SIX CHARGES

Evening Post, Issue 29, 3 August 1936, Page 10

SIX CHARGES

MCARTHUR CASE

OPENING OF TRIAL

JURY TO BE KEPT TOGETHER

■ After- the. jury had been empanelled in the ■: Supreme Court today for the trial of John William Shaw McArthur. company director, formerly of Auckland,; the Acting Chief Justice (Sir John Reed) announced that because of the "somewhat important nature of the case and-the fact that it had been the • subject of considerable public discussion for some time, he thought it was necessary in the interests of justice that the jury should be kept together until the end of the trial. Instructions accordingly were given for the Court to be adjourned for half an hour to en able the jury to retire to the jury-room to send messages to their families anri make, all necessary arrangements. The Court sat shortly after 10.30 a.m. A new jury panel had first to be sworn in, and from this the jury for the trial of the case was drawn. Ten jurors were stood aside by the Crown and four were challenged by the defence before the jury of twelve men had been completed. The whole process took time —even the reading of the six charges in the indictment. It took the Registrar (Mr. W. W. Samson) about fifteen minutes to read the counts in t the indictment ;before the accused was asked to plead, and subsequently, when the jury had been empanelled, another ten minutes to read it to them. McArthur pleaded not guilty in. a firm voice. -. The preliminaries incidental to the trial were completed at 11.30 a.m. His Honour then informed the jury Of his intention to keep them together. This course, he added, might cause some inconvenience to the. jurors, but he -thought it was necessary in the interests. of justice. The was adjourned until 12 o'clock, but it was not until 12.25 p.m. that Mr. Meredith began his outline of the Crown's case to the jury. THE CHARGES. The six charges against McArthur covered ■■■ five typewritten foolscap pages. They were that McArthur, being a director of the Investment Executive Trust of New Zealand, Ltd., on or about March 16, 1933/ made, circulated, or "published or concurred in making, circulating, or publishing a report to debenture holders for the year ended December 31, 1932, which was false in certain material particulars; on or : about April "8,, 1933, made or published or. concurred in making or' publishing .a prospectus which was false in certain material particulars; between April 8, 1933, and AprO 3, 1934, circulated or concurred in circulating a prospectus which' was false in certain material particulars; on or about March 20, 1934, made, circulated, or published, or concurred' in making, circulating, or publishing, a report to debenture holders \ for the half-year ended December 31, 1933, which was false in certain material particulars; on or about April 3, 1934, published a prospectus which was false in certain material particulars; between April 7, 1934, and August B,' 1934 concurred in circulating a prospectus dated April 3, 1934, which was false in certain material particulars. Auckland was named 'n each of the charges as the place of the alleged offence. ' The'; hearing is ■ expected to last several days. - The case for the prosecution is being conducted; by Mr. V. R. Meredith. Crown Prosecutor at .Auckland, and Mr. ■ C.. Evans-Scott. Wellington. Mr. H. F: O'Leary, K.C., with him Mr. R. E. Tripe, is 'appearing for McArthur. Dr. F. Louat','a'member of the New South Wales' Bar, is assisting the defence. CROWN'S ALLEGATIONS. Mr. Meredith first referred to the law; relating to- the formation of companies, the issuing of prospectuses and reports, and ■ the • means by which ,monejr_ is raised by a company. In .this case,, he said, the Crown alleged that' the documents were definitely false oh their face, and also that there had been material concealment of facts which a person investing money ought to know before entrusting money to the company. Counsel next dealt with the various types ,of companies, referring in particular to interlocking companies and the investment executive type of company. The term interlocking companies, he said, was generally used in connection with companies which were controlled by the same people and had the same shareholders. There was a series of interlocking companies with which McArthur was connected and it was alleged that there had been manipulation of transactions and debenture holders' funds which1 had come into the Investment Executive Trust; of which McArthur was the managing director. The investment executive type of company fulfilled a most'useful purpose.. It was a type of company which had been formed in various parts of the world and such companies had been very successful and very admirable in every possible way. Such companies were mostly used by the' 'small investor, though they were not necessarily exclusively used by him. People could put their money into these companies and have issued -to them a debenture representing the amount of the cash put in. All the money went into one big pool which was administered by the directors and management of the investment company, so that, though each individual might have put only small sums in. the total amount in the pool might be anything from half a million to a million pounds, and that money was invested in a variety "of investments by the managers of the company. In this way. investments in the pool would be spread:all over the world in all classes of sound security, so that the result was c that the money from the pool •would be so widely spread that if there was any fluctuation* in any particular company in which some of the money had been invested it would not affect the general pool. In other words, the average coming from the investments would remain practically constant. The spreading.of the money in this way was generally known as diversification, and this was always stressed by such companies as being one of their advantages. NATURE OF THE CHARGE. Mr. Meredith continued that the Investment Executive Trust of N.Z., Ltd., of which McArthur was the managing director, set out to be such a company. The charge against him briefly was that though the company set out to be that and by its prospectus was inviting money from investors on : the basis of diversification, the company really was only masquerading as such a type of company and a large proportion of the funds received into the company; 'was not diversified as it should, have been. Instead, a very large proportion, it was alleged, was used in some particular interlocking company formed by McArthur'and his 'associates. It would be shown^from 'the evidence that speculation in which McArthur was interested was embarked upon and. that from a chain of interlocking companies large sums of money filtered through to the personal advantage of McArthur. • Mr. Meredith read from some of the pamphlets issued on behalf of the In-

vestment Executive Trust, which, he said, extolled the advantages of the company. It would' be seen by the jury that the pamphlets* held out to the public the great advantages to them of entrusting their money to the investment Executive Trust because of its great safety. Counsel next dealt with the method of operation of the Investment Executive Trust. It had brokers called McInnes and Co. Evidence would be given that besides haying these brokers the company had a mass of literature which was disseminated to prospective takers of shares in the company. There were two methods of taking up shares in the company. If a person already had shares in some company he could put them into the Investment Executive Trust pool and would be given a debenture in exchange for them; if he had cash he could buy a debenture. The company was formed in 1929 but really did not start functioning until about 1931. (Proceeding.)