SEB, HVB Appeal Ruling on $57 Million Fraud by Gambling Addicted Executive

Bayerische Hypo-und Vereinsbank AG and SEB AB appealed a Singapore court ruling that Asia Pacific Breweries Ltd. wasn’t responsible for $57 million in loans taken out by a former executive to fund his gambling addiction.

Singapore’s Court of Appeal will deliberate on the “extremely complicated case” before making a decision, Chief Justice Chan Sek Keong said at the hearing yesterday. The banks had sought to dismiss an Aug. 31 ruling that they were “easy prey” to loans fraudulently obtained by Chia Teck Leng, the Singapore-based company’s former finance manager, in the brewer’s name.

Skandinaviska Enskilda Banken, also known as SEB, and HVB were reckless and took their “eyes off the ball,” by ignoring their usual procedures in dealing with Chia, Davinder Singh, Asia Pacific Breweries’ lawyer, told the court yesterday. Both European banks say the company should be liable for their losses as Chia was the most senior finance person in the brewer’s Singapore unit and responsible for financial matters.

There was a “deafening silence” on the brewer’s own lapses in allowing Chia to carry out his fraud from 1999 to 2003, said Alvin Yeo, a lawyer for Munich-based bank HVB.

Asia Pacific Breweries wants “to go scot-free when they unleashed this gambling monster on the banking community,” said Sundaresh Menon, a lawyer for Stockholm-based SEB. Putting a gambler in charge of finances was like “putting an alcoholic in charge of a brewery,” he said.

Warning Signs Missed

Chia signed loan agreements in the front seat of his car, made telegraphic transfers to an unnamed patron account at Crown Ltd., Australia’s biggest casino owner, and had the banks send correspondence to a post office box address, warning signs which the banks missed, Singh said.

“Any reasonable banker exercising common sense and prudence would have been incredulous,” he added.

Both SEB and HVB missed discrepancies in documents that “were staring bank officers in the face” and ignored normal procedures when dealing with Chia, Judge Belinda Ang said in August. Chia, described as an “inveterate gambler who unremittingly resorted to cheating and forgery” by Ang, was sentenced to 42 years in jail in 2004 for cheating and forgery.

“The case definitely serves as a timely reminder to banks to be more cautious when checking whether a corporate loan has indeed been properly authorized and approved,” said Lan Luh Luh, at the National University of Singapore’s Business school.

Beer Maker’s Shares Flat

Shirley Poo, a spokeswoman for the maker of Tiger Beer declined to comment yesterday. Asia Pacific Breweries shares closed unchanged at S$14.2 in Singapore. The stock has climbed 15 percent this year.

Ola Kallemur, a Stockholm-based spokesman for SEB, declined to comment. A spokeswoman at UniCredit SpA, which acquired HVB, couldn’t immediately comment.

Chia defrauded four banks including Japan’s Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. of S$117 million ($85 million) by forging the signatures of Asia Pacific Breweries directors to get loans in the company’s name between 1999 and 2003. The Tokyo-based banks withdrew their case against Asia Pacific Breweries on the seventh day of the trial.

“The use which Chia made of his employer’s name in order to borrow with ease from the bank was just as much a fraud on APB as it was on the banks,” Ang wrote in her 232-page ruling.

In addition to the loans, Chia also embezzled S$53 million from the brewery, according to court filings.

Asia Pacific Breweries denied responsibility in the fraud and counter-sued SEB, Sweden’s third-largest bank by market value, for “dishonest assistance,” according to court filings. The brewery is a unit of Fraser & Neave Ltd., Singapore’s biggest beverage maker.

Drew & Napier LLC is representing Asia Pacific Breweries while Wong Partnership LLP represents HVB and Rajah & Tann LLP appears for SEB.

The case is Skandinaviska Enskilda Banken AB, Singapore Branch v Asia Pacific Breweries (Singapore) Pte Ltd. & Another CA121/2009 and Bayerische Hypo-Und Vereinsbank Aktieengesellschaft v Asia Pacific Breweries (Singapore) Pte Ltd. & Another CA122/2009 in the Singapore High Court.

To contact the reporter on this story: Andrea Tan in Singapore at atan17@bloomberg.net

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