How Massive Commercial Financial Fraud Was Discovered in Singapore

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Case Study on a Senior Finance Manager’s Corporate Fraud Using Illegally-Obtained Funds from Bank Credit and Loans

Case Study I: Chia Teck Leng’s Abuse of Position of Trust

This is a case of a finance manager responsible for the accounting integrity of a reputable company turning forger and fraudster soon after joining the company.

Mr. Leng joined APBS as a Manager. As a Finance Manager, he was responsible for the corporation’s financial accounting. APBS’s principal activity is the manufacture of beer and related products. Leng was later transferred to APBL as a Senior Manager. Leng forged corporate documents to deceive banks into extending millions in credit. The company’s new auditor eventually discovered Leng’s fraudulent activities. The complex flow of funds involved four major banks. Leng had swindled $117 million using accounts set up in his employer’s name. It was the largest financial crime in Singapore.

Leng’s Blatant Abuse of His Position of Trust

Five days after joining APBS as its Finance Manager, Leng audaciously began his illegal endeavor, establishing a banking relationship with one of the banks by presenting forged documents. Corporate resolutions were passed without approval by the Board.

Leng’s Double Life

Mr. Leng was married with two teenage sons. He graduated with a degree in accountancy from the National University of Singapore in 1983. Before joining APBS, he was the financial controller in another company.

He had been secretly gambling and losing heavily since 1995/1996. By 1997, he owed several banks about $100,000. In 1996/1997, he organized a company function for his previous employers on a cruise ship and was invited to gamble in a private room in the casino. Having won a few thousand dollars on that trip, he began to gamble regularly and managed to win about $1M within a year. He was thus able to discharge his outstanding debts.

On one of his trips, he met a young woman he believed to be his lucky charm. With an increased sense of winning, his bets grew to thousands of dollars. He traveled around the world, and his mistress was his constant companion. Some of the biggest casinos courted him with free suites and private rooms to play. It was the magical promise of easy money. They mostly enjoyed private planes to Australia and London. With increased credit and higher stakes, he WON BIG—9.2 million pounds.

However, his family did not benefit from his winnings. He was not flashy with his wife and children. They maintained a lifestyle that aligned with his company position and salary. He purchased a condo for his mistress, and they enjoyed a lavish life together.

In August 1998, he had a severe reversal of fortune in gambling. He lost so much that even with help from his wife and his family, he could not settle his debts. He sought money from friends. He owed casinos huge amounts of money but couldn’t tell his wife. Hounded by his creditors, he became a desperate man. He was in a predicament. He needed cash, so he devised a scheme.

Leng’s Financial Scheme

Chia Teck Leng, Finance Manager, Singapore

It was around that period that Leng joined APBS. Driven to desperation, he began to open bank accounts in the name of APBS using forged documents. He withdrew money from the accounts and transferred it to his own account or paid it directly to his creditors. The banks never questioned why he was the sole signatory for the accounts. Of the four banks in question, SEB was the only one he had approached to open an account. The other three approached him to canvass for business from APBS. Initially, he was not confident that SEB would extend credit but was prepared to take the chance.

This was not a one-off offense committed on a surge of impulse. The offenses required the systematic planning and pre-meditation of a criminal genius. Leng diligently practiced replicating the signatures of the various directors of his employers. Money drawn down from the credit facilities was channeled to the SEB accounts fraudulently opened in the name of his employer. By rolling over the funds provided by the banks, Leng presented himself as a creditworthy customer by making timely remittances to each bank whenever repayments were due. He created the impression that money was being transferred from one company account to another.

Leng’s Defense Counsel submitted that: A desperate man would resort to desperate means. He took the chance, but he did not take advantage of the banking system. He had expected the banks to check on the authenticity of the documents and signatures and verify the documents. He assumed that they would and had done so. He did not at any time hold himself as the person who pulled the strings at APBS. He was surprised when the credit facilities were extended.

Having succeeded in doing all this, Leng continued to take further chances, and the credit got bigger, and the draw-downs increased. “The scheme would have fallen apart if the banks had done their due diligence. It is not a case of the accused knowing or having intimate knowledge that the banks will not do their due diligence.” The scheme hatched by Leng was just too simplistic and possibly too absurd to succeed, and that should be taken into account in sentencing.

