THE WARD ASSOCIATION.

Waikato Argus, Volume III, Issue 160, 22 July 1897, Page 3

THE WARD ASSOCIATION.

EXAMI NA TI O N Mi: Hannah said he first inspected the association books in June, 1891. Wh n he examined the books he saw that Mr Ward owed a large sum of money. When he audited the books he saw that Mr Ward's account was £-'I,OOO. In 1894, on the day of the balance-sheet, £21,000 was paid into Mr Ward's account. He noticed that £21,000 was drawn out the d?y after the balancesheet. This did not strike him as suspicious. In 1895 he noticed on the balance day £35,000 had been paid into Mr Ward's account. Thinking Mr Ward a lich man, it did not strike him as snspic:ous ; now it somewhat appeals as if the entries were made to deceive the shareholders. Mr Fisher represented to witness that Mr Ward was at any tin e able to pay his account. If he knew what he did now he would not hivo passed the entiies, and would have denned it his duty to inform the shareholders. In the 1895 ba'anceshect Mr Ward was credited with £33,000 by transfer, and the day after the balance he was credited with £IBOO transfer from Brooks and £6500 transfer. When he saw the entries for the third year on the day of the balance-sheet he made en quiries from Mr Fisher, and the hitter's explanation satisfied witness. On looking at Brooks' account, it appeared that the association owed Brooks £lßl6 9s 3d. This amount was placed to Mr Ward's credit. Mr Fisher explained that a'l three accounts were treated together. At that time he had no suspicion, but now he considered he might have been deceived, and should have ma-le further inquiries. The £6500 was in the same category. He understood the £30,(100 was a payment in by Mr Ward. Mr Fisher said that there was that amount to Mt Waid's credit. He had heard the circumstances of the £30,009 draft.

His Honor said if Mr Hannah was informed that .-£30,000 was paid in by Mr Ward, surely Mr Hannah was right in passing the ba'ancc-sheet and accepting the explanation. Witness went on to say that it was evident the explanation was not full enough, and if he had had full knowledge of the transaction probably he would not have passed the item. In 1805 Mr Ward's account w»a credited by £44,000. Before he audited the books the entries were reversed, and he was informed by someone in the office that the entries were made in error by the ledger clerk. Mr Ward went away from Xcw Zealand on the day the last £35,000 \vp credited him. It, however, occurred him to think the entries might have I made to show the Acting-Chairman of Directors that Mr Ward's account was better than was really the case. On balance day the entries were reversed. When he saw the effect of this juggling of figures on an account of such magnitude of the managing director he could say no more than that he accepted the explanations of the officers as satisfactory. The concern seemed a paying one, and he was satisfied that everything was all right. On balance day, 1805, Mr Ward was debited with £ISOO, rent and salary ieverted. He was told by the officials of the company that Mr Ward had foicgone these amounts. The amount should have gone to credit of profit and loss, or to reduce the charges account. .Shareholders should have been told by means of the balance-sheet that the profit was made by reason of a present by Mr Ward. Looking at the balance-sheet of 1J>0."), signed by him, he thought the shareholders would be led to believe that the £ISOO was made in the ordinary way of business. ire did not think the shareholders were wilfully misled, because Mr Ward's indebtedness of £45,000 was increased by £ISOO on paper, only this amount was treated as a cash profit and divided as a dividend. He was assured that Mr Ward was good for the amount. This £ISOO was placed to the credit of goods accounts, and only by this amount was there a profit of £ISOO on goods sold. Looking at the books now, he must admit that the profit should have been £ISOO not £SCOO. The amount should have been stated separately. Going back to Brooks nxd Council's accounts and drafts, he must again say that tlie officers assured him that these accounts were quite proper and in order, and he accepted their explanation. He accepted Mr Fisher's statements in good faith. All he could say was that all these accounts were grain accounts, and he looked upon them as the same accounts. He understood this. It appeared that instead of the company owin« Brooks and Concell money, they were in credit to Mr Ward. Knowing what he did know, he could net pass these items. If he had known the facts „f case he would have had to add £54,000 to the lirbility side of the balance-sheet. Had he known the facts of the items he would not have passed the 1895 balancesheet. The erain account due to the Colonial Bank was not shown in the balance sheet, why he could not remember, but thought it was kept out for special reasons. He did not satisfy himself as to whether the security existed. He thougtt it was a special account, lie could not say why it was done.

Mr Solomon said lie was not satis-iied with this answer. Witness must give his reason why it was done.

Witness went on : In 1895 the bal-ance-sheet showed only £IO,COO liabilities, whereas in reality the liabilities should have been £84,000 There should also have been items placed on the credit side. He could not tell why he passed such a balance-sheet. Mr Solomon asked witness if he could by any reasoning justify the practices ir.ade use of to compile the 1595 balancesheet '!

