Article

Note: Wong Mei Lan and Anor, husband and wife, controlled certain companies, including Waymax Holdings, Inc. ("Waymax") and Chinapro Pacific Limited ("Chinapro"). In October of 1998, both Waxman and Chinapro applied for credit facilities from BNP Paribas ("BNP"), secured by "a telex which purported to be a standby letter of credit issued by SAB Banka D.O.O. Sarajevo....and confirmed by Bank Austria AG dated 13 October 1998 in the amount of US$ 10 million" ("SLC1"). On this basis, Jorge Marisol, then head of the BNP Credit Department, approved an advance of US$ 10 million.

Concurrently, Chinapro was approved for credit in the amount of HK$ 70 million, secured by the following: (i) "a telex purport[ing] to be a standby letter of credit issued by GSP International Bank....and confirmed by First Union National Bank....dated 23 November 1998 to the amount of US$ 3.5 million" ("SLC2"); (ii) "a telex purport[ing] to be a standby letter of credit issued by Soko Komerc Bank and confirmed by Bank Austria AG dated 23 August 1999 numbered 001502 to the amount of US$ 16.5 million" ("SLC3"); and (iii) a "telex purport[ing] to be a standby letter of credit issued by Soko Komerc Bank and confirmed by Bank Austria AG dated 23 August 1999 numbered 001503 to the amount of US$ 16.5 million" ("SLC4"). SLC1, SLC2, SLC3 and SLC4 collectively referred to herein as the "LCs".

All four LCs were obtained by a mysterious individual known only as Ganesh. The wife claimed that she had been introduced to Ganesh by a former colleague and that she and her husband had met Ganesh in a hotel room. At that meeting, Ganesh informed them that he could obtain the LCs provided that he was paid a fee of 30% of the amount of each LC. Neither husband nor wife inquired further regarding the 30% fee.

After the LCs were provided to BNP, Waymax and Chinapro drew down on their respective credit lines. When BNP subsequently discovered that the LCs were fraudulent, husband and wife were charged with and found guilty of various offenses, including conspiracy to defraud and obtaining a pecuniary advantage by deception. On appeal, the Court of Appeals, Hon Ma CJHC, Stuart-Moore VP & Lunn J., allowed the appeal as to the wife and denied the appeal as the husband.

Among other things, husband and wife claimed that a key ingredient of certain of the offenses of which they were convicted required proof that "BNP Paribas was deceived, or an attempt was made to deceive the bank, by the false representation that the respective SLCs were genuine and/or had been genuinely confirmed as to their terms by the confirming bank." According to the husband and wife, there was insufficient evidence to prove that they knew that the LCs were not genuine.

The Court of Appeals disagreed and upheld the lower court's decision. Specifically, it pointed to the fact that both husband and wife had no relationship with any of the issuing banks, nor did they fill out any applications or forms. Instead, husband and wife paid almost US$ 3 million to a mysterious stranger they met in a hotel room. In addition, phone calls between the husband and Jorge Marisol gave the impression that the husband was aware of the illegitimacy of the LCs. Neither the trial court nor the appeals court considered significant the fact that BNP allowed Waymax and Chinapro to draw down on their respective credit lines without first verifying the legitimacy of the LCs.

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.