An Ingenius Fraud

 

 AN INGENIUS FRAUD

(Singapore 2008)

 

I.               The case

 

Shortly after retiring  from my post as a legal consultant, I received a telephone call from an old friend in arms. Thomas Aung, who still ran his legal practice although he was close to eighty, wanted my advice on the payment of fraudulently drawn cheques. As I now had ample time on my hands I agreed to discuss the case with him on the next day.

            The facts that unfolded during our conversation raised my eyebrows. The victim, a Mr. Lim who died at the ripe age of 92, had migrated to Singapore from China early in the 20^th century.  A poorly educated man, who had never mastered English, he succeeded to build up a reasonably prosperous sweetmeats business. Naturally, he needed a current cum savings account and, eventually, opened it with a bank that had a branch near to his enterprise. Being unable to sign his name in Latin characters, he used his Chinese signatures and a rubber stamp (a ‘chop’) setting out the name of the business.

He maintained his account with the same branch for many years, although his original bank had been taken over by another local bank. Being a smart entrepreneur, he arranged to have a special rate of interest paid to him on a monthly basis. He  did not give a power of attorney – or drawing rights – to anybody. Further, he did not trust  his three sons. The only person he gave a glimpse into the details of the account was the adopted daughter of the oldest son.

            That adopted granddaughter,  one Lena, was always present when Mr. Lim drew a cheque. Usually, she inserted the details in English, entered the details of the cheque in Chinese characters in an account book, and watched how Mr. Lim  signed the cheques. She then attached to each cheque the rubber stamp and arranged for its dispatch.

            Lena had a somewhat unusual life. She fell in love with a married man, shacked up with him and gave birth to two children. Initially, she got a salary from Mr. Lim for the execution of her secretarial duties. But when she moved out of the family home, she ceased to work for him. Instead, she got a job with an international bank. During it she became familiar with general banking practices and, in particular, with the clearing of cheques.

            Mr. Lim could not do without Lena’s assistance. Accordingly, it was arranged that she work for him on a part time basis, coming over to his house either before going over to her post or late in the afternoon. She and the late Mr. Lim became very close and, apparently, he trusted her without reservations.

            Regrettably, the business of Lena’s paramour had its up and downs, getting occasionally virtually insolvent. Quite naturally,  he asked for Lena’s financial assistance. Being in love, she obliged.

            Her ploy was simple. Initially, she prepared cheques for Mr. Lim’s signature but left some details in blank. In some cases, she inserted “cash” in the space meant for the payee. In others, she made the cheques payable to her paramour’s firm, raised the amount substantially and did not strike out the words “or bearer” printed on the forms. As time passed, she became increasingly bold. She started to forge Mr. Lim’s signature on blank cheque forms, made the cheques payable to cash and presented them for payment at the Bank’s counter. The employees at  the branch  paid her cash although some cheques were for amounts well above $150,000. They decided to comply with her requests as she was well known and, further, as the manager was aware of her banking background.

            To hide her tracks, she entered false details in Mr. Lim’s account book. Further, each month, the bank’s genuine statements of Mr. Lim’s account  were removed from the letter box and substituted by forged statements. These were neatly prepared and tallied with Mr. Lim’s expectations. He was further assured by Lena’s advice that all was well.

            The frauds came to light when the bank did not settle Mr. Lim’s monthly electricity bill. When he called the branch manager, he was told the account had a zero balance. When Mr. Lim and his sons confronted Lena, she broke down and confessed. She ended up with a sentence of four years in prison.

            Mr. Lim was shocked by the discovery of the real facts. Shortly thereafter, he had a heart attack which, partly due to his age, proved fatal. The heirs – the estate – demanded that the Bank reverse the unauthorized debit entries. Upon the Bank’s refusal they took the matter to court.

             On the face it, the pleadings assumed the ordinary form. The estate claimed that the bank had to reverse debit entries incurred without the authority expressed in a genuinely signed cheque. The Bank averred that the late Mr. Lim had assisted the perpetration of the frauds by his failure to exercise control over Lena. In addition, the Bank relied on a clause in the terms and conditions which, they averred, applied to the case. Under this ‘verification clause’ Mr. Lim could not rely on any error or  inaccuracy of  any entry in the bank’s statement, unless he notified it to the Bank within 15 days.

