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Case Studies
Bribery and collusion with third party for favour in mortgage loan application
A property developer frequently offered expensive lunches and free golf trips to a manager of a finance company and his wife. The property developer applied for a loan to redevelop village houses, and asked the manager to assist him to secure a higher loan amount, promising a reward. To facilitate the approval of the loan, the manager bribed a valuer of a property valuation agency with whom he had good relationship to inflate the collateral value in the report. The property valuer prepared and submitted a false valuation report to the finance company. Based on the false valuation and the manager's recommendation, the finance company approved the loan. The property developer paid a commission as reward to the manager's wife, attempting to conceal the corrupt dealing.
Case Analysis
Under Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror will also be guilty of the offence.
In this case, the manager, an employee (agent) of the finance company (the principal), accepted commission (advantage) from the property developer as a reward for favourably recommending the loan proposal (an act in relation to the finance company’s business). Under the POBO, the manager was considered to have accepted the advantage even his wife received the advantage on his behalf. Hence, the manager might have contravened Section 9(1) of the POBO for accepting bribes. The property developer might have contravened Section 9(2) of the POBO for offering bribes.
On the other hand, the manager might have breached Section 9(2) of the POBO for bribing the property valuer (agent of the property valuation agency) to inflate the value of the collateral, while the latter might have contravened Section 9(1) of the POBO for accepting bribes from the manager. They also might have contravened Section 9(3) by each submitting false, misleading valuation reports to their employers.
The manager might have also breached the Banking Ordinance which prohibits any employee of an authorized institution to receive any gift, commission etc. for his own personal benefit or advantage or for that of any of his relatives, for procuring or endeavouring to procure for any person any advance, loan, financial guarantee or credit facility from that institution.