Damapongs - Shinawatras Tax Frauds : The Guilty Verdict
( Last edit 2009-10-05 )
Thaksin begs his red-shirts supporters to revolt for him to come back to Thailand. Thaksin claims that he is a democratic leader and some people just envy of him. Thaksin says some powerful invisible hands set up double standard against him.
The facts are that Thaksin and his family jumped bails and flew away to UK after knowing the verdicts of the criminal court of the first instance to jail his wife then and the family accomplices for a huge tax fraud.
Below is an exerpt of the verdict which scared the billionaire Shinawatras up to this day. It disproves Thaksin's claims of the legitimate democratic leadership as well as his honesty to uphold the rule of law as a single standard. It also disproves Thaksin's claim to lead the poors for social justice. It also counter Thaksin accusasion against all of his opponents.
Defendant No.1 : Mr.Bannapot Damapong, adopted elder brother of Lady Potjaman
Defendant No.2 : Lady Potjaman Damapong Shinawatra, the wife then of Pol. Lieut. Maj. Thaksin Shinawatra
Defendant No.3 : Mrs.Kanjanapa Honghern, private secretary to Potjaman
Allegations : Falsification of statements for 546 million baht tax avoidance of the 738-million-baht worth of shares of Shinawatra Computer and Communication (public) Co.,Ltd., which is a violation of article 37(1)(2) of the Revenue Code and a violation of articles 83 and 91.
Right Honourable Mr.Pramote Pipatpramote, the senior judge and the case owner together with his quorum presided a court session to pass a sentence at the Criminal Court on July 31, 2008 at 9:00 am.
Summary of the verdict, with minor additional clarification in brackets.
Exchange rate estimation for 1 USD = 35 bahts.
Related rulings of the family's scandals revealed.
Lady Potjaman, Bannapot and Kanjanapa attended the Court session together with Pol. Lieut. Maj. Thaksin and their children.
The Criminal Court passed the ruling on the case black or.1149/2550 which the attorney general had indicted: 59 years old Mr.Bannapot Damapong, the former executive president of Shin Corporation (public) Co.,Ltd.; 51 years old Lady Potjaman Damapong Shinawatra; 51 years old Mrs.Kanjanapa Honghern, private secretary to Potjaman, to be the defendant number 1, 2 and 3, with allegations of tax avoidance with frauds, fraudulent declaration, or deliberate falsification of statements.
First allegation: on November 7, 1997, all three defendants conspired to deceitfully or fraudulently or trickily avoid tax of 273,060,000 bahts.
Second allegation: between May 18 to August 30, 2001 the first and second defendants conspired to declare or provide falsified statements to avoid tax according to category 2 of the Revenue Code, resulting in the state's lost of 273,060,000 bahts and indemnity of 273,060,000 bahts, to make a total of 546,120,000 bahts. [USD 15.6 million ]
The Court has thoroughly deliberated the evidences and witnesses which both the plaintiff and the defendants presented. The final facts reached, were that the second defendant intended to give the first defendant 4.5 million shares of Shinawatra Computer [which later change its name to Shin Corporation (public) Co.,Ltd.], in posessesion of Ms.Duangta Wongpakdee who acted as a nominee shareholder [of Potjaman]. However, the transactiion was carried out as a trade in the Stock Exchange on November 7, 1997 when Patra Security (public) Co.,Ltd. was the broker for the amount of 4.5 million shares at 164 bahts per share, totalling of 738 million bahts. The second defendant [Potjaman] was the payer instead [of Bannapot], with a cheque to Patra Security. After Patra Security deducted the commission fee and VAT, Patra Security then issued a crossed cheque for the shares value to Miss Duangta. The cheque was then deposited to the original account of the second defendant [Potjaman] under the full control of the third defendant in every step.
When the first defendant [Bannapot] submitted the income statement for the year 1997, the first defendant did not declare the shares received as an income to calculate the income tax. Whereas the second defendant [Potjaman] did not include the money received from Patra Security in the taxable income list when calculated the income tax because trading in the Stock Exchange is tax-exempted according to article 42(17) of the Revenue Code and Ministry Regulation No.126 in accordance with tax-exempted item 2(23) of the Revenue Code.
In 2000, during the National Counter Corruption Committee (NCCC) 's investigation of the actuality and the presence of the assets and liabilities of Pol. Lieut. Maj. Thaksin Shinawatra, the first and the third defendants [initially] testified to the subcommittee of the NCCC that the second defendant [Potjaman] splitted up of some shares to give to the first defendant, not a sale. The NCCC later ruled that Pol. Lieut. Maj. Thaksin submitted falsified statements.
The revenue department, then requested the information from the NCCC to investigate for tax collection. The first and the second defendants testified to tax investigation officers that the transfer of shares was an affectionate gift during a ritual, traditional or cultural occasion; therefore, it was not taxable income as it was exempted according to article 42(10) of the Revenue Code. The investigation for tax coleection was then discontinued.
