Disgraced monk and former head of charity Ren Ci, Ming Yi, has just been sentenced to 10 months' jail and his assistant Raymond Yeung was sentenced to 9 months. They were both found guilty of several charges related to a unauthorised loan of $50,000 made to Yeung. Many of the charges related to the covering up of the loan such as making false statements to the Commissioner of Charities and creating a false payment voucher. This case is another example of where if the defendants had admitted their wrong when first discovered instead of covering it up, they may well have escaped jail sentences. However, as is often the case, the cover up offences were more numerous than the original offence.
The judge was not impressed with Ming Yi's alleged sacrifices for the charity although a strong mitigation plea was made by his Senior Counsel Andre Yeap. An aggravating factor was that there were numerous acts of trying to cover up the unauthorised loan. Also taken into account was that public trust in the charity system was affected by such acts.
A contrast can be drawn with the case of TT Durai, former Chief Executive Office of the National Kidney Foundation. He was sentenced to a jail term of 3 months under the Prevention of Corruption Act in relation to an incorrect voucher which mischaracterized commission paid to a fund raiser. However, in Durai's case, there was no loss caused to the charity. In Ming Yi's case, the loan was repaid only after investigations had begun.
Tuesday, November 24, 2009
Sunday, November 1, 2009
Tax exemption abuse - director sent to jail
In tax Year of Assessment 2005, the government introduced a tax relief scheme to encourage entrepreneurship. Newly incorporated companies would have tax exemption on the first $100,000 of their income for 3 years.
After learning about this scheme, Gan Oh Boon, director of Steel Formation and Rolling Specialists Ltd (SFRS), proceeded to incorporate 6 companies which then entered into service agreements with SFRS. SFRS supposedly paid these 6 companies for non-existent services. However, the 6 companies had no staff. There was therefore fictitious transactions such as payments for commission fees, technical consultancy fees, marketing consultancy fees, engineering consultancy fees and management fees. In doing so, Gan saved $1.62 million when filing his personal tax returns.
As a result of the tax evasion, Gan was jailed for 2 weeks, fined $8,000 and ordered to pay a penalty of nearly $1 million. His company was fined $24,000 and ordered to pay a penalty of also nearly $1 million. Gan was also punished for omitting to state in his tax returns the benefits he received from SFRS such as car instalments and other personal expenses which were paid for by SFRS.
It is arguable that actually no loss was caused to the government - Gan could have used the 6 companies for entering into transactions with customers and therefore obtained the tax exemption. Instead, it appears that SFRS received customer revenue and from this, deducted the amounts allegedly paid to the 6 companies as its expenses.
His tax advisor and auditor, Chng Chor Tong, was also the subject of tax evasion charges. He was sentenced to 6 months years jail for tax evasion in relation to his own sole proprietorship. He was therefore the first practising certified public accountant to be sentenced to jail for tax evasion.
After learning about this scheme, Gan Oh Boon, director of Steel Formation and Rolling Specialists Ltd (SFRS), proceeded to incorporate 6 companies which then entered into service agreements with SFRS. SFRS supposedly paid these 6 companies for non-existent services. However, the 6 companies had no staff. There was therefore fictitious transactions such as payments for commission fees, technical consultancy fees, marketing consultancy fees, engineering consultancy fees and management fees. In doing so, Gan saved $1.62 million when filing his personal tax returns.
As a result of the tax evasion, Gan was jailed for 2 weeks, fined $8,000 and ordered to pay a penalty of nearly $1 million. His company was fined $24,000 and ordered to pay a penalty of also nearly $1 million. Gan was also punished for omitting to state in his tax returns the benefits he received from SFRS such as car instalments and other personal expenses which were paid for by SFRS.
It is arguable that actually no loss was caused to the government - Gan could have used the 6 companies for entering into transactions with customers and therefore obtained the tax exemption. Instead, it appears that SFRS received customer revenue and from this, deducted the amounts allegedly paid to the 6 companies as its expenses.
His tax advisor and auditor, Chng Chor Tong, was also the subject of tax evasion charges. He was sentenced to 6 months years jail for tax evasion in relation to his own sole proprietorship. He was therefore the first practising certified public accountant to be sentenced to jail for tax evasion.
More jail for dishonest lawyer
Leong Wai Nam, who stole over $93,000 of clients' money, had his jail sentence increased from 3 years, 8 months to 6 1/2 years on appeal to the High Court. Justice Tay Yong Kwang agreed that a stiff sentence was needed to stop the increasing number of dishonest lawyers stealing clients' money.
Leong had pocketed the monies instead of banking them with various other law firms with whom he had revenue sharing arrangements. In addition, he had deceived a businessman by pretending that he could act for the latter even though Leong had no practising certificate.
Leong had pocketed the monies instead of banking them with various other law firms with whom he had revenue sharing arrangements. In addition, he had deceived a businessman by pretending that he could act for the latter even though Leong had no practising certificate.
Wednesday, October 28, 2009
Fine for forged bank reference letters
Like many banks, American Express Bank (AEB) requires customers who want to open accounts with it to produce letters of reference from other banks stating the length of the customer's relationship with the other banks. This is now standard practice as part of the KYC (Know Your Customers) requirements for banks to stop money laundering and terrorist financing.
Ho Nyat Yeing, who was relationship manager with AEB, found it difficult to obtain these letters. She therefore forged reference letters using blank letterheads from other banks. In court, she pleaded guilty to 11 out of 79 charges. As no loss was caused to any party, shre was fined $41,000.
There are other relationship managers who have been caught in similar situations, with some of them having already been sentenced by the courts.
Ho Nyat Yeing, who was relationship manager with AEB, found it difficult to obtain these letters. She therefore forged reference letters using blank letterheads from other banks. In court, she pleaded guilty to 11 out of 79 charges. As no loss was caused to any party, shre was fined $41,000.
There are other relationship managers who have been caught in similar situations, with some of them having already been sentenced by the courts.
Saturday, October 17, 2009
$1.9m fine for car tax evasion
Ang Hian Koon, owner of Allied Auto was fined over $1.9 million for evading over $700,000 in customs duties and over $200,000 in Goods and Service Tax (GST) in relation to the parallel importing of cars. As he could not pay the amount of the fines, his jail sentence will be 52 weeks. His business had been under-declaring the value of the cars while arranging to pay the foreign supplier in cash during face to face meetings.Although he was not the person submitting the false information to the authorities, he was aware of what was happening. The mastermind of the fraud, Tay Kien Chuan, was fined over $10 million but will serve 8 1/2 years in jail in default of paying the fine.
In total, there are about 15 persons who have been convicted or are awaiting trial for tax evasion in the car parallel import business.
In total, there are about 15 persons who have been convicted or are awaiting trial for tax evasion in the car parallel import business.
Confession but no corruption conviction
A marine surveyor, Anuar Ahmad, was acquitted for corruption recently. He had been charged with taking a $500 bribe for overlooking a short supply of bunkers (fuel) to a ship. During investigations, he had been told by an Corruption Prevention and Investigation Bureau (CPIB) investigator that if he confessed, he would only be fined and not jailed. Based on this, he confessed to the bribery charge.
During his trial, the judge threw out his confession as it was made under an inducement. The other evidence against him was also rather weak; there were no complaints about the fuel supply. Accordingly, he was acquitted of the charge.
It should be noted that a few years ago, the bunkering industry was hit by a scandal concerning bribes to marine surveyors. They are in charge of checking on the supply of fuel to ships refuelling in Singapore. However, some of them were convicted of taking bribes from fuel suppliers in order to overlook short delivery of fuel or dilution of fuel.
Legal note - under section 24 of the Evidence Act, a confession made under inducement, threat or promise by a person in authority, is inadmissible if the accused was seeking to gain an advantage or avoid an evil.
During his trial, the judge threw out his confession as it was made under an inducement. The other evidence against him was also rather weak; there were no complaints about the fuel supply. Accordingly, he was acquitted of the charge.
It should be noted that a few years ago, the bunkering industry was hit by a scandal concerning bribes to marine surveyors. They are in charge of checking on the supply of fuel to ships refuelling in Singapore. However, some of them were convicted of taking bribes from fuel suppliers in order to overlook short delivery of fuel or dilution of fuel.
Legal note - under section 24 of the Evidence Act, a confession made under inducement, threat or promise by a person in authority, is inadmissible if the accused was seeking to gain an advantage or avoid an evil.
Tuesday, October 13, 2009
Credit card fraud - rewards for stopping fraud
A friend who worked on credit card security told me that a retailer's staff who spots and retains a stolen or fake credit card is given a reward of $50. If the credit card holder is detained, the reward is $200. However, this information was provided quite some years ago, so the rewards may now be higher.
A word of caution - detaining a suspected crook carries some risk. It the detention is not justified, a lawsuit for false imprisonment might well be started against the employee and his employer. A lawyer friend and his pregnant wife were once wrongly detained for shoplifting of a briefcase. Although he produced a receipt, this was not accepted. The retailer feared that he had bought one item, then went back to steal an identical item using the first receipt. He later settled his false imprisonment claim with the department store for $800.
A word of caution - detaining a suspected crook carries some risk. It the detention is not justified, a lawsuit for false imprisonment might well be started against the employee and his employer. A lawyer friend and his pregnant wife were once wrongly detained for shoplifting of a briefcase. Although he produced a receipt, this was not accepted. The retailer feared that he had bought one item, then went back to steal an identical item using the first receipt. He later settled his false imprisonment claim with the department store for $800.
Sunday, October 11, 2009
Ren Ci saga comes to a close?
Ren Ci is a leading Singapore charity involved in providing free medical services. Its founder-chief and monk Shi Ming-Yi and his aide, Raymond Yeung, were charged in court with various offences relating to a $50,000 loan to the aide. Shi was charged with criminal breach of trust in relation to the $50,000 as loans to Yeung were not covered by the charity's staff loan scheme as the latter was a Hongkonger who had not received permission to work in Singapore. Further, the charity's staff loan scheme had strict limits based on the employee's salary.
In an attempt to cover up the loan, the abbot and his aide recorded the $50,000 as a loan to the Mandala Buddhist Cultural Centre, a business entity owned by the charity. However, the Centre's books had no record of this. Later, false statements were made to the Commissioner of Charities when the loan was probed. This is another example where the cover-up offences turn a single act of dishonesty into a whole chain of offences.
Both have just been found guilty after a 21-day trial. Because this was not an isolated act of dishonesty and the fact that public monies in the form of charitable donations were misused, it is possible that a stiff sentence would be meted out. Sentencing will be on 11 November 2009.
[legal note - criminal breach of trust occurs when money entrusted with a person is used for unauthorised purposes. Even using such money for less than a day would amount to an offence under the Penal Code, and this is so even if the money is replaced]
In an attempt to cover up the loan, the abbot and his aide recorded the $50,000 as a loan to the Mandala Buddhist Cultural Centre, a business entity owned by the charity. However, the Centre's books had no record of this. Later, false statements were made to the Commissioner of Charities when the loan was probed. This is another example where the cover-up offences turn a single act of dishonesty into a whole chain of offences.
Both have just been found guilty after a 21-day trial. Because this was not an isolated act of dishonesty and the fact that public monies in the form of charitable donations were misused, it is possible that a stiff sentence would be meted out. Sentencing will be on 11 November 2009.
[legal note - criminal breach of trust occurs when money entrusted with a person is used for unauthorised purposes. Even using such money for less than a day would amount to an offence under the Penal Code, and this is so even if the money is replaced]
2 Taiwanese jailed for credit card fraud
2 Taiwanese, Lin Ming-Hung and Huang Cheng-Yu, were jailed for 4 years each for counterfeit credit card offences involving more than $6,000. Although the amount involved is not large, the stiff sentence shows that the courts are determined to punish credit card fraud severely. They each pleaded guilty to 3 charges of having counterfeit cards, 2 charges of abetment to cheat and 11 other charges were taken into consideration.
The accused were part of a syndicate which trained them in fraud techniques such as which goods to purchase, and how to react if the retailer made a call to a bank to check the credit cards. It is understood that their detention was as a result of information provided by Card Security Group Singapore.
The accused were part of a syndicate which trained them in fraud techniques such as which goods to purchase, and how to react if the retailer made a call to a bank to check the credit cards. It is understood that their detention was as a result of information provided by Card Security Group Singapore.
Saturday, October 10, 2009
Past scandals - National Bank of Brunei (NBB)
This blog will cover not only Singapore cases but notable past cases that may be of interest to Singaporeans.
One case from Brunei concerns Khoo Teck Phuat and his son Khoo Ban Hock. The latter was managing director of NBB w. Under his charge, the bank loaned more than Brunei $1 billion (which is equivalent to Singapore $1 billion) to companies controlled by his father. These loans were undocumented and unsecured. It was claimed that these offences under Brunei banking laws by Khoo Ban Hock were committed under the control and his direction of his father.
When this dishonesty was discovered, the younger Khoo was sentenced to 3 years jail but later only served two. The elder Mr Khoo was not charged, but it was understood that he made restitution of about S$600 million to cover the losses suffered by various party. Mr Khoo Teck Puat later went on to become a billionaire, and was of the largest shareholders in megabank Standard Chartered when he died in 2004. However, after the NBB scandal, he kept a low profile.
One case from Brunei concerns Khoo Teck Phuat and his son Khoo Ban Hock. The latter was managing director of NBB w. Under his charge, the bank loaned more than Brunei $1 billion (which is equivalent to Singapore $1 billion) to companies controlled by his father. These loans were undocumented and unsecured. It was claimed that these offences under Brunei banking laws by Khoo Ban Hock were committed under the control and his direction of his father.
When this dishonesty was discovered, the younger Khoo was sentenced to 3 years jail but later only served two. The elder Mr Khoo was not charged, but it was understood that he made restitution of about S$600 million to cover the losses suffered by various party. Mr Khoo Teck Puat later went on to become a billionaire, and was of the largest shareholders in megabank Standard Chartered when he died in 2004. However, after the NBB scandal, he kept a low profile.
Corruption and its effects
Besides strict penalties for the bribe payer and bribe taker, corruption can also lead to other effects.
For one, if an employee pays a bribe to the employee of a customer, the customer will be able to terminate the contract and also to sue the employee's company for any loss or damage.
As regards an employee bribe taker, besides losing his job, he is also subject to severe financial penalties. The employer can sue the employee for the value of any bribe received. This is on top of the penalty that can be imposed by a court which equals the value of the bribe received, under section 13 of the Prevention of Corruption Act. This "double punishment" was confirmed by the court in a case involving Carrefour Supermarket -
see Carrefour Singapore v Leong Wai Kay, [2006] 4 SLR 412 (the last set of characters is the citation of the case which tells a lawyer where to find the decision in a law library)
For one, if an employee pays a bribe to the employee of a customer, the customer will be able to terminate the contract and also to sue the employee's company for any loss or damage.
As regards an employee bribe taker, besides losing his job, he is also subject to severe financial penalties. The employer can sue the employee for the value of any bribe received. This is on top of the penalty that can be imposed by a court which equals the value of the bribe received, under section 13 of the Prevention of Corruption Act. This "double punishment" was confirmed by the court in a case involving Carrefour Supermarket -
see Carrefour Singapore v Leong Wai Kay, [2006] 4 SLR 412 (the last set of characters is the citation of the case which tells a lawyer where to find the decision in a law library)
Wednesday, October 7, 2009
Ponzi schemes - who was Ponzi?
With some much recent news about Ponzi schemes - see the posts on Bernard Madoff and about the Sunshine Empire, the question that some ask is "who was Ponzi and what was his scheme?'
