Financial Fraud

Balvinder Sandhu

Description

It has been said that the love of money is the root of all evil. This is only too true as we profile cases involving money matters. Tricksters are quick to prey on Man's desire to have more money that is why sleights of hand and ponzi schemes succeed. Even senior finance managers often succumb to greed and lust, betraying their employer's trust to fund their gambling or to lavish expensive gifts on their mistresses. Whether small time crook or seasoned swindlers, no one is above the law as we find out.

Sujets

• True crime

Informations

• Publié par: Marshall Cavendish International
• Date de parution: 01 mai 2013
• Nombre de lectures: 0
• EAN13: 9789814484565
• Langue: English

Extrait

FINANCIAL FRAUD

2013 Marshall Cavendish International (Asia) Private Limited
Published by Marshall Cavendish Editions
An imprint of Marshall Cavendish International
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National Library Board, Singapore Cataloguing-in-Publication Data
Sandhu, Balvinder.
Financial fraud / Balvinder Sandhu. - Singapore : Marshall Cavendish Editions, 2013 pages cm eISBN : 978 981 4484 56 5
1. White collar crimes - Singapore. 2. Fraud - Singapore. 3. Commercial crimes - Singapore. 4. Commercial criminals - Singapore. I. Title.
HV6771.S55 364.168095957 - dc23 OCN840879271
Printed in Singapore by Fabulous Printers Pte Lrd

