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VacationSpot.com Pin case is a blow to Thai justice system

August 3, 2001

As with the Rakesh Saxena case, there are some at the Bank of Thailand who actually do not want the former takeover king Pin Chakkaphak to come back to face trial in Thailand. Pin could create a scandal. During its heyday, Finance One handed out rights issues to several layers of central bank authorities at the par value of Bt10. Fin One stocks were then trading at Bt100. These people got rich aboard the Fin One bandwagon.

Saxena, too, handed out money he got from the Bangkok Bank of Commerce to politicians. Now nobody wants him back because he could create another equally scandalous scene. Saxena, who was believed to have carried US$2 billion in bonds in his briefcase at one point, is seeking asylum in Vancouver, Canada. His extradition case is crawling along at snailís pace.

Both highprofile cases had the same tragic ending. Taxpayers had to foot all the bills created by the financial mess. Finance One borrowed some Bt40 billion from the Financial Institutions Development Fund while it was facing a run on its deposits in 1997, before the authorities finally pulled the plug. Bangkok Bank of Commerce collapsed with bad loans of almost 100 per cent in its loan book. The damage swelled to more than Bt100 billion.

Still, the British High Court of Appealsí decision not to extradite the former takeover king to face trial in Thailand has dealt a big blow to the Thai justice system. Those who are being charged by the Bank of Thailand over allegations of financial crimes can now conveniently refer to the British Court of Appeals as a precedent. They can argue that the loans they extended to themselves or their cronies all had the approval of the banking authorities who supervise their businesses and go through their loans portfolio once a year. Instead they can blame the economic crisis as the real cause of the bad loans.

The British High Court of Appealsí ruling did not come as a surprise, however. Pin had hired the best lawyers in London and Hong Kong for his defence. Private lawyers are almost always better than government lawyers. Moreover, the Thai prosecutors lacked critical evidence to implicate Pin, whom they charged had cheated Fin One of more than Bt2.17 billion.

Some local press reports indicated that the key to Pinís triumph over Thai prosecutors lay in a letter written by former central bank governor MR Chatu Mongol Sonakul. Chatu Mongol was reported to have written to the chief of the Economic Crime Suppression Division in defence of his subordinates Kitti Pattanapongpibul, the deputy governor, and Chaktip Nitibhon, the assistant governor. Kitti and Chaktip were inadvertently embroiled in the Finance One saga. While they were serving as senior execu?tives at the Nakornthon Bank and Banque Indosuez respectively, they were alleged to have acted as gobetweens for financial transactions between Finance One and its two subsidiaries Ė Ekkaphak Holding and Consolidated Business Association Co.

Pinís lawyers made a copy of Chatu Mongolís letter and used it as evidence that the banking authorities gave a green light all along for the financial transactions between Fin One and its subsidiaries.

There were a number of critical points by which Pinís lawyers succeeded in convincing the British court of the financierís innocence. First, due to lax regulations of the Bank of Thailand, there were thousands of similar financial transactions between financial institutions and their subsidiaries, using other financial institutions as a gobetween. Subsidiaries could always borrow at lower cost because they were borrowing money from their parent companies. Thai law prevents finance companies from lending money directly to subsidiaries when they control more than 25 per cent in shares.

Second, all the loans were properly booked. Pinís lawyers argued that if Pin had the intention to embezzle money, he would have avoided booking the loans properly.

Third, Ekkaphak Holding and Consolidated Business Association conducted a similar pattern of financial transactions with Fin One for several years. The Bt2.17 billion financial transactions in question were not unique.

In short, the Royal Thai government could not prove beyond a reasonable doubt that Pin had embezzled money from Fin One.

The ruling from the British High Court of Appeals reflects the Thai authoritiesí poor handling of the highprofile case. Pin was viewed as a ďbig fishĒ. If the authorities could get hold of a big fish, they hoped that they could send a signal about the toughness of the Thai law. Yet so far not a single suspect in financial crimes has been put behind bars in spite of the huge losses of Bt1.3 trillion in the financial system. With this scale of loss, it is out of the question that that no financial fraud was ever committed at all.

Without law and order, financial crimes will continue and it will impossible to tackle the economic crisis.

Thanong Khanthong

 

 

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