to be lulled. Mr Myers: I suppose you are sorry now you did not take it? Witness: No. Tf the farmers don’t stick to their own works there is only one end—slow death. That is what is coming to the Wairoa works if they don’t change' their management and their methods. Continuing,_ he said Mr Jessep would not let him buy shares * n the Wairoa Company, because lie did not want his (witness’s) criticism. . Vesteys were operating in Wairoa, and practically sweeping the district, buying stores among fats, and. fats among stores to an unlimited extent, Mr Symes, who had .been mentioned before the

Commission, was only buying for Vesteys, and killed at Vesteys works. Frederick S. Bowen said that Mr. .Tolly had said they had lost £-1.5,1)00. The shareholders of the company lost £498,000. In order for tile Commission to understand how the loss was made it was necessary for him to make a statement. One thing which had brought this about, was the dismissal of the manager, Mr. Llliott, who w;,is highly satisfactory to all l.mt Mr. Lysnar. This was combined with the laxity of the bank in dealing with Air. Lysnar in connection with the Overdraft. When lie was on the directorate ho came to t lie conclusion that Air. Lysnar was manager and controlled the whole of the operations of the company. One of the first things that came before the Board wms the holding back of meal from Government storage. Air. Lysnar dctied the Government to takeUie meat and keep it in store, and said it mast be shipped. The meat was held back for four months and the storage held back by the Government amounted to £17,000, Out of. 42 works existing in the Dominion theirs, was the only one to quarrel with the Government. After the Oodringtou was insulated she went Home aud she was no sooner there.than Air. Lysnar Wanted to purchase another ship for £550,000. The directors madepi half-heart-ed oiler but the people iii Wellington, tyrnod the offer down because they know the company did not have the money to pay. The next thing Air. : Lysnar wanted, to do was to buy a . coal mine, which was supposed, to be :on the Coast. It turned out to bo i well inland, and then Air. Lysnar : wanted to put a railway into it. There i was no harbor on the Coast, so bp, ! then proposed to build one there. (Laughter.) He (witness) formed the impression that Mr. Lysnar was an. utter impossibility. He kmyv the annual meeting was coming on, and thought the directors were too weak’ to hold Mr. Lysnar, so lie tried to get * Mr. Ivells and Mr. Holdsworth on to. the directorate. Later things became troublesome. Meat was. shipped away to America, and claims cropped up as the result of the shipments. When the meat got to America there- was a claim put in for £20,000, aud it seemed that Mr. Lysnar gave* out the information much later than ho got it. It appeared that Air. Cralib, surveyor, of Loudon, was deputed to go and settle the claims and he reduced them, to £11,700. The Codrington later arrived Home, and they got a 1 very bad report on the meat. That was gouc into and the American meat claim was. examined;, and it was found) that the claims then totalled £20,0001 Air, Lysnar, with his characteristic manner, said that they would be settled. The result was that the Imperial Supplies held back 25 per cent, of the money on th.e meat stored in the top works. 'l,’lie daiips dragged on. for many months and caused -immense dissatisfaction. The meat buyers combined and would not buy at . the Waipaoa works until the'claims were s.ettfcd, Later Sir T. Robinson came to settle claims in T\cw Zealand, and lie had later said, to. Air. Lysnar, that thp Waipaoa wojks amongst the worst in the, Domfuipn, Mr. Lysiigv said that ho wo.uld .not have Sir Thomas saying that,. A wire latpr came from ML At. A. Elljott tQ AfiG 0. Witters, vi.co,-chai,npan of the directors, saying th.at Sfi; Thoinas Robinson refused to meet Air. Lysnar further, and advising t.h<j other directors to do so. Sir Thomas Robinson told the other directors that he would never have met Air. Lysnar again had the other directors not gone top. Ife had, also said that Air. Lysnar did not know how to conduct his business. Although lie (witness) held 3000 shares in the company he was prepared to lot them drop and freeze Aidth Vesteys, liecause lie had seen so. much of Air. L£snur. The (buyers who held mea t in the wopks claimed the 25 per cent, that had been held back, but Air. Lysnar, to save exposure, made a definite settlement. There wore other items involving smaller amounts, but they dragged on so loug that they were allowed to drop. The upshot was that the meat buyers refused th have anything to do with tlieip, and the works lost double the amount of the claims through business turned away. When the annual meeting came pn, he (witness) was the only one to stand up against him. In (he meantime, the banking, account wigs getting from bad ,lo worst. The increase in the overdraft in .1020 was £117,043. B.pforc the ann,ual meeting in 1021 witness went' to see Air. Smallbone after the annual balance sheet was made out. Witness asked Atrl Smallbone not to pay put the dividend of £15,091* (Suggested by Air. 1 jjrsnar. Air. Smallbone said, that the holding 'back of the dividen,t would cause mistrust among the shareholders. AYitucss replied that if the dividend was paid the uncalled capital of £84,0.00. would have to be paid up. Wifness learned then for the first time how the Codrington had been purchased, Air. Smallbone saying lie had advised Air. Lysnar to have nothing to dp with it. Mr. Lysnar then threatpned if tile bunk did not find the money for the boat ho would take away his private account, his bnttpr factory, account, and the company's account. Air. Smallbone did not likp to, lose these accounts, and aftpp communicating with the head office decided to increase the overdraft up to £.150,00,0, providing Air. Lysnar sold 40,000 £5 shares. , Air. Lysnar had issued a prospectus in regard t.p' the proposal and held (meetings, throughput the district, promising that the sh'P would, have a separate account and a balance-sheet after each trip. On the. uiglit the company had to clo.se the deal Air. Geo. Lysnar •rang up Air. Smallbone and said the sharps had been successfully floated. Air. W. I). Lysnar confirmed this the following morning, aud the ship was purchased. When the money was called up Air. Lysnar informed him that lie had only sold 28,000 shares. Air. Smallbone told witness, that the. subsequent correspondence between him and the head office would paper the room. Air. Lysnar thph asked for a further £20,000 to insulate the boat, which was essential to the vessel. When the boat got; to Auckland, however, it ypis found that the cost or refrigerating was £84,000 and not £24,00.0, The only reason Air. Lysnar could give, for the increase was that tluv \voirk; bud bpoii done speedily. S he s hank had no alternative 'but to find the monev, amt witness informed Air. Smallbone that the directors were not acquainted with, what: was going oil. Witness was determined to place the position before the shareholders, and