Ponzi was someone with a bright idea which he introduced in the USA as a means of generating great returns. His idea involved international reply coupons which could be bought in any country and used like postage stamps to send a letter overseas. These coupons could also be exchanged for cash in any other country. His brainwave was to buy the coupons in less developed countries and then to ship them to the USA where they could be exchanged for much greater amounts (sounds like a great form of arbitrage). Logistic problems prevented his plan from being carried out but he received such a large amount of investments in his plan that he decided to carry out a massisve deception by using new investment money to pay off previous investments.
If you wish to know more about his life and his ultimate fate, you may refer to wikipedia.
Ponzi was someone with a bright idea which he introduced in the USA as a means of generating great returns. His idea involved international reply coupons which could be bought in any country and used like postage stamps to send a letter overseas. These coupons could also be exchanged for cash in any other country. His brainwave was to buy the coupons in less developed countries and then to ship them to the USA where they could be exchanged for much greater amounts (sounds like a great form of arbitrage). Logistic problems prevented his plan from being carried out but he received such a large amount of investments in his plan that he decided to carry out a massisve deception by using new investment money to pay off previous investments.
If you wish to know more about his life and his ultimate fate, you may refer to wikipedia.
Forged cheques - safeguards
Protecting your cheques is important as letting others have access to them exposes you to the risk of fraud.
Here are some basic precautions -
1. Do not pre-sign cheques. If this is unavoidable, only sign a few and place them into the hands of one person who wil be monitored by another.
2. Set withdrawal limits on each cheque so that any forger will have to sign several in order to steal a large amount.
3. Monitor how many cheque books the bank has issued to your company. This is to ensure that employees do not make requests for such without your knowledge, or intercept them when the cheque books are sent to you.
4. Do bank reconciliation statements every month as they will warn employees that any dishonesty will be quickly caught. Some cases of forged cheques involved dishonesty over a long period of time.
5. Something unusual - ask every employee's spouse to sign an indemnity - he/she will be responsible for any fraud caused by the spouse. Depending on how badly employee wants the job, this may be difficult to achieve.
Here are some basic precautions -
1. Do not pre-sign cheques. If this is unavoidable, only sign a few and place them into the hands of one person who wil be monitored by another.
2. Set withdrawal limits on each cheque so that any forger will have to sign several in order to steal a large amount.
3. Monitor how many cheque books the bank has issued to your company. This is to ensure that employees do not make requests for such without your knowledge, or intercept them when the cheque books are sent to you.
4. Do bank reconciliation statements every month as they will warn employees that any dishonesty will be quickly caught. Some cases of forged cheques involved dishonesty over a long period of time.
5. Something unusual - ask every employee's spouse to sign an indemnity - he/she will be responsible for any fraud caused by the spouse. Depending on how badly employee wants the job, this may be difficult to achieve.
Tuesday, October 6, 2009
Forged cheques again
In a previous posting in April 2009, I raised the issue of cheques with forged signatures. Banks are under common law liable for the value of such cheques as they are not allowed to pay out under the cheques except if the actual signature of the customer is present. However, the banks use contractual clauses to shift the risk of forged cheques onto the customer.
Mr Michael Hwang, Senior Counsel, and President of the Law Society, has now raised the issue of whether the banks should do so. He has raised the issue with the Association of Banks, the Consumers' Association of Singapoe and with a Cabinet Minister. However, nothing has made banks change their minds about the use of such clauses. He mentions that in Malaysia and in Hong Kong, customers will not stand for the use of such clauses. Hopefully, the business community acting through trade associations and the like will exert some pressure on the banks to change.
In the meantime, for us individuals, there is always the issue of whether we can rely on provisions of the Unfair Contract Terms Act to try to argue that the banks' clauses are invalid.
Mr Michael Hwang, Senior Counsel, and President of the Law Society, has now raised the issue of whether the banks should do so. He has raised the issue with the Association of Banks, the Consumers' Association of Singapoe and with a Cabinet Minister. However, nothing has made banks change their minds about the use of such clauses. He mentions that in Malaysia and in Hong Kong, customers will not stand for the use of such clauses. Hopefully, the business community acting through trade associations and the like will exert some pressure on the banks to change.
In the meantime, for us individuals, there is always the issue of whether we can rely on provisions of the Unfair Contract Terms Act to try to argue that the banks' clauses are invalid.
Sunshine Empire 3 - The law of Ponzi Schemes
If James Phang and company are found to have run a Ponzi scheme, what can they be charged with?
Under Singapore law, the law relating to Ponzi Schemes can be found under section 340 of the Companies Act which refers to the business of a company "being carried on with intent to defraud creditors or ... for any fraudulent purpose" . Phang and Jackie Hoo face 1 charge under this section.
Another relevant section is section 404, Companies Act which refers to fraudulent inducing persons to invest money. However, proving fraud is usually rather difficult and it usually requires proof as to the state of the defendant's mind - that he intended to defraud others. In some cases, the defendant might claim that he honestly believed in his company's business model (its revenue generation methods). In a crminal trial, the prosecution has to prove the charges beyond reasonable doubt.
It should be noted that the bulk of the charges against the Phang gang are in relation to falsification of accounts. This may require a lot of investigation work but may in the end be easier to prove. In many cases, the assets of the company are overstated. In the cases of fraud, it is often not just over optimistic valuations of the assets but rather including ficititious assets on the balance sheets.
Under Singapore law, the law relating to Ponzi Schemes can be found under section 340 of the Companies Act which refers to the business of a company "being carried on with intent to defraud creditors or ... for any fraudulent purpose" . Phang and Jackie Hoo face 1 charge under this section.
Another relevant section is section 404, Companies Act which refers to fraudulent inducing persons to invest money. However, proving fraud is usually rather difficult and it usually requires proof as to the state of the defendant's mind - that he intended to defraud others. In some cases, the defendant might claim that he honestly believed in his company's business model (its revenue generation methods). In a crminal trial, the prosecution has to prove the charges beyond reasonable doubt.
It should be noted that the bulk of the charges against the Phang gang are in relation to falsification of accounts. This may require a lot of investigation work but may in the end be easier to prove. In many cases, the assets of the company are overstated. In the cases of fraud, it is often not just over optimistic valuations of the assets but rather including ficititious assets on the balance sheets.
Corruption - what is a bribe?
A bribe under the Prevention of Corruption Act covers not just monetary payments but any favour or advantage. For the full text of the relevant definition, please refer to the end of this post.
Even a free hawker meal can amount to a bribe as some hawker (food stall) inspectors who were convicted of corruption and lost their jobs, have found out. Some policemen
The law of corruption has been applied not just to employees who took bribes from suppliers and civil servants who took bribes from the public, but also to
a) a independent bus driver who took fees from doctors to take foreign workers for medical check-ups. He was not told to take them to any particular doctor, so I am not sure that he was correctly convicted;
b) professional football players who received bribes to play well;
c) a jockey who rode winning horses being given gifts by a grateful owner. I believe that he was later acquitted on appeal;
d) Singaporeans being paid to enter into sham marriages with foreigners.
------------
The full definition of a bribe as found in Section 2 of the Prevention of Corruption Act -
"gratification" includes —
(a) money or any gift, loan, fee, reward, commission, valuable security or other property or interest in property of any description, whether movable or immovable;
(b) any office, employment or contract;
(c) any payment, release, discharge or liquidation of any loan, obligation or other liability whatsoever, whether in whole or in part;
(d) any other service, favour or advantage of any description whatsoever, including protection from any penalty or disability incurred or apprehended or from any action or proceedings of a disciplinary or penal nature, whether or not already instituted, and including the exercise or the forbearance from the exercise of any right or any official power or duty; and
(e) any offer, undertaking or promise of any gratification within the meaning of paragraphs (a), (b), (c) and (d);
Even a free hawker meal can amount to a bribe as some hawker (food stall) inspectors who were convicted of corruption and lost their jobs, have found out. Some policemen
The law of corruption has been applied not just to employees who took bribes from suppliers and civil servants who took bribes from the public, but also to
a) a independent bus driver who took fees from doctors to take foreign workers for medical check-ups. He was not told to take them to any particular doctor, so I am not sure that he was correctly convicted;
b) professional football players who received bribes to play well;
c) a jockey who rode winning horses being given gifts by a grateful owner. I believe that he was later acquitted on appeal;
d) Singaporeans being paid to enter into sham marriages with foreigners.
------------
The full definition of a bribe as found in Section 2 of the Prevention of Corruption Act -
"gratification" includes —
(a) money or any gift, loan, fee, reward, commission, valuable security or other property or interest in property of any description, whether movable or immovable;
(b) any office, employment or contract;
(c) any payment, release, discharge or liquidation of any loan, obligation or other liability whatsoever, whether in whole or in part;
(d) any other service, favour or advantage of any description whatsoever, including protection from any penalty or disability incurred or apprehended or from any action or proceedings of a disciplinary or penal nature, whether or not already instituted, and including the exercise or the forbearance from the exercise of any right or any official power or duty; and
(e) any offer, undertaking or promise of any gratification within the meaning of paragraphs (a), (b), (c) and (d);
Monday, October 5, 2009
Sunshine Empire 2 - the charges
From the Commercial Affairs Department website - as at 5 October 2009
Q What is the status of the investigation?
A CAD has completed the investigations on Sunshine Empire Pte Ltd ("Sunshine Empire") and other companies involved in this case. On 3 February 2009, the following persons have been charged in the Subordinate Court.
a. Jackie Hoo Choon Cheat, a director of Sunshine Empire, and James Phang Wah each faced 1 charge of fraudulent trading under Section 340 of the Companies Act, 1 charge of failure to maintain proper accounting records of Sunshine Empire under Section 199 of the Companies Act and 8 charges of criminal breach of trust as an agent of Sunshine Empire under Section 409 of the Penal Code;
b. James Phang Wah also faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Communications Technology Pte Ltd under Section 401 (2A) (b) of the Companies Act. In addition to the Penal Code and Companies Act charges, James Phang Wah faced 3 charges for possession of uncensored and obscene films under the Films Act;
c. Neo Kuon Huay, a director of Empire Emall (S) Pte Ltd, faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Emall (S) Pte Ltd under Section 401 (2A) (b) of the Companies Act; and
d. Yong Wai Hong, a director of Empire Communications Technology Pte Ltd and various companies, faced 6 charges of false declaration of the share capital of various companies under Section 401 (2A) (b) of the Companies Act.
Note that Yong Wai Hong has already been convicted of the charges under the Companies Act.
Q What is the status of the investigation?
A CAD has completed the investigations on Sunshine Empire Pte Ltd ("Sunshine Empire") and other companies involved in this case. On 3 February 2009, the following persons have been charged in the Subordinate Court.
a. Jackie Hoo Choon Cheat, a director of Sunshine Empire, and James Phang Wah each faced 1 charge of fraudulent trading under Section 340 of the Companies Act, 1 charge of failure to maintain proper accounting records of Sunshine Empire under Section 199 of the Companies Act and 8 charges of criminal breach of trust as an agent of Sunshine Empire under Section 409 of the Penal Code;
b. James Phang Wah also faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Communications Technology Pte Ltd under Section 401 (2A) (b) of the Companies Act. In addition to the Penal Code and Companies Act charges, James Phang Wah faced 3 charges for possession of uncensored and obscene films under the Films Act;
c. Neo Kuon Huay, a director of Empire Emall (S) Pte Ltd, faced 6 charges of falsification of Sunshine Empire’s accounts under Section 477A of the Penal Code and 1 charge of false declaration of the share capital of Empire Emall (S) Pte Ltd under Section 401 (2A) (b) of the Companies Act; and
d. Yong Wai Hong, a director of Empire Communications Technology Pte Ltd and various companies, faced 6 charges of false declaration of the share capital of various companies under Section 401 (2A) (b) of the Companies Act.
Note that Yong Wai Hong has already been convicted of the charges under the Companies Act.
Sunshine Empire trial
The trial of the bosses of the Sunshine Empire has just started. James Phang, his wife Neo Kuon Huay, and ex-direcror Jackie Hoo Choon Cheat have been charged with their roles in this affair.
The prosecution has alleged that they masterminded what is Singapore's largest Ponzi scheme involving more than $180 million. Ponzi schemes are a scam where monies from new investors is used to pay off previous investors, thus giving the appearance of a successful business model.In this way, more investments are attracted.
Ponzi schemes have been in the news in the last 12 months because of the enormous scam run by American Bernie Madoff. Please search this blog if you want more information on some of Madoff's tactics.
The prosecution has alleged that they masterminded what is Singapore's largest Ponzi scheme involving more than $180 million. Ponzi schemes are a scam where monies from new investors is used to pay off previous investors, thus giving the appearance of a successful business model.In this way, more investments are attracted.
Ponzi schemes have been in the news in the last 12 months because of the enormous scam run by American Bernie Madoff. Please search this blog if you want more information on some of Madoff's tactics.
Sunday, October 4, 2009
Bribery of witness - first case
In 2007, new sections were introduced into Singapore's general criminal law, the Penal Code, to deal with offences in relation to the court system and the administration of justice.
One of these sections, s 204B provides for punishment for bribing witnesses and taking bribes in judicial proceedings. The words "judicial proceedings" covers legal proceedings in the course of which evidence may be taken. This definition will therefore cover not only lawsuits but also arbitrations.
It appears that a security guard, Chidambaram Radha, is the first person to be convicted under this provision. He attempted repeatedly to get an Indian national to lie on the witness stand in relation to charges against him for harbouring of illegal immigrants. Ironically the harbouring charges against him were later dropped, but for his attempted bribery, he recently received a 6 month jail term.
One of these sections, s 204B provides for punishment for bribing witnesses and taking bribes in judicial proceedings. The words "judicial proceedings" covers legal proceedings in the course of which evidence may be taken. This definition will therefore cover not only lawsuits but also arbitrations.
It appears that a security guard, Chidambaram Radha, is the first person to be convicted under this provision. He attempted repeatedly to get an Indian national to lie on the witness stand in relation to charges against him for harbouring of illegal immigrants. Ironically the harbouring charges against him were later dropped, but for his attempted bribery, he recently received a 6 month jail term.
Corruption - strictest laws in the world
Does Singapore have the stricted anti-corruption laws in the world? I have not done any studies on other laws, but our laws are extremely strict in covering acts of corruption occuring overseas.
Under 37 of the Prevention of Corruption Act, Singapore citizens who commit acts of corruption overseas, eg taking or paying a bribe, may be punished under the Act. This is one of the rare cases where the Singapore courts are given extra-territorial jurisdiction (over acts done outside the country). The Act however, does not seem to require any connection to Singapore for the Act to apply. For example, a Singaporean working in China for an American company, pays a bribe to a Chinese civil servant, would have committed an offence under the Act.
In contrast, a friend working in a neighbouring country for a major software company, recounted the story of trying to obtain a large private sector contract. An employee from the potential customer asked whether he was willing to give the employee a car. My friend was shocked by this, after having grown up in Singapore. He also amazed by the size of the bribe wanted - considering the size of the contract, sports rims could be thrown in but definitely not a car!
Under 37 of the Prevention of Corruption Act, Singapore citizens who commit acts of corruption overseas, eg taking or paying a bribe, may be punished under the Act. This is one of the rare cases where the Singapore courts are given extra-territorial jurisdiction (over acts done outside the country). The Act however, does not seem to require any connection to Singapore for the Act to apply. For example, a Singaporean working in China for an American company, pays a bribe to a Chinese civil servant, would have committed an offence under the Act.
In contrast, a friend working in a neighbouring country for a major software company, recounted the story of trying to obtain a large private sector contract. An employee from the potential customer asked whether he was willing to give the employee a car. My friend was shocked by this, after having grown up in Singapore. He also amazed by the size of the bribe wanted - considering the size of the contract, sports rims could be thrown in but definitely not a car!
