ABC Co. Ltd. (ABC) manufactured a wide variety of toys and games for children.  Ben had been the auditor of ABC and befriended its owner, Dale, for years. They were good friends and both found their business relationship quite rewarding. The growth of ABC had given Ben opportunities to provide additional services to the firm and its owner.

Due to contractions of the toy industry, ABC was facing serious financial difficulties.  When auditing the accounts of ABC, Ben discovered the financial impact of the industry contraction on ABC.  Sales of ABC declined while receivables and inventory went up.  The audit also revealed material quantities of slow-moving stock which was confirmed by the marketing manager and production manager.

When Ben informed Dale of his findings, Dale replied that he intended to design and produce more creative toys to boost up the sales in order to save the company from bankruptcy. However, it required large capital outlays for manufacturing equipment.  Dale asked for Ben’s help to manipulate the accounting records, so that he could successfully apply for a large loan from the bank.  In return, Dale offered a luxury clubhouse membership to Ben as a token of thanks.

What major factors should Ben consider when handling Dale’s request?  What should Ben do? 

Teddy was a clerk employed by a solicitor firm and much trusted by his employer.  The firm’s major source of income was property conveyancing and Teddy was responsible for handling all the paper work of the property deals.  Teddy would get married soon but his fiancée wanted a grand wedding ceremony which put Teddy under a lot of financial pressure.  

One day, Teddy had dinner with his friend Barry who worked in a bank. Teddy talked to Barry about his financial worries.  Barry responded that perhaps they could work out something together for their benefits.  Barry suggested that he would submit some forged mortgage loan applications to his bank with the support of fake conveyancing documents with inflated property values prepared by Teddy.  Barry ensured Teddy that no questions would be asked by the bank.  After that, they could equally share the approved loans.  Teddy decided to take the risk and agreed to Barry’s plan.

Peter was an engineer in a private construction company. He had been assigned to supervise works carried out on site drainage in the eastern district of Hong Kong Island.  The job was awarded to a subcontractor and the director Stanley was very happy as the project brought in good money and would be renewed annually.

Stanley knew that one of Peter’s hobbies was buying new cars. So each time they met the conversation would invariably turn to the purchase of cars of various makes. Peter realised that Stanley was indebted to him in a way as Stanley’s company secured the contract only by a twist of good luck when others failed to meet the stringent requirements set by Peter.  One day, while chatting, Peter told Stanley he intended to place order for a new limited edition RV Van and he was about to pay the deposit.  But he was in a bit of difficulty over the cash flow at the moment.  Stanley discreetly offered to make the payment for him, and insisted that he need not bother about returning the money so soon.

“It can wait,” Stanley said, “You know it has nothing to do with our business relationship.”

Should Peter accept this loan?  Did Stanley mean it to be a loan or was it an offer in disguise in appreciation of what had happened? What would be the best line of action?  At the end of the day, could Peter let other people know about this arrangement without any scruples?

Alex was a senior engineer of a consultancy firm. Part of his duties was to approve various applications of claims from contractors and subcontractors.  Alex was in a good relationship with a contractor Bernard because they shared the same interest in golfing.

Recently, Alex’s company was responsible for over-seeing a private housing estate project, in which Bernard was one of the subcontractors. One day, Bernard invited Alex for lunch over which Bernard complained the funds for the project was short. He hinted if Alex could use his discretion to approve claims for an additional cost of around $5,000,000 for contingencies. Bernard even tried to convince Alex by offering shares of his company to Alex.

As Alex would retire from his company soon, should he help Bernard this time so that Bernard would return the favour after his retirement?

A senior engineer of an engineering consultant firm recently undertook to oversee a large private housing project.  Owing to frequent contact, he got along famously with a contractor who was around his age and shared his interest in golfing.

On one occasion, the contractor treated the senior engineer to a lavish meal in the Country Club and then revealed his hidden agenda.  He said that the funds for the housing project were quite short and he wished to have more allowances for contingencies.  As the senior engineer could approve claims for additional costs, the contractor tried persuading him to exercise his discretion and add $5,000,000 to the project.  As a token of thanks, the contractor promised to treat the engineer to a luxurious overseas golf trip.

David worked in a construction company as a junior engineer after graduation. Through work, he became close with a subcontractor Mr. CHAN who often treated David lavish dinners and free trips to Macao. The two got along famously.

Recently, David’s company was conducting an open tendering exercise for a multi-billion project in Lantau, which Mr. CHAN was very keen. David was responsible for collecting the price quotation documents for the project. One day, Mr. CHAN invited David to a lavish dinner over which he made a proposal to David. He asked David to go through the quotations secretly and leaked him the price of the lowest bid. Then he would submit an even lower price just before the closing time to ensure the winning of the tender.

Knowing that David needed help for the down payment of his new flat, Mr. CHAN promised David a handsome contribution to the down payment if David helped him out. He also persuaded David that he was just as good as anyone else and that it would be a ‘win-win’ situation for both of them. David really needed a hand financially, and he did not want to sabotage the excellent relationship with Mr. CHAN.

Should David say yes to Mr. CHAN?  Would this be illegal?  Would it harm anybody in anyway?

