METHOD OF OPERATION

Waikato Times, Volume 116, Issue 19330, 9 August 1934, Page 7

METHOD OF OPERATION

TRANSACTIONS OF GROUP.

COMPOSITION OF DIRECTORATES

GIRLS USED AS "'DUMMIES.” (Times Correspondent.) WELLINGTON, Wednesday. Dealing in detail with the 15 companies which comprise tiie Investment Executive Trust of New Zealand, Limited, and its affiliates, the commission proceeds to examine each company in detail and quotes from the lists of directors and shareholders of each to show the manner in which all are linked together. Names of persons and of affiliate companies are given illustrating how each person or company is a shareholder or director _ in one or more of the companies which form the group. “We desire to point out that the respective lists of shareholders are not complete lists," sa.s the report. "We have chosen names that are common to most of the companies for the purpose of showing the intermeshing ownership and control. Concentration of control is effected through the holding of shares by one company in another.” An Example Cited. The Investment Executive Trust of New Zealand, Limited, is cited as an example. The directors and principal shareholders arc shown below with positions of each in other companies given in parentheses after each name: Directors.—J. W. S. McArthur (shareholder in British National Investment Trust, limited, Wynwood Investments, Limited, British National Trust Limited; director of Southern British National Trust, Limited) ; W. A. Pilkinglon (director Southern British National Trust, Limited) ; 11. H. 'Pollard (director Southern British National Tiust, Limited). Shareholders. —C. G. Alcorn (director Sterling Investments Company (N.Z.), Limited; shareholder in Investment Securities Association, Limited, .British National Investment Trust, Wynwood Investments, Pacific Exploration Company, First .Mortgage Freehold Security' Company, British National Trust, Alcorn Trower and Company) ; Stanley Grange (sole director British National Investment Trust, shareholder New Zealand Shareholders Trust, Wynwood Investments) ; Richard Glover-Clark (director New Zealand Shareholders Trust, Financial Publications, shareholder British National Investment Trust, Southern British National Trust, New Zealand Shareholders Trust), etc. Transactions Examined. Some transactions of the Investment Executive Trust group are next examined In the commission’s report which continues as follows: “ Sterling Investments Company (N.Z.), Limited, seems to have been for years a kind of clearing house for transactions in which Mr J. W. S. McArthur and the companies controlled by him are interested. We have direct evidence of several transactions whereby threatened litigation or other adverse action against Mr McArthur or one of the other companies lias been averted by a settlement effected by tiie payment by the Sterling Company. The latest tiled return of Sterling Investments Company (N.Z.), Limited, shows Us paid-up capital as £2350, but it lias subscribed for shares of a nominal value of £10,883 in other companies. Of these, £9979 is in Pacific Exploration Company, Limited, a company formed to finance the building of a luxurious yacht which is now registered in the name of Mr J. W. S. McArthur as owner.

Typical Methods Illustrated

“ The Transport Mutual and General Insurance Company, Limited, illustrates the typical methods of the group. It was incorporated in November, 1933, and its memorandum of association and articles of association were signed by seven most obvious 1 dummies.’ Four of them are girl clerks in the offices of the companies in the foregoing group.

“ Taking the least serious view of this whole transaction, it enables the common controllers of the two companies, by intermediate investment in shares of the Transport Insurance Company, to invest the funds of the Investment Executive Trust in investments which the auditor of the latter company would not pass. “ A more serious possibility is that funds may be used for speculative purposes designed to secure collateral advantages lo the directors of the companies. We have in tiiis connection ascertained facts which demand a close inquiry.”