Witness was at first silent, nnd then said : " They ought to have been si.own from the present point of view." Pressed again as to whether it was an unjustifiable practice, witness again said : " It ought to have been shown from the present point of view."

His Honor asked witness what was the difference between then ami now, as at both times the same papers were before him ?

Witness did not answer. Wi'ness admitted that whoever was responsible for the balance sheet had deliberately misled the shareholders and wilfully concealed the state of affairs. He afterwards said it might not. be wilful, but there was no doubt that the affairs of the company were concealed. He went over the hook debts and advances with the seerttaiy at the time, and satisfied himself that they were all rieht.

"Pressed as to his action with reference to the stock items, witniss said he would rather not answer as to whether the actions could be justified. Eventually he said, " The circumstances appear different now."

Mr Solomon said the facts were all the same f>-day, and then asked was there any excuse for the proceedings ': Witness admitted there was no excuse.

I'ust due bills, he said, were treated as bills under discount. When bills Merc dishonoured the bills were debited to customers' account in the association books. In the £29,000 assets the association must hive owed as contingent liabilities past due bills under discount. This would make the £54.00() referred to on the previous day, £[>,ifio on grain and railage account due to th'j bank was omitted or transferred. Debit due on London consignment account, did not appear in The balancesheet was accompanied by statements which explained tin: position in London, but the shareholders only saw the printed balance-sheet. Witness admitted the result of various cross entries and withdrawals was to hide from shareholders and public the increased debt the association was carrying on its shouldeis.

The report having been read he said he would not sign it now. He signed it then because lie thought if was all right and considered what the otlieers told him was correct. Witness did not know the association had made lossc3 of thousands of pounds which had been concealed. He acknowledged an item, £204 13s 3d deficiency on a shipment.by the Crusader of oats was can itd to the debit of the produce account, thereby an asset was created. After pressure he said this was a deliberately untrue entry. Losses amounting to £-1007 6s 91 had been treated in the same manner, and debited to the produce account, creating assets. The produce account was gone through item by item, and witness had to admit that losses on shipments amounting to £2500 had been treated as rssct.s in the produce account, and profits created. The icsult of taking in the debit side of the items icferred to prior to adjournment would be to show that the whole account appears as if the amount represented was stock in hi>n<l. Tin re should l.e goods to lepresent stock in hand. He did not consider it his duty to take stock in 1894. .Some items for interest and storage were treated in the same manner. A Mipplomentary account was evidently opened at the balancing of 1895, and consisted of items probably omitted. He afterwards called thru; balancing entries. Some leaves were missing from the ledger, ami there was a memorandum stating that leaves had been taken out as thire were no cn'rics on them. In the journal items referring to the missing folios appeared, and he admitted the pencil ticks at the entries were his. Witness could not explain the matter, but thought that the entries must appear somewhere else. Some of the items appeared on another folio in the ledger. In 1803 the debit of the Ocean Beach Freezing Works was £07)00 odd. This was transleired to Mr Ward's account on balancing day. Immediately afterwards it was taken out and tocredited to Mr Ward. The effect of the entries disguised the fact that the freezing works owed the association any money or that the association was in reality running the freezing works. In 1894 the balance due by the freezing works was debited to Mr Ward, but not redebitcd after balancing day. He was never shown any register ot securities. He did not recollect whether he. made any inquiries about the debts due to the association by the Southland Rope Company and the Bokoiiui Coal Company. He took the manager's word as to the oats in the store at the balancing in 1895. He had never since heard that" the oats in the store were, i'16,000 short. This ended Mr Hannah's examination, his own counsel not asking him any questions. BY TELKIIKATII —OWN CORRESI'ONDK>"T). Dunedin, Last Night. On the Court resuming to-day Mr Ward was examined with reference to the transactions in regard to taking over the bus ncss of the Ross Twine Factory at Invorcargill. He gave two cheques, one for £3OO and the other for .CO4G-2 for the purchase of the stocks sold by his company. As to the first cinque Ross was practically in difficulties owing to pressure from the Colonial Dank, and he agreed to assist him by the formation of the Twine Company. In doing so he stipulated with l'os? that the stocks purchased in the first instance by him. self as a private individual should bo taken over by the new company plus interest and all charges to date. 1L denied absolutely that he had ibis in hand for a time, and he had not. the slightest doubt the directors knew he was to receive a profit on this twine. The company was funned for a two - fold purpose, to relieve Ross' account, which was a congested one, and to dispose of the stociis of twine he held. The second cheque for £(>,-162 was signed by Ross himself anil Fisher, who was one of the directors, and on its face the specific purchase was shown, " Twine as per warrants." Ho now learned that tome of this twine had been bought by him from Ross. There was nothing hidden about the transaction.