WHERE DID BUILDING INVESTMENTS GO?

NZ Truth, Issue 1196, 1 November 1928, Page 8

WHERE DID BUILDING INVESTMENTS GO?

Whangarei Society's Secretary Cannot Account For Mysterious Loss of Funds

SYSTEM ALL AWRY AND CASH THAT SIMPLY MELTED AWAY

~ (From "N.Z. Truth's" Whangarei Representative.) Frankb, there Js not a tittle of origindlity about this story. It must have been lopped off the tree of tales which Methuselah used to whisper into the ear of Father Time, but its saving grace— if there can be such a thing m cases where executives are accused of stealing from their firms' cash- boxes— is that it inspires one to ponder upon the looseness with which some auditors conduct their observations. If Frederick William Webster, secretary to the Whangarei Building Society, really is guilty of stealing £1 500 from his employers, then Rust, the auditor, should be strongly reprimanded for the extraordinarily lax manner m which he carried out his duties.

CEEMINGLY, Webster cannot acO : count either for the disappearance of anything approaching the sum of £1505 12s. Bd., or its present repository.

Whether its source is traced by the time Webster stands his trial m the Auckland Supreme Court, cannot bo dredged from the preliminary evidence which developed m the lower court at Whangarei, where Webster declared that he was not guilty. A journalist by the name of Hugh Wentworth Crawford was one _of the promoters, and subsequent chairman of directors, of the Whangarei Terminating Building Society, and he told the court that for a year or two, at least, Webster had kept the books so well that his woi ; k was made the subject of congratulatory reference by the directors and the society's auditor. At the close of the second year of his employment, for example, the auditor made special reference to the excellence of Webster's performance, and when the letter which contained this eulogy was read at the annual meeting of the society, both secretary and auditor were rewarded with increased salaries. ■ * V

Moreover, it was decided that when the secretary needed further assistance, the society would willingly furnish it. This was necessary on one occasion only, however, and when Webster was away for a short time, Rust himself acted m the secretary's stead.

"Were there any complaints made about the secretary's work?" queried Detective Robertson, who conducted the prosecution.

Counsel for the accused (Lawyer Trimmer) took exception to this question, so the detective, rather blandly, asked: "Were there an y . comments made, apart from those concerning the good manner m which he had 'performed his work.?"

Crawford replied that there had been

Webster's Promise

complaints of dilatoriness and the directors had caution-ed Webster, but there had been no improvement; quite a number of shareholders were disgruntled because the balance-sheet was late. . ■■■■■■■■

In October, 1927, the directors requested Rust, the auditor, to conduct a. continuous audit and furnish them with a monthly report, but m the first report received from him the directors were .advised that he had been unable to conduct a proper audit because the books were not properly written up and balanced. .

Webster was advised as to the contents of this" report. He promised to pay greater heed to his responsibilities and carry out his duties m accordance with the requirements of the auditors and the society's directorate.

Subsequently, Crawford received another letter from Rust, to which was attached a list of irregularities and suggested improvements m the methods of accounting, with the result that Webster was instructed to conform with the amended system and. adjust himself to the new requirements.

He admitted that Rust's .recommendations were perfectly sound.

At a later date Crawford was astounded by. the contents of a letter from the auditor, who disclosed a shortage of £1300 m the cash account.

Webster was summoned to a special meeting of directors and confronted with the auditor's statement. He said, by way of explanation: "I cannot Understand it, and, if this statement is correct, I could not iiave used such an amount of money."

Crawford asked him if he had used any of the money, to which the secretary is stated to have replied: "I might have; taken a small amount — I . would not be surprised if I had taken £50."

"Could you possibly have taken £100?" queried Crawford at the meeting. "I would not be surprised if I had taken £100," was the alleged reply- ■'■ .

Gradually, the margin widened, until at length Webster agreed that the varying sums he had taken from the

cash, might have been £150 or even £200, but no more. The board then appointed Crawford and another man, McLean by name, to investigate the matter and take whatever steps they deemed lit. They went to the Bank of New Zealand and examined the bank ledger accounts of the society. Rust's statement to the board showed that no ; moneys were banked during the months of August and September, but according- to the bank accounting system money certainly had been deposited within that period! "I then lost a ' ' ■ certain amount of confidence m that statement of Rust's arid immediately called another special meeting of directors," commented Crawford. . Webster also was m attendance, and when the chairman told his fellow-directors what had, been discovered, their consternation was temporarily relieved. Later, Crawford took .the secretary for a. walk, and when they had gone some distance along the road, the chairman faced Webster, saying: "Now look, Webster. As man to man, have yqu taken that money?" The secretary then repeated what he had said m Crawford's office — that he may have taken anything up to £200, but he felt sure that he had not taken more than £100.

Lost Confidence .

When the chairman asked Webster where on earth was he going to get the money that would make up the deficiency, he replied: "I knew I would have to make it up when the balance was determined, but it is ridiculous to say that I have taken £1300. Why, this would mean spending £30 per week — I couldn't have spent it, even had I wanted to spend it! "I only did what every other secretary does — I took money from the till, knowing it would have to be made up af terwards," is the explanation which Crawford credited to Webster. ■■"■•■' A few days later Crawford -and McLean met Rust, who assured them that the figures outlined m his ~7 ~ ~ startling- report were perfectly correct, with the result that Webster was suspended on the following day, all documents : and books of account belonging to the building society were handed over to Rust, together with the key of the office safe. . The directors then decided upon an independent audit, so the books were scrutinized by James Reid, another auditor, m the presence of Webster, and a statement, of the deficit drawn up. ;• '■■ .' ■ : . ■ " ■ . , .--.. It' was' ipointed out to the secretary that- the defalcations were not committed at one fell swoop, but rather had' the system been a creeping one from the start. "Yes, yes. I understand," -was Webster's comment. "But I haven't had

that money, Crawford, although I know I am responsible. It would be hard enough to have to repay it if I had used it, but as I have not used it, it is hard. "Whatever happens, I am not go- , ing to let the ol.d man (Rust) suffer . for my carelessness. I know, of course, that I am responsible for thatmoney and I'll have to find it." "You'd better find it pretty (adjectivally) quick!" was. the sole response of Crawford. At a 1 subsequent meeting between the directors, Webster and Rust, the auditor denied i*eceiving a notification that a continuous audit was required, whereupon the chairman questioned the accuracy of Rust's balance-sheet, particularly m relation to the bank balance of £681 m hand at the close of the 1926,-27 period. , • Rust contended that this figure was a misprint— that it should have read as £170 m the bank and the relatively large sum of £511 m hand, represented by a roll of notes. * .', ' He was asked whether he had counted these notes to; see whether they tallied with the figures shown on the balance-sheet, but he ; replied that .he omitted to do so. Webster was then questioned as to why he had not banked this £511 immediately after the balance day, and replied that Rust instructed him not to bank the money until he (Rust), was ready with the balance-sheet. In the meantime, however, Webster was told he could pay it into Rust's trust account. He refrained from doing so. but kept the money m the office safe, instead. Webster was- asked by Cra'wford where the moneys had gone, but the secretary replied: "I know it has come into the office, -but- 1 cannot tell what has become of it. I myself have not had it. I did not want it. I had no need for it. ' . "I will guarantee also that neither