The court heard on Monday that transactions from Forum Group to FGFS were not recorded in Forum’s accounts. FGFS has previously been described in court as being at “the heart” of the $400 million alleged defrauding of Westpac, Sumitomo Mitsui Banking of Japan and French bank Société Générale.
Mr Chin, who reported directly to Mr Bouchahine, said contract processes with BHO (a introducer to Westpac) and SMBC Leasing (part of Sumitomo Mitsui Banking of Japan) were designed by the former CFO.
Mr Chin worked at FGFS from May 2020 until June 2021. Before that, he was an assistant accountant at Iugis, another Forum entity, from July 2018 to April 2020.
“I brought it up, just many parts of the finance books where I thought there was gaps, or something hadn’t but needed to be done,” Mr Chin said in the Federal Court on Tuesday.
“In terms of invoicing the customer, it was something I did bring up and say, ‘This part is missing, it doesn’t make sense on the books.’ ”
“It was something I always thought was incorrect, but I was trusting the advice of my senior that it would eventually be resolved.”
Mr Chin said if he wasn’t 100 per cent sure about something, he’d ask Mr Bouchahine, as “accounting to this extent was sort of a new lesson area and understanding for myself”.
Mr Chin was questioned on Tuesday by Nick Kidd, a barrister for Forum’s liquidator McGrathNicol, as the advisory and restructuring firm investigates the collapse of Forum on behalf of creditors.
He and Mr Bouchahine are not part of the court actions launched by the banks and are not accused of wrongdoing.
Mr Kidd asked for clarification on the “gap” being “the fact that the customers were never sent invoices”.
Mr Chin replied that was correct.
“Within FGFS they were paying invoices, but they weren’t invoicing out. So, in my mind that wasn’t being balanced because … it needed to get money from somewhere, someone being a customer of some sort.”
“I didn’t understand why it was just very one-sided; that FGFS is paying out rather than collecting in at the same time.”
Large GST discrepancy
Mr Chin said Mr Bouchahine advised him the issue would be resolved.
Under questioning, Mr Chin said Mr Bouchahine came up with the idea to move money from Forum Finance into FGFS accounts, to not record it in Forum’s accounts, reporting the amount into a BHO clearing account on FGFS’s balance sheet.
He also said he was advised by Mr Bouchahine to use a PDF editor to manually change customer invoices so they were addressed to FGFS and not the customer, and that the former CFO came up with the idea to have FGFS providing funds to repay funders for the equipment leases.
“Is it right to say you understand now that the processes that you set out in your June 29 email were the processes which enabled very substantial monies to be fraudulently taken from BHO and SMBC?” Mr Kidd asked.
Mr Chin replied: “Yes, I understand.” He said he came to that understanding after reading about the alleged fraud in the news after Westpac went public with its allegations.
However, it was “not a complete surprise, as there are signs. But a person at my level doesn’t question; you trust the expertise and the knowledge of people more senior that they’re doing the right thing,” Mr Chin said.
He said a large GST discrepancy as a result of the structure was a further issue that he had raised, but was told an accountant called Lou Stefanetti would need to be consulted.
‘Not enough knowledge’
“The little small possibilities that something was slightly off got confirmed,” he said. “That no customer was ever charged, that there was always a gap that never got solved. I always had it in my head that it would eventually be solved.”
Mr Chin said he could not say with any certainty which other Forum employees may have been involved in the alleged fraud other than Bill Papas.
“Do you think Mr Bouchahine shares your innocent understanding of these arrangements, do you?” Mr Kidd asked.
Mr Chin replied: “I don’t believe I have enough knowledge or evidence to say a definitive answer against Mr Bouchahine.”
Mr Chin was also quizzed about balance sheet items that were described as Future Funded Contracts.
The term, which was unique to FGFS, referred to contracts in which customers appeared to have been provided with financing but were not making any payments in relation to those contracts.
Mr Kidd also asked Mr Chin to explain several accounting entries, including the apparent purchase of $5.2 million of office equipment by Forum Group from FGFS.
“There was no physical office equipment that changed hands,” he said.