 

II.             AM ASKED TO OPINE

 

            Thomas’ main question was whether clauses of this type were binding under Singapore law. On behalf on the estate, he requested me to write an opinion. However, the facts were so unusual that I felt the need to meet the ‘estate’. The point that irked me concerned the statements. How would Lena know on which day the genuine statement would be put in the letter box? Unless she knew that, how would she know when to substitute for it the bogus statement? After all, she could not peep into the letter box day after day. And the Bank’s statements could be delivered at any time between the 10^th and 20^th of the month, a fact well known in Singapore. Further, she had only a day or two to prepare the bogus statement. After all, how could she be certain the late Mr. Lim would  not summon her at the end of the month to draw a cash cheque?

            A further point that kept worrying me was the professional appearance of the bogus statements. They looked as fresh and as genuine as the any originals produced by the Bank.

            In addition, there was the problem of the applicability of the terms involved. Had they ever been sent to the deceased as the branch changed hands? Was he notified of the periodic changes of the terms? Unlike younger and more dynamic lawyers, Thomas had not taken the aggressive steps needed to get at the truth. Further, he appeared to have been satisfied with the assurance that the Bank’s personnel had nothing to do with the bogus statements.

             Although the record appeared clear cut, something perplexed me. All in all, the heirs had taken the loss too lightly and did their best to avoid  publicity. Thus, the episode, including the charges brought against Lena and her paramour, had not been reported in detail  by the Press and, to my surprise, the heirs had not made any statements in public. Worse still, Thomas did not even possess a copy of the penal proceedings taken against Lena and her paramour.

 

III.            INITIAL MEETING

 

To get a clear picture of the facts, I asked to have a meeting with Mr. Lim’s sons and heirs. My motivation was simple. After almost fifty years with the law, I had no wish to tarnish my reputation by getting involved in a questionable case. Further, I was afraid of ending up with an omelette on my face.

 

The late Mr. Lim’s three sons were waiting for me when I arrived for the meeting, which took place in the unadorned conference room of the old law firm.  Thomas emphasised that we were dealing with a ‘modest’ estate.  Substantial expenditure was to be avoided. Initially, the estate had hope that the  Bank would come up with a settlement. But up to now the Bank had taken a militant stand.

“How much is involved?” I asked.

“About $2.1m. was taken from the account,” explained Thomas.

“From the Bank’s point of view such an amount is a pittance. Why did they refuse to refund? They would wish to avoid the publicity of a trial!”

            “The Branch’s Deputy Manager would not hear of a settlement. He is very stubborn.”

            I knew the officer involved – Quentin Tan – very well. At the time of the defalcations, he was a mere assistant Branch Manager. He had, since, been moved to  an important position at the Head Office. I saw less of him after his rise. Before then we had even played together as a team in a Contract Bridge tournaments. He was a good and smart partner.

            In my eyes Quentin  was a reliable common-sense man and an experienced banker. He was bound to know that the payment of large amounts over the counter was unusual. A searching trial would not enhance the Bank’s reputation. What was the cause of his uncompromising stand? In my dealings with him – arising in the context of earlier trials – his basic philosophy was ‘live and let live’. He must have known – or perhaps only suspected – that the facts were not as simple as they appeared.

 

            My meeting with Thomas and his clients, established that only the eldest son, Freddie, continued to live in old family home. His two brothers had moved out shortly after they married. Under the circumstances, it was not surprising that the house was left to Freddie. His two younger brothers did not resent this. Presumably, the deceased had given them substantial assistance when they bought their own houses. Still, the amount of about $2.1m. kept in the account was to be shared by them. All the same, none of them expressed outrage at Lena’s behaviour. Freddie even went so far as to relate that they kept visiting her in Changi prison.

            “But her dereliction has cost each of you a neat loss of $700,000. Of course, we hope to get it back from the Bank. But aren’t you outraged, or, in the very least, disillusioned?”

            “That would not help us to recover the money,” stepped in Freddie.

            “But where did it end up?”

            “In the ‘business’ of Lena’s friend. What is the point of digging?”

            “You could, for instance, trace it to the account of a loan shark. We would, then, stand a chance of getting it back under a special type of proceedings,” I explained to him.

            “But, surely, such proceedings would be very costly?”

            “I told them so,” interceded Thomas. “And it is a ‘modest estate’. We cannot afford risky proceedings.”

            “Still, how do we know that the money did not end up in an  account of Lena and her friend. Actually, are you calling her as a witness?”

