Karl Kenneth HOMUTH

HOMUTH, Karl Kenneth

Personal Data

Party
Progressive Conservative
Constituency
Waterloo South (Ontario)
Birth Date
December 12, 1893
Deceased Date
March 19, 1951
Website
http://en.wikipedia.org/wiki/Karl_Kenneth_Homuth
PARLINFO
http://www.parl.gc.ca/parlinfo/Files/Parliamentarian.aspx?Item=21ef4ab0-5bdb-4468-9c93-b860e974eed4&Language=E&Section=ALL
Profession
manufacturer

Parliamentary Career

November 14, 1938 - January 25, 1940
CON
  Waterloo South (Ontario)
March 26, 1940 - April 16, 1945
NAT
  Waterloo South (Ontario)
June 11, 1945 - April 30, 1949
PC
  Waterloo South (Ontario)
June 27, 1949 - June 13, 1953
PC
  Waterloo South (Ontario)

Most Recent Speeches (Page 464 of 466)


February 7, 1939

Mr. HOMUTH:

So there is the story that went out across this country.

When we start to delve into the report, we begin to see just what a terrible mistake the Department of National Defence made. There are in Canada a great many industries capable of making Bren guns. They do work in steel that is much more intricate than the manufacture of a Bren gun. After all, what is there to the Bren gun? The important part is the alloy and the fact that the barrel is interchangeable. Steel companies throughout this dominion do more intricate work, and I venture to say that if they had been given an opportunity to tender on these guns the government would have obtained them for at least half the amount they are going to cost this country under this contract. More than that, these people would not have asked to be paid a large sum of money for getting government patronage, which is really what happened with Major Hahn and his associates.

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February 7, 1939

Mr. HOMUTH:

I have in my hand a copy of the synopsis of the report which was handed to the press gallery, and it was clearly understood that it came from the National Liberal Federation. If it did not come from there,, did it come from the government? If it did not come from the government or the National Liberal Federation headquarters, where did it come from? Who took the trouble to prepare it and hand it to the press, fifteen minutes after they received the report? That is the story which was broadcast throughout Canada to the effect that the Bren gun report was a whitewash, and so on; and the people of the country believed there was nothing to it at all.

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February 7, 1939

Mr. HOMUTH:

to pay 8100,000, spread over instalments up to February 6, 1938, and $150,000 in six per cent bonds. It might be interjected at this point that later, on the witness stand, Major Hahn testified that an old appraisal made in October, 1929, of the old Inglis plant as a going concern, fixed the then value at $1,327,000, exclusive of land.

A first payment of $500 was made on September 22, 1936. The next payment of $2,500 was made on November 9 of the same year. A third payment of $1,000 was made on May 10, 1937. Thereafter payments ranging up to $3,500 were made at intervals, but up to the time the Bren machine gun contract was signed only $46,500 had been paid. In the meantime the new John Inglis Company had been organized. On March 31, 1938, the day the government signed the Bren gun contract, the company itself made the final payment of 353,500.

These people then made the final payment on this factory which had been represented to the British war office and to a committee here made up of civil servants as an industry equipped to make Bren guns. Of the first $46,500 of cash payments the books of Cameron, Pointon and Merritt-this is all from the evidence-credited Major James E. Hahn with $26,416.86; Gordon Plaxton with $3,616.67; Herbert Plaxton with $3,616.67, and the firm itself with $10,850. An investigation carried on by Mr. Hoult showed that these moneys were likewise applied on the books of the new Inglis company as payment on account of the undertaking of Hahn and his group to purchase 58,333 shares at $6 par value. The final payment of $53,500 on the cash purchase price of the old company's assets was made directly from the treasury of the new John Inglis Company.

Here is another point which is perfectly clear. The total capital of the new Inglis company was 250,000 shares at S6 par value, or $1,500,000. Of this $1,500,000 of capital stock Major Hahn and his group took for themselves 191,662 shares of $6 par value, or a total of $1,149,972. This was stock for which they paid nothing. This stock has been termed vendors' stock. Excluding five qualifying shares which were given to the nominal original directors who came from the office staff, the group left in the treasury 58,333 shares of $6 par value which they agreed to buy at par, paying in instalments. To put it more plainly, this group held seventy per cent of the total capital stock of the company-

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February 7, 1939

Mr. HOMUTH:

For nothing, and they had agreed to buy the other thirty per cent and to pay the money into the treasury in order to operate the company. This money was to go into the treasury to operate the company; yet the government was buying all the machinery for the plant. These people had all these shares for nothing, and then they were going to buy the others in order to-put money into the company with which to operate. Who would not take a contract like that from a government? I wish I could get two or three to-morrow.

