Wairarapa Daily Times. [ESTABLISHED 1878] TUESDAY, MAY 2, 1893. BOGUS COMPANIES UP TO DATE.

Wairarapa Daily Times, Volume XV, Issue 4408, 2 May 1893, Page 2

Wairarapa Daily Times. [ESTABLISHED 1878] TUESDAY, MAY 2, 1893. BOGUS COMPANIES UP TO DATE.

SECOND EDITION

Anyone who likes to study the modem company as she is rtm.should read the report of the Committee appointed to investigate the position of Woodhouse and Bawson, United. It is only a amail company, and has attracted 1 no attention in London, but the manoeuvres resorted to are typical / To Rive our readers an idea we will , epitomise the report. Whether the ' statements'are true or not we do not know. The Company started in 1889 by placing shares, making calls, and buying " several companies" for £269,000. These companies were more or less the properly of F. Baweon, the managing director of "Woodhouse and Ilawßon, United," £75,000 of the purchase money was left with the company as a guarantee that its dividends should amount to 15 per cent. The first year the company " made" £60,000 by the very simple process of baying m thing for a price, valuing it at double, and entering tho difference as pro-! fit. One instance will be as good as a dozen. They agreed to float a Company called the Okouite Cornpuny, for a consideration of £87,000. This was paid ihem in " shares " of t the said Company, which were, and are, unsaleable and practically worthless, let they were counted as profits. 80 at the end of the first year the shareholders got IS per cent, the " preference " shareholders 8 per cent, and the managing director a bonus of L14,000,0f which LIO.OOO was cash. The second year the Company felt so secure that thoy, or more properly their Directors, for the shareholders were not informed as to Ibe real nature of the " profits " alleged to have been made, surrendered the L 76,000 deposited with them to guarantee dividends, and procesded to make paper profits as before. The third year, their " paper " profits still being enormous, they hesitated to declare a dividend because they could no longer raise money to pay it in cash, andtheaseots being enormously overvalued, available for distribution. They could not bo sold and of course nobody would take a dividend in; worthless shares, Bo Ussy came to a stop. Just before th« smash, the managing director, wuohadoverdr&wn L 20,000 got the directors to iosept in lieu of this £IB,OOO in some sort of shares, of no particular market Value, in fact unsaleable. As his fa'her (Sir 'W. Eawson) v; mm, th is was : e&aily. : aasraagecL The■ pbsitson on ' the- : 7tS:s:March, when the Committeo presented their report, jt as that all ibe capital was gone, and there are assets " estimated "at $231,000 to bjws Iwbili-

lira of < 28,000. From whet tya linvo said it ut aw clear as rmut that the inonoy lost (ms gone into the |>eo» Ifois of tiio Managing Pirtutor mi hiii fricticlH. Ho may have been 8 mora fool of jtomo usLutti Qotbrow in il.« l>uuU ((roiiinl, t»ut tits whole coumo liBH (joi-ii no gUisaly dlshoiiitßt ftiiti to caloulntnl toJuinlctid the elmfolniltlera thai limy ought to insist iMbeing told what ho did |ith tho £2tt9,000 paid "' r "' "lion 'lip flr.m|inny (Int. Nt

>i mm. 'l'd no in tho Waivnrapii, tho nmtdT in by iun hn]»nM without inter* cut. Evrrybno who ban, of hopes to biivc, nny piohi>y for iiivrgLmrat should imtn Wt-fully that it is BU>oi« ilal toput ii nto a company unlctm yuu am already "in tho know." i-iawmitlß, f^roxam|jla, ofinbettotked on a Ktimll scalp. A. H or ;C Ima Bny n sawmill for Bale. Ho «i y lijh fciouJs to float a com|m«y to buy is. He goes into this company as unmaking director, anil bis friends are directora too. The cam|iiiny buys bit) mill far iloable wljil it is worth, and pays him n cohli. This enables him to make a liberal proueufc to bin supporters. Tboy then buy all sorts of concesnioisa Lo cut timber, value them at ten timt'B whet they co»t, and 60 mnke liiinginury profits, huH declare a diyidond of fifteen per cent., which they pay by borrowing money on tboir plant. Next ibey " promote" a saah and door frtitory, ood tnke payment for no doingjin ahares. These shares uro mit dojirn as part of the year's profitu, tbii.ge look grand, mnro inotii-y is galled up or debentures fliuitud, and another fifteen per cent, dividend declared. As long as they can go ou floating otber companies und raiding caah on debentures or otherwise, tfaoy can pay dividends and the shareholders renimn in ignoranco. Sooner or later the ecd comns, and tboir victiina find that instead of developing tho lugitimHto basilicas of tho Company, tho Directors have boon aiinpW using all the capital to prmnola tlia| interests of them friends {probably people who owe them moufly mid emi i» tluu wuy bo put in a position to pay thorn) and have been hunting fliiunolal will-o'-tho-winps. Utjfofo anyone takes shares in any coni|mny in? should have corao rooaug of knowing that tho dlreotora arc men who cnntiot. bo induoed by flnanoiul prcsimro or »olf intowut, to uso tho oapital to inalto bargain which are obviomily jipt in tbu intoieat of tho Company, and if any unftirtunatn man hail already takon iihnros In a company of which ho fouJtt doubtful, ho Hhould attoml particularly to thin point, whether tho yuars profit couaiwtH of catih payrauots raootved for Horyioea ruiidoHsd, or whether it iu got by tho Bimplo prcocw of " ■writing up ''doubtful auseta, and then paying a dividend out of borrowed monoy.