            “The clients do not want to do this. She is apparently undergoing a conversion. She sees a chaplain regularly.”

            “A prison conversion,” I muttered in disgust. “Well, what can I then do for you?”

            “We want to know if the terms and conditions are effective.”

            “But are they applicable? The late Mr. Lim opened his account with the branch long before it was taken over by the present bank. Did they ever communicate the terms to him?” I wanted to know.

            “They told him the terms could be perused at the premises of the branch!”

            “And that was all? Up to now I have never seen a person reading a long document, including a bank’s terms and conditions, displayed at a branch. And I have been in business of counselling banks for over fifty years! I would never have let a bank proceed on such a shaky basis! Do you, in the very least, have a copy of the letter advising the late Mr. Lim of his ‘duty’ to read the terms?”

            “I don’t; but they rely on a standard letter which, they say, was sent to persons in Mr. Lim’s position. It advised them about the merger and counselled  that the applicable  terms and conditions were displayed at the branch.”

            “How do you know this letter  was actually sent to the late Mr. Lim?”

            “Please proceed on the basis that it was sent and that the terms were applicable.”

            “Very well,” I gave in ungracefully. “It will take me three days to write such an opinion. Your main question is whether the verification clause, under which the late Mr. Lim should have drawn any inaccuracies to the bank’s attention within 15 days, was effective?”

            “Precisely,” concluded Thomas, averting his eyes.

            “You see, Prof.” added Freddie, “ours is a ‘modest estate’. Our best hope is a settlement.”

            “It is up to you,” I conceded. “Still, I want to grasp how Lena knew, in advance, when to substitute the forged statements for the real ones. Further, who produced them? They look spotless and genuine to me.”

            “How can we tell?” asked Freddie.

            “By calling Lena as a witness and subjecting her to a searching cross- examination!”

            “The estate wants to avoid this,” explained Thomas. “I have been  instructed me to this effect.”

 

           

IV.          A CHAT WITH THE BANK’S EMPLOYEE

 

Back in my office, I felt that something was fishy. The sons and heirs took the fraud lightly and did not even attempt to get at the truth. To satisfy myself that I was not being drawn into a morass, I obtained a copy of the proceedings instituted by the prosecutor against Lena. It turned out she had confessed and her lawyer’s only task was to plead for a light sentence. The police did not attempt to trace the money. Indeed, this was not their task.

            For a few days I reflected.  I did not need a fee and could simply turn down the brief. My curiosity, though, had been roused. After an internal struggle I rang up the bank officer who opposed the idea of a settlement.

 

            “Sorry, Peter,” said Quentin as soon as he recognised my voice, “I am extremely busy these days. I do not have the time to train for the forthcoming Contract Bridge Tournament. I’ll have to give it a miss.”

            “I am not ringing you about this event. I, too, must take a rain check. I’ll be outstation when it is held. I am calling about a matter involving your former branch. I suggest we have lunch as soon as possible and – Quentin – this will have to be an off-the-record chat.”

            “How about tomorrow, Peter?” he chuckled. “And listen – old boy – I think I know what this is all about.” 

            “So, our chat will be off the record! We are, in all probability, on opposing sides.  Our confidential chat is contrary to the Law Society’s rules of ethics and to the Bank’s own policy.”

            “Of course: but don’t you worry! Both of us believe in leaving well alone. Obviously, you have grasped that something is wrong.”

 

            Quentin arrived a few minutes after me. The cosy restaurant, in the heart of the city, looked old fashioned. The slightly shaky tables were placed closely together so that usually the noisy speech of loud guests carried over. Still, the manageress had secured for me a table in a distant corner. True, the place was inelegant – a fact evidenced by Quentin’s expression. Still, the food was excellent and reasonably priced.

 

            “Well, what is on your mind, Peter?”

            “You had a very old and illiterate customer.” I went straight to the point. “Don’t you think he deserved special attention.”

            “I know all about the case you refer to. In essence, we were pacified by our awareness of the assistance the deceased got from Lena. She is – or rather was – an officer at another bank. This way we were ‘lulled into safety’. What do you think?”

            “How about the payment of cheques for large amounts over the counter?”

            “Lena was known to us and, usually, she muttered that the money was needed for some investments.”

            “I see. But there remains a question mark. How comes that you – from all people – decided to oppose a settlement? You are acting out of character!”

