How not to do business under the table

Guest editorial by Don Tennant, Computerworld, Hong KongKeep this to yourself. I mean it. You can't tell anybody. If the people at Automated Systems (HK) Limited (ASL) knew I was blabbing about this, I hate to think what would happen.

Here's the lowdown: ASL, the big Hong Kong distributor that markets products from Sun Microsystems, Digital Equipment, Acer and lots of other high-profile vendors, has a wholly owned subsidiary in China called Automated Systems (PRC), which in turn has a wholly owned subsidiary called Beijing Automated Computer Systems (BACS). It seems that back in the spring of 1994, a guy named Andy Yeung, who had been employed by ASL since 1989, was sent up to Guangzhou to assume the position of branch manager of the BACS office there.

Now, things were apparently going along just fine for the first 18 months or so. After that, according to the BACS folks, there was some funny business going on. BACS alleges that Andy had a nifty side business happening from December of 1995 to July of 1996. BACS is accusing Andy of milking the company out of 962,640 renminbi ($A160,440) through a little invoicing scam.

The scheme went like this . . .

BACS claims that Andy's scheme worked like this: a company called "Nanhai" would issue invoices for goods that were supposedly sold to BACS and included as parts of computer systems that BACS in turn sold to its customers. There were 12 invoices, in amounts ranging from 23,950 to 207,500 renminbi. Andy would have BACS' accounting department draw up cheques to cover the invoices, then he'd sign the cheques and payment would be made to Nanhai.

The problem, according to BACS, is that Nanhai didn't really supply the goods referred to in the invoices. Not only that, the goods specified in the invoices did not relate in any way to the computer systems which BACS was selling to its clients and for which the purchases from Nanhai were supposedly made.

In a court document filed in Hong Kong earlier this month, BACS claimed that Andy "knew, or ought reasonably to have known", that the Nanhai invoices were fraudulent, and that Andy "fraudulently misrepresented to [BACS] and to its accounts department that [BACS] had incurred debts to Nanhai as specified in the invoices".

If those allegations are true, you can see why ASL would be a little annoyed with Andy. And if they're true, you can imagine how annoyed Andy must be that he got caught. Let's face it - this stuff is just standard operating procedure in China. If every branch office manager on the mainland who ever siphoned off a few hundred thousand renminbi got caught, I hate to think how congested the courts would be.

I've been trying for almost a week to get through to ASL's China management to congratulate them, but they won't return my calls. It makes me think they want to keep a low profile. So for goodness' sake, don't let on that I told you.