Sunshine Empire Fraud Case

[Musicwhiz]

The Straits Times
Aug 16, 2011
Call for Sunshine Empire trio to get stiffer sentences
Firm was an elaborate fraud on a large scale, argue prosecutors at High Court

By Selina Lum

PROSECUTORS yesterday pushed for heavier punishments for the trio involved in the Sunshine Empire case.

They are appealing at the High Court against the sentences handed down last year to James Phang Wah, his wife Neo Kuon Huay and Jackie Hoo Choon Cheat.

Sunshine Empire was a multi-level marketing company which sold 'lifestyle packages' to people who took part in the scheme.

The court heard that they were promised high returns, but the returns were paid out not using genuine profits but by recycling funds from new participants.

The prosecution argued that Phang, the 51-year-old founder of the company, should have his nine-year jail term increased to nearly 14 years.

And Hoo, a 31-year-old former company director given a seven-year jail term for collaborating with Phang, should have his sentence raised proportionately.

Neo, 48, was fined $60,000 for falsifying payment vouchers with her husband. The prosecution argued that she should be sent to jail for six months.

The trio are appealing against their convictions. Phang and Hoo are appealing against their sentences.

Yesterday, Mr Subhas Anandan, the lawyer representing Phang and Neo, argued that Sunshine Empire was not a fly-by-night company and there was enough evidence to show that it was a sustainable business.

He said it had collected millions of dollars without a single member of the scheme making a complaint.

There were no victims, he argued, and the police were relying only on the evidence of their expert witness, who said this business model would not be sustainable for more than five years.

Hoo's lawyer Philip Fong said Sunshine Empire was not a Ponzi scheme, which promises high returns and uses money from new investors to pay old investors.

Mr Fong argued that it was was a multi-level marketing company, not an investment scheme, and did not promise guaranteed returns.

But Deputy Public Prosecutor Aedit Abdullah argued for a deterrent sentence, saying it was an elaborate fraud on a large scale that had the trappings of a legitimate enterprise.

Phang received US$5 million (S$6 million) from the scheme in consultancy fees and, while Hoo did not get any direct consultancy fees, the DPP argued that both were intimately involved in the scheme.

selinal@sph.com.sg

[Musicwhiz]

As if people wouldn't have known! Such returns are virtually impossible over the long-term!

The Straits Times
Nov 22, 2011
Sunshine Empire's appeals dismissed
High Court Justice upholds findings, sentences over 'well thought-out fraud'

By Yasmine Yahya

HIGH Court Justice Tay Yong Kwang criticised the Sunshine Empire scam as a 'well thought-out scheme designed to defraud participants under an aura of legitimacy and respectability' in a written judgment issued yesterday.

Justice Tay made the comment in a 31-page written judgment upholding the findings, convictions and sentences handed down by District Judge Jasvender Kaur last year.

It means company founder James Phang Wah, 51, will start serving his nine-year jail term next month. He had been given a fine of $60,000 in July last year. Former director Jackie Hoo Choon Cheat, 31, was sentenced to a seven-year term.

Phang's wife, Neo Kuon Huay, 48, was fined $60,000 for falsifying payment vouchers.

Sunshine was a multi-level marketing company that sold 'lifestyle packages' promising high returns. But the returns did not come out of genuine profits but by recycling funds from new participants.

In upholding the sentences handed out to the three, Justice Tay said he agreed with Judge Kaur's finding that Sunshine 'was an unsustainable business and that Phang and Hoo were knowingly perpetrating a fraud on the participants by the operation of the Sunshine Empire scheme'.

He also agreed with her that Phang and Hoo had made unlawful payments to Neo.

Neo was paid a commission of nearly $950,000 as the firm's global sales director, although she had not been appointed to the role and was not qualified to hold it, he wrote.

Judge Kaur was also correct in finding that Phang and Neo had committed a dishonest act in falsifying six payment vouchers in order to receive commissions amounting to nearly $1 million, Justice Tay ruled.

He said in his written judgment that these sentences 'should serve as sufficient deterrence against such offences'.

The three had appealed to the High Court against their convictions. Phang and Hoo also appealed against their sentences. The prosecution, meanwhile, wanted longer prison terms for Phang and Hoo and pushed for Neo to be sentenced to six months' jail.

Yesterday, Justice Tay agreed to defer Phang and Hoo's jail sentence by three weeks to let them settle their personal and business affairs and to allow them to spend some time with their families.

The court heard yesterday that Phang's father is suffering from kidney failure and might have to undergo surgery to have both his legs amputated and there is a chance Phang will not see him anymore after he goes to jail.

It was also told that Hoo has a grandmother in Malaysia who is 94 and ailing. She will come to Singapore to see him before he starts his sentence.

Sunshine is being wound up. The Commercial Affairs Department has seized about $21 million and will establish how the funds should be disbursed to the firm's creditors.

yasminey@sph.com.sg

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How the scam worked

SUNSHINE Empire sold lifestyle packages from its Toa Payoh Central office, promising high returns.

About 20,000 people bought into the flashy scheme over 15 months before Sunshine was raided by Commercial Affairs Department officers in November 2007.