be formed the opinion that the bank could no more control Mr. Lysnar than the directors could. The inspector of the bank, however, demanded an audit, witness unwittingly having told him of the company’s position. Mr. Lysnar, in consequence, called a meeting of directors to consider putting witness off the board. Witness was asked'to retire while the position was considered, and he did so, being subsej quently- informed that the directors decided to do nothing in the matter. Continuing, the witness said that later in the year, before tho annual meeting Mr. Lysnar had left witness ’ name off the report as.one• of the directors eligible for re-election. Witness decided to contest-■ the position, arid arranged for Messrs Black and Bridge to stand alsfo. Following this Mr. Lysnar wrote to shareholders, complaining of witness’ behavior as sa director, urging their support of the other directors, and asking for proxies. The letter was untrue in every respect, and although Mr. Lysnar claimed that' the financial position was sound, the capital was called up within .15 months and tho works were sold within two years. At the meeting hold in that year witness explained the position to the shareholders, pointing out how unreliable Mr. Lysnar’s statements had been, and showing the difficulties,into which he had landed the company. He had then complained' of Mr. Lysnar refusing to accept £lO7 a ton for tallow, and this assertion was borne out by a letter he produced from the agents. The directors of the company from time to time pressed Mr. Lysnar for a balancesheet, of the working of the vessel. ’Phis ho refused to give for a long time,-and then ho put out a statement showing on the first voyage an excess of revenue over expenses amounting to £33,585 11s 9d. He had shown improvements to the vessel amounting £103,246. For the second year an excess of revenue amounting to £67,105. Tha directors still pressed for an audited balance-sheet, and a motion to this effect was actually carried. ..When this was produced a loss of £24,000 was shown, or a difference of £51,000 from Mr. Lysnar’s figures. One of the many reasons why the shareholders did not support the works was that they were dissatisfied with the weights of their-fat. Mr. Lysnar, in Wellington, had accused trusts generally of dishonesty in connection with by-products. .- Witness thought, howcver> that Mr. Lysnar was accusing others of a thing he committed himself. Cattle which he had put through Waipaoa works had averaged in weight SOllbs, and the fat average was only 9.81b5, instead of about 351bs. ■Of 145 sheep he put through Vesteys’ \Vprks the average weight was 64.52 lbs, and the fat average 6.881b5, or only two pounds less than the bullocks.