This case has a matter of law which the defendants raised to oppose that the CNS Announcement Number 30 is contradictory to the 2007 Constitution. The Constitution Court have already ruled in the case number 5/2008 that the CNS Announcement Number 30 is not contradictory to the 2007 Constitution. The ruling is applicable to all cases. Therefore, it is not necessary to consider this argument.
Another argument of the defendants is that the Attorney General does not have the authority to indict because it contradicts to the item 9 of the CNS Announcement Number 30 which stipulates a filing to relevant bodies first before filing to the police for criminal indictment. The criminal court judges that the second clause of item 9 of the CNS Announcement Number 30 extraordinarily authorized and endorsed ASC [Assets Scrutiny Committee]. Filing the case to the Attorney General is valid and hence the plaintiff has the authority to indict.
Regarding the issue of whether or not the three defendants conspired to fraudulently or trickily avoided tax, as seen from the facts above, despite that having nominated proxy shareholders can be practiced in the Stock Exchange, it is obvious that there was no actual trade between the first and second defendants. The transaction was a deceit to conceal the actual intents, thus a fraud to enable the second defendant, the seller, to have the earning from the shares sold as tax-exempted income.
Regarding the issue of whether or not the shares received by the first defendant are taxable income but which is extra statutory concessions, the first defendant testified to the subcommittee of the NCCC that it was a gift from the second defendant who splitted up of some shares to give to the first defendant, not a sale, because the first defendant has long helped the businesses of Pol. Lieut. Maj. Thaksin and the second defendant [Potjaman] from the beginning, as well as he has been the borrower and guarantor for them.
The Court sees that because of the importance of the scrutiny of the assets according to article 295 of the 1997 Constitution [by the NCCC] which could have impeached Pol. Lieut. Maj. Thaksin from the PM post and prohibited him from political posts for five years; therefore, the first defendant who had a very close relationship to Pol. Lieut. Maj. Thaksin, must have carefully prepared the testimony which was the very first initial statement without being investigated with tax issues and without this indictment. Thus, his testimony is considered likely to be factual.
Although that investigation did not include the issue of shares as a gift, as appeared in this case, the gift from the second defendant [Potjaman], the spouse of Pol. Lieut. Maj. Thaksin, during such a very important occasion according to the first defendant [Bannapot] 's claim, could have been mentioned in the testimony. However, instead of mentioning what occasion was the gift for, he testified only that it was a split up of some shares to give to him, not a sale whereas there were extensive detail in other cases. As a result, it is considered that the second defendant [Potjaman] gave shares to the first defendant [Bannapot] by a division which means in itself that it is not a traditional or ritual or cultrual occasion gift.
After the NCCC had [already] charged Pol. Lieut. Maj. Thaksin with deliberate submission of falsified statements, the first and second defendants then testified to the Constitution Court and tax officers that the second defendant [Potjaman] gave shares as a gift to the first defendant [Bannapot] by the observance of righteousness that he has been a co-founder and a partner in business when in the occasion that he got married and got a child. The later reasoning which is different from the initial testimony, is likely to be just a claim for tax exemption.
Also the claims of the first and second defendants that the second defendant [Potjaman], in order to even the statuses among the siblings, had wished to give the shares to the first defendant [Bannapot] since 1996 as a gift for the celebration of his mariage but Pol. Lieut. Maj. Thaksin was too busy upon entering politics and was occupied with management matters and that the gift was thus postponed until the son of the first defendant [Bannapot] was one year old, are contradictory to the testimony of the first defendant [Bannapot] and such shares had belonged to the second defendant [Potjaman] who had the third defendant as an advisor and assets manager acting on behalf of her all along. The transfer of the shares was therefore possible by the third defendant [Kanjanapa] alone.
Therefore, if the transfer of the shares were to be for a gift for marriage, then the second defendant [Potjaman] could have just informed the third defendant [Kanjanapa] to proceed without having to bother or involve Pol. Lieut. Maj. Thaksin and his management as they claimed.
Although Pol. Gen. Preawpan Damapong, Mrs.Somsong Kruachai and Mrs.Busba Damapong testified that the second defendant [Potjaman Damapong Shinawatra] had used to say that she would like to give shares to the first defendant [Bannapot Damapong] as a marriage gift; the testimonies are [naturally] likely to be for the defendants' interests, thus [relatively] weightless, since the witnesses have close relationship with the defendants.
Therefore, the concluded fact is that the second defendant [Potjaman] gave the shares to the first defendant [Bannapot] not in the affectionate manner during a ritual, traditional or cultural occasion according to article 42(10) of the Revenue Code.
The next issue is whether or not the shares fall into the category of a fostering income following the observance of righteousness according to article 42(10). During the shares were transferred, the first defendant [Bannapot] was the president director of Shinawatra Computer and Communication (public) Co.,Ltd. and directors of companies in Shin Corporation which were secured businesses. In the income statement for income tax, he declared 23,554,503.53 bahts of taxable income before expenditures and exemptions, which is very high. He also had securities as shares in many other companies.
