Case Studies

Our case studies contain analysis and discussion points for users to better understand the legal provisions. They also provide suggestions on how to prevent corruption, fraud and malpractices.

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All Areas of Concern

Search Case Studies

All Areas of Concern


Patrick was a financial controller of an information technology company planning to go public.  His bosses asked him to manipulate management accounting data and to reimburse expenses without any supporting document. The sponsor offered him valuable information after the engagement......   

 

Andrew was the chief accountant of a large trading company.  He discovered a number of fraudulent and corrupt activities involving senior sales representatives and their mainland clients and such activities were condoned by the senior management.   

 

Howard was a newly joined senior internal audit manager of a publicly listed company.  On presenting to the Managing Director about his evidence of wrongdoings by the Purchasing Director, he was asked to stay away from the case.  

The Wealthy Restaurant Group (the Group) consisted of a chain of ten restaurants in Hong Kong.   The Director of the Group, CHENG, was highly experienced in the food and beverage business but had no knowledge about construction and engineering works.  Hence, he relied on the expertise of Engineer WONG when there were selections of construction and engineering contractors.

 

WONG was authorised to approve decoration and renovation works up to a value of $300,000 and those above $300,000 would require CHENG’s endorsement.     According  to  company  policy,  contracts  below  $300,000 should be let by quotation and those above $300,000 by way of tender. Contracts should then be awarded to the bidder who offered the most competitive price, irrespective of quotations or tenders.

 

In January 2000, WONG approached one of the contractors KWAN. WONG convinced KWAN to offer him a commission (5% of the contract price) in return for supplying KWAN with quotation information submitted by other bidders every time when there was a quotation exercise.   With the information, KWAN could always submit the lowest bid and be awarded the contract on every occasion. WONG also split contracts of $300,000 or above into two or more contracts to avoid CHENG’s involvement in the award.

 

As the Group had no internal audit section, the malpractice was not discovered.   During the period from January 2000 to December 2001, most renovation contracts of the Group totalling $10 million were awarded to KWAN and WONG received over half a million dollars as commission in return.

 

WONG and KWAN were later arrested by the ICAC and convicted of offering/accepting advantages, contrary to Section 9 of the Prevention of Bribery Ordinance (POBO).   They were each sentenced to imprisonment and WONG was also ordered by the court to return the illegal commission to the Group.

 

As a registered engineer, WONG was sanctioned by his professional institution and was removed from the membership list.

 

Questions

 

  1. Why were WONG and KWAN convicted of corruption offences?
  2. What measures should be taken to prevent malpractice in tendering?
  3. What can the management of the company do in order to prevent the splitting of orders?
  4. What is the possible consequence of corruption?

 


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