He was corrupt and ended up in jail

News in Brief:

Recently, our firm achieved a breakthrough in a case involving improper profits made by a former employee of a well-known international company. The court ruled that the employee was the principal offender and that he and other participants in the case were jointly guilty of contract fraud. They were sentenced to fixed-term imprisonment and fines, and were ordered to compensate the victim for the huge losses.

This case stems from a whistleblower incident during a compliance investigation during the pandemic. As we all know, compliance is the foundation of any business, and internationally renowned companies, in particular, place great importance on whistleblowing. In this case, an internal compliance investigation should have been more efficient in terms of gathering leads and evidence. However, due to the employee's familiarity with internal rules and procedures and meticulous planning, the internal team's investigation reached a bottleneck after more than six months. Even more egregious, despite the employee's apparent intent to defraud, their meticulous early planning and strong evidence-based awareness led to a civil dispute with the whistleblower, resulting in both courts of appeal ruling that the whistleblower should pay them a service fee (actually a fraudulent payment).

With the client at a loss, our firm stepped up to the plate. Despite the fact that the employee being reported had long since departed, existing evidence was largely missing, and the pandemic had hindered the investigation, we began by rapidly analyzing and optimizing the evidence gathered from the client's initial internal investigation. We then separated the truth from the whistleblower's extensive oral accounts. Through clear analysis and sharp comparisons and categorization, we presented a bilingual report with a basic outline and preliminary action recommendations. This report succinctly summarized the complex interpersonal relationships, laid out a timeline of the voluminous core events, and clearly illustrated the core issues of the report through graphic and text comparisons. We provided a comprehensive, panoramic, and penetrating analysis of legal responsibilities, meticulously analyzing feasibility, risks, and recommended actions. Based on this analysis, the client ultimately decided to file a criminal complaint, and we embarked on a lengthy journey of evidence collection, mediation, and multiple reporting locations. We encountered difficulties with relevant parties failing to provide the required evidence, repeated changes in contact persons, and a lack of a comprehensive understanding of the case. We also experienced the frustration of vague and repetitive requests and the loss or disregard of submitted materials.

However, through tireless efforts and drawing on our practical experience, we identified two new potential breakthroughs and investigative avenues, further securing key evidence and breakthroughs conducive to the investigation. Using new investigative methods, we opened up new avenues for the investigation, ultimately giving the client's internal compliance team, despite frequent staff changes, a glimmer of hope. We also exhaustively researched and analyzed legal and case studies, and engaged in numerous discussions with experts. Ultimately, addressing the legislative vacuum that failed to fully address the realities of the commercial world, we produced a robust and up-to-date legal analysis report on the criminal nature of the conduct involved in this case. After the criminal case was successfully filed, the procuratorate, for the first time, only transferred two suspects for prosecution on charges of forgery of official seals, declining to prosecute the third accomplice. Faced with the suspects' refusal to admit their crimes and their stubborn resistance, the unprecedented and overly conservative handling of the case by local authorities, and the coveted and profiteering efforts of third parties, we repeatedly stood firm in our legal position, safeguarding the client's legitimate interests. Based on our rigorous logic and comprehensive evidence, the court ultimately ordered the procuratorate to re-indict all three suspects for contract fraud, ultimately returning guilty verdicts. The final victory was truly hard-won! This belated justice serves as a lasting wake-up call for the industry and a deep-seated scar for those who have lost themselves in the temptations of profit, a constant reminder that " corruption and decadence will ultimately lead to imprisonment ."

Basic facts of the case:

During a compliance investigation, our client, Company A, a renowned international enterprise, received a complaint from Company B's actual controller, B, alleging that former Company A employee A, in collusion with whistleblower B and a third party, C, through intermediary Company B, forged the official seal and signature of the actual purchaser, Company C, and fabricated contracts. They defrauded both Company A and Company C, buying low and selling high to profit from the difference. They then distributed the profit through fraudulent contracts with Company C's company. Later, due to an uneven distribution of the proceeds, A instructed Company C to file multiple lawsuits against Company B to demand payment. After a falling out between the two, Company B filed a complaint. An investigation confirmed the complaint to be largely true.

After the incident was exposed, our firm, on behalf of Company A and Company C, reported the case to the public security organs in many places, including the crime scene, emphasizing that this case was for the purpose of illegal possession, and that the facts were fabricated and the truth was concealed. By forging seals and false contracts, Company A and Company C were misled and ultimately defrauded of a high price difference through illegal possession. We eventually succeeded in persuading the procuratorate to change the charge to contract fraud, and even brought a public prosecution against Company C, who had previously decided not to prosecute, in a separate case, and obtained a fair first-instance judgment.

Judgment Summary: (First-instance Judgment)

Contract fraud refers to the act of fabricating facts and concealing the truth, with the intent of illegal possession, to defraud the other party of a substantial sum of money during the signing and performance of a contract. In this case, suspect A and his associates entered into a deal with Project C with the intention of illegally misappropriating the payment for the goods by fabricating a price difference. At the outset, A summoned B and C to divide the work. Throughout the contract signing and performance, A and his associates engaged in a series of fabricated facts and concealed the truth, misleading the victim and ultimately defrauding them of a substantial price difference. Furthermore, to prevent B from monopolizing the proceeds, they devised a service agreement with Company B to deter B. In summary, A and his associates' actions meet the elements of contract fraud.

Person A and others colluded with others to fabricate facts and conceal the truth in the process of signing and performing the contract for the purpose of illegal possession, and obtained a high price difference by defrauding the amount. The amount is extremely huge, and they should be held criminally responsible for contract fraud.

Peng Qiao and his team have extensive experience conducting internal compliance investigations for private companies, multinational corporations, and state-owned enterprises. To learn how they can assist you in meeting your compliance needs or resolving disputes, please contact us . Contact Attorney Peng or directly contact your dedicated contact at Shanghai Fangxu Law Firm.

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