Leng knew he had to return the money to the bank accounts. In his mind, he was “borrowing” the money and would return it with his winnings. He had no intention of fleeing with the money. He did not buy expensive goods or splurge on holidays. He lived in the same home and drove a car that he could support with his legitimate income. The illegally obtained money went straight to the casinos and back. It was not dissipated. The luxurious lifestyle he enjoyed was provided by the casinos as part of their package.

Infected by the gambling disease and obsessed with how he could return the money, he sought the highest bets available anywhere so that he could recover enough to cover his losses and repay the banks. That led to the situation where he was playing at A$400,000 a hand. He returned the winnings to the SEB account. He withdrew $53M from APBS’s account with OCBC Bank between November 1999 and October 2002 but returned the money over the period with no loss incurred by APBS and before his arrest. He also did not draw down all the available funds. He had more than A$32M in his Westpac account and would have absconded long ago if it had been his intention to enrich himself.

Leng was arrested on September 2, 2003, at the Commercial Affairs Department. This case took place over four years, and the victims were all corporations.

The accused did not siphon off any money to secret accounts and, therefore, would not have an opportunity to enjoy the fruits of his illegal acts upon release from prison.

CAD Investigations into Leng’s Fraudulent Activities

Since 1994, Leng had been gambling at casinos on board “Star Cruise” vessels. Sometime between 1998 and early 1999, before he joined APBS, Leng lost heavily in gambling and accumulated gambling debts amounting to more than $1 million (Singapore). Shortly after he joined APBS as its Finance Manager, he devised a plan in January 1999 to obtain credit from Skandinaviska Enskilda Banken (“SEB”) for his personal use by using forged documents to open bank accounts with SEB in the name of APBS. Emboldened by the successful execution of his devious plan, Leng subsequently created several other fictitious documents between January 1999 and March 2003 in order to obtain, for his own purposes, further credit and loans on behalf of APBS from four foreign banks operating in Singapore.

The credit and loans were obtained from these banks without the consent and knowledge of APBS. The numerous forged documents created by Leng included certified extracts of directors’ resolutions. Forged between January 1999 and March 2003, these directors’ resolutions purportedly authorized him, as the sole signatory, to receive the credit and loans provided by the four banks, sign all transactions, and operate the bank accounts on behalf of APBS. To forge the signatures of various directors of APBS, Leng obtained their signature specimens from APBS annual reports and other internal documents. Leng then practiced signing their signatures on pieces of paper several times until he was satisfied that he could replicate them.

Investigations by the Commercial Affairs Department (CAD) revealed that by using forged documents, Leng collectively obtained loans and credit amounting to $83 million USD and $18 million (Singapore) from these banks.

Investigations also disclosed that Leng had fraudulently made several withdrawals from the credit and loan facilities provided by the banks between 1999 and 2003. Between March 2003 and July 2003, Leng also gave written instructions to the four banks to make the following eight withdrawals:

$13 million USD from credit provided by SEB on March 20.

$30 million USD from loan provided by HVB on March 21.

$3.5 million USD from credit provided by Mizuho on April 14.

$3.5 million USD from credit provided by Mizuho on April 28.

$12 million USD from credit provided by SEB on May 19.

$5 million (Singapore) from credit provided by SMBC on June 4.

$1 million USD from credit provided by Mizuho on June 4.

$5 million (Singapore) from credit provided by SMBC on July 29.

Monies drawn from the credit and loan facilities between 1999 and 2003 were channeled into the SEB bank account, which was also fraudulently opened by Leng in the name of APBS. A large portion of these funds was transferred to Leng’s personal bank accounts maintained with the DBS Bank in Singapore before being remitted to casinos in Australia, the United Kingdom, Hong Kong, Malaysia, Cambodia, and the Philippines. These remittances were made to finance Leng’s gambling activities at these casinos.

Leng placed bets of about $200 when he started gambling. Stakes were slowly increased to about S$5,000 a hand. With the illegally obtained money, he started placing bets of A$20,000 and £25,000 in casinos in Australia and London, respectively, before eventually enlarging his bets to A$400,000 a hand when he gambled in Crown Casino in Australia.

