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THE, HONGKONG TELEGRAPH, TUESDAY, DECEMBER 17, 1929.
BREWER CASE
CONTINUED.
RESULTS OF EXAMINATION OF
BANK'S BOOKS.
THE LOAN QUESTION.
Mr. Hampden Ross, the account- ant commissioned to investigate the books of the Instone Banking Corporation, concluded his testi- mony on the resumption of the. Brewer case before Mr. A. W. G. H.. Grantham at the Central Magis- tracy yesterday afternoon.
the
Mr. S. Hampden Ross, the Liquidator, continued his evidence for the prosecution in Instone Banking Corporation case, which was resumed. before Mr. A. W. G. H. Grantham yesterday afternoon, when he stated that the Collateral Security Loans, the Mortgage and Long Term loans, Stocks, Shares, etc., and the un- called capital, the total amount of which was $2,603,147.66., shown on the printed balance sheet as as- acts of the Corporation could not be recognised as asset, as they had never existed.
fi
Replying to Mr. Somerset Fitz roy, the Public Prosecutor, the witness said that 90% of the $1,420,950 stated in the balance sheet to be uncalled capital, had never been allocated.
Mr. Fitzroy-As an experienced auditor, would you have passed that balance sheet with the amount termed "uncalled capital" as asset-No, I would certainly not.
It should never have been in- cluded?--No..
The statement that it was an asset is absolutely fulse?--Yes,
Mr. Ross added that in Novem ber, 1997, $963,600 was transferred from the Capital Account to the Allotment and Suspense Account, but in spite of this it was includ- ed in the Capital account. Cer- tain application forms had been alled in by various persons on dates in July, August and Septein- ber, 1927, for the total amount of $1,133,000 and in November, they were definitely regarded as doubt ful and were transferred to the Allotment and Suspense account. The largest applicant was a person named Kwang Hoitin, who had $550,000 warth, and the books showed that certain of his shares were forfeited in April, 1928. Despite this fact, they were still included as an asset in the Share Capital account, whereas actually they were not asset. They never were an asset, and it must have been known by those concerned that no money was likely to be realised,
No Collateral Security. Dealing with ́ the Collateral Security Loans (short term and, at enll Hem which was shown on
11
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THE PHARMACY,
TEE. C. 345.
sheet was
and as a cross-entry "Item in the
(FLETCHER & CO.,
LTD.)
A.P.C. BUILDINGS.
Mr. Ross Cross-examined, Mr. E. Davidson then rose to cross-examine for the defence.
A call was made. by the Bank which was not paid, except in the books. Moncy was lent to the shareholders, and in exchange for one of these documents. I om sug. eating the actual process was this: The shareholder goes to the
Company for It is not a question hero whether thing assuming that the only Instone Trading
the Instone Bank is properly con- NOL. An Asset.
shares possessed by the Trading $415,000,
Witness was questioned next ducted, or whether it is a sound, Turning to the Mortgage and Company were the shares of the
instone Banking Corporation. with regard to the item Customeral substantial concern. The ques- the balance sheet at $349,630, Mr. Ross said that it was no collateral Long Term Loans, which were "The Balance Sheet shows that the Deposits, and he said that item tion is whether they had adepted," security at all. In fact he could stated to be $266,630, the witness not find any. In inspecting the said he could see no mortgage held Instone Banking Corporation had was a false one, being overatated rightly or wrongly, this partlealar books, he found several applica by the bank, and if there were assets at all. When I said no to the extent of $250,000 in the method of inviting shareholders. assets of the Instone Banking! tion forms and promissory notes none, the statement made in the assets, I should have said that the Statutory Report.
absolutely Corporation were such that they amounting to $205,500, which, so balance far as he could see, had never been false. There was an amount shown were just able to pay their liabili paid out. According to the books, as owing from the Hongkong ties," these should have amounted to brunch, but it was not a mortgage
Mr. Fitzroy What do you "Mr. Rass," he said, "I am not $761,000, which included $432,000 loan, because it did not exist. I mean by "paying their liabilities going to quarrel with you on the Bank and says: "I want to pay from Mra. Brewer, He could, was a cross-entry with the Hong-Their assets were not more than subject of accounts. I am Tre however, find no collateral securi- kong branch. The $260,000 ap- aufficient to pay their abilities.
pared to accept your views as to 89 much in advance of call, in ad- ty and it was an absolute "false peared in the Head Office books
Continuing, witness said that the proper way of accounting, You vance of shares. The Company says "We don't want it now, but and Invest appreciate that in dealing with we will take it and lend it back.” statement to say that there was he would never have allowed such no means be an asset, because it ments, as shown on the Balance this report we are not considering That, I put to you, was the tran any such security. As an auditor Hongkong books. That could by Loans, Mortgages
Sheet were obviously worth prac it is a correct account from the saction as shown in the books?— a thing to appear in a balance never existed.
The witness was then taken to tically nothing, as the Directors accountant's viewpoint. The que No. I cannot agree that they paid sheet. He would have asked them to put things right. He would the Stocks, Shares and other In must have known. Their bank tion is whether it was a perjured money and wore lent it unch
1 am not asking you to any that. have regarded them as unsecured vestments item, which was marked premises in Hongkong were mort report with which Mr. Brewer is
I understand I ask you to say that the matter the Instone Banking the principal witness for the pro was treated in the books as if that loans, and insisted that they were at 3484,831.80, which he said was gaged. It followed that with the charged. You are,
made up by 415 shares of $1,000 shares of Mr. Fitzroy pointed out that it shares of the Instone Banking Cor. Corporation as its only asset, the secution? You are called to bear had been done. That was done, was stated the Company lent $761,-|poration and the purchase price of instone Trading Company was the main burthen of proof of these was it not?-Yes, that is the idea. charges? In your own point of And the result was, that instead. 000. How much money would the the goodwill in a bond selling, worth nothing.
Witness went on to say that a view, where a Company's shares Company have up to the time these which amounted to $69,793.60.
on their ahare- Mr. Fitzroy: Can "good-will" further examination of the books are allotted, the Company in prac of having a right to make a call loans were made?
Mr. Ross replied that the bulk be described as stocks. shares and showed that the 4,800 shares were tice don't receive any cash at all on the shores,
(Continued on Page 15.) of the loans were made on June investments? No. It fails to dis-originally allotted to Mrs. Brewer do they? I am taking the literal holders, the Bank got. a definite 10 and the last one on July 15. close all material information and on June 21, 1927. Payment of meaning of "cash." In effect, During the whole of that period was quite wrong to appear there. $48,000 was purported to have cash is never used, in the strict the Company never had the cash Questioned with regard to the been made, but this was only a sense of the term, and what is a block of cross-entry against her bond-Bell done in practice is that a cheque to make the loans. The balance item showing
the is nald by the shareholder and that of cash in hand at the time was 4.800 shares originally allotted to ing goodwill, refunded to $9,330, and during June and July Mrs. Brewer and subsequently Bank by Mrs. Brewer. On June goes into the Company's banking,
Witness: Yes, they received various amounts of shown in the books as having been 28, Mrs. Brewer had a "loan" of account?
It is therefore a matter of cash to a rough total of $80,000, acquired by the Instone Trading $432,000 and that evened up the so that they never had the cash in Company, witness said that ho value of the shares allotted to her hand to make the loans to the could not find any information in and showed them to have been opinion as to what constitutes shareholders. It was a physical the books as to the value of these fully paid up. Subsequently the payment of cash. That must be
shares. They would be worth no shares were transferred, to the so, isn't it? Yes. +++++ impossibility.
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