1929-08-07 — Page 2

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THE HONGKONG TELEGRAPH. WEDNESDAY, AUGUST 7 1929.

THE INSTONE BANK EXAMINATION,

MR. BREWER ADMITS BALANCE

SHEET MISLEADS.

"NO UNTRUTHS IN IT."

Mr. Instone Brewer was further

questioned regarding the affairs of the Instone Banking Corporation at the Supreme Court yesterday afternoon.

The Official Receiver (Mr. Agassiz) suggested that certain loans on promissory notes were merely erona entries, which Mr. Brewer denied.

the emergency came, they were willing to do so before...

And during the first dive months: of this year the business was car ried on at a loss 7-Yea

*

Was 50

Fencing with Words.

Your need for money At the afternoon hearing Mr. urgent that you could not raise the Brewer wae asked whether the counsel to fight an action in this necessary funds for solicitor and

total amount of actual cash

recourt and had to consent to judg- ceived by the company in respect ment? You are quite right. of subscriptions for shares never He did not agree, exceeded approximately $200.000.

Proposed Bond Issue,

10

When did you begin to have The Official Receiver: Do you doubts about these angeta?-In the agree that apart from loans made case of one or two early on. In the to shareholders by the company case of the majority I had on promissory notes and on thong doubts until we had to lean on them. receipt forms that the actual cashi Did you make an arrangement received in respect of shares never that in respect of debts due from exceeded $200,0007-Loans made shareholders it was optional for to shareholders are not included them to take out ten years bonds? in cash received.

-We were prepared to enter into I put it to you that loans were that arrangement. *** made without you having the eash You would issue bonds and a that they were purely contra-small amount would be paid each

month? Yes. That was entries? No.

the in- Mr. Agnasiz:-Was the proce- dure this: A shareholder would During June 1927 you purport- tention behind the whole system. go to the company to borrowed to grant loans of $619,100. Do It would draw the money in money. You would any "Yes, you you say you had that amount in gradually instead of all at once, can have a loan on a promissory cash on hand? That much money. note." No money was advanced, came in and went out

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to the shareholder in the ordinary, Mr. Brewer once asked the Off- Was there any reason for that? sense, the real transaction being cial Receiver to describe what he -I have tried to point out the ad- that the amount of the promissory meant by cash, the Official Re-vantages of it but they did not note was applied in part-payment ealver commenting "You know seem to see it. for his allotment of shares or what I mean. You are merely calls, and it appeared on, the com- fencing with words." puny's books as owing to the com- pany ?-No sir. If answer that in tutu, no.

The item of $260,000 under mortgages and long term loans: 1 In reply to the Chief Justice. suggest that was an asset which Mr. Brewer said 26,000 shares did not exist ?—It was an inter- were applied for, No money was branch transaction which should sent with the applications for the have been wiped off.. Promissory Notes Explanation..

shares. Asked whether the com- Then why describe it 08 Proceeding to explain, Mr. Bre-pany supplied all the cash with mortgages and long m lonna?-- said that not want to which the shares were paid for. I did not discover it because the

it to described It is erroneous. It should not be there."

GENERAL ELECTRIC CO. werd hid he did capital. He Mr. Brewer said the company took bulunce exists in the Hongkong

had applications for more than promissory notes for ninety per brunch and in the head office," two million dollars worth of rent. Cash security was given. By no possible stretch of im shares and he refused to allow He said the method was not his agination could it be described as shareholders to pay more than 10 invention. It would be found in per cent. of their money, unless any book of economies. It was a they would agree to provide the system to the advantage of the bank with mangy instantly avail-bank. able on demand, by borrowing to the extent which they had paid in excess of their 10 per cent., there by placing the bank in an ad vantageous position,

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Mr. Agassiz went on to deal with an individual instance, in the case of a Mr. Li, and said that on June 10, 1927, he was loaned $500 un a promissory note. On the same day, in the shareholders' register, Mr. Li was credited with having paid Z500 in cash,

Mr. Brewer said he thought the latter entry was on another date and on being shown the books declared it was the 16th.

Mr. Agassiz said he could only: make out it was the 10th, and asked his Lordship to look at the date.

After examining the writing, his Lordship said it was the 10th, after which Mr. Brewer had, a other look and agreeil, saying that he had been looking at another entry,

Compradore's Note,

Mr. Agarsiz asket Mr. Brewer if he agreed that that cane showed

|

How Loans were Mode.

The Offcial Receiver: The total cash received up to May 31, 1927 for shares was $37,6007- Correct.

That was before you had grant- et any loans?--Yes.

The first loan was granted on June 10 and the balance of cash the company had on hand at May 31, was $9,330,7-Yes.

