Canada's Armament Mystery
"Canadans who may be called upon for sacrifice have a right to know. . . What lies behind the Bren Machine Gun Contract
LIEUT.-COL. GEORGE A. DREW
Editor’s Note: The following article went to press on August 9. The author’s statements are based on departmental records as of August 5.
ON MARCH 31 of this year a contract was signed between the Canadian Government and John Inglis Company Limited, of Toronto, which provided for the manufacture of 7,000 Bren machine guns in a factory to be equipped for that purpose in Toronto entirely at the expense of the Canadian and British Governments. A similar contract with the British Government called for 5.000 more guns.
The Canadian Government undertook to deliver to the company, and install at public expense, the machinery the Government acquired some years ago from the Ross Rifle Company. This machinery, which had been stored at Valcartier after its removal from Quebec, is suitable for the manufacture of machine guns, rifles and other small arms, and had been intended for use in a Government Arsenal. It constitutes the bulk of the machinery which will be required for the fulfillment of both the Canadian and British contracts. The total cost of guns is expected to be about $8,000,(XX). As an incident of this joint arrangement , substantial profits are to accrue to the John Inglis Company Limited and its promoter, Major James Emmanuel Hahn, of Toronto.
On July 1, Hon. Ian Mackenzie, the Minister of National Defense, described the Canadian contract as “one of the finest contracts that was ever signed in the public interest of Canada.” After all the contracts which have been signed during our life as a nation, this is praise indeed.
Let us, therefore, look carefully at this wonderful document.
Information about this transaction was given to the House of Commons, and in turn to the Canadian public, in small doses. The first intimation that the contract had been signed was in a press release from the Department of National Defense on May 5. The first statement giving any details was in a speech of the Minister of National Defense on May 16. The contract had been sign«! on March 31. The substance of what the Minister explained then and later was that, as far back as the summer of 1936. the Department of National Defense came to the conclusion that it would be necessary to have 7,(XX) of the new Bren machine guns for the Canadian land forces, and that, in view of the difficulty of obtaining delivery from England, it was deemed advisable to consider the possibility of having them manufactured here. As a result of these enquiries and investigations, arrangements were made whereby the John Inglis Company Limited, of Toronto, ultimately received a contract for the manufacture of 7,(XX) machine guns for the Canadian Government and 5,000 of the same type for Great Britain.
Contracts in exactly similar terms, except as to the number of guns and profxirtion of cost, were entered into between the company and the Governments of Canada and Great Britain. The two contracts provided for payment on a cost plus ten per cent basis. The Canadian Government pays two thirds and the British Government one third of the cost of the installation of all machinery and putting the plant in operation. The ownership of the machinery is to remain with the Government. It is claimed that there is a substantial saving in the total cost of the guns because of the two contracts being signed at the same time.
These are all the essential details given to the House of Commons about “one of the finest contracts that was ever signed in the public interest of Canada.”
But there is a great deal more than that.
The contract itself, and what lies behind the formation of Canada's new armament industry, are matters of public concern, because this company accepts the responsibility of becoming the only source of the essential arms for Canada’s land forces. For good or evil the stage is now set for the private manufacture in Canada of primary implements of war.
Major Hahn in the Spotlight
'T'IIE figure in the spotlight is Major James Hahn, of Toronto, who went to France with the First Canadian Division. Shortly after the War he had the foresight to organize a company for the manufacture of radios. This company was absorbed by another radio company in January, 1934, and since then Major Hahn has not been engaged directly in industrial activity until his recent contract for the manufacture of machine guns.
Contrary to general belief, the company which has the contract is not the old John Inglis Company Limited, which was well known throughout Canada as a boiler company for a great many years. The company which has the contract was organized by Major Hahn and Plaxton and Company, a Toronto legal firm, acting as his solicitors. It obtained a charter on November 23, 1936, for “British Canadian Engineering Limited.” On June 4, 1937, consent was given under a court order to the use of the name of the defunct John Inglis Company Limited by British Canadian Engineering Limited. Its only connection with the old company is that it has acquired the projxrty of the bankrupt boiler company, which it has proceeded to equip for the manufacture of the Bren guns since the signing of the contract.
It is hard to understand why the Minister of National Defense appeared so uncertain in the House of Commons about some phases of the negotiations for the purchase of these guns, and why he placed so much emphasis on the fact that there had been no collaboration between his Department and the War Office in England in arranging the details of the two documents.