Obviously, the first defendant [Bannapot] was not in the needy status which required fostering according to the laws. The second defendant [Potjaman] thus did not have the obligation following the observance of righteousness to foster the first defendant [Bannapot]. Any giving for whatever reasons may not be considered as following the observance of righteousness. Consequently, it may not to be ruled that the income worth of shares value, which was
received by the first defendant [Bannapot] is taxable income which is extra statutory concessions.
The next issue is whether or not the three defendants conspired [fraudulently] to avoid tax. According to the case, the [straightforward] transfer of the shares would be taxed for 273,060,000 bahts. The second defendant [Potjaman] did not transfer the shares to the first defendant [Bannapot] despite that transferring could be done in the Stock Exchange without commission fee and VAT for the broker. Instead, the second defendant [Potjaman] fraudulentlly and deceitfully traded the shares in the Stock Exchange, and was prepared to pay 7,380,000 bahts commission fee and VAT, in order to conceal the giving which was the actual intention.
The acts indicate the intention of the second defendant [Potjaman] to avoid income tax in the processes of giving and accepting which the second defendant [Potjaman] was supposed to be the payer of the tax. Therefore, fraudulent trade was carried out [by the three defendants] to conceal the giving.
Being the private secretary of the second defendant [Potjaman], the third defendant [Kanjanapa] who carried out shares transfer, has her husband who is an officer in Patra Security which is the broker in this case. The third defendant [Kanjanapa], therefore, must have possessed good knowledges about shares and transfer of shares. Her testimony also is in agreement with the second defendant [Potjaman]'s that before the shares transfer, they were consulting and advising together. As a result, it is to be ruled that the third defendant [Kanjanapa] knowingly conspired with the second defendant [Potjaman] to [fraudulently] avoid tax.
As for the first defendant [Bannapot], he knew from the beginning that the second defendant [Potjaman] would give him the shares but when the third defendant [Kanjanapa] asked him for the security trading account number informing him that it was for buying the shares, the first defendant [Bannapot] gave it away without resisting or questioning which is unusual for an honest practice. Additionally, there was no declaration of this income in his 1997's income statement.
Following deliberation of the above findings as well as the relationship between the first and second defendants, it is to be ruled that the first defendant conspired and jointly committed the crimes with the second and third defendants. Therefore, they are all joint principal culprits.
In conclusion, the witnesses and evidences presented by the plaintiff are more reasonable and solid. The defendants' witnesses and evidences cannot rebut. The facts obtained are without reasonable doubts, in accordance with the plaint that the three defendants conspired to avoid tax by frauds or deception or tricks or by any other similar means.
The next issue is whether or not the first and second defendants conspired to declare falsified statements to avoid tax. To the revenue department request for a tax payment investigation following the ruling of the NCCC that Pol. Lieut. Maj. Thaksin had submitted falsified assets statements, the first and second defendants testified as the court ruled above, refusing the allegations. Therefore, the defendants gave falsified statements to claim exemption not to pay tax. The revenue department was misled and believed the statements resulting in the first defendant exempted from tax payment.
The facts obtained are without reasonable doubts, in accordance with the plaint that the first and second defendants deliberately declared falsified statements or exhibited fraudulent evidences to avoid tax.
The three defendants have high economic and social statuses, particularly the second defendant [Potjaman] who is the wife [then] of the country's administrator[Thaksin]. Apart from the obligation to behave as other good citizens, they should have behaved as good examples to fit their high statuses.
Instead, they conspired to give falsified statements to avoid tax, which is illegal, and unjust to the society and the tax system whereas the amount of tax avoided by the first defendant and the total of the tax which was eventually to be paid by the seond defendant is incomparable to the assets in the possession of the second defendant and her family, at that moment.
The first defendant could have paid the tax without affecting the status of the second defendant. Thus, the misfeasances by the first and second defendants are severe.
The Court thus passes the verdict that the three defendants are guilty of violation of article 37(2) of the Revenue Code in association with article 83 of the Criminal Code. In Addition, the first and the second defendants are guilty of violation of article 37(1) of the Revenue Code in association with article 83 of the Criminal Code.
The first and the second defendants' acts are various different acts. The punishments are to be in orderly count as stipulated by article 91 of the Criminal Code. The sentences for the offence of conspiracy to deceitfully or fraudulently or trickily or by similar means to avoid tax, are imprisonment of the three defendants for two years each. The sentences for the offence of declaration of falsified statements or exhibition of fraudulent evidences to avoid tax, are imprisonment of the first [Bannapot] and the second defendants [Potjaman] for one year each. The total imprisonment for the first and the second defendants are three years each.
Within two weeks after the Criminal Court of the first instance passed the verdict of guilty and the jail sentences, indicating failure to bribe the judges, the principal culprits jumped bails and fled to U.K.. It was a full house of Shinawatras who followed Potjaman Damapong Shinawatra to go out shopping in London.
Constitutional Court Chief Judge's Personal Verdict on Thaksin's Assets Hiding: CLICK
Supreme Court for Criminal Cases of Politicians, Verdict to Confiscate Thaksin's Abuse: CLICK