The Trading Company, Mr. Brewer.explained the "forma- flon of the Instone Trading Com- pany Ltd, and said it was intended as an export and import business. The Instone Banking Corporation took shures In the Company and the Instone Trading Co. took shares in the banking business. The com- pany never started business.

Mr. Brewer did not agree that the shares in the company as set out constituted a worthless asset. The com-loan to Mrs. Brewer was granted in connexion with the formation of the company which, he,suid, would have made good money if the bank branches had not been closed,

On the 30th you received pradore security of $18,000. What was that?-Banknotes.

Did he put actual cash up for that mount?---As far as I recollect it was actual cash.

At the beginning of June you had $9,330 cash in hand. During June to make loans purported YOU amounting to 3619,000. I put it to you that you had no money to make those loans-The money canje into my hands and went out again.

At this stage the Chief Justice told Mr. Brewer that fencing was use. They wanted to know out of what were the advances made. Mr. Brewer replied that they were made out of payments by share.

holders.

The Official Receiver later drew the usual form of the transaction. Mr. Brewer's attention to a loan of to which Mr. Brewer replied that $432,000 advanced to Mrs. Brewer, shareholders paid in excess cash answer to questions be said of their 10 per cent, which the there was an explanation for that tank loaned back to them. Speak and did not suggest that the amount ing with direct reference to the was paid to Mrs. Brewer in cash. individual transaction taken, Mhe was trustee in respect of cer- Brewer and that Mr. Li was, in tin shares and paid in advance of fact, the compradore and he was call like the rest. not in need of money. In fact he put up sum, for his position. He tank the promissory note to blige Mr. Brewer as he wanted wash available.

for.

Perfectly Good Assets.

He agreed that in July loans to hareholders amounted to $142,000,

He went on to explain an ar rangement whereby people in Peking were to take up certain shares. The shares taken up and remained in Mrs. Brewer's hands.

were never

The Official Receiver suggested that the effect of this was to put an asset in the balance sheet of $415,000. Mr. Brewer admitted that was the origin of it but said it was not done with the intention of putting an asset there.

Misleading, Statements.

Mr. Brewer also explained how he tried to buy Instone Banking Corporation shares and sent out brokers to buy at any figure under $97. The object of this was to get a nujority on the directorate.

The Official Receiver: From this balance sheet a business man would form the opinion that the company on April 30 had good assets to the extent of over a million. That Is what the Inflance sheet mekana.. No doubt.

the customi.

re-

I put to you that the state- He did mit agree that the only cashment about loans, mortgages and in- His Lordship asked if any

received was $5,260 or that the rest vestments is misleading and inac curity was required for the notes the cash purported to have been curate?I don't agree,

Mr. Brewer answered that there received was in connexion with pro- Mr. Brewer said the item of was only one security possible missory notes and receipt trans- $150,000, under specialty debt which was cash. No Joan vas Letions with the company's own ferred to the mortgage on the bank made until the shares were poid | shareholders. Mr. Brewer Bald premises. Asked why the mort

$12,000 had been received in bank-gage on the premises was not stated Mr. Agassiz pointed out that on notes. January 1, 1929, the compradore He agreed that loana to share so many words he said it was not owed the company $9,188.

bekers amounting to over seven

The Ofeiul Receiver: The item Mr. Brewer replied that the man lakhs appeared in one form or an-

was taken out of your balance sheet had credit with the earpany's other in the balance sheet as per by the auditor and put under ac- fectly good gets. He said there was no need for provision for bad counts payable-That shows the No Demand for Payment.

doubtful debts and that out-difference between the legal mind standing loans amounted to about and that of an accountant. Has that ever been paid?-He four lakhs.

The premises of your bank were purchased for $240,000 from Mr. has never been asked to pay. I The Official Receiver:--If you re- have said all along, until we ac-garded them as good debts why did Yau Wai?--Yes, - tually came to the crash, there was you not collect them?---I did not de- never one man asked to pay moneysire to before the failure of the became my whole object was to branches. Afterwards they could keep ready money available to not be collected, meet an emergency, and the only The company was in urgent need mistake I made was in believing of money before liquidation? Yes, these people would pay up when' since July last year.

other accounts.

ŞALESMAN ŞAM

COULDJA TELL ME TH WAY TO "TH' WHITE.

HOUSE-I WAS UP "THERE YESTERDAY, BUT I'VE LOST MY BEARINGS THIS MORNING →

OUGHTA PAY MY RESPECTS BEFORE LEAVING TOWŃ -

SURE FOUR BLOCKS)(YEP! JUST THOUGHT

SOUTH AN' TWO. BLOCKS NORTH! "GOIN' UP "TA SEE MISTER HOOVER,!

SUPPOSE?

CHINA SHOPPE

FAIRT

ALLA

One of your directors?-1 think

Did you ever ask him if he made a profi of $35,000 out of the com- many of which he was a director?

No.

(Continued on Page 11.)

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