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Note: In a transaction for the purchase of waste paper and cardboard shipments, America Chung Nam, Inc. (Buyer/Applicant), a California-based recycling company, obtained a series of letters of credit from Comerica Bank (Issuer), Buyer/Applicant’s American bank, between March 2011 and July 2011 for the benefit of TT Waste and Resource Management (Seller/Beneficiary). Seller/Beneficiary is a trade name registered by Australian-based Paris International Group Pty Ltd (Paris International), of which Xia Zhao (Fraudster) was the sole director and shareholder.

Buyer/Applicant negotiated by email with Seller/Beneficiary for the supply of waste paper product from Australia, and subsequently placed four purchase orders with Seller/Beneficiary for USD 500,000, USD 637,000, USD 208,800, and USD 204,750. Payment was to be made through the letters of credit. Buyer/Applicant and Seller/Beneficiary initially agreed that payment would be made ninety days after the date of the bill of lading, but the terms of the letters of credit were later amended to “‘at sight’ rather than ‘ninety days.’” The amendment allowed Issuer to release the funds under the letter of credit facilities immediately upon presentation of documents, which were to include the bill of lading.

Between April and May 2011 there were nine legitimate shipments of waste paper product by Seller/Beneficiary to Dong Guan Nine Dragons Papers Industries Co. Ltd (Dong Guan). The letters of credit contained strict shipping deadlines of 7 May 2011, 13 May 2011, and 31 August 2011. By 7 May 2011, only 19 of 228 containers had been shipped. Between 7 May 2011 and 12 May 2011, four false bills of lading were created for USD 147,201.30, USD 262,499.55, USD 155,122.74, and USD 168,005.25, and were used to procure payments from Issuer upon receipt of the forged documentation. The false bills of lading were signed “Kelly,” a pseudonym of Fraudster. Paris International ultimately received the money, as Seller/Beneficiary remained an unincorporated entity at this point.

Funds from these fraudulent bills of lading were used to pay a debt of USD 627,346.44 owed by Paris International to Commonwealth Bank. The remaining USD 102,784.23 was credited to a CBA foreign currency account held by Paris International. In May 2011, a property was purchased by another company Fraudster incorporated, Sunday International Investment Pty Ltd (Sunday International), and paid for with some of the funds procured through a loan from Commonwealth Bank.

Between 3 May 2011 and 4 July 2011, only four legitimate shipments were made.

On or about 25 July 2011, another false bill of lading was created, referring to thirty two containers with a value of USD 198,325. Seller/Beneficiary’s commercial invoice was signed by “Louisa,” another of Fraudster’s fictitious identities. Most of this money went into Sunday International’s account.

Buyer/Applicant commenced an internal investigation following inquiries into the bills of lading after Dong Guan failed to receive scheduled shipments. In October 2011, Australian police commenced an investigation, and, on 24 April 2012, Fraudster was arrested and charged with one count of fraud involving over AUD 1,000,000. Fraudster pled guilty, and the District Court at Sydney, McClintock, J., imposed a sentence of three year’s imprisonment and a compensation payment of AUD 750,000.

In his request for leave to appeal, Fraudster argued that the Judge failed to consider or give enough weight to her special circumstances. Fraudster also requested an extension to file an application for leave to appeal because she was not familiar with the Australian system and was not aware of her right to an appeal. The Court of Criminal Appeal Supreme Court New South Wales, Adams, J., granted the extension to file application for leave to appeal, but subsequently denied leave to appeal.

[ZLK/GMC]

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