A former chairman of the diversified natural resource, energy and shipping logistics conglomerate, Keen Lloyd Group (KLG), has been sentenced to a jail term of six and a half years for his part in a massive letter of credit (L/C) fraud.

A Hong Kong court handed down the sentence to Chin Kam-chiu, alias Chun Kam-chiu, at the same time as it sentenced another former Keen Lloyd official and three of the company's former bankers for their part in a US$28.78 scam.

Sentences

A former manager of KLG, Tsang Siu-lan, along with two ex-employees of the then Sin Hua Bank - former assistant general manager Hau Pui-yee, and former senior branch manager Ma Kin-fai - were each sentenced to four and a half years' imprisonment

The bank's former deputy general manager, Chow Wai-choi, received a harsher sentence than his colleagues of five and a half years.

According to Mr Justice Pang Kin-kee who heard the case, each of the defendants each played a pivotal role in the fraud, which he said had put the bank at risk.

The five defendants were earlier found guilty by a jury on one count of conspiracy to defraud.

Initial complaint

The case arose from a complaint, alleging that Chun might have corruptly secured credit facilities from a bank.

The charge stated that between 1 November 1998 and 30 April 1999, the defendants had conspired together and with other persons to defraud Sin Hua Bank, its shareholders and creditors.

False documentation

The court heard they dishonestly caused and permitted applications to be made to Sin Hua Bank by Keen Lloyd (Holdings) Limited and Keen Lloyd Motors Limited for the issue of L/Cs to finance the purported purchase of goods from a number of companies.

This entailed the production of false documentation required for the negotiation of the L/Cs. The conspirators were also accused of causing and permitting payments to be made to the beneficiary companies pursuant to the negotiation of the L/Cs.

No genuine transactions

The court heard that as a result, Sin Hua Bank released a total of US$28.78 million under the L/Cs to the beneficiary companies before these sums were transferred to KLG's bank account.

The beneficiary companies were controlled by KLG and there were no genuine commercial transactions relating to the purchase of electrolytic copper cathodes or aluminium ingots as claimed in the 25 L/Cs employed in the scam.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.