The Canadian contract was signed on March 31, 1938, Ixtween “His Majesty the King, represented by the Hon. the Minister of National Defense for Canada,” and “John Inglis Company Limited,” of Toronto. As Mr. Mackenzie in his official capacity, was, therefore, a party to the contract, there must be some explanation for the fact that the contract itself and subsequent events clearly demonstrate the inaccuracy of several of his statements in the House of Commons. His anxiety to disclaim all knowledge of Major Hahn’s activities prior to the signing of the contract must also arouse more than passing curiosity, in view of the facts now available.
On July 1 of this year Mr. Mackenzie told the House of Commons that “Major Hahn went to England in 1936 and evidently made a favorable impression upon the British people. He also had access over there to the specifications of the Bren gun.” Mr. Mackenzie had explained on May 16. when he announced the contract, that, “as far back as 1936 the Department of National Defense came to the conclusion that it would lx necessary to arm the forces with the Bren gun. and that 7.0CX) would be required.” He also explained that, “it early became clear that Canada could not kxik to the manufacturing establishments of the Government of the United Kingdom as a certainor timely source of supply reasonably safe from possible enemy action.” Thus Canada's decision that it would require 7,000 Bren guns to lx manufactured in Canada coincided with the
beginning of Major Hahn’s investigation of the Bren gun in England.
On June 22, Mr. Mackenzie replied “No” to the following question by Mr. Woodsworth:
“Was Major James Hahn appointed by the Canadian Government to go to England in 1937 and 1938 to make a survey of munitions production for the purpose of advising the Canadian Government?”
Perhaps the answer is technically correct, but it would seem that if there was no such arrangement, the Minister of National Defense has been somewhat generous with public funds, as he has undertaken that, under the Canadian and British contracts, a sum “not exceeding $20,000” shall be paid for the cost of “preliminary investigation, planning and engineering services carried out” by the company, “prior to the execution” of the contract, of which the Canadian Government pays two thirds. As Major Hahn’s expenses would obviously be expxnses of the company which he organized and of which he is president, the Government has now undertaken to pay Major Hahn, indirectly if not directly, for making “a survey of munitions production.”
Even if Mr. Woodsworth’s question was not framed with full regard to the difference between arrangements with an individual and with a company of his own creation, the purport was clear, and others besides Mr. Woodsworth will be anxious to learn what the arrangements were between
the Minister of National Defense Major Hahn, or his company, which have now beeryi^i mented by an undertaking to pay up to $20,00 services already rendered. J
Mr. Mackem* ^ Statement -iiur
MR. MACKENZosentli the House on June 22 that “there was no (’imperative contract; that the contract with the British \ Ar Office was signed by the Toronto firm entirely separately from the contract with the Canadian Government but, as the result of two complementary contracts being signed, there will be a saving to this Government of over one and a quarter million dollars.”
This statement is a little difficult to understand in the light of Mr. Mackenzie’s words to the House on July 1. Asked why arrangements had been made for private production of arms, Mr. Mackenzie explained:
“The contract was discussed by an interdepartmental
committee which was formed about two years ago. I think that a subcommittee, studying the terms of the contract for three months, found they had various possible alternatives. One would be that, once a unit basis was established with reference to the contract, they might possibly call for tenders. The suggestion was made to those who had already organized the main details in England of a complementary contract, and we were told that if any further delay occurred the arrangements could not be proceeded with.” This would suggest that there was very definite co-operation, and that Mr. Mackenzie was told by “those who had already organized the main details in England” that he must co-operate without delay by signing a complementary contract. That being the case, Major Hahn must have had some undisclosed status. The British authorities would hardly have been negotiating such an important contract with a man who had no previous experience in manufacturing arms and had no plant in which to make them, unless
vouched for in some way by the Canadian authorities. In England, at any rate, it appears that they looked upon the transactions as closely related, because on July 12 War Minister Leslie Hore-Belisha told the British House of Commons that “the order for Bren guns to be made in Canada is placed in association with the Canadian Government.”
How can it possibly be said that “the contract with the British War Office was signed by the Toronto firm entirely separately” when the production schedule, showing dates of delivery, gives totals of guns to be produced at stated periods, of which seven twelfths are for the Canadian Government and five twelfths for the British Government? They could not be more closely tied together.
