Dr M, the Chief of Service of the Paediatric Department of a public hospital, has the approving authority for purchases not exceeding $100,000. His girlfriend Phoebe is a sales manager of a large medical equipment company.

Recently, David, the Department Operations Manager, recommended a replacement of a medical equipment and the sourcing was in progress. As Dr M knew that Phoebe was being pressured by her boss to secure more business for the company, he offered to help her.  After going through the quotations obtained by David, Dr M found that the price quoted by Phoebe was not the lowest.  He thus asked David to mark up the quotations of other companies so that he could secure the contract of the medical equipment to Phoebe’s company.   In order to please Dr M, David agreed to the proposal.

Dr J is a general practitioner in private practice. On one occasion, his friend Tony, an insurance agent, suggested to him a plan for earning quick money. The Personal Accident Insurance Policy (PAI) offered by his company would provide insurance compensation for an injury caused by an accident resulting in death, permanent or temporary disability to an insured. All claims under the PAI had to be supported by a form issued and signed by a registered doctor in Hong Kong. Tony knew many construction workers and, as a first step, he would suggest to them to buy PAI policies from him. These individuals would make claims later, even though they just suffered from minor injuries. What Dr J could help was to exaggerate the seriousness of the injuries when filling in the worker's claim forms as the attendant doctor, thus resulting in higher compensation payments. The “profit” could then be split among all parties.

Andrew was the chief accountant of a large trading company.  Due to keen competition, the business of the company deteriorated substantially.  To improve the situation, the company attempted to invest in the Mainland.

When reviewing the books and bank statements, Andrew found that there was evidence of fraudulent activities involving some sales representatives. Andrew discovered that there were no supporting documents for some cash payments claimed by the sales representatives.  When asked for explanations, the sales representatives replied that those expenses had been incurred for the purpose of building up new businesses in the Mainland.  They further explained that the offering of commission to agents of business clients was a common practice.  When consulting the Marketing Director who was a long serving staff of the company, Andrew was told that the expenses were approved by  the Marketing Director personally. 

With no choice, Andrew went to see the Vice-president.  The Vice-president pacified Andrew and told him that in real business life, the company had to tolerate some minor variations in order to get the job done.

Next day, a cheque was placed on Andrew’s desk and the phone rang.  It was the Marketing Director.  Andrew was asked to sign the cheque and was told that it would be deposited in a designated Hong Kong bank account belonging to a buyer of a firm in the Mainland.  The arrangement enabled the buyer to pay for his various expenses while on business in Hong Kong.  He further suggested that the sum could be paid by an overseas subsidiary of the company.

Although Andrew knew that the client was very important to the company, he suspected that the payment might be unlawful.

What should Andrew do?

Mike, a certified public accountant, was the voluntary treasurer of the parent-teacher-association (PTA) of the private school which his son attended.  Though the PTA had an annual expenditure budget and raised substantial funds each year, no formal accounting reports had been made by the school.  The new PTA Chairman thought it was time to clarify the current financial position of the association and asked Mike for assistance.

When going through the accounting records, Mike discovered several red flags: the actual expenditures were inconsistent with the approved budget; the cash balance fluctuated without explanation; and the cash inflows from fund-raising events did not match with the accounting records.

Mike then approached the school secretary, who looked after the PTA’s accounts, for clarification.  However, the school secretary repeatedly gave vague and evasive responses. As Mike did not have access to the school’s accounts and lacked important information to determine the cause of the problems, he suspected that a fraud might be involved. Meanwhile, the school principal had recently indicated concerns on the academic performance and constant school behavioural problems of Mike’s son.

Mike was uncertain if he had any professional obligations as a voluntary treasurer in the PTA.  He was also worried whether reporting the suspected fraud would cause the school any trouble and affect his son’s interests in school. What should Mike do?   

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.

Upon her return to Hong Kong after a few years in the States, Sandy worked in La Fonda, an architect firm.  She had her first degree in Hong Kong but left for the US with her boyfriend soon after graduation.  Her performance in the firm was brilliant and the portfolios she submitted were excellent.  When her senior Kelly resigned, her unit head Antonio considered recommending Sandy for promotion to take up Kelly’s post.  Sandy was full of hopes.