            “I investigated the case, Peter. Aren’t a few facts puzzling?”

            “Well,” I prompted.

            “To start with, didn’t the faked bank statements look pretty genuine? How about the colour scheme and the quality of the paper. They did look genuine to me!”

            “Was it then an in-house job? Thomas thought that digital made such fakes reasonably easy provided you had a good printer and camera.”

            For just a moment Quentin hesitated. Then he went on unflinchingly: “I disagree. Even water marks were beautifully reproduced. The fakes were produced by an employee and I managed to unmask him. It will take him a long time to get another job!”

            “Didn’t the Bank report him? Was he prosecuted?”

            “Somebody higher up decided that his dismissal was good enough. We decided to avoid the unsavoury publicity that could result from a hearing.”

            “I understand; but then,  why didn’t you recommend a settlement?”

            “Because Lena must have had an accomplice in the late Mr. Lim’s household. Someone who removed each original statement from the letter box and substituted the pre-prepared fake!”

            “I can think of but one person. The venerable Freddie, Lena's adoring stepfather. He did have access to the letter box. But what would be his motive?”

            “The oldest one in the world,” Quentin asserted dryly.

            “Not curiosity, surely?”

            “Greed, Peter. Craving for a bit of an extra.”

 

Quentin’s words made sense. Freddie stood to inherit the family’s home and one third of all the estate’s other assets, including the amount standing to the credit of the account. His own stepdaughter ‘milked’ that account. If part of her spoils had gone to him, then he would in addition be entitled to one third of any amount refunded by the bank.    

Freddie’s ill-gotten gains though would depend on the amounts paid to him by Lena. I had thought that the money stolen by her had ended up in her paramour’s account. On that basis, Freddie would have got a small amount. But this did not make sense. Why would he facilitate a fraud without making a genuine profit?

Quentin looked at me keenly. He guessed my train of thought. His next words threw light on the outcome. “Lena’s boy friend got about $300,000. The accomplice at the bank pocketed a miserable $150,000. The balance was shared by Lena and Freddie. No wonder Freddie remains attached to our new prison convert: a model Christian!  I am sure they’ll go to church together – arm in arm – when she is out!”

“So, the true losers are the deceased’s second and third sons.”

“So, it would appear. But who knows how much they got out of  their dad when they bought their owns houses. In my books, Peter, family frauds usually remain undisclosed. Nobody wishes to wash the dirty linen in public. All in all, family Lim is united. Their bloody hope is to get an extra $2.1m. from the Bank. In the circumstances, Peter, do you still think I am ‘acting out of character’? Why should they milk us!”

Quentin’s outburst surprised me. Had he himself been gotten at by members of his own family? Still, my present business concerned Lena’s defalcations. To clear matters, I observed: “I see your point now, Quentin. But how about the money that went to the Bank’s accomplice and to the paramour?”

“We got the money bank from both the internal culprit and the boy friend. You see, Peter, the boy friend had  an account with us. We used the rights conferred on us under the General Terms and Conditions vigorously: we debited his account.”

“I see. So, in reality you got back $450.000. Can’t you – in the very least – pay these back? After all, you don’t want to make a profit from the family’s loss? Further, don’t you want to avoid the publicity of the episode. Its handling by the Press  would not enhance confidence in the Bank!”

“You have a point there. Let me think all this over,” concluded Quentin. “But Peter – on which point do they want you to opine? Just the validity of our existing terms.”

“Quite,” I affirmed dryly.

“Surely, you can do so without any issue of conflicts.”   

 

 

V.             I SUBMIT MY OPINION

           

After some three days I advised Thomas and the estate the terms of the agreement, cited as applicable, were binding under Singapore law. They concluded, on this basis, that they had a poor case. It seemed best not to prod them. Thomas said he was still hoping for a settlement.

            “In that case you have to fight the case on the merits” I told him. “For instance, didn't the Bank owe special duties of care to a very old and illiterate customer? They did have his record!”

            “That might turn into a difficult case,” interjected Freddie.

            “It might,” I had to concede.  “But Thomas and I know that the courtroom is an arena. Once you enter it, you must be prepared to make use of the weapons available to you.”

            “I wrote to the Chairman of the Bank’s Council. He was prepared to be generous until one of their chaps blocked the deal. What can we do?” asked Freddie.

