Ooops, too many zeros…

By Legal Eagle

In the Sydney Morning Herald today:

A New Zealand couple who fled the country after receiving millions of dollars in a banking error may have had a 16-day head start on police.

It also emerged the couple may now be in China, and that other family members were also missing.

The unnamed couple, believed to be Asian man “Leo” Gao, perhaps in his 30s, and his Kiwi girlfriend Kara (or Cara) Young, have not been seen since $NZ10 million was mistakenly deposited into their account after they applied for a $NZ10,000 business overdraft.

The $NZ10 million was first deposited in the account on or about May 5, but police only announced it was investigating the matter yesterday – 16 days later – the New Zealand Herald reported.

Police would not say when Westpac first reported the missing money.

Mr Gao and his girlfriend reportedly left the country after abandoning his service station on Old Taupo Road in Rotorua, NZPA said.

The service station closed so suddenly that motorists were still driving in to fill up thinking it was open, it said.

Ah, the banking error. As I’ve already noted, this is staple fare for restitution lawyers. This NZ case has shades of Chase Manhattan, also mentioned in my previous post:

Chase Manhattan Bank N.A. v Israel British Bank (London) Ltd [1981] Ch 105… [was] a particularly notable case. An amount of over US$2million was accidentally transferred to Israel British Bank twice, but before the mistake could be rectified, the IBB became insolvent. Doh! Controversially, Chase Manhattan was awarded a constructive trust (or arguably a resulting trust) over the wrongly transferred money, and thus it was a secured creditor in the insolvency. Whew. Lucky for them.

I don’t think this New Zealand couple will be able to argue that they have changed their position in good faith. In fact, it’s looking like theft: the epitome of bad faith. I wonder if there’s any agreement between China and New Zealand as to what is to be done with proceeds of crime in a situation such as this?

Update

The poor bank employee who made the mistake is traumatised enough to need counselling. No bloody wonder – I must confess I once made a mistake with a payout figure for a settlement which involved failing to ‘carry the one’ when adding up in hurry, and thus being short by $1000. I felt sick for days, and set up an Excel spreadsheet to check all payouts for settlements thenceforth. And that was a ‘small’ error of $1000, not an error of $9,990,000.

Meanwhile, relatives travelling with the enriched pair have provided clues to their whereabouts via Facebook updates. Doh!

Update II:

Eoin at Cearta.ie has a post detailing various other cases involving banking mistakes. Yes, guys, if you take it when you know that the transfer is mistaken, it’s theft – as a Pennsylvania couple detailed in Eoin’s post have discovered.

An article in The Independent outlines the story of the Gaos in more detail, concluding:

These days, when taking money off a bank is regarded not so much as a crime as a service to the community, Mr Gao has his admirers. Hundreds have signed up to three Facebook groups, including one with an authentically Down-Under title: “Go Leo Gao – Go You Good Thing”.

But this is not an entirely victimless caper. A family has been divided by greed, poor father of three Mr Antony has lost his job at the filling station, tenants don’t know if they’ll still have a home, and, back in Christchurch, the woman who forgot the decimal point is undergoing trauma counselling. Meanwhile, somewhere in Asia, the spending goes on.

17 Comments

  1. Posted May 22, 2009 at 1:06 pm | Permalink

    So how did they get the money out of the bank? They would’ve had to transfer it somewhere right? I’m sorry I hope they get away with it.

    Sucked in. 🙂

    The bank not the depositors. Sorry depositors.

  2. Posted May 22, 2009 at 7:40 pm | Permalink

    Close the account and take a cashiers cheque? Then why not just stop the cheque or pursue the bank overseas into which it had been deposited?

    Ah just found another another article.

    The customer had attempted to transfer amounts totalling around 6.7 million US dollars, but the bank said it had been able to recover around 2.8 million.

    “Westpac is continuing to vigorously pursue the outstanding amount of 3.8 million US dollars,” it added in a statement.

    In Hong Kong they probably were able to just withdraw the money in cash, then took it straight upstairs to the private banking arm and opened a new account in an ostensibly different bank. Silly, they should have just used it to buy negotiable securities and flocked off with them.

    Don’t know what they were thinking legally (other than “let’s take the money and run”): it wasn’t even a deposit, it was an OVERDRAFT FACILITY, so anything they took they would have been obligated to repay.

  3. Posted May 23, 2009 at 9:07 am | Permalink

    I would not like to be in the shoes of the banker whose name is attached to the “ok” on the extra zero.

  4. Jacques Chester
    Posted May 23, 2009 at 1:15 pm | Permalink

    I’m surprised they don’t have any internal systems for watching transactions like this. At the very least little flags should go up for transactions over, say, $1 million which freezes the transaction pending a double-check. Or better yet, pattern-matching software which says “hmmm, they don’t usually ask for $10 million overdrafts …”

    Fun fact: Westpac recently knocked me back for merchant facilities. I was too much of a risk.

  5. Posted May 24, 2009 at 9:19 am | Permalink

    L.E – we average punters might be of the belief that overdraft facilities are ordinarily quite small, a little bit of leeway to help manage cash flow, for example. In the real world, not so. A multimillion dollar facility would not be unusual in many industries, or even for many private investors.

    Not sure why the public states all the obvious with these events … don’t they have processes to check these things?! … blah, blah … of course they have processes, good grief!

    Trillions of transactions a year and only a handful of errors worthy of news cover. That’s hardly monumental incompetence or failure to have processes in place.

    As with plane crashes or NASA disasters: if something goes badly wrong, it’s pretty much always human error.

  6. jasbir
    Posted May 24, 2009 at 6:32 pm | Permalink

    are you sure its theft? when the money was transferred they did not have the intention. the only problem was that it was an OD. otherwise would it be theft. If you woke up one morning and found 10m in your account and decided to take it and travel the world. would it be theft?

  7. pete m
    Posted May 26, 2009 at 11:21 am | Permalink

    LE: “But should I be liable to pay it back? It depends what you spent the money on and how easily you can reverse the purchases you made.”

    Is that right? I doubt the end transaction has any relevance at all to the issue of repayment. While your honest intention means you did not commit a crime, nothing changes the civil remedy in the bank in requiring the money to be paid back.

    I often cop this question, and usually answer – “don’t be stupid”. If you don’t bother checking with the Bank about the source of the $, you can never safely claim complete innocence.

  8. pete m
    Posted May 27, 2009 at 9:58 am | Permalink

    Thanks – I knew you knew 1000 times more about this than me!

    I hear NZ law requires actual handling of the $ physically for a serious charge of theft, so the most they can be charged with is using an electronic device for unlawful purposes. Sounds like an old law needing modernisation!

  9. Posted May 27, 2009 at 7:12 pm | Permalink

    Jeez.

    Apparently they’re posting n’ah n’ah n’ahs on Facebook. . How dopey can you be. But NZ doesn’t have an extradition treaty with the PRC.

    So maybe they got away with it.

  10. Posted May 27, 2009 at 7:13 pm | Permalink

    If they come back will the bank still let ’em have the loan? 🙂

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  1. […] are commenced, the recipient will still be liable to return the money. As Skepticlawyer points out, this is staple fare for restitution lawyers, and, in a forthcoming post, I’ll tease through some of the restitution issues that arise. In […]

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