TOBACCO DEALING

Waikato Times, Volume 127, Issue 21196, 20 August 1940, Page 7

TOBACCO DEALING

AFFAIRS OF DIRECTORS COMPANIES IN LIQUIDATION EXAMINATION OF TWO MEN (By Telegraph.—Special to Times) AUCKLAND, Monday The Supremp Court examination ordered by Mr Justice Blair last March of two directors and officers of two tobacco companies now in liquidation, Loyal, Limited, and the Consolidated Tobacco Company, Limited, wag commenced before Mr Justice Fair today. The examination was ordered following a report by the Official Assignee as liquidator of the two companies. Mr V. R. Meredith, with him Mr N. I. Smith, conducted the examination. The two directors, Edward Valentine Owen, of Howick, and Michael Maher, of Wanganui, were represented by Mr A. H. Johnstone, K.C., and Mr Mackay.

From Loss to Profit Edward Valentine Owen said that he and Maher each took up 100 shares as directors of Loyal, Limited. About £7OOO share money had been subscribed for this venture. The company made a loss in its first year, but, according to the next balancesheet at March 31, 1934, there was a net profit of £4535. He thought they paid a dividend of 15 per cent. The minutes of a meeting of April 5, 1934, witness agreed, showed that his salary was put up from £SOO to £1250 and Maher’s also from £SOO to £1250. In addition he had director’s fees, £66, travelling allowance £l2 a month and also an expense allowance of £250, making a total of £l7lO. Maher got about the same. Customs Allegation Witness said he did not draw any of the £3OOO that was offered him for the lease of his formulas. The manufactured tobacco under bond was from two sources, imported and New Zealand-grown. When it was manufactured he paid exise duty, plus the import duty on the foreign-grown. The customs people found that he was paying sales tax on a greater amount of tobacco than that on which he was paying duty. They issued a writ alleging that 33,7281 b of manufactured tobacco had been removed by Loyal, Limited, without paying duty and claiming £6815 short paid duty and also penalties of £40,000 for three times the value of the goods. Mr Meredith: That was the year in which you showed a profit of £4s3s?—That is correct. If you had paid the duty the customs claimed you would have shown a loss of over £2ooo?—Yes. Witness said Maher and he went to see the Comptroller of Customs in Wellington on receipt of the writ and the matter never came into Court. Mr Meredith: Did you agree to pay the claim?—Yes. Did you pay?—Subsequently, yes. You agreed to pay something just under £Booo?—Yes. Ignorant of Breach Witness said he knew he was selling more tobacco than he was paying duty on. No other directors knew that, but Maher did. Asked how he got tobacco out without paying duty, Owen said he induced a customs locker to take back into bond unsold cigarettes on which duty had been paid and to release an equivalent lot of cut tobacco on which duty had not been paid. He did not know that this was a gross breach of customs regulations. Witness said that at a meeting on February 25, 1935, he declined to complete the sale of formulas for £IO,OOO. At the same meeting a resolution was passed to raise the capital of Loyal, Limited, from £30,000 to £IOO,OOO. That was on account of the amalgamation that was about to take place. Mr Meredith: In March, 1935, you asked £20,000 for your formulas and the board agreed to give it to you?— That is so. Witness said he got about £15,000 in fairly big cheques, and lent about £6OOO to Consolidated Tobacco Company. Maher received about £2700 of it. Witness retained about £3OOO for himself. When Consolidated Tobacco went into liquidation his formulas and blends came into the possession of the liquidator, who sold them for £125. He became factory manager for Consolidated Tobacco. The stock was valued by a Government tobacco inspector, Mr C. Low. Rise in Value Witness was examined on 40,0001 b of tobacco bought from the Department of Agriculture on April 24 through Mr Low at Is a lb valued on April 30 at a higher figure, and a further lot of 29,0001 b bought at Is 6d on April 30 and shown in the balance-sheet on the same day at 2s 9d. Those two items alone showed an increased value of £5875 on the balance-sheet. Witness said that a good balance-sheet would increase the chance of raising capital, and if the capital was raised he could get paid for his formula. The company paid a 10 per cent divident out of profits obtained from the valuation of stock. The hearing was adjourned until tomorrow morning.