Mr. Mackenzie made another remarkable statement. For some reason he was particularly anxious to convey the impression, in the meagre information which he furnished, that Major Hahn had dealt separately with the British authorities, and that the contract for the sale of 5,000 guns to the War Office was completed without reference to his Department. On July 1 he spoke of Major Hahn’s arrangements with England and said that he “had access over there to the specifications of the Bren gun. I want to leave the idea with the committee that these are secret specifications and we had no control over them. It is quite possible they would not be available to any competitor of the firm which got the contract.” It is extremely difficult to understand why Mr. Mackenzie wanted to leave that impression, because the statement is extremely important and according to the contract it is not correct.
The contract provides that the Minister of National Defense will fumi«h the John Inglis Company with a license to manufacture the Bren gun for ten years, and also with “specifications of Bren gun, and spare component parts thereof . . . The said sjjecifications may be varied or modified from time to time by the Party of the First Part (the Minister of National Defense).” If the Minister had no control over the specifications, how can he undertake to grant a license and furnish specifications to the Inglis Company?
The contract, in fact, makes it perfectly clear that the Minister had control and still retains control.
Mr. Mackenzie also made the statement that the profits are limited by the contract to ten |x*r cent of the cost of the guns. This statement is also incorrect.
It is true that there is a provision in the Canadian and English contracts which appears to limit the profit to ten per cent, with an over-all limitation of $457,000 for the 12,0fX) guns covered by the two contracts, but there is another provision which overcomes that limitation. Section 6A provides that when the company is in prcxluction a “Standard Cost” for each gun shall be agreed upon, based on the costs up to that time. If after that time costs arc reduced below that standard cost, the company shall receive one quarter of the difference, in addition to its other profits. As the costs during the experimental stages are bound to be higher than when normal production has been reached, it is clear that this is likely to add a very substantial figure to the profits.
There is no apparent reason for the inclusion of this section in the contract. As the Government has the right of constant supervision and inspection of records under the contract, no sjx.*cial inducement is needed to prevent waste or inefficiency. This section might have some meaning if the company were to be penalized for costs above the “Standard Cost” to the same extent that it would gain for any costs below that figure. Such an arrangement is not unusual. It is most unusual to have a provision such as this, which only works one way. Its only likely effect is to increase profits for the company.
Executive Salaries Included in Costs
AGREEMENTS providing for production on a “cost plus” basis are not at all unusual. But many of the items on which the ten per cent profit is allowed in this contract are extremely unusual. Profit is in no way limited to actual factory costs. For instance, the GovemContinucd on page 32
Canada's Armament Mystery
Continued jrom page 9—Starts on page 8
ment pays the salaries of all executive officers of the John Inglis Company Limited, although their activities are not confined to the manufacture of machine guns. It also pays travelling expenses, and under the contract Canada would pay two thirds of the cost of travelling which might be necessary to England or Czechoslovakia where the gun originates. Not only that, hut both salaries and travelling expenses are paid by the Government from the date of the contract whether any machine gun is ever delivered or not. It is doubtful if such a contract evet was signed in Canada before. But even that is not enough. The company receives from the Government as part of its "cost plus” profit, ten per cent of the amount of these salaries and travelling expenses from the date of the signing of the contract.
Other unusual items to be paid by the Government, and on which ten per cent profit is also to be paid, are legal fees; telephone, telegraph, and other office expenses; cost of light, heat and power; of all plant alterations (including even the cost of removal of any or all machinery which may ever be removed), and the cost of all tools, dies, jigs and gauges, whether bought from the company or manufactured by the company itself, if they are to he used in the production of Bren guns. Nothing is forgotten. The Government even pays for all cartridges and explosives used in testing the guns before delivery. The Government, or rather the Canadian public, pays everything, and then pays a profit as well to the company of ten per cent of the amount of these already remarkably generous payments.
The least that can be said is that the contract is extremely favorable to Major Hahn and his company. Even if the contract is cancelled before the company gets into production, the company will receive $43,750. The reason for this generosity is not given. As the Government pays all costs of installation of machinery, of the machinery itself, and even of its removal, as well as profits and salaries in the meantime, the public might be inclined to think that it had already done enough for Major Hahn and his company. But the contract says that there must be a substantial profit in any event.
