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We are satisfied that in both cases Chan Tsz Un obtained the moneys and that he did so, not by obtaining the actual cash from Mr. Forrest, but by taking advantage of the fact that he acted as intermediary between the Director and Mr. Forrest, whereby Mr. Forrest was not aware of the number or amount of the cheques which the Director had signed.
Thus Chan was able to procure the payment of cash to persons for whom cheques had been prepared and to retain the cheques on which he doubtless afterwards forged the necessary endorsements.
This is evidenced by the fact that while Mr. Forrest made all payments himself, and marked the vouchers to show that certain persons had not been paid and refunded to the Department the cash remaining in his hands in respect of the unpaid sums, che- ques had been prepared in favour of those persons and these were duly met by the Government's bankers.
As the persons did not then receive payment but were in fact paid the arrears at the end of the next quarter the only conclusion is that the endorsements on their cheques must have been forged.
67. One particular cheque opens an avenue of enquiry which we have been unable fully to explore owing to its not having been obtained until after Mr. Ralphs' departure on leave.
It is a cheque dated the 29th March, 1923, drawn on the Government Account for a sum of $1,300.00 in favour of Mr. Yeung Pak and signed by Mr. Ralphs for Director of Education. We are satisfied that the endorsement is forged.
In the subsidy voucher for March, Mr. Yeung Pak appears as entitled to receive only $270 which sum he duly received on the 3rd April and paid over to the Treasurer of the School.
We are unable to find any satisfactory explanation for the drawing of a cheque for the larger amount.
68. A peculiar position is disclosed in respect of the vouchers for March, 1923. On these Mr. Forrest had marked in red ink the items which he was unable to disburse. The total amount thus shown as due to be refunded was $1,800 and this is the amount of cash which should have been left in Mr. Forrest's hands when he completed payment. We find, however, that he paid into his own account, and thence to the Education Department, a sum of $1,770. This amount cannot be traced as having been refunded to the Govern- ment because the departmental books for the period are not available for our inspection. We are informed that they were destroyed when Mr. Irving retired.
That Mr. Forrest should have had in his hands this excess of $570.00 appears to in- dicate that Chan may have made an error in his manipulation of the cheque and cash payments and may have delivered to Mr. Forrest cheques for that amount in excess of what he intended.
The over payment seems to show that Mr. Forrest did not make any careful check of the amount to be refunded. A careful check would have disclosed the discrepancy and might thus have led to the discovery of the fraud.
69. During Mr. Orme's administration the loss due to frauds in connection with sub- sides amounted to $8,775.00.
Mr. Orme had not had any previous experience in the Education Department, and he appears to have had the most implicit faith in the integrity of Chan Tsz Un; for he took out of the hands of the Inspector of Vernacular Schools the payment of all sub- sidies, and entrusted this duty entirely to Chan.
The latter passed through two complete vouchers for a total of $5,295.00 in respect of non-existent schools, forged recipients' signatures for a further $1,425.00 and failed to refund $2,055.00 which was not paid to the persons entitled thereto.
70. In 1924, Chan Tsz Un obtained by these frauds a total of $3,255, and towards the close of the year he appears to have realized that this would cause an over-expenditure of the vote, for on the 12th December, he obtained the signature of Mr. Ralphs to a
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