PP v Leng Kah Poh - Singapore Law Watch

Dispute Resolution
Singapore
Client Alert
December 2014
Public Prosecutor v. Leng Kah Poh: Former
IKANO F&B Manager's Acquittal Overturned
Following Singapore Court of Appeal's Decision
For further information please contact
Andy Leck
+65 6434 2525
[email protected]
Weiyi Tan
+65 6434 2689
[email protected]
Clarence Ding
+65 6434 2662
[email protected]
Baker & McKenzie.Wong & Leow
8 Marina Boulevard
#05-01 Marina Bay Financial Centre
Tower 1
Singapore 018981
www.bakermckenzie.com
In a recent decision, the Singapore Court of Appeal (the "CA") clarified the
interpretation and application of Section 6(a) of the Prevention of Corruption
Act (Chapter 241) (the "PCA") to a charge of corruption and held that an
agent who had initiated, masterminded or co-conspired in the payment of a
gratification to himself could still be found to have been induced or rewarded
in respect of his principal's affairs.
Facts
Leng Kah Poh ("Leng"), the former food and beverage manager of IKANO Pte
Ltd ("IKEA Singapore"), had been acquitted by the Singapore High Court
following an appeal against his conviction and sentence for 80 charges of
corruption under Section 6(a) of the PCA. Leng, together with two others, had
devised a plan to supply food to IKEA Singapore through companies (AT35
and FRT) in which he had an interest. He provided insider tips and exercised
his influence to approve his companies as exclusive food suppliers of dried
goods and chicken wings to IKEA Singapore, thereby profiting from the
arrangement.
The High Court held that if the nature of the arrangements and scheme were
such that Leng was in fact the mastermind or co-conspirator, then it can
hardly be said that Leng had been induced or bribed by some third party to
commit the allegedly corrupt acts (see our earlier Client Alert, which discusses
the Singapore High Court decision and the facts of the case).
Pursuant to Section 397 of the Criminal Procedure Code (Chapter 68), the
Public Prosecutor referred two questions to the CA for its determination:
(1) where an agent initiated, masterminded or co-conspired in the
payment of a gratification to himself, whether this ipso facto meant
that he was not induced or rewarded in respect of his principal's
affairs (the "First Question"); and
(2) where an agent used his position (vis-à-vis his principal) to create an
arrangement for the payment of a gratification that conflicts with the
interests of his principal, whether this ipso facto meant that the agent
was not, by such arrangement, induced or rewarded for showing
favours in respect of his principal's affairs (the "Second Question").
The CA observed that the Second Question was substantially the same query
as the First Question. The CA therefore took the Second Question to mean
whether, in a situation where the agent had some beneficial or legal interest in
the third party, the agent's drawing of his share of the profits obtained by that
third party from the benefits conferred could be considered "gratification" for
the purposes of Section 6(a) of the PCA.
Decision
The CA held as follows:
(1) just because an agent had initiated, masterminded or co-conspired in
the payment of a gratification to himself, it did not mean that he was
not induced or rewarded in respect of his principal's affairs; and
(2) where an agent had some beneficial or legal interest in the third party,
the agent's drawing of his share of profits obtained by the third party
from the benefits conferred could be considered gratification for the
purposes of Section 6(a) of the PCA.
Accordingly, the CA overturned Leng's acquittal and restored the trial judge's
sentence of 98 weeks' imprisonment and a fine of approximately S$2.3 million
(in default, 58 weeks' imprisonment).
The Paradigm of Corruption
The CA affirmed that the elements required to be proved in order for a charge
of corruption to be made out under Section 6(a) of the PCA are as follows:
(1) the acceptance of gratification;
(2) as an inducement or reward for the conferment of the benefit;
(3) an objective corrupt element in the transaction; and
(4) the agent's subjective guilty knowledge in accepting the gratification.
Accordingly, a corrupt transaction within the meaning of Section 6(a) of the
PCA has to involve at least three parties, namely: the principal, the agent and
the third party (i.e. the party giving the gift). This is because, in giving the
agent the gift, the purpose of the third party must have been to cause the
agent to act in the third party's interest, against the interest of the principal
and in breach of the agent's duty.
The mens rea of the offence consists of both an objective corrupt element and
the subjective guilty knowledge on the part of the agent. In a factual inquiry
into the agent's intention in receiving the gratification, one is required to
examine whether the agent received the gratification believing that it was
given to him as a quid pro quo for conferring a dishonest gain or advantage on
the third party in relation to his principal's affairs. The crux of the matter is
therefore the influence that the received gift would have on the agent and on
his conduct of his principal's affairs.
In this manner, the characterisation of the gift is intrinsically tied to the third
party's intention in giving it, that is to say, whether the gift was for the purpose
of obtaining a benefit conferred by the agent at the expense of the principal's
interest. This in turn informs the presence of an objective corrupt element in
the transaction as well as the agent's subjective guilty knowledge.
Accordingly, the cornerstone of a charge under Section 6(a) of the PCA is
whether the agent had been influenced or tempted by the gift given or
promised by the third party and proceeds to, or intends to, perform his acts
corruptly.
