FRAUD (part II)

Legal forms of fraud
The person who forges a diploma, agreement or identity document is guilty of a criminal offence.
Although the concept of ‘fraud’ is only mentioned in relation to human trade in the Criminal Code of Curaçao, there are various offences which can have a relationship with fraud in the sense meant herein: forgery, embezzlement, swindle, (fraudulent) bankruptcy and bribery.
In civil-law relationships the doctrines such as breach of contract, wrongful act, misleading advertisement, error and deception come to mind. In addition, there are lots of other Acts with special provisions such as tax law. I will pass over the fact that in the area of the law of evidence there are big differences between criminal law and civil law.
For the counsel assisting victims of fraud it is usually sufficient at the beginning of a case that there is a reasonable assumption that a breach of contract or a wrongful act took place. After all, on the basis of those doctrines he can, if possible, seize goods or reclaim them. In the first phase of a case it is sensible not to stick the label of fraudster on the alleged offender too quickly, and certainly not in public. At that stage the counsel usually does not yet have all the relevant details at his disposal. In addition, it has already happened far too often that any investigators who were engaged concluded fraud in their report, whereas later it had to be established that there was no conclusive evidence for this. A well known example is the investigation into the invoicing behavior of Dr. Bram Peper as the major of Rotterdam. The investigators would have been wiser to be less positive, certainly in a publicity-sensitive case, and should have limited themselves better to a “reasonable presumption of fraud”.
In general it is obviously sensible to be critical with regard to evidence that the client collects or which emerges otherwise. It is easy to be wrong-footed. It would therefore be wise to keep in mind the ruling of the Supreme Court of 6 December 1954 in the case of Holland v United States (348 U.S. 121, 137-138 [1954]):
Circumstantial evidence in this respect is intrinsically no different from testimonial evidence. Admittedly, circumstantial evidence may in some cases point to a wholly incorrect result. Yet this is equally true of testimonial evidence. In both instances, a jury is asked to weigh the chances that the evidence correctly points to guilt against the possibility of inaccuracy or ambiguous inference. In both, the jury must use its experience with people and events in weighing the probabilities. If the jury is convinced beyond a reasonable doubt, we can require no more.
In practice almost every advocate is faced with a fraud case every once in a while. In my practice this usually relates to cross-border cases. I mention here only a few cases and then very globally.
(1) Some wealthy foreign individuals have their capital managed by the intervention of a trust office established in Curaçao. At some point they discover that about USD 50 million has disappeared from their bank accounts. Apart from some smaller amounts which the owner/administrator of the trust office appropriated, it appears that a so-called Nigerian fraud took place. In essence this form of fraud boils down to a foreign person or organization holding out the prospect of a large amount (for instance an inheritance of USD 10 million), only the donee must first pay several thousands of dollars because all kinds of formalities have to be fulfilled. In extreme cases (as in our case) people appear to be prepared even to pay millions, because they think they will receive a multiple of that amount in return. This form of fraud has been going on for years and despite our warnings it still appears to be successful.
(2) A Dutch entrepreneur enters into a partnership with a foreign entrepreneur who is active in the international rice trade, and who uses legal entities in various countries, including Curaçao. The Dutch entrepreneur contributes many millions into the partnership but never receives any returns. The cooperation commenced in good faith and therefore the mutual arrangements were not laid down properly. Many legal actions took place for many years in various countries and the counterparty did not leave any litigation trick unused, but in the end it was successful in obtaining a judgment from the court in Miami creating the prospect of (partial) repayment. For that matter, a good judgment does not mean that recovery is immediately possible: sufficient assets must also still be found.
(3) A foreign multinational uses a Curaçao financing company. After a new CEO is appointed and he made himself familiar with the investment activities of his business, he severs the ties with an external asset manager. This asset manager objects to this and alleges that a contract existed between the Curaçao financing company that cannot be broken just like that and he claims compensation of over USD 200 million. After investigations it appeared that the asset manager was in cahoots with the former CFO of the multinational (which had received considerable kick-backs) and that no lawful contract at all had been entered into. But firstly, in Curaçao (in two instances) and abroad various legal actions had to be conducted and criminal investigations had to be started abroad before this asset manager could be stopped.
FraudNet is a network of counsels specializing in fraud cases established by the International Chamber of Commerce. These highly specialized counsels assist victims of international fraud. These might be financial institutions, companies but also wealthy individuals.
The network makes it possible with experts in the countries involved to take action rapidly after fraud has been detected. Apart from the expertise in this area, speed of action is crucial to try to detect embezzled funds or cash equivalents.
FraudNet, established in London, has at the moment over 70 members working in 66 different countries. High demands with regard to knowledge and experience are required from a member. Apart from bigger countries, a maximum of one counsel per country can in principle become a member. I am the exclusive member for Aruba, Bonaire, Curaçao, St. Maarten, St. Eustatius and Saba. A counsel is only invited to become a member if he has specific knowledge of and in-depth experience with cross-border fraud cases.
Counsels assisting fraud victims usually cooperate not only with counsels in other countries due to the often cross-border nature of those types of cases but also with forensic investigation agencies and accountants specializing in fraud.
Karel Frielink
(Attorney/Lawyer, Partner)
(12 September 2015)
Karel's Legal Blog

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