Corruption - early Singapore history
Corruption is a problem for many developing nations. Singapore in its early days was not spared.
A recent book, Men in White, which is a story about the People's Action Party, its history and its opponents, contains references to corruption in the early days of Singapore's independence.
One account is that obtaining forms from any government department required payment of tens of cents to the employee dispensing the forms. Another story concerns President Nathan, who when he was applying for a civil service job many decades ago, was asked in Tamil, by an Indian inteviewer, "how many tables?". Nathan could not understand what was being asked. He did not get the job, but later found out that he was being asked how many tables for a fancy dinner he would give to the civil servant in return for getting the job.
Lee Kuan Yew, when he came to power, ensured that corruption was severely punished. No one from clerk to Minister should be outside the law. The most famous case of high level corruption was Teh Cheang Wan, Minister of National Development, who lived in a big bungalow in the Chancery Road area, before his suicide on his criminal activity being discovered.
A recent book, Men in White, which is a story about the People's Action Party, its history and its opponents, contains references to corruption in the early days of Singapore's independence.
One account is that obtaining forms from any government department required payment of tens of cents to the employee dispensing the forms. Another story concerns President Nathan, who when he was applying for a civil service job many decades ago, was asked in Tamil, by an Indian inteviewer, "how many tables?". Nathan could not understand what was being asked. He did not get the job, but later found out that he was being asked how many tables for a fancy dinner he would give to the civil servant in return for getting the job.
Lee Kuan Yew, when he came to power, ensured that corruption was severely punished. No one from clerk to Minister should be outside the law. The most famous case of high level corruption was Teh Cheang Wan, Minister of National Development, who lived in a big bungalow in the Chancery Road area, before his suicide on his criminal activity being discovered.
Duty to report fraud by auditors
Auditors, like many professionals, owe a duty of confidentiality to their clients. This means that if an auditor discovers fraud, it is strongly arguable that he should take his clients' instructions on whether or not to report the fraud. In many cases, the directors of a client company might prefer not to report the fraud as it may reflect badly on their management, in addition to damaging the company's reputation.
However, for public companies or their subsidiaries, auditors are required to report serious fraud to the Minister of Finance. Under section 207(9A) of the Companies Act, serious fraud is defined as an offfence involving fraud or dishonesty where the maximum penalty is at least 2 years jail and the value of the property involved at worth at least $20,000.
An interesting point about the provision is that the auditor is only required to report fraud against the company by its officers or employees. However, if he discovers that the company is committing fraud against someone else, the provision does not seem to apply(the relevant words of the provision being "is being or has been committed against the company by officers or employees of the company").
However, for public companies or their subsidiaries, auditors are required to report serious fraud to the Minister of Finance. Under section 207(9A) of the Companies Act, serious fraud is defined as an offfence involving fraud or dishonesty where the maximum penalty is at least 2 years jail and the value of the property involved at worth at least $20,000.
An interesting point about the provision is that the auditor is only required to report fraud against the company by its officers or employees. However, if he discovers that the company is committing fraud against someone else, the provision does not seem to apply(the relevant words of the provision being "is being or has been committed against the company by officers or employees of the company").
Tuesday, September 29, 2009
Liquid assets 2
The judgment in the case of Public Prosecutor v Giorgio Ferrari is now available on the internet - http://lwb.lawnet.com.sg/legal/lgl/rss/subcourts/63675.html
Normally, such judgments are only available free for a period of about 3 months, following which only Lawnet subscribers will be able to access it.
Readers of a previous blog will remember that the case involves charges relating to Goods and Services Tax and customs duties of over $400,000 payable by his alcohol business. It was surprising that with such a large amount of duty evaded, there was only a massive fine but no jail time. The judgment now clarifies the situation.
The alcohol was stored in a licensed warehouse where no duty is paid for the time being. For supplies to diplomatic missions like foreign embassies, the alcohol can be taken out without any duty having to be paid. However, the process requires applications for approval from Singapore Customs, which would delay delivery to customers. Because these customers required the alcohol at short notice, Ferrari would supply them with duty-paid alcohol from its own stock. It would later apply for the necessary Customs permits, and it would then use the duty free alcohol allowed under the permits to replace its earlier withdrawn stock. This was a breach of the Customs rules.
The court accepted that Ferrari had gained no economic advantage as in the end, no duty was evaded, but he had gained intangible advantages. The court allowed him to pay the huge fine of just over $2.5 million over a period of 30 months subject to sureties for the whole amount being provided.
The case is interesting as the judge remarks it is the first of its kind.
Normally, such judgments are only available free for a period of about 3 months, following which only Lawnet subscribers will be able to access it.
Readers of a previous blog will remember that the case involves charges relating to Goods and Services Tax and customs duties of over $400,000 payable by his alcohol business. It was surprising that with such a large amount of duty evaded, there was only a massive fine but no jail time. The judgment now clarifies the situation.
The alcohol was stored in a licensed warehouse where no duty is paid for the time being. For supplies to diplomatic missions like foreign embassies, the alcohol can be taken out without any duty having to be paid. However, the process requires applications for approval from Singapore Customs, which would delay delivery to customers. Because these customers required the alcohol at short notice, Ferrari would supply them with duty-paid alcohol from its own stock. It would later apply for the necessary Customs permits, and it would then use the duty free alcohol allowed under the permits to replace its earlier withdrawn stock. This was a breach of the Customs rules.
The court accepted that Ferrari had gained no economic advantage as in the end, no duty was evaded, but he had gained intangible advantages. The court allowed him to pay the huge fine of just over $2.5 million over a period of 30 months subject to sureties for the whole amount being provided.
The case is interesting as the judge remarks it is the first of its kind.
Wednesday, September 23, 2009
Hacking services
A recent local newspaper report covered the use of hacking services. These will, for a fee, hack into anyone's computer account like an e-mail account, and then provide the customer with the password to access the target account. Many of the hacking services are performed by parties who are overseas.
The above is clearly a case of unauthorised access under section 3 of the Computer Misuse Act. The issue that arises is when does such activity fall under the jurisdiction of the Singapore Court. Under Section 11 of the Act, the Act applies if the computer, program or data was in Singapore at the relevant time, or the accused was in Singapore at the relevant time.
Assuming in all the cases discussed below that the hacker is overseas, let's discuss the following situations (we will refer to the owner of the hacked account as the target and the person using the services of hackers as the customer) -
a) the target is a Singaporean or resident in Singapore. However, the customer uses the password obtained from the hacking services to access this account while the customer is in Singapore. Here, the accused is in Singapore so the offence is committed under the Act;
b) the target is a Singaporean or resident in Singapore, but the customer illegally accesses the account while he is overseas. Here, a big problem arises as to where the computer, program or data is. Even if the Internet Service Provider (ISP) is a Singapore company, there is still a problem since the relevant computer servers may be overseas. So no computer, program or data is in Singapore, and no offence is commmitted under Singapore law. Where the ISP or e-mail service is a foreign one, for example, Yahoo or Google e-mail services, it is even easier to argue that all relevant acts have taken place overseas, and therefore the Singapore courts have no jurisdiction.
A suggestion - the law should be amended to provide that where the account holder is resident in Singapore (to use the language of section 11 of the Act - "where the computer, program, or data is habitually used by a person resident in Singapore"), then the offence should be considered to have been committed in Singapore. This will protect the secrets and interests of Singaporeans and other local residents.
The above is clearly a case of unauthorised access under section 3 of the Computer Misuse Act. The issue that arises is when does such activity fall under the jurisdiction of the Singapore Court. Under Section 11 of the Act, the Act applies if the computer, program or data was in Singapore at the relevant time, or the accused was in Singapore at the relevant time.
Assuming in all the cases discussed below that the hacker is overseas, let's discuss the following situations (we will refer to the owner of the hacked account as the target and the person using the services of hackers as the customer) -
a) the target is a Singaporean or resident in Singapore. However, the customer uses the password obtained from the hacking services to access this account while the customer is in Singapore. Here, the accused is in Singapore so the offence is committed under the Act;
b) the target is a Singaporean or resident in Singapore, but the customer illegally accesses the account while he is overseas. Here, a big problem arises as to where the computer, program or data is. Even if the Internet Service Provider (ISP) is a Singapore company, there is still a problem since the relevant computer servers may be overseas. So no computer, program or data is in Singapore, and no offence is commmitted under Singapore law. Where the ISP or e-mail service is a foreign one, for example, Yahoo or Google e-mail services, it is even easier to argue that all relevant acts have taken place overseas, and therefore the Singapore courts have no jurisdiction.
A suggestion - the law should be amended to provide that where the account holder is resident in Singapore (to use the language of section 11 of the Act - "where the computer, program, or data is habitually used by a person resident in Singapore"), then the offence should be considered to have been committed in Singapore. This will protect the secrets and interests of Singaporeans and other local residents.
Tuesday, September 22, 2009
Asia Pacific Breweries case concluded?
The case of Asia Pacific Breweries (well known for its Tiger Beer) and the massive fraud of their Finance Manager Chia Teck Leng may have come to a close.
Chia had defrauded 5 banks with Singapore branches of over $100 million by using the name of his employer to obtain loans. His employer was unaware of his activities. He was sentenced to a record 42 years jail. Of the 5 victim banks, 4 sued but 2 dropped out halfway. Finally, only Skandinaviska Enskilda Banken from Sweden and Germany's Bayerische Hypo-und Vereinsbank (HVB) continued with their claims.
Their arguments in court were based on the actual authority or the apparent authority of Chia to obtain finance for his employer, and negligence on the part of his employer. In a lengthy judgment, High Court judge Belinda Ang rejected all arguments of the banks and dismissed their claim. The court found that the banks had not followed proper procedures which would have led to the fraud being detected at an earlier date. As expected, the banks were ordered to pay the costs of the legal proceedings.
At a later date, the judge's decision will be summarised on this blog. In the meantime, the story may not have ended as an appeal appears to have been filed. It is rare for a judge to issue a written judgment if there is no appeal in a particular case.
Chia had defrauded 5 banks with Singapore branches of over $100 million by using the name of his employer to obtain loans. His employer was unaware of his activities. He was sentenced to a record 42 years jail. Of the 5 victim banks, 4 sued but 2 dropped out halfway. Finally, only Skandinaviska Enskilda Banken from Sweden and Germany's Bayerische Hypo-und Vereinsbank (HVB) continued with their claims.
Their arguments in court were based on the actual authority or the apparent authority of Chia to obtain finance for his employer, and negligence on the part of his employer. In a lengthy judgment, High Court judge Belinda Ang rejected all arguments of the banks and dismissed their claim. The court found that the banks had not followed proper procedures which would have led to the fraud being detected at an earlier date. As expected, the banks were ordered to pay the costs of the legal proceedings.
At a later date, the judge's decision will be summarised on this blog. In the meantime, the story may not have ended as an appeal appears to have been filed. It is rare for a judge to issue a written judgment if there is no appeal in a particular case.
Bernie Madoff's fraud techniques
How did Bernard Madoff carry out his massive Ponzi scheme fraud for so long?
Press reports show that the scheme was quite sophisticated. Some of his techniques -
a) attention to detail - his company recorded millions of pages of non-existent trades that were reflected in customer cofirmations and account statements; trade prices were checked to ensure that they were not out of line to normal real prices at the relevant times;
b) keeping of old stationery - old letterheads were kept in case he needed to create records relating to earlier periods; and
c) fake counterparties - in case of surprise visits at his office by regulators, an employee was supposed to enter in fake trades on a computer, while another employee in a nearby office would play the part of counterparties using a linked computer. This would give the appearance of active trading at that particular time.
The scope of not just the fraud but the large scale of the fraudulent activities show that Bernie Madoff did not act alone. His right hand man Frank DiPascali has also pleaded guilty to his part in the fraud.
Press reports show that the scheme was quite sophisticated. Some of his techniques -
a) attention to detail - his company recorded millions of pages of non-existent trades that were reflected in customer cofirmations and account statements; trade prices were checked to ensure that they were not out of line to normal real prices at the relevant times;
b) keeping of old stationery - old letterheads were kept in case he needed to create records relating to earlier periods; and
c) fake counterparties - in case of surprise visits at his office by regulators, an employee was supposed to enter in fake trades on a computer, while another employee in a nearby office would play the part of counterparties using a linked computer. This would give the appearance of active trading at that particular time.
The scope of not just the fraud but the large scale of the fraudulent activities show that Bernie Madoff did not act alone. His right hand man Frank DiPascali has also pleaded guilty to his part in the fraud.
Monday, September 21, 2009
Crying over liquor assets
Customs is in charge of collecting duties on imported goods. 2 major areas of duties are on alcohol and cigarettes.
Recently, a clever scam involving alcohol bottle exchanges were busted and ten people arrested in relation to fraud involving about $400,000 in import duties and taxes. Normally, alcohol meant for export escapes taxes. This is common as Singapore is a major transhipment centre. Alcohol meant for export has to be stored in a license warehouse.
The scam is supposed to involve a switch of bottles filled with alcohol with those filled with nothing or with water, and then, the latter is packed into cartons for export.The hope is that Customs would think that the exported bottles were those filled with alcohol while the actual valuable bottles were then sold in Singapore. Penalties for tax evasion can be up to 20 times the tax evaded.
Because taxes on alcohol and cigarettes are high in Singapore, there are many cases of tax fraud involving such producst. As regards cigarettes, the scope of the problem has resulted in Singapore law requiring all duty paid cigarettes to bear individual markings. Therefore smuggled cigarettes will not have this marking and court cases against smugglers are much easier to prove. Some may wonder what is to stop smugglers from printing the markings; however, this is not worth the expense. Smugglers normally source for their cigarettes from nearby countries where no such markings are required. To stem the problem, persons caught with smuggled cigarettes are slapped with hefty fines.
Recently, a clever scam involving alcohol bottle exchanges were busted and ten people arrested in relation to fraud involving about $400,000 in import duties and taxes. Normally, alcohol meant for export escapes taxes. This is common as Singapore is a major transhipment centre. Alcohol meant for export has to be stored in a license warehouse.
The scam is supposed to involve a switch of bottles filled with alcohol with those filled with nothing or with water, and then, the latter is packed into cartons for export.The hope is that Customs would think that the exported bottles were those filled with alcohol while the actual valuable bottles were then sold in Singapore. Penalties for tax evasion can be up to 20 times the tax evaded.
Because taxes on alcohol and cigarettes are high in Singapore, there are many cases of tax fraud involving such producst. As regards cigarettes, the scope of the problem has resulted in Singapore law requiring all duty paid cigarettes to bear individual markings. Therefore smuggled cigarettes will not have this marking and court cases against smugglers are much easier to prove. Some may wonder what is to stop smugglers from printing the markings; however, this is not worth the expense. Smugglers normally source for their cigarettes from nearby countries where no such markings are required. To stem the problem, persons caught with smuggled cigarettes are slapped with hefty fines.
Sunday, September 20, 2009
Jail for another food court partner
Wong Kee Yock, a panrter in All Family Food Court, was jailed for 6 months for tax evasion. His other partners were also previously jailed for the same period of time. Wong was at the same time ordered to pay about $250,000 as a penalty, which is 3 times the amount of tax evaded.
The partners of the food court had falsified their statements of account to under-declare their profits.
As a reminder, tax avoidance, which involves tax planning, is not illegal but tax evasion is illegal as it involves making false statements to the tax authorities. Sometimes, with complicated artificial multi-stage business transactions, the line between evasion and avoidance may not always be clear.
The partners of the food court had falsified their statements of account to under-declare their profits.