May we go on? Up to September 15, 1938, it was shown that the group had paid in $231,198 on the 58,333 shares of $6 treasury stock which had a total value of $349,998, which they were obligated to buy. On that date they owned outright a $1,500,000 corporation, its assets and stock for that amount of money, subject to the payment of a balance of $118,000 on the treasury stock. The initial cash payment of $100,000 had been charged against these treasury funds. In the meantime 3,855 shares of treasury stock had been sold to the public and a few brokers for $27,041. The public paid $7.50 a share for its stock. It is easy to fill in the details when you get the framework.

Though the Hahn-Inglis corporation set-up was engineered with four corporations, one functioned only to take the group s subscription for $349,998 of treasury stock. Another functioned as a temporary holding company for the huge block of $1,149,972 of vendor's shares taken by the group. The third corporation was the machine which 'created the stock expansion, and the fourth was converted into the John Inglis Company. There is the picture. If ever there was a piece of manipulation for the purpose of watering stock of a company, this gives the picture. This is something to which western members can point with pride. They can point to this as showing how their government gives a large contract. I have given the exact picture of this whole affair.

The stock expansion corporation was the British Canadian Engineering Company which was incorporated on November 23, 1936, with an authorized capital of 200,000 shares at $1 each. Mr. Nurse, an employee of Cameron, Pointon and Merritt, who had bought in the old Inglis property, made an agreement, of date October 22, 1936, with Major J. E. Hahn and his employers to turn over to this British Canadian Engineering Company, when incorporated, the properties of the old Inglis company. One interesting paragraph in this

Bren Gun-Mr. Bertrand (Laurier)

early agreement of October 22, 1936, made nearly eighteen months before the Bren gun contract was signed, reads:

John E>. Cameron, H. A. W. (Herbert) Plaxton and the persons they represent, together with Major Hahn "are interested to manufacture war machinery, equipment, munitions and supplies or products of all kinds, and to act as agents, intermediaries or otherwise in obtaining, introducing or placing business or orders for war machinery, equipment, munitions and supplies or products of all kinds as may be furnished, dealt in, manufactured or supplied by other persons, firms or corporations whether in the United Kingdom, dominion of Canada, United States of America or elsewhere, and the parties hereto have agreed to incorporate, organize and promote a limited company for the above purpose."

In other words, these people were organized to make munitions, and in this contract there is nothing which says that they cannot use the Canadian government's machinery to make munitions for some foreign power. When one follows this thing through one begins to realize that here was a group of men without a plant and without any particular engineering ability. One had been mixed up with a radio company and the others were lawyers and brokers. These men come to this government, and the government points to ,them and says to the British war office, "Here are the only men who are capable of making Bren guns in Canada." If ever there was an insult to the heads of industry in this country, that was it. All one has to do is read the contract. Read what the deputy minister of defence said in his evidence. Read what the Minister of National Defence (Mr. Mackenzie) said in his evidence. Read what some hon. members opposite have said in the house. One cannot help but feel that these men considered the heads of industry and the workmen in industry in this dominion absolutely incompetent to do a job like that.

As the hon. member for Kootenay East (Mr. Stevens) said this afternoon, manufacturers come to Ottawa to see all departments of government. They pay their own expenses to come here to bid on contracts in order to get government business. All this government had to do was to say to the steel manufacturers of this country: We want these guns made and we want other arms and munitions made. These men would have come here. The heads of industries in Canada are loyal enough to give of their time, of their experts and of their office staffs and to spend their money to help the Department of National Defence to build up an effective defence force. Yet the Minister of National Defence and the deputy minister of national defence say to our Canadian manufacturers: You are not

competent; we cannot trust you with this job; it is too intricate a job for you, and we are going to give it to a man who had a radio company that failed, to a couple of brokers and a couple of lawyers, and the patronage is going to a member from the city of Toronto. That is the story in a nutshell.

Surely, Mr. Speaker, the members of this house cannot help but feel that the contract is not only improvident but unfair to the Department of National Defence, because it is going to be years before we get guns. They are now buying the machinery in spite of the Davis report. The government would not wait. Mr. Justice Davis in his report did not exonerate the government from responsibility for the contract. Corruption, no; he said there was no corruption. That is quite true, but he did not exonerate the government in any other way. What he did say to them was this: Here is your baby; this is your child. In a very subtle way he said: It is a little dirty and messy; it ought to be cleaned up, and it is up to parliament and the government to do the job.

There is only one way to do the job, Mr. Speaker, and that is to cancel the contract. I think the Prime Minister himself should unhesitatingly say: I will agree to cancel the contract and to create a munitions board. Not a purchasing board, Mr. Speaker, because patronage would be just as vicious under a purchasing board. But let the Prime Minister and his government say: We will create a munitions board and give them the right to handle the whole business, so that we can clean this thing up and once more give the people of Canada some confidence in the Department of National Defence.

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February 7, 1939

Mr. HOMUTH:

I still maintain that a copy-

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