A subsidiary of Malaysia's state-owned oil and gas company, Petronas, has successfully sued a former senior executive in a letter of credit (L/C) fraud that cost the company US$75 million.

The case underlines that L/Cs provide protection from frauds perpetrated not only by third parties but also from company employees.

Bribes

A Singapore court found that Mohamed Najib Mohamed Amin received at least US$1.2 million in bribes between April 1998 and April 2000, while he was an acting manager at Malaysian International Trading Corporation (Mitco).

The case was heard in Singapore because most of the proceeds of the fraud were allegedly filtered through Singapore bank accounts.

Procedures breached

The court heard that Najib sanctioned the supply of thousands of tonnes of the palm oil derivative, palm olein. He did not however demand valid L/Cs from buyers; thus he

was acting in breach of company procedures.

Najib knew that MITCO would not be paid according to the court - which dismissed as "totally incredible" his claim that the vast sums of money in his bank accounts had come from commissions earned from a financing deal.

Co-conspirators MITCO took legal action against another 23 defendants for damages and to recover money. They included buyer Inter America's Group LLC (IAG), Singapore companies Interamerica Asia and Interamerica International, and three individuals.

The conspirators essentially used IAG to perpetrate the fraud. That company procured the L/Cs and received more than US$29 million from the proceeds of the transactions.

According to the judge, the fact that Najib agreed to let IAG pay by telegraphic transfer instead of a L/C was "utterly beyond his mandate and authority, and it cost Mitco dearly."

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