As a reminder, tax avoidance, which involves tax planning, is not illegal but tax evasion is illegal as it involves making false statements to the tax authorities. Sometimes, with complicated artificial multi-stage business transactions, the line between evasion and avoidance may not always be clear.
Saturday, September 19, 2009
NKF scandal
The National Kidney Foundation (NFK) scandal was big news sometime ago. As perhaps one of Singapore's biggest and most succesful charities, the NKF which is set up as a company limited by guarantee, had its apparent clean and above board image damaged when it sued Singapore Press Holdings (SPH) for defamation in relation to an article in the Straits Times, a newspaper published by SPH. SPH had written about extravagant expenditures of public monies by NKF, for example gold taps in the Chief Executive Officer's toilet.
However, in the defamation lawsuit, the CEO, TT Durai, was torn apart in cross-examination by well known lawyer Senior Counsel Davider Singh. The lawsuit was dropped after this embarassing episode which was of course widely publicized. Shortly thereafter, Durai resigned from his position.
Following this, NKF sued its board of directors and Durai (who acted like a director) for breach of directors' duties under the Companies Act and equity. Halfway through this trial, they admitted liability and agreed to pay substantial damages of varying amounts to NKF.
However, in the defamation lawsuit, the CEO, TT Durai, was torn apart in cross-examination by well known lawyer Senior Counsel Davider Singh. The lawsuit was dropped after this embarassing episode which was of course widely publicized. Shortly thereafter, Durai resigned from his position.
Following this, NKF sued its board of directors and Durai (who acted like a director) for breach of directors' duties under the Companies Act and equity. Halfway through this trial, they admitted liability and agreed to pay substantial damages of varying amounts to NKF.
Unmarried couple in $1.7 million bank fraud
Couple Ragamahhhulla Meeran Gani and girlfriend Anita Said were involved in cheating her employer OBCB Bank of $1.7 million dollars in a fake invoice scam. Over 5 years, they used 750 fake invoices to obtain payment from the bank for fake courier services of bank brochures and prospectuses. This was easy as she was involved in processing payment to the bank's suppliers and service providers.
They were charged in court with 93 charges of cheating and 9 charges of moving the illegal proceeds to Malaysia where some of the money was used to pay for a house in Malaysia and renovation work on it. For their crimes, they were sentenced to 5 1/2 years jail each.
The bank would of course be able to sue them for the monies taken and perhaps for a share of the value of the house in Malaysia.
They were charged in court with 93 charges of cheating and 9 charges of moving the illegal proceeds to Malaysia where some of the money was used to pay for a house in Malaysia and renovation work on it. For their crimes, they were sentenced to 5 1/2 years jail each.
The bank would of course be able to sue them for the monies taken and perhaps for a share of the value of the house in Malaysia.
Friday, September 18, 2009
Allegations of fraud against lawyer
Allegations of fraud have been made against a lawyer involving over $800,000. He has been sued for this sum in the High Court. For more details, please see refer to my blog on professiona negligence -
http://professionalnegligencesg.blogspot.com/
http://professionalnegligencesg.blogspot.com/
Wednesday, September 16, 2009
Womanly man jailed
A well-figured transvestite named Dexter Rayala Flores was just jailed for a year and 8 months for 5 charges of stealing handbags and wallets, and 15 charges of using a stolen credit card. All in all, the amount of assets were less than $15,000. Reports are unclear as to the value of any recoveries, if any, but it does not appear that any restitution was made.
It was revealed in court that the offender was going through the stages of a sex change procedure. An interesting question is whether the offender will be held in the male or female prison.
It was revealed in court that the offender was going through the stages of a sex change procedure. An interesting question is whether the offender will be held in the male or female prison.
Thursday, September 10, 2009
Assisting fraud
Those who assist in a breach of trust can be sued by victims of the breach of trust, as constructive trustees. The term "constructive trustees" means that the court considers them as trustees although they never agreed to be such.
What about those who assist inadvertently? The test seems to be that the person knowingly assists in the breach of trust. Lawyers like to make things complicated, and here, the question of knowledge is decided objectively (but again, there is some controversy on this point). An objective approach means that we consider what the reasonable man in such a situation would think. The personal view of the person being sued would therefore be irrelevant.
An interesting example of knowing assistance in a breach of trust is the case from Brunei - Royan Brunei Airways v Tan. In this Privy Council case, Tan was the managing director of a travel agency which sold tickets on board Royal Brunei Airways (RBA) flights. Under IATA (International Air Transport Association) rules which the agency promised to follows, all monies from such ticket sales were supposed to be banked into a separate trust account. These monies were not to be used for any purpose other than to pay RBA. Tan used the monies to pay the travel agency's expenses.
The lower court found that Tan all along intended to replenish the money but his business later collapsed. As it was pointless to sue the travel agency, RBA sued Tan personally for the missing ticket monies. The Privy Council in England held that Tan's personal intention to repay the monies was irrelevant. He knowingly used trust monies for unauthorised purposes and was therefore liable for the lost funds.
What about those who assist inadvertently? The test seems to be that the person knowingly assists in the breach of trust. Lawyers like to make things complicated, and here, the question of knowledge is decided objectively (but again, there is some controversy on this point). An objective approach means that we consider what the reasonable man in such a situation would think. The personal view of the person being sued would therefore be irrelevant.
An interesting example of knowing assistance in a breach of trust is the case from Brunei - Royan Brunei Airways v Tan. In this Privy Council case, Tan was the managing director of a travel agency which sold tickets on board Royal Brunei Airways (RBA) flights. Under IATA (International Air Transport Association) rules which the agency promised to follows, all monies from such ticket sales were supposed to be banked into a separate trust account. These monies were not to be used for any purpose other than to pay RBA. Tan used the monies to pay the travel agency's expenses.
The lower court found that Tan all along intended to replenish the money but his business later collapsed. As it was pointless to sue the travel agency, RBA sued Tan personally for the missing ticket monies. The Privy Council in England held that Tan's personal intention to repay the monies was irrelevant. He knowingly used trust monies for unauthorised purposes and was therefore liable for the lost funds.
Top 3 crooked lawyers
In terms of monies stolen, these 3 lawyers are tops in Singapore -
1. David Rasif who fled in June 2006 with over $11 million, $10.7 million of which was placed by an American couple with him for a purchase of a house. He appears to be the first lawyer to abscond based solely on greed; the previous lawyers who fled with client's monies appeared to be under great financial pressure. This is not to excuse any of them but merely to look at the psychological factors behind fraud.
2. Tan Cheng Yew, a well-known debater, fled in 2003 with over $5 million of trust funds entrusted to him in relation to the building of a church. Recent reports in September 2009 state that he has been arrested in Germany.
3. Zulkiffli Amin, a partner of lawyer firm Sadique Marican & ZM Amin, fled Singapore in November 2007 with over $6 million of clients' monies.
The victims of these dishonest lawyers are -
a) the clients who lost the money;
b) often the partners in the law firm of dishonest partner who end up having to bear the loss if the loss is considered to be a partnership debt under the Partnership Act;
c) the Law Society's Compensation Fund, and
d) public trust in lawyers.
1. David Rasif who fled in June 2006 with over $11 million, $10.7 million of which was placed by an American couple with him for a purchase of a house. He appears to be the first lawyer to abscond based solely on greed; the previous lawyers who fled with client's monies appeared to be under great financial pressure. This is not to excuse any of them but merely to look at the psychological factors behind fraud.
2. Tan Cheng Yew, a well-known debater, fled in 2003 with over $5 million of trust funds entrusted to him in relation to the building of a church. Recent reports in September 2009 state that he has been arrested in Germany.
3. Zulkiffli Amin, a partner of lawyer firm Sadique Marican & ZM Amin, fled Singapore in November 2007 with over $6 million of clients' monies.
The victims of these dishonest lawyers are -
a) the clients who lost the money;
b) often the partners in the law firm of dishonest partner who end up having to bear the loss if the loss is considered to be a partnership debt under the Partnership Act;
c) the Law Society's Compensation Fund, and
d) public trust in lawyers.
Sentencing for fraud
How does a judge decide on how long a criminal should be sent to jail for fraud? The maximum punishment for the relevant offence is one important fact. The judge will decide based on the facts of the case, whether a sentence at or near the maximum is called for. Some of the factors that the courts consider -
a) the amount of money involved;
b) the degree of planning involved - the more planning, the more serious the criminal activity;
c) how much restitution was made - sometimes, if full restitution is made to the victims of the fraud, a fine may be imposed,
d) whether the criminal co-operated fully with police when caught and whether he pleaded guilty, and
e) whether there is a need to deter that type of offence in the public interest. For example, credit card fraud especially by syndicates is considered very serious because of the potential for great harm to Singapore's status as a business, tourism and financial centre.
It should be noted that there is no mathematical formula that provides a scientific answer to how long a jail sentence should be. An appeal court will only interfere with a lower court's sentence if the sentence is manfestly and clearly too low or too high.
One point to be noted is the effect of a bulk discount from the court. In order words, a person who commits 50 offences of the same type is not usually sentenced to 10 times the jail sentence of another offender who commits only 5 offences similar to the 1st offender's. The reason for this is the concept that the overall effect of a sentence should not normally be crushing. For example, if the normal sentence for a fraud offence is 6 months jail, if a strict mathematical approach is used, one who commits 50 of that type of offence should strictly speaking be sentenced to 300 months' jail. This is more than 20 years jail. Such long sentences are usually reserved only for serious fraud involving mult-million dollar losses.
a) the amount of money involved;
b) the degree of planning involved - the more planning, the more serious the criminal activity;
c) how much restitution was made - sometimes, if full restitution is made to the victims of the fraud, a fine may be imposed,
d) whether the criminal co-operated fully with police when caught and whether he pleaded guilty, and
e) whether there is a need to deter that type of offence in the public interest. For example, credit card fraud especially by syndicates is considered very serious because of the potential for great harm to Singapore's status as a business, tourism and financial centre.
It should be noted that there is no mathematical formula that provides a scientific answer to how long a jail sentence should be. An appeal court will only interfere with a lower court's sentence if the sentence is manfestly and clearly too low or too high.
One point to be noted is the effect of a bulk discount from the court. In order words, a person who commits 50 offences of the same type is not usually sentenced to 10 times the jail sentence of another offender who commits only 5 offences similar to the 1st offender's. The reason for this is the concept that the overall effect of a sentence should not normally be crushing. For example, if the normal sentence for a fraud offence is 6 months jail, if a strict mathematical approach is used, one who commits 50 of that type of offence should strictly speaking be sentenced to 300 months' jail. This is more than 20 years jail. Such long sentences are usually reserved only for serious fraud involving mult-million dollar losses.
Liquid assets and a fine of $2.5 million.
Giorgio Ferrari, a SIngapore permanent resident from Italy, was fined $2.5 million for offences in relation to his liquor business which bears his name. He pleaded guilty to 10 charges and another 178 charges were taken into account. His offences related to customs duties and Goods and Services Tax (GST). He was allowed to settle the fine in instalments over 2 and a half years. There does not appear to be any jail sentence, going according to recent reports.
Under international rules and local statutes, foreign diplomatic missions are exempt from local taxes. For example, foreign diplomatic missions do not pay Certificate of Entitlement and Additional Registration Fees on their cars. As regards liquor ordered by foreign missions, a similar rule applies. However, Ferrari made liquor deliveries to such missions either without the proper permits or after the permitted validity period for the permits that he obtained.
Under international rules and local statutes, foreign diplomatic missions are exempt from local taxes. For example, foreign diplomatic missions do not pay Certificate of Entitlement and Additional Registration Fees on their cars. As regards liquor ordered by foreign missions, a similar rule applies. However, Ferrari made liquor deliveries to such missions either without the proper permits or after the permitted validity period for the permits that he obtained.
Former cop jailed for computer misuse
Peck Weihong, a fomer police sergeant, was jailed for misusing a police database to check on whether a criminal complaint of rape was lodged agaisnt a friend. Under the Computer Misuse Act, since he was not authorised to carry out this check, he had committed the offence of unauthorised access.
For this offence, he was jailed for 3 weeks. The court agreed with the prosecutor that a jail term was customary for such offences. Although he only committed one offence, the stiff sentence shows the court's attitude to protecting confidential government data.
An issue pointed out previously - if he had looked a paper file rather than a computer file, in similar circumstances, would he have been punished in the same way.
For this offence, he was jailed for 3 weeks. The court agreed with the prosecutor that a jail term was customary for such offences. Although he only committed one offence, the stiff sentence shows the court's attitude to protecting confidential government data.
An issue pointed out previously - if he had looked a paper file rather than a computer file, in similar circumstances, would he have been punished in the same way.
Sunday, August 23, 2009
Phantom Workers Scam 2
The SME Group, a cleaning services firm, has had 3 of its staff charged with usinga phantom workers scam, the workings of such a scam being discussed in a previous post.
Stephen Lee Kong Weng, a director of the Group, was sentenced to a year's jail for his part in the scam. Tay Hian Chye, another director, is due to be sentenced shortly (before the end of August 2009) for his role in the scam (after pleading guilty to 15 charges and another 86 to be taken into account). Lim Chye Cheng, the actual mastermind, after being charged in court, has now disappeared.
The SME Group used a tactic of "recycling" its local workers. Once government approval was obtained to employ foreign workers for one company in the group, the same phantom local workers were then allocated to another company in the group for application for additional employment of foreign workers.
Stephen Lee Kong Weng, a director of the Group, was sentenced to a year's jail for his part in the scam. Tay Hian Chye, another director, is due to be sentenced shortly (before the end of August 2009) for his role in the scam (after pleading guilty to 15 charges and another 86 to be taken into account). Lim Chye Cheng, the actual mastermind, after being charged in court, has now disappeared.
The SME Group used a tactic of "recycling" its local workers. Once government approval was obtained to employ foreign workers for one company in the group, the same phantom local workers were then allocated to another company in the group for application for additional employment of foreign workers.
Phantom workers scam 1
A recent spate of trials relating to phantom workers have been appearing in the Singapore courts during the past few months.
Under Singapore employment laws, quotas are set on the number of foreign workers that can be employed in low skill industries like retail or food outlets. These quotas are based on a ratio of a certain number of foreign workers to every local worker. Therefore, increasing the number of local workers allows an employer to employ more foreign workers who tend to be cheaper and more willing to work long hours.
Problems arise when the local workers are employed in name only. Some companies list local employees who never even turn up for work for 1 day. In one case, even deceased persons were listed as employees. To give credence to claims of having local employees, companies make periodic deposits into the phantom employees' Central Provident Fund accounts which ordinarily are compulsory for all employees, and are meant for retirement purposes.
Extensive investigations are required to unearth these phantom worker scams, including interviews with all employees in a suspected company and scrutiny of payroll accounts of the suspect company.
Under Singapore employment laws, quotas are set on the number of foreign workers that can be employed in low skill industries like retail or food outlets. These quotas are based on a ratio of a certain number of foreign workers to every local worker. Therefore, increasing the number of local workers allows an employer to employ more foreign workers who tend to be cheaper and more willing to work long hours.
Problems arise when the local workers are employed in name only. Some companies list local employees who never even turn up for work for 1 day. In one case, even deceased persons were listed as employees. To give credence to claims of having local employees, companies make periodic deposits into the phantom employees' Central Provident Fund accounts which ordinarily are compulsory for all employees, and are meant for retirement purposes.
Extensive investigations are required to unearth these phantom worker scams, including interviews with all employees in a suspected company and scrutiny of payroll accounts of the suspect company.
Blogshop woman jailed
Diana Koh, a young woman aged 21 years, cheated 37 buyers using her blogshop to sell branded accessories and handbags at bargain prices.