            “Fight,” I let my temper show. “Begging is not the way.”

            He reflected and then summed up: “My bothers and I will discuss this with Thomas. I still think that my appeal to the Chairman may work.”

 

VI.          SETTLEMENT AND POST MORTEM

 

            A few days later on, Thomas asked me to present my fee note and advised me that they settled for $250.000. Thomas appeared deeply moved by the Bank's generosity. I thought it best to congratulate him. All the same, I bit my tongue!

 

            Quentin looked perturbed when we met the following week. After solving together a Bridge quiz, both of us were again at home with one another. In the event, he opened the final discussion of the case.

            “You, Peter, resent the ‘poor’ settlement.”

            “I do indeed. Why didn’t the Bank fork out some $400,000. On the facts you conveyed to me, such a settlement would have  saved the Bank from incurring any losses.”

            “Look here, Peter. To start with your friend Thomas could have bargained. Well, he did not. Furthermore, the investigations we instituted cost a lot of money. The Private Investigator who unmasked the internal crook was dear. So was the chap who had a watching brief respecting the criminal proceedings. The settlement did not enrich the Bank. And our new practices re statements cost a packet. So don’t go on with your tirade about the ‘nasty bank’. You have uttered this ‘pearl of wisdom’ ad nauseam in your published pieces. I, too, know it by heart. And don’t keep telling me that the only difference between sharks and banks is that banks don’t display their ghastly teeth. Don’t make me shed tears of remorse.”  

            “But, Quentin, I get the impression that Lena and Freddie got off Scott free, except that Lena is temporarily fed and clad at the State’s expense. The real looser are the deceased’s younger two sons.”

            “Up to a point you are right. And I am sure Lena enjoys Changi; and Freddie rubs his hands.  Still, if the remaining family members really wanted to fight would they have instructed Thomas?”

            “Why not?” I looked a him stupefied. “He used to teach ‘banking’ to the Institute of Bankers.”

            “But this was a long time ago. Today he is an old man. And tell me: if you yourself wanted to have a ‘good day in court’  would you have  engaged  an Octogenarian?”

            “Thomas is sill lively enough,” I protested.

            “Yes, Peter, on the rare occasions in which he does not fall asleep during the proceedings.”

            “Quentin, Quentin, aren’t you indicting the legal profession as a whole?”

            “Not really, Peter. Most firms send you grazing when you are 60 or so. Some old timers continue thereafter on their own. But how well do they do? And look here: would you yourself take on the role of a lead counsel in such a difficult case?”

            “Actually, I would not. I know I lack the stamina. Age has caught up with me. Effectively, I have retired from practice.”

            “And you were an excellent strategist.”

            “I was; but time does not stand still.”

            “And your friend Thomas was never top class: not even in his heyday. I became suspicious about the case when I was told that  he had been briefed. There are plenty of young lawyers who want to be constituted Senior Counsel. They would have given us a run for the money.”

            “Well, well, well, Quentin. So, all in all nobody made a gain.”

            “Except yours truly. You see: they moved me to Head Office when I unravelled the case and got rid of the internal crook. But banks – as you always tell us with a malicious grin – are parsimonious. I did not get a bonus; just a laudatory letter of thanks from the Chairman. The Roman Catholic church would, in the very least, have canonised me: St. Quentin, the Bloodhound.”

            “I accept your analysis. But, then, why on earth did Thomas consult me? Why did he and Freddie make a half-hearted attempt to drag me into the ring?”

            “Thomas needed an endorsement. Some respected lawyer, who would confirm they had a weak case. He must have got worried when you started to dig.”

            “He did look uneasy. But I thought he feared losing face in front of the clients. Quentin, do you think he smelt a rat?” 

            “I can’t be certain, Peter. But he did not want to fight the case. Nowadays he prefers to settle. A day in court is becoming painful. He knew there were problems undermining our position as regards the applicable terms. But you, Peter, were told to keep out of that. He concluded that he better accept that our terms apply. He asked you to write an opinion on an obvious point.”

            For a while both of us kept staring  into the distance. I knew that Quentin was right. I had been used as a cat’s paw. Still, I had been paid and so had nothing to grumble about.

            I realised that the issues of the case had been solved and sorted out. To change the subject,  I took out of my briefcase a new book with Bridge Quizzes. Before long both of us were immersed in  them. Lena, Freddie and Thomas were no longer relevant.