I.—4a

MINUTES OE EVIDENCE. Thursday, 15th August, 1901. Herbert Ernest Easton in attendance and examined on oath. (No. 1.) 1. The Chairman.] What is your name ? —Herbert Ernest Easton. 2. You are the petitioner ?—I am the petitioner. 3. We shall be pleased to hear what you have to say.—Mr. Chairman and gentlemen,—ln view of the grave nature of the charges I am about to-make in support of my petition, I ask permission to read my statement, in order to avoid errors and facilitate business. Before giving you my reasons for the action I have taken, I wish to explain how I come to be mixed up in what appears one of the greatest scandals in mining history of modern times. Last year I landed in New Zealand from the Old Country, commissioned by some influential and wealthy friends to look into the dredging industry, prepared to invest for them a large sum of money— not, I may tell you, for mere speculative purposes, but for investment. To satisfy myself the claims were genuine, I inspected a large number of the properties quoted on the Stock Exchange lists, and to facilitate my business dealt with a Mr. W. B. Cook, a man who I thought could be relied on, seeing that he had been engaged as a liquidator to several very large estates, and the fact of such appointment having been made by the Supreme Court of New Zealand appeared to me, though a new-comer, sufficient guarantee to warrant my having thorough confidence in him and in his advice. An incident occurred, however, which created a suspicion in my mind that all was not as it should be. I at once went from Wellington, where I was living, to Dunedin, and asked to look over the share registers, which showed a deplorable state of affairs, and I found myself face to face with what appeared to me to be serious irregularities, which tended, if unchecked, to bring ruin to a very large number of investors in this colony, and which seem to me to be in open defiance of the spirit of the laws of the country which Parliament has placed on the statute-book, this being done by clauses being altered or struck out when framing the articles of association, the effect being, lam told, to render the Act absolutely valueless as a safeguard. If this is so, it is a most serious state of affairs, and one which I fear, if action is not taken, will seriously retard investments in the colony, and ruin what should be (if carried out on honest lines in the spirit of the Companies Act of 1882) one of the most profitable and popular industries of New Zealand. The industry itself is, in my opinion, a good one. The Acts alluded to also provide safeguards for investors; but these Acts are worthless if men who trade and make a living on the credulity of the public are to be allowed to draw up contracts and articles of association in 'direct contravention of the spirit of those Acts. Happily, though to some extent implicated myself, I was in time to prevent any of my friends' money being swallowed up in the maelstrom. I then set about to try to right matters; and that my action in exposing these irregularities is meeting with approval is evident by the number of letters I have received and am receiving from all classes in all parts of the colony. But I found my task much harder than I anticipated owing to my inability to fully ventilate the subject in the Press on account of the newspaper proprietors being in fear of libel actions. Hitherto the subject does not appear to have been brought prominently under the notice of members of Parliament, and, as I did not feel inclined to submit to what I thought was a great wrong-doing, I determined alone to take action, and now come before you voicing the views of holders of thousands of shares, many of whom are struggling men and. women. Of the latter I can, if required, give you as an illustration a most sad case. I respectfully ask you to take the matter up, and afford such redress as is possible to those now suffering from the state of affairs existing. The irregularities complained of are as follows : (1.) I find in many companies, especially in those floated by Messrs. Cook and Gray, the articles of association are so drawn as to override what may be classed as the safety clauses of the Act under which they are framed, thereby allowing a few holders of shares to obtain almost absolute control of the companies. (2.) Large blocks or parcels of shares have been allotted to office clerks who are evidently unable to meet the liabilities, as they have up to the present paid next to nothing on them. In one company floated by Cook and Gray, one-seventh of the contributing capital was allotted to an office clerk in the employ of Mr. W. B. Cook, the promoter, vendor, broker, and director of the company (another clerk was secretary), and the registered office of the company alluded to was in Mr. Cook's office. And yet Mr. Cook has obtained brokerage on the said shares, taken from moneys paid in by genuine or qualified shareholders. (3.) Offices of companies are being registered in the same office as promoters, these promoters acting as promoters, vendors, and directors, and their employes as secretaries. (4.) Brokers are receiving brokerage on shares upon which no money has been paid. (5.) Share registers are in some cases improperly kept. (6.) Improper auditing. (7.) Directors have struck calls and invoked the law against defaulting shareholders at a time when they (the directors) were owing very large sums on their own shares. (8.) Misrepresentation of prospectuses; in support of which statement I would point out that Mr. Cook's late partner, William Gray, in defending an action for payment of allotment-money due on a large number of shares held by him, repudiates shares on the grounds of misrepresentation, and this in a company floated by Cook and Gray, and upon which brokerage has been received. (9.) Directors passing transfers at a time when money is owing to the company by the seller. (10.) Vendors making a profit on liquidation upon shares which have cost them nothing. (11.) Directors receiving fees whilst almost entirely neglecting the business of the companies. (12.) The formation of secret rings, for speculative purposes only, by promoters and directors at a time when the public were being asked to subscribe money to be used for mining purposes. (13.) That out of I—l. 4a,