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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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It is generally accepted that when a corporate debtor is in financial
diffculty or becomes insolvent, indicators that "hard"
and "soft" fraud has been committed will surface.
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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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It depends on the amount involved as well as the will of the
particular creditor. Generally, it can be expected that both "soft"
and "hard" fraud is likely to be pursued, particularly
where the amounts involved are substantial and a recovery will
greatly benefit the affected creditors.
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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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There have been a number of instances where the fraud involves
substantial amounts. There have been widely publicized occasions
where the owner of the corporate debtor has fled the country.
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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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No.
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(ii) settled by negotiation; or
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Yes.
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(iii) pursued through either civil or criminal law sanctions?
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Yes.
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