Commission Against Corruption, Macao SAR

The Commission Against Corruption (CCAC) referred a bank-loan fraud case to the Public Prosecutions Office today (14th March 2005). The case involves an electrical appliances shop owner who is suspected of defrauding three local banks of huge amount of loans through bogus business transactions. The case also involves one bank-branch manager who is suspected of accepting bribes and misappropriating funds.

At the end of 2003, the CCAC received a complaint regarding a branch manager of a local bank accepting advantages and conspiring with the owner of a chain of electrical appliances retail shops to defraud money by using letter of credit (L/Cs). After 17 months of investigation, the CCAC identified a number of suspects, including the electrical appliances shop owner's son surnamed Kou (the main suspect), his family members, employees and several other individuals. The suspects allegedly forged business transactions from late 1997 to 2004 between the main suspect's retail shops, one electrical appliances shop registered in his brother's name and other seven companies (six of them registered in Hong Kong and one in Macao, all controlled by the main suspect and some were shell companies) to apply for L/Cs from three banks in Macao (two of them are branches of Hong Kong-listed banks) and successfully obtained a total of 634 loans. The alleged bank-loan fraud involved as much as HK$437.9 million and it is estimated that tens of millions have not yet been recovered.

The main suspect allegedly applied to the banks for L/Cs through bogus business transactions and instructed his family members, employees and business partners to forge certain documents, such as the L/C beneficiaries' (sellers') commercial invoices and the applicants' (buyers') cargo receipts to defraud the banks. Actually, the main suspect's electrical appliances retail shops did not really purchase from the sellers and the sellers did not really sell the products. All the documents about the delivery and receipt of products were false, while the banks still granted loans for these non-existing transactions. After the fake suppliers had obtained money by executing the L/Cs, the main suspect instructed his family members and employees to inform the staff in Hong Kong by fax to transfer the money obtained to his bank accounts in Hong Kong. Later the money was again transferred to Macao in the form of cash or cheque. From 2002 to 2004, a total of more than HK$41.6 million obtained by deception was carried to Macao in cash. During an operation in May 2004, the CCAC investigators seized HK$779,900 from one of the suspects from Hong Kong.

In addition, the main suspect allegedly bribed the branch manager of one of the cheated bank with loans in total of HK$580,000 and the use of a Mercedes-Benz with Macau and Guangdong licenses. In return the manager helped the main suspect to cash 195 cheques issued from the banks in Hong Kong early, amounting to a total of over HK$128.5 million and a considerable part of which was obtained by deception. Cashing the Hong Kong-issued cheques early is a credit issue. The scam caused the banks involved a loss of more than HK$64,000 in interest.

Meanwhile, the branch manager is suspected of having misappropriated HK$438,000 in the bank's funds and trying to make up the shortage by using the blank cheques signed by the main suspect so as to deceive the bank's auditors.

The CCAC had searched a number of locations in Macao and gathered various evidences including signed cheque books, blank cheques, stamps, invoice books, receipt book, account records, inventory records and passbooks of some shell companies. Eight suspects were arrested, including two Macao residents, six Hong Kong residents (three of them also hold Macao citizenship). Three of the suspects surnamed Kou, and the others surnamed Chan, Ho, Leong, Choi and Ng. One of the suspects was the branch manager of a bank in Macao when committing the crime.

The above-mentioned deeds involved a huge fraud, credit breaking, abuse of confidence, active and passive corruption. The suspects involved have also confessed the deeds.