Lennon was a foreman working in the Hong Kong Harbour Engineering Company Limited which was a contractor carrying out the sanitary landfill and associated works at the Sai Kung Landfill.

One of the duties of Lennon was to evict gleaners from the landfill site as it was laid down very clearly that no salvage of any material within the site was permitted. There was a large sign displayed at the entrance of the site in both Chinese and English which could cause no misunderstanding.

Lennon had an old friend Gary who was unfortunately laid off a few months ago.  After much effort, Gary finally started a recycling business.  He approached Lennon one day asking to be allowed to send his men around to see what could be salvaged.  He promised that it would be done very discreetly and unobtrusively.  There were various arguments between the two. Gary doubted if Lennon would have anything to lose because he was merely lending a helping hand by turning a blind eye.  Gary stressed that it was all for a good cause, that environmental protection was the duty of every global citizen and that no real victims or suffering parties were involved.  Gary continued to persuade Lennon that the rules could always be bent a little bit.  The important thing was not to disturb the operation of the landfill.

Lennon thought to himself, “Should I help my old friend out?  He was an unfortunate guy.  Must I adhere to the rules laid down by the firm?  Gary was quite right.  What have I got to lose?  Why can’t I have a say in things as minor as these?  Maybe at the end of the day, I can still say I have evicted Gary’s people but not after they have had a chance to glean through the stuff a bit.  These practice was common in construction sites.”

A large building project developed by a public body (PB), involving five residential blocks and a commercial complex with a car park, should be completed by April 2003.   The PB awarded the project to a main contractor CK Holdings Ltd (CK) in May 2001 at $1,800 million.   Central Architects and Engineers Ltd (CAE) was appointed by the PB as the project consultant.

There were a number of sub-contractors responsible for different aspects of work for this project.   Among them, CK sub-contracted all plastering works to Diamondhead Plastering Company and CHONG was its proprietor.

Being the project consultant, CAE was responsible for monitoring and supervising the workmanship and progress of work including that for CK and its various sub-contractors.   CAE had recruited a team of five residential site supervisory staff headed by a Clerks of Works (CoW) Martin.   All of them were public servants acting as an agent for the PB in the project.

CHONG, Martin and other site supervisory staff of CAE always had dinner together and played mahjong after work.   Being a habitual gambler, Martin was in great debt and often borrowed money from his relatives and friends.

CHONG also invited Martin to Shenzhen on several occasions to have lavish meals and attend nightclubs.   CHONG paid all the bills on these occasions.   Furthermore, CHONG sometimes offered Martin loans and chips in the casinos in Macau.   Martin considered CHONG treated him well solely on friendly basis.

Shortly  after  their  visits  to  Shenzhen  and  Macau,  CHONG  went  to Martin’s site office and suggested to adopt a quicker method for laying screed. Instead of using a thorough mixture of cement, sand, aggregate and water, CHONG proposed to adopt a ‘semi-dry sand’ method in which a layer of sand was put onto a layer of cement and thereafter water was sprayed onto the layers.   Although this shortcut method of laying screed was used in some other projects, it was not allowed in this project and it was clearly stipulated in the Specifications.   Thus, Martin immediately objected to the suggestion.

On the day before Winter Solstice, CHONG approached Martin again and pleaded for relaxation on the screeding method.   He indicated that the screeding work had been behind schedule and the liquidated damage for delay was heavy.   CHONG offered a laisee packet of $50,000 to Martin claiming that it was for the forthcoming Winter Solstice and requesting for ‘flexibility’ in acceptance of work completed.  He also demanded Martin not to be too stringent when inspecting the work.   He further indicated that since he had been treating Martin well for so long it should be time for Martin to do something in return.   Finally, Martin decided to accept the bribe, accede to CHONG’s request and connive at the shortcut screeding method.

CHONG and Martin were later arrested by the ICAC and were found guilty of offences under Section 4 of the Prevention of Bribery Ordinance (POBO).

Questions

1. How did CHONG and Martin violate the POBO?
2. What do you think about the over-socialisation between Martin and CHONG?

3. Is customary practice, such as giving laisees during festivals （開工利是）, a defence to accept an advantage? Why?

4. Being a habitual gambler, what is the possible risk of Martin in respect of corruption?

Raymond  is  a  fund  manager  who  manages  the  provident  funds  in  a medium-sized asset management company.  His wife, Jenny, is an account executive in a brokerage firm.   Recently, Jenny has been under pressure from her employer to generate more business.   Due to the keen competition within the industry, she is unable to meet the quota for finding new clients.   In order to help his wife, Raymond makes use of his official position to place business with her without observing his company policy on the selection of external brokers.

Robert is a fund manager of an international asset management company, who manages the provident funds for certain large corporations.   One day, he receives a research report from an analyst stating that the profit margin of Hydroplane is expected to be high in the forthcoming three years.

Robert, therefore, plans to buy a substantial amount of Hydroplane’s shares for his provident funds portfolios.   Knowing that such a bulk purchase will likely boost its share price, he decides to place an order for himself through an external broker before sending out the purchase instruction to the dealing room for his provident funds portfolios.