There
are several warning signs of bankruptcy frauds. These warning signs can be used
as a strong indication to initiate an investigation process. Sometimes these warning
signs could exist in conditions of no fraud, thus, do not jump to conclusions
simply based on these warning signs (Brown, Netoles, Rasnak, & Tighe, 1999). Among the possible warning
signs in relation to the case are as
follows:
1) Failure
to disclose prior bankruptcy case – Mr.X was declared a bankrupt effective
on February 1993. On April 1996, he
became a guarantor for a loan facility of the ABC Bank without
disclosing his bankruptcy status in the bank loan applications.
2) Incomplete
information in the bank loan application – The law requires any person who has
been declared bankrupt under the Bankruptcy
Act 1967, shall informed the person with whom he entered into the contract that
he was undischarged bankrupt. However, Mr.X failed to do so.
3) A
history of prior litigation or post-petition litigation involving breech of
contracts or fraud misrepresentation – Mr.X was originally charged with
two principles charges under provisions of the Penal Code. However, the
prosecution chose not offer any further evidence and subsequently he was
discharged of the principle charges.
4) Concealment
of assets – Mr.X jointly with his wife had formed new company on August
1995 namely JKL Sdn Bhd. Based on the facts of case, the company belongs
to his wife and he was acting as a guarantor in the overdraft and loan
applications for the company to buy an apartment unit despite being declared a
bankrupt.
5) Same
individuals involved in previous "failed company” – Mr.X was made a
bankrupt in respect of a default judgement against him. The default judgement
filed by XYZ Bank and entered in the Kota Kinabalu High Court
on May 1987. In the prosecution’s case, he was the second defendant who was
a guarantor for a loan facility granted to a company belonging to his wife.
REFERENCES:
Brown, J. B., Netoles,
B., Rasnak, S. T., & Tighe, M. (1999). Identifying Bankruptcy Fraud. Credit Reasearch Foundation, 1–16.
http://www.insolvensi.gov.my/gallery/press-statement/the-star/182-star-02-12-10-a-g-t...
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