Leng had cheated the four banks collectively of about S$117.1 million. CAD managed to secure the recovery of just about S$34.8 million from property seized in the course of investigations, as well as voluntary remittances made by Leng from bank accounts maintained by him overseas. Approximately S$62 million was squandered and lost at various casinos around the world.

The Prosecution argued that the sentencing principles of retribution and deterrence were of particular relevance here as this case “is the largest case of commercial fraud in the history of Singapore.” It highlighted the aggravating factors discussed below.

The Sum of Money Involved

Leng cheated the four banks in question of an unprecedented total of $117.1M over some four years, out of which only the sum of $34.8M was recovered. The loans and credit granted amounted to some $159M.

How Leng Used the Money

A colossal $62 million (Singapore) of the banks’ money was frittered away, throwing dice and playing Blackjack without restraint. Being one of the biggest players in an Australian casino, he was provided with transport in a private jet whenever he wanted to gamble. Various casinos in Australia and London extended personal invitations for him to visit them. Leng also used the illegally obtained money to purchase a Mercedes Benz car and an apartment in Francis Lodge, Singapore. He also gave away more than $300,000 in cash and gifts to various persons.

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Impact on Singapore’s Reputation as a Financial Hub

The Prosecution argued that Leng’s actions damaged Singapore’s reputation as an honest and efficient financial hub. The foreign banks in question have invested substantially here. The Prosecution also argued that the plea of guilt in the face of the “avalanche of evidence” against Leng should not attract a substantial discount in sentencing. The fact that the accused was a first offender was of little mitigating value. It was, at best, a neutral factor unless there was positive evidence of his character rather than adverse inference from the absence of antecedents.

The Prosecution referred to two recent High Court cases. In PP v Teo Cheng Kiat [2000] SGHC 129 (unreported), an employee of Singapore Airlines who embezzled $34.9M of his employers’ funds was sentenced to an aggregate imprisonment term of 24 years on ten charges under s 408 of the Penal Code. In PP v Lam Chen Fong [2002] 4 SLR 887, an operator of a money remittance business was sentenced to an aggregate of 22 years in prison on 22 charges, 20 of which were under s 409 of the Penal Code. The amount misappropriated was $8.7M. Both accused persons in those two cases pleaded guilty.

Citing Sim Gek Yong v PP [1995] 1 SLR 537, it was argued that the accused’s conduct here fell within a range of conduct that characterized the most serious instance of the offenses in question. The offenses were not motivated by need but by greed, and there was “little doubt that the accused relished the thrill of high-stake gambling and enjoyed being revered at the casinos as a high roller.” He would still be swindling the banks had he not been caught.

Given the numerous charges, Leng cooperated fully with the investigators right from the moment he was questioned by them. Although the scope of their inquiry at that time was very limited, he not only answered their questions but also volunteered information on the other bank accounts, where most of the funds were held, and the flow of the funds. He also helped in the tracing and the recovery of the money by signing all necessary papers. He thus saved the investigators a lot of time and effort. The extent of his cooperation attested to his remorse and regret.

The complex flow of funds was not deliberately designed to avoid detection. It was simply the route he took to allow for the flow of funds to support his gambling habits. He did not use any fictitious names for his accounts.

There was restitution of about $34.8M, representing almost 30% of the total amount he had illegally obtained. Where the $1.29M remitted to the authorities by his girlfriend, Li Jin, was concerned, the accused asserted that he had given her only S$254,000 and US$20,000. He claimed that the rest of that amount was Li Jin’s own money and that it should be returned to her. It would be to his advantage to increase the amount of restitution, but he did not wish to implicate an innocent party.

In response to the Prosecution’s contention that the accused’s actions have damaged Singapore’s standing as an honest and efficient financial hub, the Defense argued that: To a certain extent, the ease with which the banks relied on the forged documents reveals that increased security measures must be implemented. This can be done by the banks themselves or by amendments to the regulatory legislation. These actions will certainly restore public and investor confidence, which passing a crushing sentence on the accused can never hope to achieve.

The mitigation plea also seems to be casting some blame on the banks cheated for having made it too easy for him to commit the offenses by being too naïve and trusting or perhaps even negligent. That appears to be the thrust of the statement, “the scheme would have fallen apart if the banks had done their due diligence.” As mentioned, the banks believed, and rightly so, that they were dealing with a responsible head of finance of an established company. That is why the law regards abuse of positions of trust as an aggravating factor. The accused, accustomed to playing slot machines and taking chances on gaming tables, took a gamble with SEB and was obviously elated that it paid off. That emboldened him to play for higher stakes.