Another slight inaccuracy of the Minister of National Defense, of, perhaps, minor importance, was one of his reasons for favoring private production. “In Australia they have a Bren plant which is publicly owned. That plant has been constructed for two and a half years, but they have not yet got into production A guaran-
tee lias been given that the Canadian company will be in production within twentyfour months.”
The contract with the Hahn company actually provides that, from the twentyfourth to the thirty-sixth month after the signing of the contract, there shall he delivered 583 guns. Actually, this number may be delivered at any time within three years. Perhaps we may not do better than the publicly owned plant in Australia.
There are several other interesting features of this contract. For instance, the Inglis Company Limited is to be equipped notonly forthe production of Bren machine guns, but also for the production of Enfield rifles and other small arms. In each case
every cent of cost of machinery and installation is to be paid by the public. That being the case, the public has the right to know what the plans of the Department are for the purchase of rifles and other small arms to replace the obsolete weapons with which our forces are now equipped. As the cost of 200,000 rifles, which would be our approximate requirements, would be at least five million dollars, further interesting prospects of profit are opened to our new armament producers.
Another provision which requires some explanation is the undertaking by the Government to grant a license for the manufacture of the Bren gun for a period of ten years, although the contract calls for the delivery of all the guns now ordered within five years and four months. There must have been some reason for granting tiie license for the longer period and making it renewable at that time. Is this contract only for part of orders the Government intends to place? If so, what further orders are contemplated? As the Canadian public will be paying for any further guns it has the right to know.
The public also has the right to know what salaries Major Hahn and his associates are receiving. By the contract it is expressly provided that the Minister of National Defense must approve of the salaries to be paid under the contract. The Minister is merely the representative of the taxpayers whose money he is sending. They have a right to know how it is being spent.
Distribution of Stock
SO MUCH for the contract itself. Let us now look at what lies behind the contract. Profits from armaments are not confined to the earnings of a company. Even if $157,000 in five years is as small a profit as Mr. Mackenzie thinks it is. that is only the beginning. There are the salaries which have already been mentioned. That can be a rich source of profit. But the greatest opportunity for large profits lies in the stock of the company. In the past the public has not only expressed its repugnance to profits on the sale of arms but it has been particularly resentful of profiteering in the stock of armament companies. Let us see then what the possibilities are in that respect.In order to do so it is necessary to trace the steps by which the Hahn
company acquired its property and what has happened to the stock.
As has already been explained, Plaxton and Company, as Major Hahn’s solicitors, obtained the charter for this armament company in 1936, shortly after Major Hahn and the Department of National Defense had started their investigation in England of the possibility of manufacturing the Bren gun in Canada. Its capital consists of 250,000 shares of the par value of $6 each.
The property of the bankrupt boiler company in which the guns are to be manufactured was not bought by the present John Inglis Company Limited direct from the receiver of the estate of the defunct John Inglis Company. Some arrangement was made whereby Stanley Nurse, the office manager of the Toronto stock brokerage firm of Cameron, Pointon and Merritt, acquired the property from the receiver, and lie acted as the vendor to the new John Inglis Company Limited. The consideration shown as payable to him was $100,058 in cash, the assumption by the company of an existing first mortgage for $150,000, and 191,662 shares of stock out of the total capitalization of 250,000 shares. This would appear to have given Mr. Nurse a commanding control of John Inglis Company Limited. But appearances are as deceiving with armament companies as with many others. The shares were not issued to Mr. Nurse. On April 26, 1938. he instructed John Inglis Company Limited to issue the entire block of 191,662 shares to a company known as Investment Reserves Limited. The remaining shares, other than the five shares issued to the original directors, were allotted to another company, Anglo Engineering Company Limited. Of the 58,333 shares allotted to the latter company, however, 25,000 were issued under their instructions to the firm of Cameron, Pointon and Merritt.
Major Hahn is shown by the company’s prospectus as holding 107,964 shares which appear to be part of the block issued to Investment Reserves, Ltd., so that the stock position on April 26, 1938, would be;
Major James E. Hahn ........ 107.964
Investment Reserves Limited . 83,698
Anglo Engineering Company
Limited .................... 33.333
Cameron, Pointon and Merritt 25,000
Original incorporators ....... 5
Of these shares cash has been paid or is payable for those in the hands of Anglo Engineering Company Limited; Cameron, Pointon and Merritt, and the holders of the five shares issued to the original incorporators.
