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| SECTION KK - FRAUD |
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| This section deals with fraud by owners/directors of corporate
debtors. It may be 'hard' fraud (for example, transfer of assets of
the corporate debtor, illegal transfer of money) or "soft' fraud (for
example, false accounting). |
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(a) Are there instances of fraud in relation to a corporate
debtor in this economy?
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Yes.
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(b) If so, is it usual that instances of such fraud will be
revealed when a corporate debtor is in financial difficulty or
becomes insolvent?
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Yes.
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(c) What is the attitude that is normally taken to such fraud
in this economy?
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If it is "hard" fraud, criminal liabilities are pursued.
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(d) Is it the case, for example, that 'soft' fraud may be
overlooked (or not pursued) and 'hard' fraud may more likely be
pursued in this economy?
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Previously "soft" fraud might be overlooked. However there
is recent tendency that pursuit of liabilities will become more
rigid.
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If there have been instances of fraud:
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(i) does the insolvency law (or other civil law) provide
for possible recovery of the proceeds of (or damage caused by)
the fraud;
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Yes.
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(ii) does the criminal law provide for possible sanctions;
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Yes.
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(iii) how effective is the application of these laws in
practice?
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Effective to some extent. However the difficulty in practice
is to get clear evidences and to establish the facts of fraud.
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(e) Would it be common or usual that instances of fraud would:
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(i) be largely ignored;
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(ii) settled by negotiation; or
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(iii) pursued through either civil or criminal law sanctions?
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(ii) or (iii) is applicable.
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