In reply to the submission that the “simplistic scheme” of the accused was practically doomed to failure, I only need to point out that it was very successful for more than four years. Sometimes, the simplest solution or scheme is obvious only to a genius. The fact that his massive defalcations and movements of funds remained undetected for more than four years must surely attest to the correctness of the Prosecution’s assertion that this was the work of a criminal genius.

The illegal taking of money here was likened to “borrowing” by the Defense. It would appear then that the “loans” the accused took had no repayment dates and were interest-free. The “loans” were also getting bigger over the years. How was he hoping to repay $62M worth of loans? He did not need to splurge on lavish overseas holidays because each gambling trip was a lavish, all-expenses-paid holiday. Were his massive gambling losses not the payments made in any event? His gambling trips using the illegally obtained funds were nothing more than a result of his addiction to the grandeur and splendor of being treated like a royal flushed with slush funds.

While Leng may not have kept some secret account somewhere, he has squandered a sum, which is enough to feed many people for life. There are, of course, some points in the accused’s favor. By pleading guilty and indicating he was going to do so from the outset, a lot of time and expense in a potentially lengthy trial have been saved. However, this would have to be counter-balanced against the time and expense that would be involved in the litigation that is likely to be generated among the corporate entities ensnared by his misdeeds.

He had no criminal record and had done some good for the flood victims in Cambodia in 2001. His cooperation with the investigators helped to piece together the mess he had created and recover some 30% of the funds. It was fortunate for the accused that the Australian dollar had risen in value against the Singapore dollar, resulting in a higher amount of restitution when the funds in Australian dollars were converted to local currency.

Leng may have lost everything else, but he still has the immeasurably valuable gift of love from his two sons.

Crimes like this case strike at the heart of banking and commerce. They erode the open halls of trust and erect the high walls of suspicion. They lead to ever more stringent checks by banks on honest businesses with the attendant impact in terms of time and cost.

Chia Leng’s Sentencing

Weighing all the above factors and bearing in mind the 32 charges to be taken into consideration. For each of the 14 charges on which he has been convicted, he is sentenced to undergo six years in prison. Seven of these imprisonment terms are to run consecutively, with the other seven running concurrently, totaling 42 years. The commencement of the sentence was backdated to September 2, 2003, the date of his arrest.

Leng was no mere corporate sentry; he was the commander of the guards. The implication of the mitigation plea appears to be that the crime was less serious because some of the victims walked through the door themselves without him seeking them out actively. It was unremarkable that the banks involved here would seek his acquaintance with the hope of establishing a profitable banking relationship with the company. Bankers knocking on his door were there to meet the man “responsible for all financial, accounting, and bookkeeping matters of APBS” to forge a business relationship, but the man they met was, unfortunately, in the business of forgery. They did not suspect for one moment that the financial wizard was conjuring up fake documents. The fact that they made “cold calls” on the accused, therefore, does not make his crimes of forgery and fraud more forgivable.

Chia Leng’s Sentencing

Leng was no mere corporate sentry; he was the commander of the guards. The implication of the mitigation plea appears to be that the crime was less serious because some of the victims walked through the door themselves without him seeking them out actively. It was unremarkable that the banks involved here would seek his acquaintance with the hope of establishing a profitable banking relationship with the company. Bankers knocking on his door were there to meet the man “responsible for all financial, accounting, and bookkeeping matters of APBS” to forge a business relationship, but the man they met was, unfortunately, in the business of forgery. They did not suspect for one moment that the financial wizard was conjuring up fake documents. The fact that they made “cold calls” on the accused, therefore, does not make his crimes of forgery and fraud more forgivable.

Chia Teck Leng was found guilty and sentenced to 42 years imprisonment.

Leng was not being punished for being a gambler.

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Case Study on a Senior Finance Manager’s Corporate Fraud Using Illegally-Obtained Funds from Bank Credit and Loans: Chia Teck Leng

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How Massive Commercial Financial Fraud Was Discovered in Singapore