LORD KYLSANT SENTENCED

Taranaki Daily News, 1 August 1931, Page 7

LORD KYLSANT SENTENCED

IMPRISONMENT FOR YEAR SHIPPING COMPANY FRAUDS SECRET RESERVES SYSTEM CRITICISM BY THE JUDGE By Telegraph—Press Assn.—Copyright. London, July 30. Lord Kylsant was found guilty on the charge of issuing false statements in the prospectus of the Royal Mail Steam Packet Company, and was sentenced to a year’s imprisonment in the second division. He was found not guilty on the first two counts. Morland, the accountant, was acquitted.

Kylsant, chairman of the company, was charged with making a false statement in the report of the company for 3.926, and in that for 1927, with intent to deceive the shareholders. Harold John Morland, chartered accountant, was summoned on a charge of aiding and abetting. A further charge was preferred against Kylsant with reference to a written statement in a prospectus which, it was alleged, he knew to be false in a particular. It was on the last charge that he was found guilty. Mr. Justice Wright in summing up said the practice of keeping secret reserves had been followed by many companies of high standing, but the system might be subject to serious abuse if used to cover up irregularities or negligence. It would be a serious thing if it became known to the world that the balance-sheets of English companies could not be relied upon. Referring to the prospectus, Mr. Justice Wright stated that as a statement of the company’s real position it left much to be desired. Letter by letter it was accurate and cotild only be a fraud if the jury ratified that there was criminal intent io concoct a falsG and misleading document. Morland s position was different. He had no motive for deceit. The jury was absent three hours. Mr. Justice Wright in sentencing Kylsant said: “You have held the highest position and had an honourable career, but the offence Of which you hdve been found guilty is very grave, especially in a commercial community.. As a fact the prospectus you issued invited the public to subscribe money in view of your past career. The sentence I pass may be the least part of the punishment before you.” Sir John Simon gave notice of appeal. It is officially stated that there is no truth in the report that the Royal Mail Steam Packet trustees are willing to dispose of the fleet.

CASE CAUSES -SENSATION.

PATHETIC SCENES IN COURT.

Rec. 7 p.m. London, July 30. The verdict in tho Kylsant case caused a sensation in London. Not one in ten business men expected a conviction, though the tone of the. judge’s summing up was unexpectedly severe. Much sympathy is expressed for Kyisant, City men remembering that he commenced life as a humble cleik at Newcastle. When he purchased the Australian Commonwealth Line he had the greatest shipowning combination in the world and was chairman of no fewer than 32 companies. 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 (1760), Lord Byron (1765), Earl Russell (1901)- and Lord Terrington (1928), Morland, the accountant ■ who was acquitted, was the recipient of many congratulations and was cheered in the streets.

Lady Kylsant and her daughters waitfor 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 Kylsant and Lady Kylsant in a taxi, and they drove to Wormwood Scrubs, where the sentence will probably be served if the appeal djes 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 for safeguarding the interests of investors, the clarifying of balancesheets and the strengthening of the authority of auditors.