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The Agent as the Mastermind or Co-Conspirator
In relation to the First Question, the CA held that it was unnecessary, in
establishing the "gratification", to prove as a matter of fact that there was an
act of inducement by the third party upon the agent as such a finding may not
arise in all cases and would be largely dependent on the facts before the
court. In the CA's view, the High Court had misinterpreted the meaning of
"inducement" in Section 6(a) of the PCA and thus erred in finding that Leng,
as the mastermind or co-conspirator in the scheme, was incapable of being
induced to act in the way he did. Whether or not an objective corrupt element
existed could not be dependent on who initiated the promise of a gift.
Otherwise, the law would be rendered potentially ineffective in certain
situations and could lead to absurd outcomes, particularly where the agent
was the one actively soliciting the gift. This would undermine the entire object
of the PCA.
On the contrary, the correct approach was to ask whether there was a
gratification by inducement or reward to the agent that led to a dishonest or
improper gain or advantage being conferred by the agent on the third party.
This was because inducement, as an example of a gratification within the
meaning of Section 6(a) of the PCA, should not be conflated with inducement
as an act of persuasion when this latter meaning was clearly not intended
based on a literal reading of Section 6(a) of the PCA. Thus, the initiation of the
transaction by a third party does not necessarily have to be found as a fact in
all cases in order to establish "gratification" under Section 6(a) of the PCA.
The existing case law to date had also permitted for a breadth of factual
matrices where either party (i.e. the agent or the third party) could initiate the
procurement of a gift for a benefit to be conferred when establishing the
objective corrupt element of the transaction. In this vein, the focus has been
and should continue to be on the nature of the gift and the influence it has on
the agent and his subsequent actions. To determine "gratification" based on
the act of inducement of the agent by the third party would be incorrect. As
such, the mere fact that the agent had not been induced by the third party into
entering the scheme would not be fatal in establishing the gratification in the
transaction.
The Conferment of a Benefit Upon Oneself
In relation to the Second Question, the CA held that where the agent had a
beneficial interest or ownership in a legal entity, it did not mean that the entity
was incapable of amounting to a third party for the purposes of Section 6(a) of
the PCA. In the CA's view, the High Court had erred in finding that Leng had
essentially benefitted himself (qua his beneficial interest in AT35 and FRT),
which meant that there was no third party upon whom the agent had conferred
a benefit, and accordingly that the secret profits received by Leng (qua agent)
could not amount to gratification for the purpose of Section 6(a) of the PCA.
The CA observed that the doctrine of separate legal personality should apply
to AT35 and FRT, notwithstanding their status as unincorporated entities.
Thus, just because Leng had a beneficial interest in AT35 and FRT did not
automatically mean that Leng and those entities were synonymous. It was
also incorrect to assume that just because Leng obtained his share of the
profits by virtue of his beneficial interest in AT35 and FRT that a corrupt
transaction could not have taken place (i.e. that such profits could not be said
to have been a "gratification"). An inquiry into all the circumstances of the
case was required, otherwise it would be too simple for an agent to devise
inventive schemes to escape the sanction of Section 6(a) of the PCA.
3 Client Alert December 2014
These circumstances included, inter alia, the workings of the scheme, how the
secret profits were derived, the setting up of the third party, the duration and
purpose of the third party, fair competition against other entities and the
agent's actions vis-à-vis the principal and the third party in making the profit.
Depending on the circumstances, the scheme may be considered to have an
objectively corrupt element despite the agent's beneficial interest in the
monies received by the third party.
On the whole, an agent seeking to obtain a gift under a cleverly disguised
scheme may find himself guilty of corruption as the court will not hesitate to
look beyond the pretext or the guise to determine the presence of an objective
corrupt element in the transaction, as well as the true nature of the
arrangement.
Comments
The present case demonstrates that Section 6(a) of the PCA is not merely
limited to cases where an agent is prompted by a third party to act against the
interest of his principal. Corruption may equally be made out in relation to
agents who conspire with others to receive secret profits. The cornerstone of
a charge of corruption is whether the agent had been influenced or tempted
by the gratification and proceeds to perform his acts corruptly by conferring a
dishonest or improper advantage on the third party.
The court will not hesitate to look beyond the pretext or guise of a cleverly
devised scheme to uncover the true nature of the arrangement in order to
determine the presence of an objective corrupt element in the transaction.
However, a potential issue that remains unresolved is whether the agent and
third party must necessarily be separate legal personalities for the purpose of
construing a charge under Section 6(a) of the PCA. In explaining its answer to
the Second Question, the CA highlighted that there could be situations where
the line between agent and third party may be blurred, particularly where the
third party was a sole proprietorship with the agent being the proprietor, or
where the third party was an incorporated company with the agent being the
sole shareholder. Whilst the agent and the third party could be considered one
and the same, the CA left the proverbial door open by highlighting that it was
reserving judgment on the issue for another day.
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4 Client Alert December 2014

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