The packages ranged from $240 to $12,000 and offered attractive bonuses and incentives. There was also a customer rebate points (CRP) system that allowed participants to use the points to buy goods online.

Founder James Phang Wah and former director Jackie Hoo Choon Cheat assured participants that the points programme was derived from the firm's turnover on its e-commerce platform. But the court heard that the CRP returns were actually paid using revenue from the sale of packages to new participants.

From August 2006 to October 2007, almost 26,000 packages were sold, bringing in about $180 million.

While $118 million of this was spent on pushing the purchase of more packages, much of the rest ended up in the pockets of Phang, his wife Neo Kuon Huay and Hoo.

YASMINE YAHYA

[d.o.g.]

As if people wouldn't have known! Such returns are virtually impossible over the long-term!

Actually, lots of people DON'T know. That is why Ponzi schemes often manage to raise lots of money. New ones will undoubtedly continue to surface. They all prey on 2 things: financial illiteracy and greed.

[KopiKat]

As if people wouldn't have known! Such returns are virtually impossible over the long-term!

Actually, lots of people DON'T know. That is why Ponzi schemes often manage to raise lots of money. New ones will undoubtedly continue to surface. They all prey on 2 things: financial illiteracy and greed.

I have 1st hand experience with a potential victim.

One of my acquaintance, in his early 20s, approached me for my opinion (I think forced by his parents). His friends had put in $$ on the scheme and was making amazing returns. Every time they met up, his friends would be telling him how much their "investments" had grown.

From my observations, some peer pressure was at play here as many of his friends were "invested". But, there was pure greed and fear written on his face. Greed, for the easy astronomical returns and Fear, of losing the opportunity (not the money) to make easy money. The rich appearance of the Sunshine office (TP Hub?) also gave him the added assurance that they were a real, profitable organisation.

At that point in time, I have not heard abt Sunshine. I finally found a lot of good comments by forummers in this community (I think one of the predecessor of Value Buddies). After giving him my 1ct worth of advice, I gave him the link to that thread. Fortunately, he was convinced (the fear of losing all his $$ was greater than his other Greed and Fear) and didn't "invest". For the next few months, whenever I saw him, he does have that forlorn look that he may be making a big mistake not "investing" or perhaps his "invested" friends were laughing at him for being "chicken". It only turned to relief when the news broke that it was just a scam after all...

Oh ya, tks again for all the valuable analysis/comments in that old thread.

[Musicwhiz]

Hi KopiKat,

Thanks for relating your experience on this guy.

I just hope his friends did not lose their shirts (and pants) as a result of this fraud.

[KopiKat]

I just hope his friends did not lose their shirts (and pants) as a result of this fraud.

I think one of the techinque used in such scams is the use of a pyramid structure ie. if you are already "invested" and if you manage to sell to another victim (oops.. I mean another customer), you get some good rewards (can't remember they use points or their own 'gold' system). So, very often, peer pressure is being applied as the pyramid structure usually means you'll sell to friends and relatives as they are the easiest target.

In the case of my acquaintance, he managed to break out of the peer pressure (after making his own decision not to "invest") approach by not meeting up with this group of friends that often. Probably a complete break as he subsequently also couldn't tell me whether they lost a lot of their $$.

Oh ya, I also identified the above peer pressure method at play as another of my acquaintance also approached me for my opinion for a different high return "investment". She was approached by her friends to invest in Gold ( few % returns per mth). The key sales person would organise an informal tea session to introduce this sure-make-money "investment". In the same group, there'll be a couple of others who'd "invested" who'd share their success stories. After such sessions, they'll follow up individually and tell them that so-and-so had also "invested". So, you can actually see the pyramid building in process, if you are able to watch from a safe distance (if you are not the subject of such peer pressure technique).

Ya, better tell your loved ones about such scams in case they get invited for informal teas by their friends (can be their best friends or close relatives even), especially if they are not as financially literate..

[thefarside]

I wonder if they seized the assets of these people (including from their relatives) - like what happened in the SLA case. They must have millions put away somewhere (probably cash in a box or something) to enjoy once they are out of jail.

[greypiggi]

this is classic ponzi scheme and i think people like that need to be prosecuted to the full extent of the law. reason is that it is usually the less educated who fall prey to their schemes and they need the money the most!

[Temperament]

Yes, close friends and relatives are the easiest to be persuaded to join some sort of Ponzi scheme. The reason is if you don't trust them then who you can trust kind of psychology?

Some years ago, my wife's cousin approached me, showing me half kilogram/one kilogram gold bars from reputable banks. His proposed investment seemed to have no downside risk. Of course, i did not fall into the "trap" knowing there was/is no such investment in this world. Only upside gain.

And he is a successful business-man. i don't know what happen to his money and his gold investment scheme .

So the moral of the story is:
It is usually quite easy to beware of strangers/acquaintances but not close friends and relatives due to "bias psychology".

And never ever think you are too smart to be con. Everyone of us has a deadly weak point. What about super sale-man-ship and maybe a little "hypnotism" may convince us to buy- Line, hook and sinker. YES? No?

[brattzz]

don't put $ into what you don't understand, at least you won't lose it.