She collected over $1,000 but never delivered at all. For this, she was recently jailed for 3 months.
Cheating schemes using blogshops have started appearing on the crime scene here. A website - www.safeblogshopper.com provides a useful service in providing information about dishonest blogshop sellers.
She collected over $1,000 but never delivered at all. For this, she was recently jailed for 3 months.
Cheating schemes using blogshops have started appearing on the crime scene here. A website - www.safeblogshopper.com provides a useful service in providing information about dishonest blogshop sellers.
Sunday, July 19, 2009
Lawyer's fraud, partners' sorrow
Zulkifli Amin was a law firm partner who disappeared in November 2007 allegedly with more than $6 million of clients' monies missing. Often, law firms hold on to clients' monies pending payment to sellers and developers of property. For one transaction, the monies held by a law firm may be from ten thousand dollars to millions of dollars.
Unfortunately for Sadique Marican and Anand Kumar, they were partners in the same law firm as Zulkifli Amin. All partners are fully liable for partnersip debts. What are partnership debts? Debts incurred in the course of partnership business will fall into this category. It looks like monies taken by Zulkfli Amin as law firm partner will probably be found by the courts to be partnership debts.
A recent report stated that the 2 partners of Zulkfli Amin will have to pay about $380,000 taken by the latter as the monies were paid by our client to the law firm in the course of a property transaction.
It is understood that many law firms are now converting to Law Corporations or Limited Liability Partnerships because of risk of fraud by law partners. When these 2 types of vehicle are used, it is much more difficult to hold the other partners or directors (in the case of a Law Corporation) personally liable for any fraud of one partner.
Unfortunately for Sadique Marican and Anand Kumar, they were partners in the same law firm as Zulkifli Amin. All partners are fully liable for partnersip debts. What are partnership debts? Debts incurred in the course of partnership business will fall into this category. It looks like monies taken by Zulkfli Amin as law firm partner will probably be found by the courts to be partnership debts.
A recent report stated that the 2 partners of Zulkfli Amin will have to pay about $380,000 taken by the latter as the monies were paid by our client to the law firm in the course of a property transaction.
It is understood that many law firms are now converting to Law Corporations or Limited Liability Partnerships because of risk of fraud by law partners. When these 2 types of vehicle are used, it is much more difficult to hold the other partners or directors (in the case of a Law Corporation) personally liable for any fraud of one partner.
Thursday, July 16, 2009
Preventing employee fraud
Many cases of fraud involve insiders like employees who steal money or forge cheques.
How to prevent this? Overseas, it is common for employees in sensitive positions to be covered by fidelity bonds. These are in fact of form of insurance to cover losses from employee fraud. I understand that this is not common in Singapore. The Law Society has professional indemnity insurance which protects law firms against negligence suits and fraud by employees but in the past, it did not cover fraud by the partners of the law firm. Not sure about the situation now.
So what should you do as HR manager? One possiblity, which is also quite novel, is to require a potential employee to obtain a guarantor who is a close friend or relative. This guarantor will promise to be liable for losses caused by the employee's dishonesty. This measure will face some resistance from employees. Also, whether the guarantee works in the end depends on many factors, including the guarantor's financial capability at the time of the claim.
How to prevent this? Overseas, it is common for employees in sensitive positions to be covered by fidelity bonds. These are in fact of form of insurance to cover losses from employee fraud. I understand that this is not common in Singapore. The Law Society has professional indemnity insurance which protects law firms against negligence suits and fraud by employees but in the past, it did not cover fraud by the partners of the law firm. Not sure about the situation now.
So what should you do as HR manager? One possiblity, which is also quite novel, is to require a potential employee to obtain a guarantor who is a close friend or relative. This guarantor will promise to be liable for losses caused by the employee's dishonesty. This measure will face some resistance from employees. Also, whether the guarantee works in the end depends on many factors, including the guarantor's financial capability at the time of the claim.
Accountant jailed for embezzlement
Accountant Lim Seow Kok was jailed for 5 1/2 years for embezzlement of over $500,000. He admitted to 74 counts of forgery and criminal breach of trust.
He worked at 11 different organisations (including charities such as Hougang Care Centre) between 2007 and 2009. His method was to join the company for a while, forge cheques to withdraw his employer's monies and then to disappear.
It is unclear whether or not any employer could have stopped him before he took their money. Human Resources departments should, before hiring someone, check his employment history. If the person claims to have had no employment, perhaps a check of his CPF statements will confirm this. To preserve the employee's privacy, the non-essential parts of the statement can be covered up before the statement is shown to the company.
Organisations should also take good care of their cheque books. Although it could be argued that forged cheques are invalid and the banks should bear the loss, avoiding the costs and uncertainty of legal disputes is far preferable.
He worked at 11 different organisations (including charities such as Hougang Care Centre) between 2007 and 2009. His method was to join the company for a while, forge cheques to withdraw his employer's monies and then to disappear.
It is unclear whether or not any employer could have stopped him before he took their money. Human Resources departments should, before hiring someone, check his employment history. If the person claims to have had no employment, perhaps a check of his CPF statements will confirm this. To preserve the employee's privacy, the non-essential parts of the statement can be covered up before the statement is shown to the company.
Organisations should also take good care of their cheque books. Although it could be argued that forged cheques are invalid and the banks should bear the loss, avoiding the costs and uncertainty of legal disputes is far preferable.
Car importer jailed and fined
Tay Kien Chuan, parallel car importer, was fined $10.8 million for tax evasion. He under-declared the value of over 2,500 cars, thus resulting in cheating the government of taxes such as import duties and Goods and Sales Tax. These taxes are based on the Open Market Values (OMVs) of the cars, which is the cost of the car overseas, plus the cost of insurance and freight to Singapore. He was sentenced to 42 weeks jail, in addition, for furnishing false information to Customs Officers regarding imports from the United Kingdom. As for his huge fine, as he is unable to pay it, he will serve 354 weeks jail in default (about 7 years).
Reports suggest that Tay was caught because he used electronic means to communicate to his Japanese suppliers to tell them to under-declare the value of the imported cars., and these messages were found by investigators He had arranged with his suppliers to meet them in person to pay them in cash for the under-declared amounts.
Others also convicted for similar offences were Tan Chi Beng and Toh Chee Wee.
In some of these cases, the companies involved were also punished by the courts.
Reports suggest that Tay was caught because he used electronic means to communicate to his Japanese suppliers to tell them to under-declare the value of the imported cars., and these messages were found by investigators He had arranged with his suppliers to meet them in person to pay them in cash for the under-declared amounts.
Others also convicted for similar offences were Tan Chi Beng and Toh Chee Wee.
In some of these cases, the companies involved were also punished by the courts.
Credit card holders' response
The previous post referred to what we can do as consumers regarding loss credit cards and liability for all charges incurred on them.
Another step that might assist sometimes is to ask for full information regarding the use of the stolen cards. What we might want to find out is whether the retailers whose customers used the stolen cards have followed proper procedure. Some examples where this is not done -
a) the name on the card is obviously female but the only person using the card is a male;
b) the photo on the card (I believe Citibank and some other banks issued such cards) obviously does not match the spender;
c) the signature on the credit card slip is totally unlike that found on the back of the card;
An argument can be made that the retailer has been negligent, and perhaps should bear some of the loss. Consult your lawyer especially if the loss is major.
Another step that might assist sometimes is to ask for full information regarding the use of the stolen cards. What we might want to find out is whether the retailers whose customers used the stolen cards have followed proper procedure. Some examples where this is not done -
a) the name on the card is obviously female but the only person using the card is a male;
b) the photo on the card (I believe Citibank and some other banks issued such cards) obviously does not match the spender;
c) the signature on the credit card slip is totally unlike that found on the back of the card;
An argument can be made that the retailer has been negligent, and perhaps should bear some of the loss. Consult your lawyer especially if the loss is major.
$17000 shock for credit card owner
Ms Tan Shock Ling had her credit cards stolen and ended up with a bill for $17,100. Her card was used by the thieves to buy luxury goods such as 3 Rolex watches.
Under the terms of agreement with the various card issuers, UOB, Royal Bank of Scotland, and Citibank, she was liable for all losses before she reported the loss of her card. This is a matter of contract law - she agreed to it and she now has to bear the losses.
What can we do as consumers? We should pay attention to the loss provisions of the credit card issuers. We should think carefully about taking the credit cards issued by banks with harsh loss provisions on overseas trips where the risks are higher. Even better, support those issuers who protection limits for loss cards and don't do business with those issuers who have no loss limits.
I understand that American Express has a low loss limit. If any reader knows of other issuers with loss limits, do let me know and I will share this knowledge on this blog.
Card issuers will of course claim that having a loss limit will in the long term lead to all customers sharing the losses of careless customers. To some extent, it is true but perhaps, the card issuers should learn from the insurance companies. All customers should have loss limits at the start but after the loss of the first card, then no loss limits are offered to them. Furthermore, all customers when applying for cards will be queried on their loss history. This would be fairer to all parties concerned.
Under the terms of agreement with the various card issuers, UOB, Royal Bank of Scotland, and Citibank, she was liable for all losses before she reported the loss of her card. This is a matter of contract law - she agreed to it and she now has to bear the losses.
What can we do as consumers? We should pay attention to the loss provisions of the credit card issuers. We should think carefully about taking the credit cards issued by banks with harsh loss provisions on overseas trips where the risks are higher. Even better, support those issuers who protection limits for loss cards and don't do business with those issuers who have no loss limits.
I understand that American Express has a low loss limit. If any reader knows of other issuers with loss limits, do let me know and I will share this knowledge on this blog.
Card issuers will of course claim that having a loss limit will in the long term lead to all customers sharing the losses of careless customers. To some extent, it is true but perhaps, the card issuers should learn from the insurance companies. All customers should have loss limits at the start but after the loss of the first card, then no loss limits are offered to them. Furthermore, all customers when applying for cards will be queried on their loss history. This would be fairer to all parties concerned.
Sunday, July 5, 2009
Techniques to stop casino fraud
Casinos are well known places for carrying out money laundering and major fraud because of the large sums of money involved in their operations.
In Singapore, with a major casinos set to open soon, a special body, the Casino Regulatory Authority, has been sent up to police the 2 casions to ensure no fraud and to ensure that the casinos are not linked to organised crime.
The Authority has recently announced some measures to stop fraud at the casino. These are -
a) the destruction of cards used in card games after their use in one game - to ensure that players do not mark the cards and thus cheat the casino or other players;
b) mechanical shuffling of cards - magicians are well known for sleight of hand tricks. In fact, anyone can master them with practice. To stop such moves, cards used in games like baccarat will be shuffled by machines, instead of manually; and
c) all jackpot payouts will be in the form of coupons and not coins or tokens. The coupons will be bought to the cashier for payment. This is probably to prevent one player from transferring large amounts of coins or tokens to another person for money laundering purposes. Depending on the information stated on the coupon, money laundering may be made much harder. However, from the customer experience point of view, there is nothing like the sound of thousands of coins falling into a winner's tray to create excitement. Maybe there should recorded sounds to simulate this.
In Singapore, with a major casinos set to open soon, a special body, the Casino Regulatory Authority, has been sent up to police the 2 casions to ensure no fraud and to ensure that the casinos are not linked to organised crime.
The Authority has recently announced some measures to stop fraud at the casino. These are -
a) the destruction of cards used in card games after their use in one game - to ensure that players do not mark the cards and thus cheat the casino or other players;
b) mechanical shuffling of cards - magicians are well known for sleight of hand tricks. In fact, anyone can master them with practice. To stop such moves, cards used in games like baccarat will be shuffled by machines, instead of manually; and
c) all jackpot payouts will be in the form of coupons and not coins or tokens. The coupons will be bought to the cashier for payment. This is probably to prevent one player from transferring large amounts of coins or tokens to another person for money laundering purposes. Depending on the information stated on the coupon, money laundering may be made much harder. However, from the customer experience point of view, there is nothing like the sound of thousands of coins falling into a winner's tray to create excitement. Maybe there should recorded sounds to simulate this.
Fall guys and the law
The term "tua pek kong" (actually the name of a Chinese god) is local jargon for a fall guy - a person who takes the rap for another's offence.
Under Singapore law, most cases of paying someone else to take the fall for your offence is caught by the laws relating to corruption under the Prevention of Corruption Act. Another alternative that may be used, but still is rarely seen, is the offence of perverting the course of justice under section 204A of the Penal Code. This is a comparatively new section. It appears that looking at Part XI (False Evidence and Offences against Public Justice) of the Penal Code under which section 204A is found, that this section is meant to be a catch-all or miscellaneous section for tactics that are not clearly offences under the other sections in this part.
Wikipedia states that perverting the course of justice under English law covers 3 types of acts - threatening a witness or juror, intimidating a witness or juror, and fabricating or disposing of evidence. It appears that most of these would be covered by existing Singapore provisions. The Ministry of Home Affairs takes the view that the new section covers bribery of witnesses before trial which may not be caught by existing provisions.
Under Singapore law, most cases of paying someone else to take the fall for your offence is caught by the laws relating to corruption under the Prevention of Corruption Act. Another alternative that may be used, but still is rarely seen, is the offence of perverting the course of justice under section 204A of the Penal Code. This is a comparatively new section. It appears that looking at Part XI (False Evidence and Offences against Public Justice) of the Penal Code under which section 204A is found, that this section is meant to be a catch-all or miscellaneous section for tactics that are not clearly offences under the other sections in this part.
Wikipedia states that perverting the course of justice under English law covers 3 types of acts - threatening a witness or juror, intimidating a witness or juror, and fabricating or disposing of evidence. It appears that most of these would be covered by existing Singapore provisions. The Ministry of Home Affairs takes the view that the new section covers bribery of witnesses before trial which may not be caught by existing provisions.
Jail for lying to get permanent residence
The tag "government fraud", as used here, refers to cases or issues relating to making false statement to the government or regulatory authorities.
A China national, Lin Shuliang, was recently jailed for 2 weeks for lying about his educational qualifications in his application to obtain permanent residency. He had used fake documents showing that he had graduated from a China Middle School when he applied to the Immigration and Checkpoints Authority.
Despite his lack of education, he is the owner of 2 building companies who are involved in some 10 construction projects. He is possible that his sentence will lead to his permanent residency status being revoked.
A China national, Lin Shuliang, was recently jailed for 2 weeks for lying about his educational qualifications in his application to obtain permanent residency. He had used fake documents showing that he had graduated from a China Middle School when he applied to the Immigration and Checkpoints Authority.
Despite his lack of education, he is the owner of 2 building companies who are involved in some 10 construction projects. He is possible that his sentence will lead to his permanent residency status being revoked.
Fake performance bonds
Jasons Lim Hua Tong, a former insurance agent, who is alleged to have run Love Foundation while a bankrupt, was jailed 8 months for misleading a client,Dynasty Industrial and Construction , into thinking that he had obtained a performance bond for it. He was jailed for 8 months for the offence. He had faxed a quotation to his client showing that the performance bond would be issued by Mayban Assurance when this was not true. He took $7,000+ for the bond fee and another $2,000+ for its renewal. However, he argued in court that the money that he took was still available to repay the client. However, the court took into account that he abused the client's trust and took steps to fabricate documents.
Performance bonds are issued usually by banks, insurance or finance companies. They are contain promises to pay, usually on demand. These bonds allow the named party on the bond (the beneficiary) to obtain cash more or less immediately. The function of such bonds is to allow the beneficiary to obtain compensation for contract breaches without having to spend time and money suing in court. These type of bonds are used in large scale projects such as construction jobs or major information technology contracts. Often, the bond amount is for 10% of the contract sum.
