DEALINGS IN SHARES

Wanganui Chronicle, Volume 77, Issue 210, 5 September 1934, Page 7

DEALINGS IN SHARES

COMPANIES INQUIRY ALCORN’S EVIDENCE INVESTMENT TRUST LOAN QUESTION OF SPECULATION .By Telegraph—Press Association—Copyright, Received Sept. 4, 9.5 p.m. SYDNEY, Sept. 4. At the Royal Commission, Mr. Monahan asked Alcorn whether the* former Daily Telegraph building was bought on McArthur’s owu capital. Alcorn said that the capital was borrowed from the Investment Executive Trust. Mr. Monahan: Is there any record in the books of the Investment Execu live Trust that McArthur could purchase the building for his own personal profit? Alcorn: He used the company as an instrument of purchase. Mr. Monahan: So that he could put £287,000 in his and your pockets? The Commissioner: The outcome of the transaction seems to be that without putting in a penny piece Alcorn and McArthur have on paper at least made £287,000 profit. Alcorn wa.s questioned regarding a list of personal drawings he had compiled at the Commissioner’s request. Mr. Monahan: These book entries detailing your drawings have been entered since the Commission started. Was there no book record until then? Alcorn: No. Referring to £15,000 he had made in June, Alcorn said that he and McArthur had sold Investment Executive Trust shares to the Southern British National Trust in order to give the latter control of the former. There had been money owing to McArthur and himself for establishment charges in the Southern British. Mr. Monahan: Actually you made £15,000 personal profit. Bankruptcy Proceedings Alcorn said that though he was a personal friend of McArthur, he did not know particulars of bankruptcy proceedings in which McArthur had been involved in New Zealand. Mr. Monahan: Don’t you know that such proceedings resulted from his nonpayment of a debt to the Government? Alcorn: Yes. McArthur took up a timber contract and when he began operations he found that there was no timber there. It was all part of the campaign being directed against the Investment Executive Trust. Alcorn said that at the formation of the Investment Executive Trust in 1931 he, McArthur, and McArthur’s son had been the original directors, and each received 250 shares, which had never been paid for. Mr- Monahan: Have you ever put one shilling of your own money in any of these companies? Alcorn; No, but I have put back into them all the money I received for my services. The Commissioner: As far as I can see you find it hard to detail just what your services wereAlcorn: McArthur and I put in many months of hard work in drafting ideas for these companies. Alcorn said that he later was allotted a further 4750 shares for which he had paid with money received for his two years’ service. He had subsequently resigned from the board in order that the names of better known men might appear on the prospectus about to be issued. He had introduced McArthur to Mclnnes, and it was arranged that Mclnnes and Bridgwater were to sell Investment Executive Trust debentures in th« South Island of New Zealand. Another firm had charge of the sales campaign in the North Island, but Sterling Investments was allotted to the Auckland district. No Income Tax. Replying to Mr. Mcnahan, Alcorn said he had had no income for income tax purposes for four or five years. The Commissioner: You got £485 for your services to the Investment Executive Trust. Alcorn: Yes. The Commissioner: Is that income? Alcorn: Yes, I forgot that. Mr. Monahan: You got £45 or more for introducing McArthur to Mclnnes. Alcorn: Yes. Witness said he really had been living on capital. Alcorn, continuing, said the British National Investment Trust began as the Stock Exchange Corporation of , New Zealand, Limited. It consisted of licensed sharebrokers who were not in the Stock Exchange, which opposed them. Witness had 250 two shilling shares. He was not sure whether he or the trust paid for them. Mr. Monahan: The Investment Securities Association took over 9000 of the shares? Alcorn: Yes. That is myself. Mr. Monahan: Who paid for them? Alcorn: I do not know. Mr. Monahan: At the meeting in February, 1933, additional shares were allotted to McArthur and yourself. You were allotted 44,498 shares. What had you done to deserve that? The Commissioner: He applied for them on the condition that he paid for them. Mr. Monahan: What was the value of these shares at the time? Alcorn: At par value. Mr. Monahan: Did you, as actingchairman of directors, regard yourself as having a duty to see that the company’s property was not sold for less than its real value? Alcorn: Yes. Mr. Monahan: What did you pay for the shares? Alcorn: Par value. The Commissioner: How did you pay? Alcorn: We borrowed from the Investment Executive Trust. Mr. Monahan: You took trust moneys and used them for speculation for pri- < rate gain? Alcorn: No. A loan was raised for £50,000 with the Investment Executive Trust. Mr. Monahan: You used trust moneys for private speculation? Alcorn: It was in accordance with the terms under which we got the money. The Commissioner: Is there any record that before the Commission bebegan not one penny of profit you made as a private speculator was to go anywhere but into your own pocket?’ Alcorn: Yes. Ninetv-five thousand

pounds was already in the hands < f the 3 British National Investment Trust, and i £25,000 was in the hands of the luvest- . merit Executive Trust. The Commissioner: Do you consider i you were under any obligation to see i the company got the value of the r shares? Alcorn: No. The company was going t into liquidation. Alcorn, further questioned with regard to the King Street building, said that c on March 1 it was decided to lease this r property to the British National Trust for 99 years at a yearly rental of i £7500. Mr. Monahan interjected: That just suffices to pay the interest on the mort1 gage, also rates and taxes. , Referring to the resignation of Mc5 Arthur from the British National Investment Trust, Alcorn explained that , his going into that company was a mistake. There had been some trouble with the printing of names, and a ’ special rescinding resolution was neces- , sary. The Commissioner: So he became a J director by a mischance. That’s the first time I heard where a man becomes ' a company director through a printer’s ' error. . Mr. Monahan interposed: It is very handy to fade out like that after pilot- ' ing his shares through. ! What Assets? Mr. Monahan: What assets wore there to represent the £55,000 you got from the British National Trust, and which I suggest was public money paid out of debenture capital? Alcorn: The debentures were a floating charge. Mr. Monahan: Exactly, and that charge disappears when the debentures are paid off. There was nothing left. Alcorn: It was exactly the same as before the debentures were paid off. Mr. Monahan: Supposing the British National Investment Trust was placed in liquidation. Where would the holders of the preference shares stand? The Commissioner: I suppose they would have the lease. We must assume that the lease for £7500 a year was a value. Mr. Monahan (to Alcorn): Whatever was left was sufficient to pay a dividend on the shares? Alcorn: Yes, nt the rate of seven per cent. Alcorn later admitted that he received 76,400 shares in the flotation of the Southern British National Trust —£50,000 of ordinary shares paid for t.y the sale of debentures in the British National Trust. Later he sold his holding in the Investment Executive Trust, to that company to hand over control of that trust to the Southern British National Trust. That had happened by the time they all lef New Zealand with the books and records. Mr. Monahan: Yon had not produced your books to the New Zealand Com- • mission? Mr. Alcorn: No (definitely). Mr. Monahan: The bringing of the books hers had no relation to this inquiry? Alcorn: None. Referring to Alco-n’s person?:! draw irgs, Mr. Monahan a c ked whether he had £2200 out of Sterling Investments since March. Alcorn replied: Yes, I had sold two debentures whereof T had 16 or 17. 1 handed over the first debenture in Auckland. I think Glasson debited me instead of crediting me with it. Dr. Louat informed the Commission that he hoped to Live the balancesheets of the Investment Executive ( Trust and Southern British National Trust ready by to-morrow. Mr Monahan said ho required a list of the securities of all the companies as nt June 30. The Commissioner directed that the securities’ register he brought to the Court to-morrow. The Court adjourned till to-morrow.