Fraud Is an Everyday Occurrence. It Is of All Times, and a Phenomenon That Happens in Every

Curaçao

Fraud is an everyday occurrence. It is of all times, and a phenomenon that happens in every country. In discussions about fraud (and corruption) in Curaçao you regularly see that people refer to other countries, in particular to the Netherlands, to downplay this phenomenon here somewhat. The small number of criminal prosecutions and convictions are often mentioned. In this connection it is often said that they are of 'a political nature'. Sometimes it is even alleged that someone's integrity can only be discussed when there is a criminal conviction. We can delude ourselves a lot!

In the event of corruption the core is that someone with certain powers (for instance the power to grant a license) grants unlawful favors in exchange for reciprocal favors. It is a form of abuse of power.

In 2013 a report called 'National Integrity System Assessment: Curaçao 2013' was published by Transparency International. On page 29 of this report the following was stated:

“The Crime Analysis of Curaçao 2008 confirms the lack of information about the extent of corruption. According to those interviewed for this analysis, corruption in Curaçao is not a systemic feature of departments of the administration, but concerns ‘individual missteps’. A public prosecutor when interviewed estimated that there have been some 50 bribery cases involving civil servants over the past 10 years. Two types of corruption are mentioned as the most common in practice: support in drug transactions and document fraud. The political aspect of corruption cases is also underscored in the study, and illustrated by reference to the offering of jobs, permits and contracts to secure political support and finances for political campaigns. According to the Crime Analysis, those practices result in too much dependency of high officials and politicians on financiers and voters, which undermines their critical stance and their ability to act if they need to address irregularities or enforce compliance.”

Fraud and corruption occur in the public and private sector. The extent to which these phenomena occur is not known. Obviously those involved have an understandable interest in keeping this as quiet as possible. The public concern with these phenomena has increased in recent years and it is increasingly recognized that there is a social problem. After all, fraud and corruption can have a devastating effect by which honest people as well as society as a whole can become the victim.

She was almost a member of the family

Just an announcement in the newspaper: ‘Top bank employee embezzled NAf 1.2 million’ (Amigoe, 6 March 2004). The respective woman had been employed by the bank for almost 40 years and was, incidentally, entrusted with monitoring fraud. The President of the bank made it known that she had been employed for such a long time that she was considered almost a family member. But he also said two other interesting things: (i) if you consider the integrity of an employee, you really should also look at their family circumstances and (ii) who actually monitors the monitor?

1 A very large proportion of fraud in companies is committed by long-service employees. Long service and an advanced age are therefore certainly no guarantees that the respective persons will not commit fraud. This is not an invitation to immediately subject such employees to a cross- examination, but it is meant to indicate that 'trust' in a certain person does not provide a guarantee against fraud.

Prevention is better than cure. In this connection it can only be said that a good organizational structure is important, because this can prevent opportunities being created for individuals to act improperly. For instance Nick Leeson at Barings was able to place orders on the stock exchange as well as being responsible for their administrative processing (error account 88888). Due to this double function combined with the absence of internal control, it was possible to commit fraud. So Barings' management can also be blamed for this.

What is fraud?

Everybody knows some examples of fraud. Bankruptcy fraud, invoicing fraud, credit card fraud, benefit fraud, election fraud, identity fraud, insurance fraud, mortgage fraud, building fraud, subsidy fraud, tax fraud, computer fraud, cyber fraud, food fraud and diploma fraud come to mind.

Fraud is not a legally defined concept. Usually, fraud is considered if the following elements are present: (i) a person performed a certain intentional act creating a misleading misrepresentation, (ii) with the aim of obtaining a dishonest or unjustified advantage from this and (iii) in addition, there is a person or organization which is or could be adversely affected, financially or otherwise.

For instance the person who commits diploma fraud makes it appear as if he successfully completed a certain training course and therefore obtained his diploma, with the aim of becoming eligible for a certain job. If the person is engaged on the basis of a non-existing diploma, the employer will be the party who experiences or can experience harmful consequences. If someone reports something wrongly to the police as stolen in order to claim the loss from his insurer, this constitutes insurance fraud. If someone consciously does not declare certain income or assets to the tax authority in order to pay less tax, he will be guilty of tax fraud.

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, fraud, (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

2 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

3 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

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.