Work Permit Kickback Scam by 7-11 Franchisees - Blind MOM or More Than Meets the Eye?

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An honorable member of the Coffee Shop Has Just Posted the Following:

The curious case of the 7-Eleven franchisees

May 4th, 2014 | Author: Contributions



On 18 February, the Ministry of Manpower charged 22 foreign workers, all from
India, for falsely declaring their salary on their work permit applications.
These workers were employed by four 7-Eleven franchisees—Vina Trading,
Manthra Enterprises, Magnaton Ventures and Nalla Traders.



Whilst these employees declared salaries ranging from
$2,400 and $4,550, following receipt of their stated salary via GIRO (automated
inter-bank transfer), they were required to return to their employers between
$600 and $3,350, in cash. The actual salaries of these workers, in most cases,
works out to be about a quarter of the amount declared on their work permit
applications. In this scam, employers not only hire workers at dirt-cheap wages,
they pay lower corporate taxes as a result of declaring higher expenses while
lining their pockets with freshly laundered tax-free money. It is uncertain if
the employer or the workers paid the workers’ taxes.

Since the floodgates opened to foreign workers, this has been a common scam
with small businesses, HR companies specializing in foreign workers, and workers
from third-world countries—where the culture of bribes and kick-backs in the job
market are the norm—all colluding to defraud the government and Singaporeans. In
fact, MOM acknowledges this by declaring that investigations are underway in
similar cases involving 230 foreigners and as many as 75 employers. Although a
certain profile of such employers and employee comes to mind, there are reports
on alternative media that even some private clinics engage in this fraud in the
hiring of foreign nurses or clinic assistants. Therefore, the numbers given by
MOM may only scratch the surface as far as such illegal acts are concerned
particularly as MOM depends primarily on whistleblowers to bring these
illegalities to its attention.

Amongst the SME community, a combination of rising business costs (due to
ever-increasing rents), availability of cheap regional labour, and a lax
enforcement regime has contributed to the climate that makes such fraud so
tempting. The MOM’s Fair Consideration Framework, which will be instituted in
August this year to ensure Singaporeans are considered fairly in the job market,
is likely to exacerbate rather than reduce fraud, since it will squeeze the SME
further towards breaking point.

Following up on the above prosecutions, on 10 April, MOM charged eight
employers, all franchisees of 7-Eleven, and two employment agents for making
false declarations on 35 Employment Pass (EP) and six S Pass work permit
applications. The EP is meant for foreign professionals in managerial,
executive, or specialized jobs and whose salary is a minimum of $4,000. The S
Pass category is for semi-skilled foreign workers such as technicians who are
paid a minimum of $2,200. In addition, employers who hire workers with the S
Pass are required to pay a monthly levy of between $300-$450 to the
government.

The employers who were charged are from Vina Trading, Manthra
Enterprises, Magnaton Ventures, Nalla Traders, Chandrani Enterprise, Niche
Formulas, Changrich Enterprise, and Rui Fuels & Services. The
employment agents are, ironically enough, from a company called Ethics
Career Solution Pte Ltd.

The above-mentioned sets of prosecutions were reported in the local
newspapers and Channel News Asia. However, the mainstream media merely
regurgitated the information fed to them by the MOM via press releases which can
be found here and here. Therefore, the media failed to ask the obvious follow-up
questions one would expect of inquiring, analytical, and competent news
organisations.

Why were there only 22 employees from four companies charged in the first
instance yet, in the second set of prosecutions, there were eight companies that
were brought to court for defrauding MOM on 19 more work permit applications?
Why the discrepancy?

Perhaps after charging the initial group of 22 employees, MOM decided to
charge the 8 employees while continuing to prepare the case against the
remaining 19 employees. But it is odd nevertheless since the cases all involve
7-Eleven franchises and identical offenses.

Another curiosity is that the first press release dated 19 February
identifies by name and age the 22 workers and provides detailed information on the following: work permit application
date, type of work permit, declared occupation, declared monthly salary, and
actual salary received. However, the eight employers and two employment agents
mentioned in the 11 April media statement are only identified by their company
names and their nationality—seven are Singaporeans and one is identified as a
Permanent Resident. The MOM, which is often accused of having a pro-employer
bias, does itself no favours by seemingly shielding employers from further
embarrassment in this instance. It unnecessarily invites speculation regarding
their identities and why they are being withheld. Interestingly, Vina Trading, a
sole-proprietorship, which is one of the companies charged in court, was a
recipient of the 2013
SME One Asia Prominent Award given to “businesses which have weathered the
growing pains and flourishing in their first decade of business”.

The workers who pled guilty were given fines of $5,000 to $7,000 or, if
unable to pay, jailed five weeks and seven weeks respectively. In addition, the
workers were permanently banned from being employed in Singapore.

In comparison, the unnamed employers, who are arguably more culpable having
orchestrated the scam, were given fines of between $8,000 (or four weeks’
imprisonment in default) and $56,000 (or 42 weeks’ imprisonment). One of the
employment agents was fined $22,000 (or eight weeks’ jail) and the other was
fined $40,000 (or 15 weeks’ jail). The agents’ company was responsible for 21
fraudulent work permit applications.

The MOM’s 19 February charge sheet lists the following number of work pass
violations by company:

Company Name

Offenders

Vina Trading 10 Manthra Enterprises 3 Magnation Ventures 2 Nalla Traders 7 Total 22

If one was to assume that the largest fine of $56,000 was given to the
biggest offender, Vina Trading, then each offence works out to a fine of $5,600
each. The smallest fine of $8,000 may have been given to Magnation Ventures.
This would average $4,000 per offence

It is very hard to see how the penalties given to the 7-Eleven franchisees
can possibly be construed as deterrent ones. The fines appear to be about the
same or less than those received by the workers who, in addition, will never be
able to work again in Singapore. Worse, if one assumes that each scam lasted an
average of six months before being exposed—based on the figures in MOM’s press
statement—an employer could have profited by as much as $21,000 from a single
employee in kickbacks during that period seemingly making a mockery of the
fines.

Perhaps the most bizarre aspect of this whole matter is that MOM processed
and approved work permit applications for 7-Eleven jobs—even if they contained
such job titles as “Store Manager”, “Senior Store Manager”, “Customer Service
Manager” and “Business Development Manager”—that purportedly listed a salary
above $4,000 a month. Are MOM officials so out of touch with reality that they
did not catch a whiff of sulphur when the applications landed on their tables?
Did they not wonder why these franchisees are hiring from abroad for jobs that
Singaporeans would be competing for given the attractive remuneration?

It is fortunate that the mainstream press has the support of the Prime
Minister who said he is unfazed by its dismal international press freedom
rankings as the way media is managed “makes sense” for Singapore where
“newspapers report freely the news, but also responsibly”. Because, most
everyone else is rather unimpressed.

Masked
Crusader

* The author blogs at MaskedCrusader.


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