'Senior management approved fraudulent transactions,' argues executive
The General Division of Singapore's High Court recently dealt with a case involving alleged fraudulent activities within a large multinational corporation specialising in technology products.
The matter centred on a former sales executive who was accused of orchestrating schemes to siphon company funds through falsified invoices and unauthorised rebates.
This case highlights important issues around corporate governance, internal controls, and the responsibilities of management in overseeing financial processes.
Alleged fraudulent schemes
According to records, the prosecution alleged that the defendant, while employed as General Manager of the Sales Division, masterminded two major conspiracies:
- Submitting falsified invoices to siphon money from the company's advertising and promotional fund
- Creating false invoices to funnel "parked" funds to personal bank accounts
These schemes allegedly involved collusion with subordinates and third-party vendors. The court heard that the defendant received over S$598,000 through these activities.
The first conspiracy involved 133 charges and centred on the submission of falsified invoices to the company. These invoices were used to divert funds from the advertising and promotional budget, either as unauthorised rebates to sales channel partners or to create "parked" funds held by third-party marketing agencies.
The second conspiracy, involving 24 charges, related to the creation of false invoices submitted to third-party marketing agencies to facilitate the transfer of "parked" funds to the defendant's personal bank accounts.
The defendant claimed the Japanese senior management had approved the practices as a way to boost sales. However, the prosecution argued this was an unauthorised subversion of company policies designed to maintain a structured sales channel.
Defence arguments and evidence
The defendant's primary defence centred on alleged approval from senior management. She claimed discussions during her recruitment interviews indicated support for "creative" uses of company funds to drive sales.
The defendant emphasised conversations with the former Executive Director and Head of the Regional Office, arguing that he had expressed interest in changing the channel partner system and dealing directly with resellers.
She also claimed that during her interviews, senior management had proposed giving various forms of discounts and incentives to resellers.
However, the judge found the defendant's evidence to be inconsistent and self-serving. Notably, the defendant had previously admitted wrongdoing during the company's internal investigation, making no mention of management approval at that time.
The defendant also argued that the accounting department's processing of the invoices implied tacit approval. But testimony from accounting staff indicated they relied on the sales team to verify invoice legitimacy, and were at times misled about the nature of expenses.
Assessment of ‘intent to defraud’
A key issue was whether the prosecution proved intent to defraud. The judge carefully evaluated evidence from multiple parties, including:
- Testimony from senior management denying approval
- Accounts from co-conspirators implicating the defendant
- Patterns of fund transfers to the defendant's personal accounts
The court considered evidence from various members of the company's Japanese management, who consistently denied authorising the scheme. They testified that such practices were against company policy and would be detrimental to the organisation's long-term interests.
The court also heard from the defendant's subordinates, who testified that they received instructions from her to perpetrate the schemes. These co-conspirators stated they were unaware of any interaction between the defendant and senior management that would have indicated support for the scheme.
The court ultimately rejected the defence's arguments, finding that the schemes were deliberately designed to circumvent company policies and controls. As the judge noted:
"The invoices, which were for internal processing, appeared to be designed to avoid arousing the suspicion of the Japanese management and accounts department."
Sentencing considerations
In determining the appropriate sentence, the court considered several factors:
- The premeditated nature of the schemes
- The significant sums involved (over S$1.5 million diverted)
- Abuse of the defendant's senior position
- Lack of genuine remorse
The judge emphasised the potential for long-term damage to the company, stating:
"Any short-term gain in local sales would be outweighed by the chaotic situation of an influx of parallel exports from Singapore into other regional markets. The scheme also risked reputational damage for [the company], if it was discovered that the company had been sidelining their first-tier channel partners."
Employer’s ‘best interest’?
The court considered the defendant's claim that she had merely worked to benefit the company. However, it found that personal gain was not merely incidental, noting that a substantial sum was spent by the defendant for her personal use, including partial redemption of housing and car loans, and as downpayment for the purchase of a condominium.
Ultimately, the court imposed a total sentence of 52 months' imprisonment. This was deemed appropriate given the gravity of the offences and consistent with precedents for similar white-collar crimes.
This case underscores several key points for companies and HR professionals:
- The importance of clear approval processes and documentation for financial transactions
- The need for robust internal controls and auditing procedures
- Risks associated with informal or undocumented management directives
- Potential for conflicts between sales targets and corporate governance
As the judge noted in concluding remarks "The [executive] had acted wilfully with intent to defraud [the company].”
This decision serves as a reminder of the serious consequences for executives who engage in fraudulent practices, even if they claim to be acting in the company's interests.