It should be noted that Lim deceived not only his client but also the customer of the client who required the bond for the latter's protection.
Performance bonds are issued usually by banks, insurance or finance companies. They are contain promises to pay, usually on demand. These bonds allow the named party on the bond (the beneficiary) to obtain cash more or less immediately. The function of such bonds is to allow the beneficiary to obtain compensation for contract breaches without having to spend time and money suing in court. These type of bonds are used in large scale projects such as construction jobs or major information technology contracts. Often, the bond amount is for 10% of the contract sum.
It should be noted that Lim deceived not only his client but also the customer of the client who required the bond for the latter's protection.
Fake vouchers used to evade tax
As readers may know, tax evasion is illegal but tax avoidance is not. Tax avoidance refers to tax planning, while tax evasion refers to dishonest statements and documents and dishonest concealment of income.
Seah Boon Huat, a director of a construction company, was recently sent to jail for 8 months for tax evasion. He had created fictitious payment vouchers amounting to over $1 million. These were used to show that his company, Project Building Construction, had made these payments to sub-contractors. The company was also fined $60,000 and ordered to pay a penalty of over $1 million.
As for Seah, his financial penalty was the same, and all this for a tax saving of $265,000.
Seah Boon Huat, a director of a construction company, was recently sent to jail for 8 months for tax evasion. He had created fictitious payment vouchers amounting to over $1 million. These were used to show that his company, Project Building Construction, had made these payments to sub-contractors. The company was also fined $60,000 and ordered to pay a penalty of over $1 million.
As for Seah, his financial penalty was the same, and all this for a tax saving of $265,000.
Tuesday, June 30, 2009
Chia Teck Leng, APB and the banks 1
As previously mentioned, Chia Teck Leng, hold the record for the longest prison sentence for commercial crime and for the biggest losses caused by fraud.
The facts show that he approached various foreign banks operating in Singapore, in his capacity as finance manager of major brewer, Asia Pacific Breweries, (APB) for loans totalling $117 million for his employer. He managed to divert the loans into accounts controlled by him.These loans were never approved by the board of directors of APB and the board denied all knowledge of them.
4 of the 5 banks started lawsuits against APB in the Singapore High Court. These were -
Germany's Bayerische Hypo-und Vereinsbank (HVB) and Sweden's Skandinaviska Enskilda Banken (SEB) and Japanese banks Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation.
SEB is seeking US$25 million, a lawyer for the Scandinavian bank said. Mizuho was seeking US$8 million and Sumitomo Mitsui S$10.3 million. HVB, a unit of Unicredit, is claiming US$32 million. It is believed that their claims were based on arguments relating to estoppel, agency and apparent authority.
The Japanese banks discontinued their claims at the start of the trial. The claims by the other banks have not been decided by the court.
The facts show that he approached various foreign banks operating in Singapore, in his capacity as finance manager of major brewer, Asia Pacific Breweries, (APB) for loans totalling $117 million for his employer. He managed to divert the loans into accounts controlled by him.These loans were never approved by the board of directors of APB and the board denied all knowledge of them.
4 of the 5 banks started lawsuits against APB in the Singapore High Court. These were -
Germany's Bayerische Hypo-und Vereinsbank (HVB) and Sweden's Skandinaviska Enskilda Banken (SEB) and Japanese banks Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation.
SEB is seeking US$25 million, a lawyer for the Scandinavian bank said. Mizuho was seeking US$8 million and Sumitomo Mitsui S$10.3 million. HVB, a unit of Unicredit, is claiming US$32 million. It is believed that their claims were based on arguments relating to estoppel, agency and apparent authority.
The Japanese banks discontinued their claims at the start of the trial. The claims by the other banks have not been decided by the court.
Monday, June 29, 2009
Lawsuits against government and regulators
When massive fraud is committed eg in the Madoff case, the victims look for parties to sue. One set of possible defendants are the governmental and quasi-governmental regulators. In the Madoff case, some investors are looking to sue the Securities and Exchanges Commission (SEC), which as the name suggests, is supposed to regulate the securities industry.
In the United Kingdom, there have been lawsuits against the financial regulator the Bank of England although I am not aware of any successful lawsuits. The financial regulator is England is now the Financial Services Authority.
In Singapore, relevant regulators are the Ministry of Finance and perhaps the Singapore Exchange (SGX). I have not done any research on this matter, but my preliminary feeling is that there is no reason why the regulators cannot be sued if they are negligent in the discharge of their statutory or common law duties of care. In each case, it is important to note the scope of responsibility of the relevant authority as well as the areas in which they are alleged to have been deficient as regards the standard of care expected. It should be noted it is not possible to spot in advance all cases of fraud. However, in some cases, the fraud is supposedly apparent from the start.
In the Madoff case, there are allegations that there were red flags - obvious warning signs - for example, the audit firm supposedly auditing Madoff's multi-billion dollar operations were a small firm with only a handful of staff in total. Many investments funds invested with Madoff without doing due diligence and they are facing lawsuits from their investors.
In the United Kingdom, there have been lawsuits against the financial regulator the Bank of England although I am not aware of any successful lawsuits. The financial regulator is England is now the Financial Services Authority.
In Singapore, relevant regulators are the Ministry of Finance and perhaps the Singapore Exchange (SGX). I have not done any research on this matter, but my preliminary feeling is that there is no reason why the regulators cannot be sued if they are negligent in the discharge of their statutory or common law duties of care. In each case, it is important to note the scope of responsibility of the relevant authority as well as the areas in which they are alleged to have been deficient as regards the standard of care expected. It should be noted it is not possible to spot in advance all cases of fraud. However, in some cases, the fraud is supposedly apparent from the start.
In the Madoff case, there are allegations that there were red flags - obvious warning signs - for example, the audit firm supposedly auditing Madoff's multi-billion dollar operations were a small firm with only a handful of staff in total. Many investments funds invested with Madoff without doing due diligence and they are facing lawsuits from their investors.
The Madoff case
The news is out - Bernie Madoff, who probably created the world's biggest Ponzi scheme, has been sentenced to 150 years jail. It is unlikely that he would even serve 1/5 of that sentence, but with advances in medical science, you never know how long human life expectancies will increase.
Madoff's sentence for his fraud involving perhaps only US$13 billion in monies actually invested with his funds (not US$50 billion claimed by him) is the longest ever awarded by a US court.
In Singapore, on the other hand, the records for the longest sentence for commercial crime and the longest non-life sentence was formerly found in the case of SIA ex-employee Teo Cheng Kiat who was sentenced to 24 years jail. These records are now held by Chia Teck Leng who swindled banks of $117 million while he was finance manager of Asia Pacific Breweries. He was sentenced to 42 years jail in 2004.
If he behaves himself, he can get 1/3 time off for good behaviour, meaning that his sentence might only be 28 years, and he could be out in the year 2032.
Madoff's sentence for his fraud involving perhaps only US$13 billion in monies actually invested with his funds (not US$50 billion claimed by him) is the longest ever awarded by a US court.
In Singapore, on the other hand, the records for the longest sentence for commercial crime and the longest non-life sentence was formerly found in the case of SIA ex-employee Teo Cheng Kiat who was sentenced to 24 years jail. These records are now held by Chia Teck Leng who swindled banks of $117 million while he was finance manager of Asia Pacific Breweries. He was sentenced to 42 years jail in 2004.
If he behaves himself, he can get 1/3 time off for good behaviour, meaning that his sentence might only be 28 years, and he could be out in the year 2032.
Thursday, June 25, 2009
Motivations for fraud
Fraud is motivated by many reasons. Why should a acounting professional or a fraud investigator be concerned with the motivation? A criminal's motivations may be important for the following reasons -
1. pre-fraud - when hiring staff, it might be possible to sieve out those with the propensity to commit fraud;
2. fraud occurence - looking for red flags such as an employee's gambling habits, might help detect or prevent fraud
3. investigation - understanding fraud motivation might assist in questioning of the suspect or tracing the money flow
4. trial - the motivation may have some effect on the sentencing meted out by the court but this is not common.
The motivations for fraud include -
a) financial - this could either be pure greed, or desperation when a person encounters financial problems; (lawyer David Rasif was probably one of the few lawyer crooks who stole not because of financial pressure but because of sure greed)
b) revenge - a desire to punish the victim for some real or imagined wrong;
c) vindication - there is some evidence that SIA clerk Teo Cheng Kiat was partly motivated to show his employer that he was smarter than it was.
1. pre-fraud - when hiring staff, it might be possible to sieve out those with the propensity to commit fraud;
2. fraud occurence - looking for red flags such as an employee's gambling habits, might help detect or prevent fraud
3. investigation - understanding fraud motivation might assist in questioning of the suspect or tracing the money flow
4. trial - the motivation may have some effect on the sentencing meted out by the court but this is not common.
The motivations for fraud include -
a) financial - this could either be pure greed, or desperation when a person encounters financial problems; (lawyer David Rasif was probably one of the few lawyer crooks who stole not because of financial pressure but because of sure greed)
b) revenge - a desire to punish the victim for some real or imagined wrong;
c) vindication - there is some evidence that SIA clerk Teo Cheng Kiat was partly motivated to show his employer that he was smarter than it was.
Wednesday, June 24, 2009
Fraud and funny numbers
I am not a mathematician but a mathematical law is supposed to help spot fraud. Known as Benford's Law, it was referred to in the crime investigation TV series "Numb3rs" in the episode "The Running Man".
Apparently, in many sets of numerical data, the first number is not divided equally among the digits 1-9. The number 1 is expected to be present 11% of the time as the first digit but under Benford's Law, "the first digit is 1 almost one third of the time, and larger digits occur as the leading digit with lower and lower frequency, to the point where 9 as a first digit occurs less than one time in twenty."
This mathematical principle is important in fraud investigations as it may reveal fictitious data eg made-up daily sales figures when in fact no sales have been made. A criminal when creating fictitious sales figures may well try to distribute the first digits evenly about the various numbers but Benford's Law may show suggest that the figures are made up.
For more details about this mathematical law, see http://en.wikipedia.org/wiki/Benford%27s_law
Apparently, in many sets of numerical data, the first number is not divided equally among the digits 1-9. The number 1 is expected to be present 11% of the time as the first digit but under Benford's Law, "the first digit is 1 almost one third of the time, and larger digits occur as the leading digit with lower and lower frequency, to the point where 9 as a first digit occurs less than one time in twenty."
This mathematical principle is important in fraud investigations as it may reveal fictitious data eg made-up daily sales figures when in fact no sales have been made. A criminal when creating fictitious sales figures may well try to distribute the first digits evenly about the various numbers but Benford's Law may show suggest that the figures are made up.
For more details about this mathematical law, see http://en.wikipedia.org/wiki/Benford%27s_law
Defamation and auditors 2
Another defence that is sometimes important to investigating auditors of fraud is found in section 8 of the Defamation Act.
Normally, the defence of justification to a defamation lawsuit requires that the defamation is literally true. For example, if the auditor makes the statement that the finance manager of a company stole money ten times from the company, but the manager only stole money 9 times, then the defence of justification would fail.
Under section 8 of the Defamation Act, the defence of justification will still succeed even if certain allegations are untrue provided that considering the rest of the true allegations, the false allegations do not materially injure the other party's reputation. There is probably little difference from the defamatory point of view whether a person stole money 9 times or 10 times, so the defence is likely to succeed.
Normally, the defence of justification to a defamation lawsuit requires that the defamation is literally true. For example, if the auditor makes the statement that the finance manager of a company stole money ten times from the company, but the manager only stole money 9 times, then the defence of justification would fail.
Under section 8 of the Defamation Act, the defence of justification will still succeed even if certain allegations are untrue provided that considering the rest of the true allegations, the false allegations do not materially injure the other party's reputation. There is probably little difference from the defamatory point of view whether a person stole money 9 times or 10 times, so the defence is likely to succeed.
Defamation and auditors
As mentioned previously, section 208 of the Companies provides auditors with qualified privilege with respect to defamation lawsuits relating to the audit report.
Defamation occurs where a oral or written statement lowers the reputation of a person. The defamation may occur expressly or impliedly. For example, a statement like "the financial manager embezzled the money" is expressly defamatory while the statement "the clerk was in charge of the missing funds" is impliedly defamatory.
At common law, an auditor also has qualified privilege. This privilege is important when fraud investigations are being carried out. Very often, preliminary statements and conclusons implicating certain person or persons will be made by the investigating auditors before all the evidence is available. Such statements could well turn out to be incorrect.
Qualified privilege will protect the auditors for honest mistakes. They must ensure that the statements are made to the correct persons - those who have an interest in receiving the information or have a duty to receive it, for example, statements about the fraud made to the directors of the victim company or to the authorities. However, statements made to the spouse of the suspected criminal will probably not be privileged.
Defamation occurs where a oral or written statement lowers the reputation of a person. The defamation may occur expressly or impliedly. For example, a statement like "the financial manager embezzled the money" is expressly defamatory while the statement "the clerk was in charge of the missing funds" is impliedly defamatory.
At common law, an auditor also has qualified privilege. This privilege is important when fraud investigations are being carried out. Very often, preliminary statements and conclusons implicating certain person or persons will be made by the investigating auditors before all the evidence is available. Such statements could well turn out to be incorrect.
Qualified privilege will protect the auditors for honest mistakes. They must ensure that the statements are made to the correct persons - those who have an interest in receiving the information or have a duty to receive it, for example, statements about the fraud made to the directors of the victim company or to the authorities. However, statements made to the spouse of the suspected criminal will probably not be privileged.
Tuesday, June 23, 2009
True and fair view - what it means
Financial statements are required to show a true and fair view. But what do the words "true and fair view" mean?
There is no definition in the Singapore Companies Act. Neither are the words defined in the United Kingdom's companies legislation. The relevant accounting standards bodies have also not defined these words.
Queen's Counsels Mary Arden and Leonard Hoffman (as he then was) in England (who are senior well respected lawyers) stated that the words require that the accounts will not be true and fair unless the information in them is sufficient both in quantity and quality to satisfy the reasonable expectations of readers to whom the accounts are addressed. Unfortunately, these words do not assist in any meaningful way.
In the English case of Lloyd Cheyham v Littlejohn, the judge stated that compliance with the rules of the relevant accounting standards authority is strong evidence as to the proper standard to be adopted.
This case was referred to in the local case of JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (a firm) [2007] 4 SLR 460; [2007] SGCA 40
(for a discussion of this case from the viewpoint of the law of negligence, please see http://professionalnegligencesg.blogspot.com/2009/04/gaelic-inns-jsi-shipping-2-contributory.html)
There is no definition in the Singapore Companies Act. Neither are the words defined in the United Kingdom's companies legislation. The relevant accounting standards bodies have also not defined these words.
Queen's Counsels Mary Arden and Leonard Hoffman (as he then was) in England (who are senior well respected lawyers) stated that the words require that the accounts will not be true and fair unless the information in them is sufficient both in quantity and quality to satisfy the reasonable expectations of readers to whom the accounts are addressed. Unfortunately, these words do not assist in any meaningful way.
In the English case of Lloyd Cheyham v Littlejohn, the judge stated that compliance with the rules of the relevant accounting standards authority is strong evidence as to the proper standard to be adopted.
This case was referred to in the local case of JSI Shipping (S) Pte Ltd v Teofoongwonglcloong (a firm) [2007] 4 SLR 460; [2007] SGCA 40
(for a discussion of this case from the viewpoint of the law of negligence, please see http://professionalnegligencesg.blogspot.com/2009/04/gaelic-inns-jsi-shipping-2-contributory.html)
True and fair views in the accounts and financial statement
A company's financial statements are required to show a true and fair view. The company's external auditors are also supposed to express an opinion as to whether the accounts do in fact show such a view. If the accounts appear to be in order, then an unqualified opinion is given.