The chairman: They must have been very skinny bullocks. (Laughter.) Mr. Bowen said that while Mr. Lys-

nar was running the works he had produced six balance-sheets, showing a profit, and two showing losses, one of £7OO and the other of £3OOO or £4OOO.

In spite of this the shareholders of the company had lost hundreds of thousands of pounds. When there was difficulty in obtaining shipping spare, Mr. Lysnar had not shipped in rotation to killings, but had given preference 1 to his friends, and particularly to his brotlier-in-law, Mr. Field. Witness said he could show further instances of mismanagement. It had beon said that there was only room for two works in the Bay, but he maintained, that if they had disposed of / Mr. Lysnar they could liavo made a success of the company—notwithstanding tho ship. That a farmers’ co-opcrativo\company could run successfully was cleaT from the experience of the Whakatu works which, while in competition with other companies, had paid a dividend each year, and now hiid : assets valued at £200,000. The -difference between Whakatu and Waipaoa was the difference between good management and bad. At the end of the commandeer, when the sheep were counted out of tho Waipaoa works it was found that there were about 1000 sheep short,!and all the explanation they got from Mr. Lysnar was that they had probably gone out to tho cookhouse and no return been sent in. There had been no system in tho works since Mr. Elliott went out. After that. Mr. Lysnar had been a dictator.; dictating to the manager, to the directors, to the bank, and to everyone else. He had said what' he liked, when he liked, and regardless . of whethor it was truo or 1 not. He had increased the overdraft from £BO,000 to £150,000, while guarantees amounting to £300,000 had been, given. If Mr. Smallbono had kept Mr. Lysnar

to these terms the preference shareholders would have been adequatelyprotected. The action of the bank, in bping dictated to by Mr. Lysnar, was largely responsible for the failure of the company. Thero were now huge losses in addition to tho capital of the company. Mr. Lysnar would undoubtedly endeavor to strain the position as he-strained everything, but there was no doubt that the company had been badly, extravagantly, and recklessly run. Had thero been a few strong men on the directorate, Mr. Lysnar would have - had a short run, and if the National Bank had not had such a

weak manager, Mr. Lysnar would have Keen kept within reasonable limits. . : The witness proceeded to refer further to Mr. Lysnar’s management of the works, when Mr. Myers interrupted and suggested that whilst he had

no brief for Mr. Lysnar, witness would bo njoli advised not to be bitter. Mr. Bowen reiterated that if, the

company had been efficiently managed it might have been quite successful. To. Mr. Myers the witness said ho had not previously been on any directorate, nor did he attempt ■ to poso ns a financial expert. It was a |a<;t * that witness was one of the 'stoutest advocates of tho purchase of

a ship, but he wanted a first-class ship. Ho was a supporter of the idea that the producers should run- their own ships. Mr. Myers: I suppose now you have learned that the business of shipping is no sinecuro?—l have paid for my experience. ' You realise now that, you could not bent the others on their own ground? The chairman: Hardly, ground, Mr. Myers. (Laughter.) Mr. Myers: Well, in their own ole-merit?-—'We did not intend to compete with tho other companies, but to carry our own produce. The witness said the killings in the three Hawke’s Bay works last year amounted to 830',000, and those for Poverty Bay were considerably less. Do you think, a total of .100,000 freight carcases would keep three works going? —No. It would not be u profitable. _ . , Are you aware that during tho last three years the average killings in Gisborne only very slightly exceed 500,000?—That’s freight carcases. Yes. It would not keep three large W'wks going, would it?—No. • t~-.11, Hawke ’s Bay cannot be com- , nV j ith Poverty Bay, can it?—You . ca'-ihM, ’v’flfo by tho killings. Tho X., r n S nre the best guide, and it -is well Known that thgusands and

thousands of sheop are sent to Hawke’s Bay from Poverty Bay every year.

You will admit that there are not enough killings in Poverty Bay for three works? —One large works could do the lot.

Cross-examined by Mr. Lysnar the witness said he did not go on to the directorate until after the purchase of the Codrington. Most of his shares were shipping shares, and he was elated at the purchase of the vessel until he saw it in tho Bay. He then realised where his money had gone. Mr. Lysnar: Do you remember supporting a resolution thanking me for my work in connection with the ship? —I may have done so. After hearing the resolution read from tlic minutes, the witness admitted supporting the resolution, but said he might not liavo taken any interest in the motion.

