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Reports by
Wong Wei Kong (Business Times 15 Mar 2004)
Kwek Chye Teck abused his authority and position as managing director of Orix Leasing Singapore to misappropriate $2.3 million from the company. He did so by keeping the scrap rebates of cars scrapped by the company, creating false loan applications and pocketing payments made by the company's customers. Saddled with gambling debts, he used the money to repay loan sharks and bookies. Kwek was sentenced to eight years in jail.
WHAT happens when there are inadequate checks and balances in a company? For one Singapore firm, the result was a criminal breach of trust to the tune of $2.3 million - and by a company director at that.
And had it not been for a whistle blower, the fraud may never have been discovered.
In April 2003, the finance manager of Orix Leasing Singapore Ltd, a joint venture between Orix Corporation, DBS Bank and United Overseas Bank, noticed that the scrap value of the company car had not been accounted for nearly a year after it had been sent to the scrapyard. She found out from the company driver that the car was scrapped on the instructions of Orix managing director Kwek Chye Teck in May 2002. Sensing that something was amiss, she reported the irregularity to the assistant general manager of Orix.
The assistant general manager suspected that Kwek had misappropriated the scrap value of the company car as he knew that Kwek was in desperate need of money and had recently asked the board for an advance of his incentive bonus. However, he was unable to question Kwek, who was his immediate supervisor. In May 2003, the matter was reported to Kwek's superior, the managing director of Orix Investment & Management Pte Ltd. An internal investigation was then launched.
Upon questioning, Kwek confessed to scrapping the company car and retaining the scrap value. He also admitted to misappropriating the scrap value of several cars that Orix had repossessed over several months in 2002. He was sacked, and on May 21, 2003, a report against Kwek was filed with the Commercial Affairs Department (CAD).
Until then, Kwek's career had every appearance of that of a successful business executive. He joined Orix in 1984 and rose through the ranks, starting as a credit officer and rising to assistant manager, manager, and then assistant general manager, before becoming managing director in May 1997.
'In 1996, he obtained the coveted certified financial analyst (CFA) qualification, to add to the Business Administration degree he had obtained from National University of Singapore.
As managing director, Kwek was entrusted with full powers to run the day-to-day operations of the company. With over 20 years' working experience with Orix, Kwek knew all the company's procedures and found it easy to move money out of the company. His subordinates carried out his instructions with little or no questions asked.
But the game was up. And once he knew Orix was reporting him to CAD, Kwek fled Singapore on the morning of May 21, 2003. For the CAD investigating team led by Jenny Koh, the first task was to find him.
After receiving the complaint against Kwek on May 21, CAD dispatched a team of officers to his last known address at Balmoral Road and found no one there. However, CAD officers managed to reach him through his handphone. Kwek refused to surrender himself, said he needed more time and hung up. All subsequent attempts to contact him were fruitless. CAD immediately took steps to trace Kwek and put a team on standby to arrest him.
Five days later, on May 26, 2003, CAD received a call from Kwek. He said he was in Johor Bahru, Malaysia, and wanted to give himself up. A team of investigators met Kwek at the Woodlands Checkpoint and he was arrested that afternoon. 'Thereafter, it was a battle against time, as we could only detain Kwek for questioning and had to produce him in court before the 48 hours deadline,' said Ms Koh.
Kwek admitted to misappropriating the scrap value of the company car that was registered under his personal name.
After the car was scrapped, the Land Transport Authority (LTA) sent him what is commonly known as the PARF paper, which sets out the Preferential Additional Registration Fee or PARF and Certificate of Entitlement (COE) rebates on the scrapped car.
In the case of Kwek's company car, this amounted to $44,579. Since the PARF paper is transferable and can be sold to a third party, Kwek sold the PARF paper to Skyway Motor Pte Ltd for $43,798 and kept the money.
On May 28, 2003, Kwek was charged in court for misappropriating the money from Orix. CAD then asked the court for permission to remand Kwek for another week for further investigations.
The scrapped company car was just the tip of the iceberg. CAD officers found that Kwek had misappropriated another $441,583 from the sale of more PARF papers. In March 2002, Orix had repossessed 24 cars from a defaulting customer, AB Car Rentals Pte Ltd. After taking possession of the cars, Kwek transferred the ownership of these cars to his name and sent the repossessed cars for scrapping.
He then sold the PARF papers to Skyway and kept the money to pay off gambling debts from betting on horses. Kwek had also forged a PARF paper under the fictitious name of Kwok Yong Tin in November 2002 and got Orix to issue two cheques to purchase this for $51,731.
Kwek did not stop at just scrapped cars and PARF papers. Being the managing director, Kwek could approve loan applications for amounts up to $1 million. He needed only another subordinate to countersign the loan agreement.