If the accounts do not show a true and fair view, the auditors are supposed to render an adverse opinion. This is used where the auditors are reasonably sure that the accounts are incorrect. Where the information and documents available are insufficient for the auditors to ascertain whether the accounts are correct or incorrect, then the auditors are required to express an disclaimer opinion.
If the accounts do not show a true and fair view, the auditors are supposed to render an adverse opinion. This is used where the auditors are reasonably sure that the accounts are incorrect. Where the information and documents available are insufficient for the auditors to ascertain whether the accounts are correct or incorrect, then the auditors are required to express an disclaimer opinion.
To protect the auditors from defamation lawsuits in relation to such opinions, section 208 of the Companies Act provides them with qualified privilege. This means that unless there is malice or some improper motive of the auditors in making incorrect statements, the auditors will win any defamation lawsuits against them.
Monday, June 22, 2009
The Informatics affair 2
Continued from previous post.
Some of Infomatics' top executives were charged in court with the creative accounting practices used by IGSPL (Informatics Group Singapore Pte Ltd). They were Wong Tai and Ong Boon Kheng.
Wong Tai, Chairman and non-executive director of IHL Ltd, was charged under the Securities and Futures Act with 2 charges of making false statements by misstating the company's profits in 2 quarterly income statements by by $4.18 million and $0.84 million. He pleaded guilty to 2 charges, with 2 others to be taken into consideration.
The District Court considering facts that he was a first time offender and was not personally involved in theSome of Infomatics' top executives were charged in court with the creative accounting practices used by IGSPL (Informatics Group Singapore Pte Ltd). They were Wong Tai and Ong Boon Kheng.
Wong Tai, Chairman and non-executive director of IHL Ltd, was charged under the Securities and Futures Act with 2 charges of making false statements by misstating the company's profits in 2 quarterly income statements by by $4.18 million and $0.84 million. He pleaded guilty to 2 charges, with 2 others to be taken into consideration.
preparation of the financial statements fined him $120,000 on each of the charges.
Ong Boon Kheng, Chief Executive Officer of Informatics at the relevant time, claimed trial. He was charged with 4 counts, 3 of which related to false accounting in the first, second and third quarters 2003 financial statements of the company while the 4th related to a statement made to the Singapore Exchange, SGX.
Tan Cheng Han, specialist district judge (and also Dean of the Faculty of Law, National University of Singapore) sentenced him to a total fine of $445,000.
Ong was also ordered to pay prosecution costs of $45,400 for the 28 day trial.
The sentences were upheld by High Court judge Tay Yong Kwang on appeal.
The above convictions are probably sufficient to disqualify the above 2 directors from acting as directors under the Companies Act.
The Informatics affair 1
Informatics Holdings Ltd is a listed company which is one of the largest education providers in Singapore. One of its subsidiaries is Informatics Groups Singapore Pte Ltd (IGSPL). False accounting issues in relation to IGSPL's 2003 financial statements involved approved in principle revenue (AIP revenue) and international student recruitment revenue (ISRR).
AIP revenue involved student fees from local students. IGSPL has standing arrangements with financial institutions to provide loans to students for to finance their studies. It is not totally clear but it appears that the students only signed up with the school on the basis that their student fees would be paid through loans arranged by the school. The school here recogised revenue from student fees when the student was registered, rather than when approval for the student loans were obtained.
ISRR is revenue from foreign students studying in Singapore. Under Singapore law, each such student can only commence his studies after approval from the government body, Immigration and Checkpoints Authority (ICA). However, IGSPL recognised the revenue from these students even before approval had been obtained fro ICA. This was based on its past experience that
The above 2 accouting procedures adopted by IGSPL contradict the accounting principle that revenue from services should only be recognised when the service has been rendered to the customer.
Saturday, June 20, 2009
Bank officer's fraud
Former bank officer, Ms Lynette Ng Pei Ling, was sentenced to 3 months for her offence of forgery in July 2007. As a relationship manager with United Overseas Bank, she had forged a letter purportedly from the bank guaranteeing a customer Mr Lok Kok Seng 10% returns per annum for 4 years. She made full restitution, an important fact in the court sentencing decision.
She later jointed HSBC but in court, said that she had lost her job.
She was supposed to obtain a $1,440 commission from the sale of a $150,000 investment to Mr Lok.
She later jointed HSBC but in court, said that she had lost her job.
She was supposed to obtain a $1,440 commission from the sale of a $150,000 investment to Mr Lok.
Thursday, June 18, 2009
Punishment for fraud
The courts take into account many factors in sentencing including the degree of planning, the amount of money involved and the restitution made (in other words, whether the criminal has repaid the victim for the loss).
One interesting fact is that if you want to steal a million, from the punishment point of view, it is better to take it all at one go rather than take the amount through several actions. In the first case, it is sometimes possible to argue that it was done in a moment of weakness and the court might be slightly lenient. In the second situation, with repeated offences, the court will note that the acts were done with deliberation and if they took place over a periood of time, the sentence may well be on the high side.
One interesting fact is that if you want to steal a million, from the punishment point of view, it is better to take it all at one go rather than take the amount through several actions. In the first case, it is sometimes possible to argue that it was done in a moment of weakness and the court might be slightly lenient. In the second situation, with repeated offences, the court will note that the acts were done with deliberation and if they took place over a periood of time, the sentence may well be on the high side.
Tuesday, June 9, 2009
Digging through rubbish
One method used by business competitors to steal trade secrets is by digging through your trash or rubbish bin.
Is this allowed under the law? What can you do about such dirty tricks?
One possible response is to report to the police and claim that it is theft under the Penal Code. However, since a dishonest intention is required, it is unlikely that the police will take action. Of course, if you wish, your lawyer can help you start a private prosecution for theft.
A civil lawsuit agaisnt the rubbish takes is also possible in order to recover damages and perhaps obtain an injunction against the use of any information obtained.
An interesting case which did not come to a firm conclusion about the legal effect of what is sometimes called dumpster diving is
Obegi Melissa and Others v Vestwin Trading Pte Ltd and Another
[2008] SGCA 4.
Is this allowed under the law? What can you do about such dirty tricks?
One possible response is to report to the police and claim that it is theft under the Penal Code. However, since a dishonest intention is required, it is unlikely that the police will take action. Of course, if you wish, your lawyer can help you start a private prosecution for theft.
A civil lawsuit agaisnt the rubbish takes is also possible in order to recover damages and perhaps obtain an injunction against the use of any information obtained.
An interesting case which did not come to a firm conclusion about the legal effect of what is sometimes called dumpster diving is
Obegi Melissa and Others v Vestwin Trading Pte Ltd and Another
[2008] SGCA 4.
Questioning employees suspected of fraud
What is the legal position in the following situation - when you question your subordinate employee suspected of fraud and he refuses to answer. Later, when he is sued in court, he gives an answer which you feel he should have mentioned to you earlier.
Under section 116 of the Evidence Act, the court is allowed to draw adverse inferences. The court will have to take into account all facts including any excuses and explanations from the employee about his earlier failure to answer. If it thinks fit, the court can presume that the employee is lying in court and his answer is something concocted by him recently. If on the other hand, the employee gives a good explanation which the court believes, then his failure to answer will not be held against him.
There are no hard and fast rules as to the court's response in such situations but the court is expected to take into account normal human responses in such situations.
Under section 116 of the Evidence Act, the court is allowed to draw adverse inferences. The court will have to take into account all facts including any excuses and explanations from the employee about his earlier failure to answer. If it thinks fit, the court can presume that the employee is lying in court and his answer is something concocted by him recently. If on the other hand, the employee gives a good explanation which the court believes, then his failure to answer will not be held against him.
There are no hard and fast rules as to the court's response in such situations but the court is expected to take into account normal human responses in such situations.
Monday, June 1, 2009
Lawyers and clients monies
Lawyers are often entrusted with large sums of their clients' monies which may be held by the lawyers for later use, eg, pending completion of a major business deal or a payment deadline under a property transaction.
The law has strict rules on dealing with these sums held by the lawyers. They are required to bank the monies into a special account called the Client Account. This is a separate account from the law firm's own bank account which is called the Office Account. The Office Account is used to pay for expenses of the firm such as salaries, rent, etc. Since it is the lawyers' own monies, they are free to agree on how to use it.
On the other hand, the Client Account is a trust account. Monies there are only to be used according to the client's instructions. Monies of one client also cannot be used for another client's purposes. If the money is misused by the lawyers, the criminal offence of criminal breach of trust will be committed with jail sentences being almost always being the punishment. If the lawyer is honest, then even if he becomes bankrupt, the monies will be safe in the Client Account, and cannot be taken by the lawyer's personal creditors.
The law has strict rules on dealing with these sums held by the lawyers. They are required to bank the monies into a special account called the Client Account. This is a separate account from the law firm's own bank account which is called the Office Account. The Office Account is used to pay for expenses of the firm such as salaries, rent, etc. Since it is the lawyers' own monies, they are free to agree on how to use it.
On the other hand, the Client Account is a trust account. Monies there are only to be used according to the client's instructions. Monies of one client also cannot be used for another client's purposes. If the money is misused by the lawyers, the criminal offence of criminal breach of trust will be committed with jail sentences being almost always being the punishment. If the lawyer is honest, then even if he becomes bankrupt, the monies will be safe in the Client Account, and cannot be taken by the lawyer's personal creditors.
Wednesday, May 27, 2009
Jail for commercial/industrial espionage
Charles Tan Chye Guan (Managing Director of a company called “du Lexbuild International Pte Ltd) is probably the first man in Singapore to be sent to jail for 3 weeks and fined $5,000, for a commercial or industrial espionage case. In this particular case, he had downloaded a confidential computer file from a notebook computer belonging to the DSTA into his thumbdrive. Defence Science and Technology Agency or DSTA is the consulting arm of the Ministry of Defence.
By doing this unauthorised downloading, the accused committed an offence under section 3(1) of the Computer Misuse Act. The key relevant words of this sub-section are
"any person who knowingly causes a computer to perform any function for the purpose of securing access without authority to any program or data held in any computer".
He pleaded guilty to the offence and was sentenced by the Subordinate Courts. He then appealed to the High Court regarding his sentence but Justice Choo Han Teck dismissed his appeal. Among the facts justifying his jail sentence when previous offenders who were former employees of Citibank were only fined, were the information related to a tender for a contract to build the SAF’s Munitions Storage Container System (“MSCS”) (in other words, an ammunition rack) and this information was "not devoid of military signifance" (to quote the judge).
It is possible that the accused could also have been charged under section 9 of the Computer Misuse Act which deals with protected computers which includes computers containing national defence information. The punishment for this could be up to 20 years jail.
One important point to note is that if the accused had seen hard copy of the relevant information and had used a handphone camera to take pictures of it, it is unlikely that he would have committed any criminal offence, although an offence under the Copyright Act might be a remote possibility.
By doing this unauthorised downloading, the accused committed an offence under section 3(1) of the Computer Misuse Act. The key relevant words of this sub-section are
"any person who knowingly causes a computer to perform any function for the purpose of securing access without authority to any program or data held in any computer".
He pleaded guilty to the offence and was sentenced by the Subordinate Courts. He then appealed to the High Court regarding his sentence but Justice Choo Han Teck dismissed his appeal. Among the facts justifying his jail sentence when previous offenders who were former employees of Citibank were only fined, were the information related to a tender for a contract to build the SAF’s Munitions Storage Container System (“MSCS”) (in other words, an ammunition rack) and this information was "not devoid of military signifance" (to quote the judge).
It is possible that the accused could also have been charged under section 9 of the Computer Misuse Act which deals with protected computers which includes computers containing national defence information. The punishment for this could be up to 20 years jail.
One important point to note is that if the accused had seen hard copy of the relevant information and had used a handphone camera to take pictures of it, it is unlikely that he would have committed any criminal offence, although an offence under the Copyright Act might be a remote possibility.
JEL Corporation - charges laid
The Business Times in January 2008 reported that the fraud investigation arm of major audit firm KPMG, KPMG Forensics, had found creative accounting in listed company JEL Corporation's accounts for Financial Year 2006 and the first half of Financial Year 2007. The creative accounting resulted in overstatements of profits of $11.84 million. Among some of the tricks used were the creation of fake invoices and accounting documents. These were designed to show transactions with other companies when such transactions were fake.
For details, please refer to http://137.132.179.30/Portals/0/images/CGFRC/docs/CG_News_Feb_2008.pdf.
As of today, 28 May 2009, latest news is that several persons have been charged in court in relation to the above accounting. Ng Soon Heng, the financial controller and JEL's ex-CEO and chairman Eric Tan Boon Yong, ex-deputy CEO and CFO Wee Teck Han and ex-COO Eric Leow Hock Leong were those charged. It is unclear what offences they were charged with but likely offences would be under the Companies Act, and since JEL is also listed, there are also possible offences under the Securitites and Futures Act.
For details, please refer to http://137.132.179.30/Portals/0/images/CGFRC/docs/CG_News_Feb_2008.pdf.
As of today, 28 May 2009, latest news is that several persons have been charged in court in relation to the above accounting. Ng Soon Heng, the financial controller and JEL's ex-CEO and chairman Eric Tan Boon Yong, ex-deputy CEO and CFO Wee Teck Han and ex-COO Eric Leow Hock Leong were those charged. It is unclear what offences they were charged with but likely offences would be under the Companies Act, and since JEL is also listed, there are also possible offences under the Securitites and Futures Act.
Tuesday, May 12, 2009
Corporate espionage
Do we need criminal laws on corporate espionage in Singapore?
Where an employee steals confidential computer data from his employer, the Computer Misuse Act may well be the appropriate statute to punish the wrongdoer. See for example, the recent Citibank cases where its ex-employees were heavily fined for stealing client data.
Is it possible that in some situations, the employee may steal valuable data without the use of computers or the like, cause massive damage to his employer, and yet not be liable under current criminal laws? I think that you could in some situations use the Penal Code or other statutes against such an employee but their applicability is by no means clear.
If anyone has come across a situation where there is a big loophole in this area, I welcome your contribution.
Where an employee steals confidential computer data from his employer, the Computer Misuse Act may well be the appropriate statute to punish the wrongdoer. See for example, the recent Citibank cases where its ex-employees were heavily fined for stealing client data.
Is it possible that in some situations, the employee may steal valuable data without the use of computers or the like, cause massive damage to his employer, and yet not be liable under current criminal laws? I think that you could in some situations use the Penal Code or other statutes against such an employee but their applicability is by no means clear.
If anyone has come across a situation where there is a big loophole in this area, I welcome your contribution.
Wednesday, April 15, 2009
Professional negligence
Sometimes professional negligence by auditors or accountants allow fraud to be carried out. Even if these professionals could not stop the initial criminal acts, sometimes, their carelessness allows further acts of fraud to be carried out.
In relation to fraud, readers may also wish to refer to the blog -
http://professionalnegligencesg.blogspot.com/
which covers issues and cases relating to professional negligence of all professions.
Contributions of reports of any ongoing lawsuits are welcome.
In relation to fraud, readers may also wish to refer to the blog -
http://professionalnegligencesg.blogspot.com/
which covers issues and cases relating to professional negligence of all professions.
Contributions of reports of any ongoing lawsuits are welcome.
Wednesday, April 8, 2009
Fraud prevention - division of duties
To prevent fraud, auditors and management consultants recommend divisions of duties or a system of checks and balances.