The Three Companies and Their Directors
THE next point to consider is the personnel of these companies. A company which has been entrusted with the job of rearming the Canadian land forces must be in particularly strong hands. A prospectus issued by the company and dated June 7, 1938. gives the following as the directors of the John Inglis Company Limited, with the amount of stock they hold opposite each name.
James E. Hahn, 14 Strachan
Ave., manufacturer ........ 107.964
F. M. Campbell, 1207 Canada Permanent Building,
Toronto, secretary ......... 1
L. McCartney, 1207 Canada Permanent Building,
Toronto, secretary ......... 1
K. Robinson, 1207 Canada Permanent Build'
Toronto, clork .... 1
J. S. Writ,
Toronto, barrister.......... 1
A. L. Ainsworth, 14 Strachan
Ave., manufacturer ........ 1
W. R. McLachlan, 14 Strachan
Oí uie°e, Major Hahn, A. L. Ainsworth, and W. R. McLachlan were previously engaged in manufacturing radios. The address of the John Inglis Company Limited is given as their address. The address of the remainder is 1207 Canada Permanent Building, Toronto, which is the office of Plaxton and Company. Lillian Maria McCartney, Florence Marjory Campbell and Kathleen Robinson are employees of Plaxton and Company, while John Steele Wright is a young barrister in their office who was called to the bar last November. These are the directors of Canada’s great new armament firm.
Next let us find out something about Investment Reserves Limited, which holds such a large block of the stock of the armament company. Its directors, according to the return filed with the Provincial Secretary on June 27, 1938, two months after it acquired the stock of the John Inglis Company Limited, are Winnifred May Woodburn, Lillian McCartney and Kathleen Robinson, all employees of Plaxton and Company who are also shown as the company solicitors.
The letter from Plaxton and Company which accompanied the application for the charter is not without some interest.
December 16, 1937. Provincial Secretary,
On behalf of our clients, we enclose herewith application for incorporation of a limited company under the name Investment Reserves Limited, with an authorized capital divided into 100,000 shares of the par value of $1 each.
The objects and powers are similar to the powers granted to General Resources Limited, incorporated on application from this office on the 20th April, 1937, and the warrant powers are similar to those granted to Anglo Engineering Company Limited, incorporated on the 16th November, 1936.
We enclose herewith our cheque for $160, being the fee for incorporation.
We would appreciate it if you would fix the date of the issue of this charter as at this date, as there is some special urgency.
In view of the fact that three employees of Plaxton and Company are the directors of a company which holds 83,698 shares of the John Inglis Company Limited with a present valuation of $585,886, on the basis of the price at which the stock is now being sold to the public, it would be interesting to know what the “special urgency” was. Was it known that the contract with Hahn’s company was soon to be signed? This is also something the public has the right to know. This stock has value only because the Minister of National Defense has undertaken to buy Bren guns with public money, so the public has a perfect right to know what special urgency there was about getting a charter for a company which now holds stock apparently worth more than half a million dollars.
Anglo Engineering also holds a large block of stock of the John Inglis Company Limited. According to a departmental declaration filed on June 27, 1938, the head office of this company is the office of Cameron, Pointon and Merritt. The soli-
citors for this company are Plaxton and Company. Its directors are:
Winnifred May Woodburn.
Lillian Maria McCartney Kathleen Robinson.
John Steele Wright.
Florence Marjory Campbell.
All of these are employed in the Plaxton office.
Cameron, Pointon and Merritt are at present selling this stock to the public at $7 a share. As there is a provision in the contract that the license of the John Inglis Company Limited will be cancelled if any such sale takes place without the consent of the Minister of National Defense, he must be fully informed of all the facts regarding these companies.
Position of Member of Parliament
SECTION Fifteen of the contract reads as follows: “No member of the Senate or the House of Commons of Canada, or of the Parliamentof theUnited Kingdom shall be admitted to any share or part of this contract or to any benefit to arise therefrom,”
In view of this clear prohibition the public has a right to know what the position of Mr. Hugh Plaxton, M.P., is in the suite of offices occupied by Plaxton and Company at 1207 Canada Permanent Building, Toronto. The Canadian Law List for 1937 showed Mr. Hugh Plaxton as a partner in the firm of Plaxton and Company. The Canadian Law List for 1938 does not include his name as a member of the firm but gives his name separately. His office, however, is still at 1207 Canada Permanent Building. He still occupies an office in the suite of offices of Plaxton and Company in which all the partners are his brothers.