He used the same fictitious person, Kwok, to obtain hire-purchase financing of $118,000 from Orix in December 2002. In order to support the loan application, Kwek forged an invoice purporting to be a sale of a sound system by a certain Lee Boon Yeong to Kwok.
He then approved the loan application and directed accounts staff to disburse the loan to Lee. CAD investigations revealed that Kwek owed gambling debts to Lee; Lee's signatures on the invoice and the loan application were both forgeries by Kwek. Kwek forged documents to obtain two other loans worth $380,160 from Orix in July and October 2001, also to repay gambling debts.
Apart from having the authority to approve loan applications, Kwek's position in Orix involved collecting debts from customers. Upon further questioning by CAD, Kwek confessed that he had misappropriated money received from two clients, Absolute Sound distribution Pte Ltd and ESP Lines (S) Pte Ltd. 'The gravity and scale of the respondent's crimes had intensified over the years. He had spent substantial periods of time in corrective training as well as prison, but those stints in custody apparently had little deterrent effect.'
The evidence, however, was difficult to obtain. The Orix records could not be relied on while its customers did not demand from Orix statements of their accounts as they were long-time clients and trusted Kwek regarding their loan repayment schedules. Kwek simply dictated to them the amount and mode of settlement of their loans with Orix. Mostly, he would request them to pay by cash or cash cheques. Until CAD's investigation, the two customers had no idea that their payments were being misappropriated by Kwek.
However, the customers had issued payment vouchers to support each payment that were made to Kwek for settlement of their loans and had made him sign on their payment vouchers to acknowledge receipt of the money. This helped CAD establish that Kwek had received the money but failed to credit it to Orix. From the cheque counterfoils obtained from banks, CAD also found that Kwek had either deposited the cheques issued by Orix's clients into his personal bank account or had encashed the cheques. Between July 2002 and April 2003, Kwek misappropriated $426,860 and another sum of US$412,328. He used the bulk of it to repay his gambling debts and some part of the money to settle the fictitious loans as well as the funds he had previously misappropriated.
That was not all. The CAD found that between April 2001 and October 2002, Kwek had dishonestly led Orix to disburse another $97,392 on the pretext of paying for company expenses, such as payment to creditors, registration of company cars and purchase of PARF papers. He had not provided any supporting documents but had used his position to override internal controls.
CAD concluded its investigation into Kwek in two weeks. Kwek admitted to abusing his position of trust to cheat Orix of a total of $2.3 million. Most of the money was used to pay off bookies and loansharks.
On July 1, 2003, Kwek was charged with 16 fresh charges, comprising six charges of forgery and 10 charges of criminal breach of trust. He pleaded guilty in September 2003 and was sentenced to 8 years' imprisonment.
In passing the sentence, the court considered the fact that Kwek had made restitution of $217,000 using his own funds before the discovery of the offence and had cooperated fully with CAD investigations. He was also remorseful and was a first offender.
'However, the court noted that the offences committed by Kwek were more serious than simple criminal breach of trust cases considering that he was placed in a fiduciary position vis-a-vis the victim,' said CAD. The sums misappropriated were substantial and $1.718 million was still not recovered. The offences were also committed over a period of nearly two years.
'The offender's high academic qualifications and unblemished record, his contributions to the company during his employment, and his career rise through the ranks, deserved little consideration, given that such positions of trust are not normally accorded to an individual unless he has proven himself to be trustworthy,' it said.
For Ms Koh, who led the CAD probe into Kwek, the case evoked mixed feelings: 'During the course of the entire investigation, the accused expressed deep remorse for siphoning funds from his employer to feed his gambling habit. I understand his feelings, but as a law enforcer, I have to maintain a professional attitude in securing all the necessary evidence to prosecute him.'
'It was a battle against the accused's wits and his will, to get him to volunteer all evidence to incriminate himself. That was a big challenge for me.'
- Better checks and balances. It is important to have good corporate governance, eg. an independent internal audit unit that reports directly to the audit committee.
- Segregation of duties. It is important to separate custodian and disposal duties. In this case, Kwek could approve loans, give instructions on their disbursement, and collect money from creditors. This creates opportunities for misappropriation of company funds.
- Companies should send monthly statements of accounts to their debtors. Debtors should also insist on obtaining some form of official receipt or statement of accounts to show their payments.
- Scrapped car rebates or PARF papers are transferable, can be easily traded and sold for cash. Companies should impose controls to ensure safe custody and accountability of PARF papers.
- Importance of whistle blowers. Kwek's case would not have been uncovered if the finance manager had kept quiet after she discovered the accounting irregularity. Companies should encourage whistle blowing.
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Click here (2.24MB) to view article.
This is part of a series produced in collaboration with the Commercial Affairs Department and the Legal Division of the Subordinate Courts.
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| Last updated on 17 May 2007 |
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