CHARGE AGAINST KYLSANT

Taranaki Daily News, 27 July 1931, Page 9

CHARGE AGAINST KYLSANT

QASE TO GO BEFORE A JURY

COUNSEL’S PLEA FOR ACCOUNTANT

KYLSANT DENIES FRAUDULENCE.

By Telegraph—Press Assn. —Copyright.

London, July 24. _ Sir Patrick Hastings, concluding his addrerk-' for the defence of the charge of fraud against Lord Kylsant, eaid that if Morland, the accountant who is also charged, in signing the balancesheets was guilty of a criminal offence there was not an accountant in the wprld who was not in the same position- . The Judge ruled that cases against Kylsant and Morland miwt go to the jury. , Giving evidence Kylsant said that he never misled the board. He denied any intention to deceive or defraud the shareholders or to induce people to become shareholders by a false statement. The case was adjourned.

CASE IN LOWER COURT

FINANCE OF THE COMPANY.

■STATEMENT FOR THE CROWN.

On June 2, Lord Kylsant, ■phairman of the Royal Majl Steam Packet Company, was charged, at tlic GujldhaJl, with making 1 a false statement iri'thp report of tho company for 1926, and ip that for 1927, -wi,th-intent to deceive the shareholders.' Harold Jol'P Morjanfl, chartered accountant, formerly auditor fpr the company, was sipngioned on a charge of aiding and ajjettipg. A > further summons was preferred agpinst Lord Kylsant with reference to a written statement in a prospectus WlpchJ it was alleged, ho knew to be fake in a particular. Counsel for the Crown, in opening the qisc, declared that Lord Kylsant’s remuneration from the Royal Mail Company was based on an arrangement under which he received a commission of A per cent, on the company’s«gross takings when a diyidpnt of 5 per cent, or more was paid. If the dividend was less than' 5 per cent, the remuneration was fixed at £3OOO. In 1926, the dividend was 4 per cent, and Lord Kylsant received the latter amount, but in 1927 5 per cent, was paid and Lord Kylsant’s remuneration was, counsel believed, £26,000. RAIDING THE RESERVES. ft was alleged that, in each year, the Royal’ Mail group - had made serious losses, but had “raided” the reserves of its “10 per cent, subsidiaries” and purported to have made large trading profits. For example, R.M.S.P. Meat Transports was alleged to have made in 1926 a trading loss of £21,941, but to have withdrawn £62,500 from reserves and paid £55,000 in dividends to the Royal .Mail. In 1927, the Meat Transports Company’s profit was £28,657, but a further £25,250 had been drawn from reserves and another dividend declared, absorbing £55,000. Altogether, submitted counsel, whereas the profit shown by the R.M.S.P. on the face of the 1926 accounts was £355,325, there had been, in reality (including the losses, of the subsidiaries), an actual trading’ loss’ of £804,663. Thus*- ' the 1926 figure was “wrong” by £1,159,988. Similarly, the error in the 1927 figure was £1,120,249. With regard to the second charge, counsel for the Crown contended that, in connection with a Royal Mail debenture issue of £2,000,000, for the building of Royal Mail House and the general purposes of the copipany,. the prospectus contained a statement intended to convince a reader that the company, during the previous ten years, had made a trading profit of something like £500,0'00 every year. In fact, it was declared, a hpavy trading loss had been suffered during the seven years preceding the issue of the prospectus. i INVESTIGATOR’S EVIDENCE. Sir William McLintock was then called, and declared that, as a result of his examination, on behalf of the Treusqry, he had discovered that R.M.S.P. Meat Transports, Limited, after charging depreciation, had made a trading loss of £21,945 in 1926, and a trading profit of £28,657 in 1927. The company had brought in various amounts from reserves, and declared absorbing £55,000 each year. This figure Sir William subsequently amended to £49,000 net. Sir .William described the various capital transactions as between the Royal Mail Company and the two “Nelson companies” (Nelson." Steam Navigation and H. M.” W- Nelaon)> ■ and reefrred to various figures in the accounts of Mclver and Company and the Pacific Steam Navigation Company, declaring that in 1926 the latter, whose accounts appeared to indicate? a profit of £60,532, had made, on his computation, a trading loss of £183,755, after charging depreciation on a normal-basis. In-1927 the company s accounts showed a profit of £59,422, whereas, Sir William alleged, a loss of £160,748 had been made. Sir William declared that the remaining ‘TOO per cent, subsidiary” of the Royal Mail, MacAndrcws and Company, had shown a loss in 1926 of £52,973, which he himself had placed, after adjustments, af £57,107*’ and in ■ 1927 had. shown * profit of £9778, which he suggested .should be restated as a net loss, after depreciation of £47,428. ’LOSSES OF COMPANIES. . In the. aggregate, Sir William calculated tiiat the six subsidiaries had made a net loss of £213,669 in 1926 and £169,006 in 1927. The Royal Mail and its .subsidiaries as a whole had suffered losses Of £804,663 in 1926 and £630,309 in 1927. The payment of dividends in the two years had. been" accompanied by transfers . from .various reserves, some of which—c.g., those for income tax and excess profits duty—had not been disclosed at any time in the published documents of the company. Under cross-examination from Sir Patrick Hastings, -Sir William agreed that a case might be made for the views expressed by various eminent accountants as to the propriety of withdrawals from secret 'reserves without disclosure to shareholders. The Lord Mayor,, how-ever-ruled that evidence as to other companies’ balance-shepts, in thi§ connection, <-ould not be .admitted, and -Sir Patrick Hastings (for Morlapd) and bir John Simon (for Lord- Kylsant) announced that, in view of this ruling, they would take no further part in the courts pioceedings, though their junior counsel would remain.