Trio sentenced for conspiracy to defraud

Three men aged 50, 34 and 33 respectively were sentenced ranging from three to four years' imprisonment at the District Court today (May 17) upon conviction of conspiracy to defraud.

The court heard that the two male defendants aged 50 and 33 were the directors and shareholders while the 34-year-old man was the shareholder of a licensed insurace brokerage company. They had signed brokerage contracts with three well-known insurance companies between January 2003 and July 2004.

Under the contracts, the brokerage company introduced policyholders to the three insurance companies. In return for the introduction of new clients, these insurance companies would pre-pay the brokerages lump sum commissions ranging from 100 to 138 per cent of the annual premium paid by the policyholders.

On the other hand, the brokerage company was required to return or "clawback" part of these commissions if the new policyholders stopped their monthly premium payment installments within 12 months of the policy subscription.

Since the commencement of the scam in 2003, 2 335 new clients had been introduced through the brokerage firm with total sum of $36 million being paid as commission. Within a year, about 90 per cent of the policyholders stopped paying the premiums and the brokerage firm was liable to pay the 'clawback' percentage to the insurance companies.

However, the brokerage firm was closed down in July 2004 causing a net loss of approximately $6.6 million to the three insurance companies.

Police investigation revealed that the insurance policies were often given as prizes in lucky draws, or as staff benefits. To this end, the premium of the "clients" was in majority settled by the brokerages and the insurance companies were kept in the dark.

In November 2004, Police Commercial Crime Bureau arrested the three defendants who were charged with conspiracy to defraud in the District Court. Conviction was made on April 21 and sentences were handed down today.


Police Report No.9

Issued by PPRB

End/Wednesday, May 17, 2006