This means that as far as possible, no one person is in charge of a sensitive or important function. For example, a cheque book should not be left in the hands of an employee who has power to decide on payment who is the cheque signatory as well.
Another common example is found in the financial industry in relation to traders - allowing one person to be in charge of trading as well as back room operations (the paperwork involved in the trades). This is of course similar to the Barings Bank situation.
This means that as far as possible, no one person is in charge of a sensitive or important function. For example, a cheque book should not be left in the hands of an employee who has power to decide on payment who is the cheque signatory as well.
Another common example is found in the financial industry in relation to traders - allowing one person to be in charge of trading as well as back room operations (the paperwork involved in the trades). This is of course similar to the Barings Bank situation.
Saturday, April 4, 2009
Forged cheques
Many cases of corporate fraud involve the use of forged cheques by company insiders. For example, an employee who is in charge of the company cheque book, may take a few cheques and forge the authorised signatory's signature to draw cheques payable to himself or his accomplices.
What is the legal position? Case law requires banks to know their customer's signatures. Therefore, a forged cheque is not valid and any withdrawal is not authorised. The bank would have to refund the monies drawn out.
However, banks have often reacted through using contract clauses in their agreements with their customers, to shift some of the risk to the latter. Customers may be required to take reasonable care of the cheques. More common is the clause that deems the regular statements of accounts sent to the customer as conclusive within a certain time period (usually 14 days). In other words, after 14 days, if the customer does not query the statement, all reported withdrawals will be deemed valid.
For corporate customers, case law has held such clauses to be valid. For individual customers, perhaps such clauses may be invalid under the Unfair Contract Terms Act, but this is highly arguable.
What is the legal position? Case law requires banks to know their customer's signatures. Therefore, a forged cheque is not valid and any withdrawal is not authorised. The bank would have to refund the monies drawn out.
However, banks have often reacted through using contract clauses in their agreements with their customers, to shift some of the risk to the latter. Customers may be required to take reasonable care of the cheques. More common is the clause that deems the regular statements of accounts sent to the customer as conclusive within a certain time period (usually 14 days). In other words, after 14 days, if the customer does not query the statement, all reported withdrawals will be deemed valid.
For corporate customers, case law has held such clauses to be valid. For individual customers, perhaps such clauses may be invalid under the Unfair Contract Terms Act, but this is highly arguable.
Friday, April 3, 2009
The trial of Shi Ming Yi
The Ren Ci Hospital charity has been in the spotlight these past few weeks as the trial of its former chief executive officer, Shi Ming Yi (whose real name is Goh Kah Heng) has just begun in the Subordinate Courts.
He faces charges of criminal breach of trust of $50,000 which was allegedly used to renovate the apartment of a 3rd party, and disguising this as a loan to a Buddhist centre. Other charges relate to allegedly making false statements to the Commissioner of Charities which regulates Ren Ci.
Basically, from the investigation point of view of fraud, offences can be divided up into 2 types - the initial offences and the cover up offences. The initital offences are committed for previouslyreasons, eg, to inflate profits artificially, or to dress up the balance sheet. The cover up offences are meant to prevent detection by other parties such as auditors, other employees of the company, etc. Often, the offences might include forgery of documents, and making false statements to regulators (as in this case).
He faces charges of criminal breach of trust of $50,000 which was allegedly used to renovate the apartment of a 3rd party, and disguising this as a loan to a Buddhist centre. Other charges relate to allegedly making false statements to the Commissioner of Charities which regulates Ren Ci.
Basically, from the investigation point of view of fraud, offences can be divided up into 2 types - the initial offences and the cover up offences. The initital offences are committed for previouslyreasons, eg, to inflate profits artificially, or to dress up the balance sheet. The cover up offences are meant to prevent detection by other parties such as auditors, other employees of the company, etc. Often, the offences might include forgery of documents, and making false statements to regulators (as in this case).
Computer crime - obstructing use of computer
Section 7 deals with obstructing the use of a computer in short. The section in full covers a person who
(a) interferes with, or interrupts or obstructs the lawful use of, a computer; or
(a) interferes with, or interrupts or obstructs the lawful use of, a computer; or
- (b) impedes or prevents access to, or impairs the usefulness or effectiveness of, any program or data stored in a computer.
Punishment includes a fine of up to $10,000 and/or jail time of up to 3 years, with enhanced punishment for repeat offenders
Where damage is caused (as defined in section 2), then jail of up to 7 years and/or a fine of up to $50,000 may be imposed.
l
Computer crime - forensics
Computer forensics refers to the use of computer contents and data for litigation (or lawsuit) purposes. There are strict rules to follow to ensure that the contents or data are not compromised as they will be used as evidence often to establish civil or criminal liability of the defendant or accused.
Various companies claim expertise in this area. I have no personal knowledge of anyone of them.
For additional information about computer forensics, I have adopted, with permission, information from Adriot Data Recovery Centre as at 1 April 2009 (http://www.adrc.com/forensic_investigation.html). The portion in blue below is taken straight from the webpage.
Various companies claim expertise in this area. I have no personal knowledge of anyone of them.
For additional information about computer forensics, I have adopted, with permission, information from Adriot Data Recovery Centre as at 1 April 2009 (http://www.adrc.com/forensic_investigation.html). The portion in blue below is taken straight from the webpage.
What is Computer Forensics?
Specialized and scientific techniques and methodologies which are used to acquire and analyze computers, computer networks and storage media in order to discover evidence related to fraud, crime or unauthorized activities.
"Who needs or who uses Computer Forensic Services?
Mostly, companies may engage in computer forensics investigation when they suspect a breach in data security or illegal activities in a network or computer system, for instance, employees' activities such as internet abuse or porno, unauthorized disclosure or intentional deletion of sensitive or confidential information, industrial espionage or computer fraud.
Whether you are looking for digital evidence in a law suit, or determining exactly what an employee has been up to, ADRC is well equipped with Certified Computer Forensic Experts who know how to secure and document digital evidence with full audit trail suitable for court submission.
One should not attempt to do the investigation without proper techniques and expertise. Evidence could be easily destroyed or altered by just booting up the suspected computer with a quick browse."
Thursday, April 2, 2009
Computer crime - unauthorised modification of computer contents
Section 5 covers unauthorised modication of the contents of any computer. Even if no financial loss or real harm is caused, the offence is committed.
For example, if a website is hacked into and the webpages are changed as a joke, the crime will have been completed.
The normal punishment is a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both. There are enhanced punishments for repeat offenders. Finally, if any damage is caused as a result of an offence under this section, a person convicted of the offence shall be liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 7 years or to both.
It could be argued that anyone hacks into a computer will have modified without authorisation some part the computer contents, and therefore will have committed an offence under section 5 as well. However, in order to ensure that the basic offence of hacking under section 3 is not rendered redundant, section 5 should be interpreted to refer to significant modification of computer contents.
For example, if a website is hacked into and the webpages are changed as a joke, the crime will have been completed.
The normal punishment is a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both. There are enhanced punishments for repeat offenders. Finally, if any damage is caused as a result of an offence under this section, a person convicted of the offence shall be liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 7 years or to both.
It could be argued that anyone hacks into a computer will have modified without authorisation some part the computer contents, and therefore will have committed an offence under section 5 as well. However, in order to ensure that the basic offence of hacking under section 3 is not rendered redundant, section 5 should be interpreted to refer to significant modification of computer contents.
Computer crime - unauthorised use or interception
Section 6 of the Computer Misuse Act covers
Unauthorised interception of computer services is committed when a person "intercepts or causes to be intercepted without authority, directly or indirectly, any function of a computer by means of an electro-magnetic, acoustic, mechanical or other device." The wording here is very wide and even reading the screen of someone else's computer by capturing the electro-magnetic impulses transmited through the airwaves (relying on what is sometimes called the Tempest effect) would be considered an offence.
Again, the keyword here is the fact that the acts here must be unauthorised. Punishment here is a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both and, in the case of a second or subsequent conviction, to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 5 years or to both. If any damage is caused as a result of an offence under this section, a person convicted of the offence shall be liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 7 years or to both.
- unauthorised use and
- unauthorised interception of computer services.
Unauthorised interception of computer services is committed when a person "intercepts or causes to be intercepted without authority, directly or indirectly, any function of a computer by means of an electro-magnetic, acoustic, mechanical or other device." The wording here is very wide and even reading the screen of someone else's computer by capturing the electro-magnetic impulses transmited through the airwaves (relying on what is sometimes called the Tempest effect) would be considered an offence.
Again, the keyword here is the fact that the acts here must be unauthorised. Punishment here is a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both and, in the case of a second or subsequent conviction, to a fine not exceeding $20,000 or to imprisonment for a term not exceeding 5 years or to both. If any damage is caused as a result of an offence under this section, a person convicted of the offence shall be liable to a fine not exceeding $50,000 or to imprisonment for a term not exceeding 7 years or to both.
Wednesday, April 1, 2009
The Computer Misuse Act - application to foreign acts
The Computer Misuse Act makes it clear that it applies to acts done outside Singapore. In lawyers' jargon, it has extra-territorial application.
Under section 11, the Act applies if either or both of the following occur -
a) the person involved was in Singapore at the time of committing the offences, or
b) the computer, program or data was in Singapore when the offence is committed. The nationality of the person is irrelevant.
For example, if someone in Singapore hacks into a foreign computer, then by virtue of section 11, the Act applies. Also, if someone outside Singapore hacks into a local computer system, the Act will also apply. The Singapore authorities will then have to obtain the assistance of foreign authorities to arrest the person outside Singapore and arrange for him to be brought to Singapore (or extradited) to fact trial here.
Under section 11, the Act applies if either or both of the following occur -
a) the person involved was in Singapore at the time of committing the offences, or
b) the computer, program or data was in Singapore when the offence is committed. The nationality of the person is irrelevant.
For example, if someone in Singapore hacks into a foreign computer, then by virtue of section 11, the Act applies. Also, if someone outside Singapore hacks into a local computer system, the Act will also apply. The Singapore authorities will then have to obtain the assistance of foreign authorities to arrest the person outside Singapore and arrange for him to be brought to Singapore (or extradited) to fact trial here.
Future posts- ideas welcome
If readers have any ideas about any topics for future posts, please do not hesitate to add a comment which will trigger an email to me.
In the meantime, I still have several topics to cover in future blogs including corruption, remedies against fraudsters eg Mareva injunctions, etc.
In the meantime, I still have several topics to cover in future blogs including corruption, remedies against fraudsters eg Mareva injunctions, etc.
Tuesday, March 31, 2009
Computer crime - hacking
Hacking, an offence under section 3 of the Computer Misuse Act, is committed when a person knowingly causes a computer to perform a function for the purpose of securing access without authority to any program or data held in any computer. The keywords here are "without authority". It therefore covers outsiders trying to penetrate a company's computer system as well as employees trying to access company data knowing that they had no right to do so.
Hacking is now no longer regarded as a harmless prank. Punishment is $5,000 maximum fine and/or jail of up to 2 years. There are enhanced penalties for repeat offenders as well as those who cause damage as a result of the offence.
Section 4 covers what I call aggravated hacking - this is hacking for the purpose of committing a further offence involving property, fraud, dishonesty or which causes bodily harm and which is punishable on conviction with imprisonment for a term of not less than 2 years. Again, enhanced punishment is provided for - up to 10 years jail, up to a $50,000 fine or both.
Various professionals including a few lawyers and government servants have been convicted for hacking or related offences.
Hacking is now no longer regarded as a harmless prank. Punishment is $5,000 maximum fine and/or jail of up to 2 years. There are enhanced penalties for repeat offenders as well as those who cause damage as a result of the offence.
Section 4 covers what I call aggravated hacking - this is hacking for the purpose of committing a further offence involving property, fraud, dishonesty or which causes bodily harm and which is punishable on conviction with imprisonment for a term of not less than 2 years. Again, enhanced punishment is provided for - up to 10 years jail, up to a $50,000 fine or both.
Various professionals including a few lawyers and government servants have been convicted for hacking or related offences.
Computer crime
Computers and microprocessors (collectively, called computers) are so much a part of daily life that many fraud crimes are committed using computers or with the aid of computers.
The Singapore government recognised the importance of info technology and passed a statute, the Computer Misuse Act in 1993, despite a nominated Member of Parliament writing an article that argued against any special legislation on computer crime. Instead, he argued, existing laws should be modified or interpreted to cover computer crime.
My view on the other hand is that specialised laws were needed for several reasons -
The Singapore government recognised the importance of info technology and passed a statute, the Computer Misuse Act in 1993, despite a nominated Member of Parliament writing an article that argued against any special legislation on computer crime. Instead, he argued, existing laws should be modified or interpreted to cover computer crime.
My view on the other hand is that specialised laws were needed for several reasons -
- to make the laws on this area easy to understand,
- to save time and problems in trying to deal with non-purpose drafted laws, and
- to send a signal of the government's strong stance against computer crime.
Monday, March 30, 2009
Fraud - JSI Shipping case
New posts on the JSI Shipping case heard by the Court of Appeal will be published shortly on the following blog - http://professionalnegligencesg.blogspot.com/.
This case is a common example of how when fraud occurs, the criminal is either nowhere to be found or often has little left of his ill-gotten gains. The end result is that often innocent parties end up suing other "innocent parties" to recover their losses. In this case, the company which had suffered large losses ended up suing the company auditors for professional negligence in relation to the fraud.
This case is a common example of how when fraud occurs, the criminal is either nowhere to be found or often has little left of his ill-gotten gains. The end result is that often innocent parties end up suing other "innocent parties" to recover their losses. In this case, the company which had suffered large losses ended up suing the company auditors for professional negligence in relation to the fraud.
Sunday, March 29, 2009
Bounced cheques
Cheques where the payee is unable to collect payment due to the issuer's bank stating "refer to drawer" are known as "rubber cheques" or "bounced cheques". The issue to be considered here is whether issuing of such cheques should be considered a criminal matter, eg the offence of cheating under the Penal Code.
From what I understand, the police normally take the view that this is only a civil case and not a criminal one. The police would only take action if the case is reasonably strong. In the normal bounced cheque situation, it is possible that the cheque issuer intended to pay but for some reasons, the funds were not available on the due date for payment. There is therefore no intention to cheat. On the other hand, if it can be shown that the cheque was issued from a closed account, then there is clearly no way for the payee to receive payment. This would then be a clear case of cheating.
Even if the police rejects the complaint of criminal conduct, it might still be possible to obtain a private summons for cheating against the cheque issuer. It would be better to consult your lawyer on this although the procedure is not complicated.
As a final comment, it might be possible to show cheating even where the bank account was not closed if it can be shown that the issuer issued cheque(s) for ridiculously large sums of money. For example, if he issued cheques totalling $500,000 when his bank account never had more than $10,000, the court may well agree that he had no intention of paying the cheques.
From what I understand, the police normally take the view that this is only a civil case and not a criminal one. The police would only take action if the case is reasonably strong. In the normal bounced cheque situation, it is possible that the cheque issuer intended to pay but for some reasons, the funds were not available on the due date for payment. There is therefore no intention to cheat. On the other hand, if it can be shown that the cheque was issued from a closed account, then there is clearly no way for the payee to receive payment. This would then be a clear case of cheating.
Even if the police rejects the complaint of criminal conduct, it might still be possible to obtain a private summons for cheating against the cheque issuer. It would be better to consult your lawyer on this although the procedure is not complicated.
As a final comment, it might be possible to show cheating even where the bank account was not closed if it can be shown that the issuer issued cheque(s) for ridiculously large sums of money. For example, if he issued cheques totalling $500,000 when his bank account never had more than $10,000, the court may well agree that he had no intention of paying the cheques.
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