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
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.
I’m presuming they transferred it in tranches to overseas accounts. Surely they couldn’t have gone to the bank and withdrawn $10M in cash.
The thing is, if they don’t get the money back the bank will make us pay for their mistake, we’ll all end up paying an extra $3 ATM fee or something to make up for the hole in their balance sheet.
Pretty crazy that it took the bank 2 weeks to notice the loss. I guess some heads will roll over this.
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.
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.
Thank you, DEM, for that further detail.
Well, a lot of HK transactions are done in cash, so it’s not such a strange thing there to request a cash withdrawal.
Still, given that it was an overdraft facility, it was a pretty dumb thing to allow.
As I say, I’m sure some heads will roll, somewhere, somehow.
I would not like to be in the shoes of the banker whose name is attached to the “ok” on the extra zero.
I think it was actually an extra three zeros – so $10,000 became $10,000,000. One zero is kind of understandable (just like pressing the transfer button twice is kind of understandable). But three zeros? How can you not notice that? What kind of checking mechanisms did they have in place before these things were approved? I think they need to review them. Oh yeah, I’m sure some heads will roll.
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.
Jacques, I too am surprised. I’m sure overdraft facilities don’t usually run to $10M either.
I think the banks are toughening up in the downturn. I was amazed at how much they would hand over when things were good. Look at the ill-fated ABC Learning, for example – millions handed over, and security alleged to be hugely overstated, with some kind of bizarre corporate structure obscuring exactly what was going on.
I’m lucky I got my home loan about 3 – 4 months before everything went pear-shaped. I think they’d balk at giving a loan to someone without a permanent position now. Of course I’m not the kind to get into a mess with my mortgage anyway – I’ve seen far too many repossessions to get within a whisker of that kind of thing.
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.
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?
Jasbir, if the bank transfers $10M accidentally into my account tomorrow and it just sits there, that’s not theft. I haven’t actually touched it. I can just give it back to the bank, and I’m no worse off than I was before I got the money. The fact that it’s a line of credit (through an overdraft) rather than a positive amount put in my account is neither here nor there.
The elements which turn behaviour into theft are (a) dishonest intention and (b) removing something I know doesn’t belong to me from the account. So if I know I’m not entitled to the $10M, but try and transfer it out of my account ASAP, then that’s when the theft occurs.
So, to answer your question 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? Yes, it would be theft if you knew that it was a mistake on the bank’s behalf, and that it couldn’t possibly be intended for you, and dishonestly decided to take it anyway. I don’t usually give legal advice – but I’m going to break my rule and say: DON’T TAKE THAT MONEY IF IT HAPPENS TO YOU!
There’s a hard middle situation – say the bank accidentally transfers $1000 to my account twice. I don’t notice because I thought I was entitled to $1000 extra in stimulus money this month anyway, and I spend it. I was totally in good faith when I spent the extra $1000. It’s not theft because I didn’t have a dishonest intention to deprive the bank of money. I thought belonged to me. 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.
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.
Pete M, David Securities establishes in Australia that change of position is a defence against a claim in unjust enrichment if the defendant can show that she irreversibly changed her position in good faith and in reliance on receipt of the benefit.
The irreversible bit is where it depends what you spend your money on. Can the transaction be reversed easily? If so, it’s no skin off your nose to have to give it back to P.
However, you also have to show that the expenditure was in reliance on the payment. If it’s the kind of thing you would have spent your money on anyway, your expenditure can’t really be said to be specifically in reliance on the payment.
Also, of course, the reliance has to be reasonable – you can’t say, “Oh I never check where money in my bank account comes from” or something like that.
I’ve heard of a case where a person was overpaid pension or something like that – and when he checked with the authorities, they said, “Oh yeah, you’re entitled to it”. Then later (after he’d spent the money), they realised it was a mistaken payment and tried to get it back. It was tough titties for them – his reliance on the faith of the receipt was entirely reasonable in the circumstances! However, if he’d just accepted it without making inquiries, I’d suggest that his reliance wouldn’t be reasonable, and the payor ought to get it back.
I think your answer is bang on: “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.
It’s much better not to get into trouble in the first place. And if in doubt – you should check. Otherwise it’s unlikely you will establish reasonable reliance or good faith.
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!
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.
If they come back will the bank still let ‘em have the loan?
Adrian @ 16 – somehow I think this might be the kind of conduct which enables the bank to terminate at will and demand all moneys payable back instantly!
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