To further questions the witness said that at the annual meeting of shareholders lie had placed his views fully before tho shareholders and was given a good hearing. Mr. Lysnar: Well, where did you como in the voting? Witness: The voting did not take place that day. But where did you come? —I was at the bottom of the poll. And that was a fair indication of the feeling of the shareholders? —No. The witness said the American claim for £20,000 was made against the Imperial authorities, but ultimately against the company. He would not admit that the claim had been settled. If it had been Mr. Lysnar owed him a further £lO. Witness had seen tho manager, Mr. McLelland, in regard to the matter and the. latter, said Mr. Lysnar had settled the claim by wiping it off the slate. • Mr. Lysnar stated that the balancesheet showed that the £20,000 claim was reduced to £2IOO and settled at that figure. Mr. Bowen’s statement that the loss on the meat was £20,000 was thus whittled down to £2IOO. Witness, questioned further, said he was-aware that the settlement of the Imperial claim also included the claims of the meat buyers, and had not made it appear as if there were two distinct claims. In the interim, however, the buyers had refused to operate at the works. Mr. Lysnar: You told the inspector of the National Bank—a stranger to you at the time—that you expected the company to lose £23,000? —Yes. Do yoU think it right for a director of a company to tell a stranger, in troublous times that you expected the company to lose £20,000?—It was only a small matter, only it happened to affect you generallv. And you think it was a right thing to do?—lf I had known I was speaking to the inspector of the bank I might not have said it. I suggest to you that there was a profit that year of over £I2OO? —That is what is shown. And over £6OOO was allowed for depravation? —Yes. So that the profit was over £7OOO, depreciation being merely a method of dodging income tax? (Laughter)—iliose are the figures shown. So that in saying there was a loss of £20,000 you were about £25,000 out?— I don’t admit that.

You will admit that the audited bal-ance-sheets show that there were only losses on two years?—Yes. And you have said that all the farmers were working at a loss during the slump? -Yes:.

Well, then, don’t you think that, the position of the company at such a time reflects credit on the management, and the directors, including the chairman? — Tire company did not make profits. The chairman: You mean they are shown, but do not exist?—l mean that the working of the Codrington was not shown in the balance-sheet. Mr. Lysnar: You have frozen at Vestey’s works since 1920?—Yes. And you suggest that loyalty is necessary to'enable farmers’ concerns to carry on?—I would not have anything to do with a business concern with which Mr. Lysnar was associated. Mr. Lysnar: Tam afraid T can reciprocate. I would not like to bo associated with a director who disclosed confidential information to strangers.

With reference to .the tallow which Mr. Bowen said Mr. Lysnar had refused £lO7 for, Mr. Lysnar produced a- letter from the agent, stating that no offer had actually been made at the price. Witness: That, letter is a joke. Mr. Lysnar: Why is ft a joke?

Witness: Did you not tejl Mr. Irwin that if lie would give you a letter like that you would give him a fair amount of business?

Have you any justification for that?— Not without seeing Mr. Irwin.

Do you know that I have not done a bit of business with Mr. Irwin since. Who told you I offered Mr. Irwin substantial business to get that letter?—Mr. Irwin told me himself.

Mr. Irwin told you?—He did; and a few minutes later you had a violent row with him, and that was the end of your business relations with him. The chairman: Where is this Mr. Irwin?

Mr. Lysnar; Tie is a Dunedin man, but lie moves about a good deal. Other documents vyerc handed in by Mr. Lysnar, showing that the wiles of tallow referred to bv Mr. Bowen had been disposed of at prices from £lO3 to £l2O.

Mr. Bowen said this was not- the tal low he had referred to.

Mr. Lysnar: I suggest to you that where you say there was a loss of £40,OQO, there was a profit?—l am not going to try and reason with you. You are impossible. You have shown profits all the way through, and yet the company is bankrupt. You said the company’s overdraft when it, was wound up was £354,000? —Yes; it was about that. Well, it is on record that the amount, was £299,000? —That, was after capital had been called uo,

Your figur € is £54,000 out?—After *he cared-up capital was paid in. The Commission at this stage adjourned at 10 p.m. till 9.30 this morning.