According to a sworn return to the Ontario Provincial Secretary, this is also still the address of Winnifred M. Woodburn, described as “chief officer or manager in this province (Ontario)” of both Investment Reserves Limited and Anglo Engineering Company, which, according to departmental records, hold between them nearly half of the stock of John Inglis Company Limited. Having regard to the public nature of this contract, the public has a right to know exactly what Mr. Hugh Plaxton’s present position is in relation to Plaxton and Company, and what his connection with this firm has been at all times since 1936, when the negotiations began which have resulted in this extremely profitable contract. The Canadian Law List shows him as a partner in this firm at the time the preliminary negotiations took place in 1936 and 1937, and at the time John Inglis Company Limited was incorporated.
Another rather interesting fact is that E. T. Pointon, of the firm of Cameron, Pointon and Merritt, has recently been appointed treasurer of the John Inglis Company Limited. This, it will be remembered, is the same firm in which the involved series of transactions began when Mr. Nurse, their office manager, appeared as the vendor of the property to the John Inglis Company Limited.
While there can be no possible objection in the ordinary course of events to a broker being appointed as treasurer of a company, there does seem to be good reason for questioning the wisdom of a partner in the brokerage firm, which is now selling this stock to the public, being appointed to this extremely confidential position. No matter what the form of the company may be, it is a public enterprise of the utmost importance, being fitted out for the manufacture of arms entirely at the public expense. Under those circumstances there must be no possibility of market operations in this stock. It is no reflection on Mr. Pointon to recall that his primary business is the buying and selling of stock for profit. That business and the urgent need for arms, forced on Canada by disturbed conditions throughout the world, do not go hand in hand.
MR. MACKENZIE has emphasized the limitation of profit and apparently believes that a profit of $457.000 for the five-year jieriod in which the 12,000 guns are to be delivered, is extremely moderate.
But as has been pointed out, there are other profits.
What of the personal profit to Major Hahn?
If the price at which the stock is being sold is its true present value, then Major Hahn holds stock worth $775,748. If through any market stimulation this stock should sell up to twenty-five dollars a share, which would not be a very difficult market operation, his holdings would have a value of more than two and a half million dollars. But in any event, without attempting to estimate its possible value, Major Hahn holds stock worth a very considerable fortune. That is a profit which comes only from a national necessity and the opinion of the Minister of National Defense that Major Hahn is the man to meet that necessity.
And we must not forget that it is also going to be an extremely profitable contract to Investment Reserves Limited which holds 83,698 shares. Another fortune can go to the company whose directors are in the Plaxton office.
It is very difficult to understand, either from the contract or the departmental records, how Major Hahn and Investment Reserves Limited were entitled to nearly four fifths of the stock of this company, which stood in their names on April 26. When a company is organized, the practice frequently followed is for the promoters to acquire some right to the property and patents to be used, and then to sell these for a substantial block of stock to the company they organize. But in this case neither Major Hahn nor Investment Reserves Limited were selling assets to the new company. On the contrary, the company bought its assets from Mr. Nurse, There is no evidence in the departmental records that Major Hahn had anything to sell for which shares worth a considerable fortune have been issued. He did not sell property. The company bought the property from Mr. Nurse. The total cash payment in the transaction was $100,058. This was raised by the sale of some of the company’s stock. Hahn did not sell the license nor specifications for the Bren gun. The company got those under its contract with the Government. The company did not require to reimburse him by stock for services already rendered, because it receives under the contract a sum “not exceeding $20,000" for that very purpose. For what consideration then do Major Hahn and Investment Reserves Limited hold stock which at $7 a share has a value of $1.341.634. With any sort of market activity, resulting from further Government business which is implied by the contract itself, this stock might easily have a value of many millions of dollars.
The people whose money will furnish that profit—the taxpayers of Canada— have a right to know.
