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necessary Customs permits, and it would then use the duty free alcohol allowed under the permits to replace its earlier withdrawn stock.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.
Tuesday, September 29, 2009
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.
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