Cover design by Benson Tan
Cover photo courtesy of Svilen Milev, www.efffective.com
Contents
Introduction
Chapter 1 The Man Who Brought Down A Bank
Chapter 2 The Taxman s Revenge
Chapter 3 Charity Under Fire
Chapter 4 Cheats Get Caught
Chapter 5 Brewery Scandal
Chapter 6 Stealing On The Job
Chapter 7 Civil Servants Gone Wild
Chapter 8 Dead Man Walking
Chapter 9 Lawyer On The Loose
About the Author
WHITE-COLLAR CRIME IS not without its casualties. While it usually does not involve death or physical harm, individuals or companies are nonetheless victimised, be it in terms of the loss of money or value of a product, or even that of the company itself. The list of financially-motivated crimes include cheating, forgery, embezzlement and fraud.
Some of the criminals mentioned in this book are famous-or should we say infamous-while others were involved in relatively low-key crimes. But this does not detract from the fact that they have committed crimes and have been made to pay for them.
One of Singapore s most famous cases was that of trader Nick Leeson, who was responsible for bringing down one of England s oldest financial institutions. Then there was the case of David Rasif, the lawyer who absconded after taking millions of his clients money, and who is still on the run today.
And who can forget the case involving the National Kidney Foundation (NKF), in which its CEO was accused of misappropriating the charity s funds?
Even senior finance managers often succumb to greed, betraying their employer s trust to fund their lavish lifestyles or gambling habits, or on expensive gifts for their mistresses. Such cases include that of Chia Teck Leng from Asia-Pacific Breweries (APB), who pocketed over 100 million of the company s money, as well as civil servants Koh Seah Wee and Lim Chai Meng, who worked at Singapore Land Authority (SLA) and effectively cheated the government organisation of more than 10 million.
Financial Fraud also profiles other small-scale criminals who might not have benefited near as much financially, but committed severe crimes nonetheless.
But as we find out, be they small-time crooks or seasoned swindlers, no one is above the law.
IF THERE EVER was a financial crime in Singapore that garnered the most international interest, it was the case of Nick Leeson. The Englishman was responsible for bringing down Barings, one of Britain s oldest and most prestigious merchant banks. As if that wasn t shocking enough, he was also just a few days shy of turning 28 when it happened.
Just how did a young and relatively inexperienced trader cause the downfall of a 223-year-old blue-chip bank, of which even Queen Elizabeth was a customer? The collapse happened in late February 1995 and was sparked off by Leeson initiating US 27 billion worth of reckless trades on Japanese futures contracts.
Leeson was general manager of Barings Futures (Singapore) (BFS) and was seen as a whiz-kid trader because of the amount of money he was thought to be making the bank. Of course, a lot of this wasn t actually true-Leeson was allegedly falsifying accounts and recording fictitious trades in order to hide his trading losses in Japanese stock futures. When this finally came to the bank s notice, it had already lost 860 million.
ACCOUNT 88888
Leeson joined Baring Securities London (BSL) in 1989 and was posted to Singapore in April 1992. In July, he opened Account 88888, a secret error account in Baring s internal accounting system meant to record small error trades. By December 1992, the account had accumulated losses of 2 million stemming from Leeson s trading activities. In December 1993, Account 88888 hid cumulative losses of 23 million. Just a year later, the figure had ballooned to a whopping 208 million.
On 17 January 1995, the Kobe earthquake shook Japan and its stock market suffered as a result. Leeson decided to try and recoup his losses by gambling heavily on a strong recovery in the Nikkei 225 futures share prices. He continued gambling as the market slid further, eventually accumulating a loss of 827 million.
While on secondment to the group s Singapore office, a senior settlements clerk from Barings London uncovered a US 190 million hole in Leeson s account on 23 February. But before he could get an answer from Leeson, the former general manager left the office, never to return again.
THE BLAME GAME BEGINS
On 26 February 1995, the Bank of England announced that Barings had been put under administration. In Singapore, the Commercial Affairs Department (CAD)-which probes white-collar offences-started its investigations by questioning key senior Barings employees such as regional managing director James Bax and director Simon Jones. Both surrendered their passports to the CAD. Bax was in charge of the group s Asian operations outside of Japan and reportedly told the CAD that he had no control over Leeson s trading activities as the trader answered directly to London.
Although there were rumours that Barings PLC had sent a team to Singapore to check the books just a week before the crisis erupted, the bank denied these allegations and claimed to have no idea of the losses suffered by its Singapore offices.
British newspapers reported that investigators had evidence that Barings treasury department in London had advanced as much as US 70 million to Leeson. Another report said that Leeson had obtained an extra US 130 million in February alone. However, a Barings spokesman dismissed these reports as being purely fictitious .
A source told The Straits Times in early March that Barings had conducted investigations even before Leeson fled town on 23 February.
Obviously, Barings knew beforehand something had gone wrong and flew three officials down to go through the books before the whole case blew up, said the source. The officials left in haste... just before the authorities moved in and placed Baring Futures under judicial management.
Both the Singapore and British authorities conducted investigations on alleged fraud and falsification of accounts. Judicial managers from Price Waterhouse went through the books and said that they were getting assistance from Leeson, who was arrested in Frankfurt, Germany, on 2 March.
When Leeson went missing and the world was talking about him and how he brought down a British institution, it turns out that he and his wife Lisa were catching some sun by a hotel pool in Kota Kinabalu. The couple had checked in to the Tanjong Aru Beach Resort in the East Malaysian state of Sabah and checked out on 28 February.
They departed for Bandar Seri Begawan (Brunei s capital city) the next day, and spent the day at the airport s transit lounge before flying on two economy class tickets to Frankfurt, Germany that evening.
As more details emerged about the case, it seemed that both the bank and the Singapore authorities were aware that something wasn t quite right with the operations that Leeson was handling. An internal audit that Barings PLC had done in August 1994 highlighted the problems that eventually led to the bank s downfall. Although top Barings executives in London were aware that the Singapore futures arm was exposed to significant risks because Leeson had too much control over both dealing and settlement operations, they chose to keep him as general manager because of his experience and the profits he had generated for the bank. BFS had raked in profits of 20 million in 1994.
And despite the report s recommendations that Leeson should not retain responsibility for supervision, cheque-signing and other back-office functions, these suggestions were ignored.
NO CONTROLS OVER LEESON
In January 1995, the Singapore International Monetary Exchange (SIMEX)-now known as the Singapore Exchange (SGX)-had also warned Barings about the huge volume of trade built up by its Singapore futures arm. The top management of Barings PLC assured SIMEX that