Antonio was about to nominate Sandy. One evening, he was talking to his cousin Gamma who just returned from a long stay in the States. Gamma had been doing a doctoral programme in Architecture in the University of Vermont. Antonio causally mentioned to Gamma that his prize staff, Sandy, also worked on a second degree at the University of Vermont too.  Antonio thought that Gamma and Sandy might have met in the University because their years of study coincided. But, to Antonio’s astonishment, Gamma could not recall a Chinese lady studying Architecture during his seven years’ stay at the University, particularly as he worked part-time in the Registrar’s Office.  If Sandy had studied there, Gamma would have remembered her.

Antonio was flabbergasted and determined to look into the matter. When he went back to the office the next day, he sent for Sandy at once.  He asked Sandy if the credentials she submitted to the firm were in order. Sandy guessed what he was getting at and blurted out the truth.   

It was a sad story.  Sandy was about to be married to her boyfriend in US when she found out that he was dating another girl who could help him to get US citizenship. He tore her heart into pieces. After a few years of living only on the money sent from home, Sandy finally decided to turn over a new leaf and went back to Hong Kong.  She built up a portfolio of her own work which was in fact copied from overseas designers and made up an academic and professional history for herself.  Then she landed the job at La Fonda.

Antonio did not know what to do.  Should he expose the fraudulent past of Sandy?  Was it his duty to make sure that the firm was not cheated? Would this destroy the career of Sandy who had been a star in the firm?

Sandy had promised to work hard if Antonio kept her secret for her. Could Antonio do that with a clear conscience?

Using a number of false invoices, a company's lift maintenance engineer conspired with two maintenance supervisors and a sub-contractor to defraud his company by claiming that certain jobs were carried out by the sub-contractor whereas the jobs were actually done by the maintenance engineer's subordinates.  The offences came to light when one of the company’s workers who carried out the jobs suspected irregularities and reported to the ICAC.

In a construction project of a commercial complex valued over $500 million, the main contractor employed ten foremen to monitor the work of sub-contractors.  A site engineer of the company, who took charge of the foremen, was responsible for the overall supervision of the project.

The salaries of the foremen and other workers were calculated on a daily basis.  Each  of  them  was  required  to  punch  an  attendance  card  when reporting on and off duty every day.  The attendance cards and the punching machine were placed in the engineer’s office so that when the foremen and other staff  reported  on  or  off  duty, they  had  to  punch  the  cards  in  the engineer’s office.  The engineer was responsible for ascertaining that his subordinates personally punched the cards.  At the beginning of each month, the engineer was responsible for calculating the salaries of his subordinates based on their individual attendance records for the previous month.  His calculations and the punched cards were then sent to the Accounts Department of the company for processing salary payment.

As the family of one of the foremen, CHAN, was in the Chinese Mainland, CHAN would seek every opportunity to travel there to visit his family.  One day, CHAN went to see the engineer and requested for three days’ off.  CHAN, however, requested the engineer not to record his leave but instead punched the attendance card for him so as to show that he was working on the three days.  In return, CHAN offered the engineer $500 for assisting him in punching the attendance card and turning a blind eye to his absence.

The engineer turned down the offer and reported the matter to the ICAC.  Eventually, CHAN was convicted for offering a bribe to the engineer, contrary to Section 9 of the Prevention of Bribery Ordinance (POBO) and was sentenced to imprisonment.

A relationship manager of a bank was responsible for managing portfolios of his corporate clients.  He noticed that one of his SME clients, Client A, had been lax checking his account statements.  Without Client A’s knowledge, the relationship manager took a series of malpractice in Client A’s account, for example, fraudulently applying for an increase of credit line, forging the client’s instruction to draw funds from the credit line and transferring the money from the client’s account to an account he controlled.  Later, Client A raised his doubts about the balance of the credit line, the relationship manager lied that it was caused by an error in the computer system. 

On another occasion, the relationship manager also forged a loan application under Client A’s name by using another client as guarantor and forged signatures.  He wanted to use the loan to settle the debit balance in Client A’s credit line to cover up his scam earlier.  During the credit approval and fund transfer process, the backend staff members had their doubts but only went to the relationship manager for clarifications.  The supervisor of the relationship manger also raised questions about the irregularities but he easily accepted the explanation given by his subordinate without follow-up. Later, with Client A’s persistent enquiries and complaints about the questionable credit balance to the bank supervisor, the scam by the relationship manager was finally exposed.