In a contract which disposes of public money with such liberality, a few thousand one way or another may not seem important but it is jierhaps of some interest that the Government even pays for depreciation in that part of the plant which is to be used for producing guns. The value of the assets of John Inglis Company Limited, for the purpose of arriving at depreciation, is fixed by agreement at $280,000. As the total cash consideration for these assets amounted to $100,058 and the assumption of an existing mortgage of $150,000, making a total of $250,058, it would he interesting to know why there was an immediate advance of $30,000 in fixing the amount upon which the Government’s liability for depreciation is to be determined. The figure may also be interesting in view of the very liberal valuation placed on the company’s assets in statements used
in selling the company’s stock to the public.
In the face of all these facts and unanswered questions, it is difficult to understand how Mr. Mackenzie can describe this as “one of the finest contracts ever signed in the public interest of Canada.” On the contrary there appears to be good reason to believe that Canada was not wrong in declaring some years ago that “the manufacture by private enterprise of munitions and implements of war is open to grave objections.”
But in any event the atmosphere of mystery which surrounds this contract must be dispelled. This is no ordinary private company and the contract provides for no ordinary type of business. The public, through the Minister of National Defense, pays every cent for the cost of installing the machinery which will not only make machine guns, but may be used also for making Enfield rifles and other small arms. The public will also pay for the products of this machinery. That being the case, the public has a right to know every minute detail of the contract itself and of every transaction connected with it.
While the contract was arranged by the Department of National Defense, Mr. Mackenzie King, as head of the Government, must accept full responsibility for the course which has been followed. His Cabinet must have approved of the contract before it was signed. These are questions to which he should therefore give an immediate answer:
1. Why did the Canadian Government depart from its stated policy that the manufacture of primary implements of war should be confined to state-owned establishments?
2. Having decided that it should foster the private manufacture of military weapons, why did it choose Major James Emmanuel Hahn, whose industrial experience was confined to the manufacture of radios, instead of choosing men with years of experience in the manufacture of rifles who are available?
3. What were the arrangements with Major Hahn or his company which called for a payment of up to $20,000 for services rendered before the signing of the Bren gun contract?
4. For what consideration did Major Hahn receive 107,964 shares of stock in a company which is now dependent upon public money for its present existence and ultimate profits?
5. Who owns the shares issued to Investment Reserves Limited?
6. Who are the shareholders and real directors of Investment Reserves Limited?
7. Who owns the shares issued to Anglo Engineering Limited?
8. Who are the shareholders and real directors of Anglo Engineering Limited?
9. What did Anglo Engineering Limited pay for the stock it received from John Inglis Company Limited?
10. Why was it deemed advisable to have a stockbroker as treasurer of the John Inglis Company Limited?
11. What was the real position of Mr. Nurse, of the firm of Cameron, Pointon and Merritt, in these transactions?
12. How does the Government explain the fact that four of the seven directors of this enterprise are employees in the office of Plaxton and Company?
13. What is the position of Mr. Hugh Plaxton, M.P., in the office of Plaxton and Company, and what has it been at all times since Plaxton and Company began acting for the armament company which now has the contract?
14. What steps, if any, are being taken to prevent speculation in the stock of John Inglis Company Limited based on the expectation of profitable Government contracts?
15. Why did the Government move all its own machinery available for the making of rifles and machine guns from Valcartier to Toronto, instead of using it in a Government Arsenal as originally planned?
16. Why did the Government assist in establishing Canada’s only source of machine guns, rifles, and small arms in the heart of a large city, when the development of bombing aircraft has made this extremely dangerous both to the company and the citizens of that city?
17. Who represented the Canadian Government in the negotiations with the British Government?
18. Who had “already organized the main details in England” to a point that forced Mr. Mackenzie’s hand, according to his own statement in the House of Commons?
19. What are the salaries of Major Hahn and the other executive officers,
and for how long are they to be paid by the Government?
20. What further contracts are in contemplation which explain the tenyear license, although the guns bought under the present contract are to be delivered in five years and four months?
These are the questions which only Mr. King can satisfactorily answer. This private enterprise is a virtual monopoly engaged in the public service and supjx>rted by public funds. There must be no secrets and no mystery. Canadians who have sacrificed so much for Canada in the past, and others who may be called upon for sacrifice in the future want to know and have a right to know, without delay, what the real facts are behind this extraordinary agreement.
The urgent need of the nation must not provide the opportunity for large profits to friends of any government.
Canada is waiting for an answer.