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Ink over Stamp: Identification of Fraudulent Documents in China

2019-09-10


Author: Freddy Huang
Translator: Angela Xiang

 

In PRC law, it is required that any official document shall come into its legal force once it acquires a stamp (including official stamps and name stamps), which shall conform to the steps as follows: first, wordings shall be written or printed on paper; second, it shall be stamped after approval, which means stamp shall be used after printing ink meets the paper. However, fake documents exist in practice with the above steps being changed: stamping on a blank paper and then write, print or copy words on it. Therefore, determining the sequence of crossing ink lines and stamp on the paper becomes one method to verify the authenticity of the document.

The Sequence Determination of crossing Ink Lines and Stamp refers to determining the sequence of crossing ink lines and stamp through forensic examination. The form and characteristic at the overlap differ based on sequence, which leaves precondition for forensic examination. Actually, in nowadays’ litigation practice, lots of evidence need to be verified, e.g. debit notes, receipts, wills, agreements, contracts, etc.

The author meets such situations in recent labor dispute cases. To defend employee’s claims on the unpaid remuneration of a huge amount, the author advised the company to apply for a sequence determination of ink lines and stamp. This article will introduce relevant main points, case analysis, the author’s experience, and provide suggestion under the circumstance that the company meets unfavorable result.

 

Case Brief

Mr. Wang was hired by Company A as a salesman in Sept 2004. The written labor contract was signed on Sept 20, 2004 with the consensus that Wang’s remuneration includes monthly base salary RMB 10,000 and yearly bonus. In Feb 2017, it was anonymously reported to the new general manager that Wang had represented Company B to sign a project service contract (“general contract”) with client Party C, and then introduced Company A to actually undertake the project but to sign a service contract (“subcontract”) with one of Party B’s affiliates. The two contracts are different in the gross amount, whose discrepancy is up to RMB 3,000,000.

Company A then entrusted attorneys to take compliance investigation. The investigation found out, except for the above fact, Company A’s former general manager and legal representative Mr. Li set up the Suzhou Branch of Company A and then transferred its 100% stake to Company B with only RMB 1 Yuan. Also, Li had been the legal representative of Company B for three months after leaving Company A.

In June 2017, Company A dismissed Wang due to his violation of interest conflict rules. Wang initiated a labor arbitration and claimed for illegal termination compensation and other claims including unpaid salary, bonus, overtime pay and reimbursement, which amounts up to RMB 1,500,000. In the arbitration hearing, Wang showed two salary confirmation letters which were claimed to be stamped by Company A on Oct 15, 2004. The Confirmation wrote that Wang has RMB 450,000 for yearly wage and shall have the performance bonus in the amount of 5% of the commercial contracts’ amount he signed. Company A was shocked and thought the letters were fake. With attorney’s suggestion, Company A decided to apply for the sequence determination of ink lines and stamp. Also, Company A brought another case to the court to revoke the stake transfer agreement of Suzhou Branch of Company A.

 

Legal Analysis

1)  The identification result and common features

a)  There are three kinds of identification results, including conclusive result: print before or after stamp; tendentious result: unsure print before or after stamp; no results.

The conclusive result would be made with the following requirements:

i)  Complete and integral overlaps, with no mark of contamination or damage impacting the identification result;

ii)  Micro-features in the overlaps are obvious with high-quality reflection, which shows the distinctive features of print before or after stamp;

iii)  There is evidence or experiments to prove that no other factors influence the micro-features;

iv)  There is no essential conflict between the result and other factors in the document.

“No results” occurs when the document does not meet the identification requirements, or the conclusive and tendentious result could not be achieved according to a micro test.

b)  Features of inkpad oil and pen writing

The pen ink is soluble in water while the inkpad is oil-soluble. Therefore, pen ink is insoluble with inkpad oil. The features are obvious in observation.

i)  Print before stamp: generally, in pale color. The overlap has a distinct edge and obvious form of print and stamp. Ink is in high density and the overlap is covered by inkpad oil. The blank space turns to be red and the black space changes colors.

ii)  Print after stamp: glossier in general. The ink lines are in small density, sparse, and even has stop line. It is because pen ink is insoluble in the inkpad oil. At the overlap, the inkpad oil is generally not obvious, but the blank space (with no ink) is generally covered by inkpad oil.

 

2)  Suggestion on unfavorable identification results

In Company A’s case, the identification result is that the document was stamped after printing, and the stamp on the Confirmation Letter is the same as the one registered in the Business Administration Department. In other words, from the angle of direct evidence, Wang has the upper hand in evidence regarding to claims on his so-called unpaid salary and bonus, which is unfavorable for Company A. In practice, if employees are so confident to accept the sequencing identification, there is relatively high possibility that the company will receive an unfavorable result. Thus, it is suggested to defend from the following angles.

a)  From the perspective of the employee’s position, to defend that the employee is authorized to access to and use the official stamp.

In practice, if the employee has access to the official stamp, or if the employee is in the position of sales, admin, HR or legal, which company could submit enough evidence to prove his possible use of stamps, the company could make the defense that employee has the possibility to use stamp privately. For instance, the employee had represented the company to sign contracts with other companies, or helped the company to proceed with business or administration application.

The defense yet could not fully contradict employee’s evidence and it is a weak evidence which only serves as an auxiliary proof.

b)  From the related-interest between the employee and the stamp keeper, to defend that there is a probable conspiracy.

In this case, with attorney’s instruction, Company A wins in the case on the issue of revoking stake transfer. The court believed that Li is the former general management and legal representative of Company A, but utilized the official stamp he kept to privately establish the Suzhou Branch on Company A’s behalf with no approval of company’s shareholders. Also, Li transferred 100% stake of Suzhou Branch with only RMB 1 Yuan, which is obviously unfair and therefore shall be revoked.

To defend this labor case, the attorney analyzed Li’s series of conduct, described the related-interest among Wang, Li and Company B, and endeavored to prove that they damaged Company A’s commercial interest. Based on Li’s special position in Company A and his convenience to keep official stamp, Li has enough reason and capacity to help Wang take the official stamp privately on the Confirmation Letter. Therefore, even though the stamp is real, it could not be recognized as Company A’s true intention, and could not show Company A’s promise on Wang’s salary and performance bonus.

In practice, if a company has enough evidence to prove the related interest between employee and stamp keeper, this defense opinion would relatively easier to get support from arbitrator or judge. If a company has also other evidence to refer to and to make a complete evidence chain, the company would win initiative even though in unfavorable results.

c)  From the angle of the actual performance of labor relations, the employee’s claims after dismissal are unreasonable.

In this case, the Confirmation Letter was issued in Oct 2004 but Wang only claimed for unpaid salary after he was dismissed in 2017. Therefore, the attorney could defend as following.

Company A paid salary every month by bank transfer, so Wang could accurately know his monthly remuneration. However, in his service period of over two years, Wang had never claimed in written or by oral about his unpaid salary, which could reflect that Wang has admitted the paid salary and amount, or else it is impossible for Wang not to protest about his such high amount unpaid salary.

In practice, after the issuing of the Supreme Court’s IV Interpretation of Matters of Applicable Law in Judging Labor Dispute Cases, the principle of respecting actual performance was being paid more attention by the court, which means that except for written contracts, the actual performance regarding labor remuneration, work position, work location, etc. would be also considered by arbitrator or judge. Therefore, while under the similar circumstance, the company could defend with this opinion.

 

Conclusion

This article is written from the angle of real case and had introduced the condition and suggestion on sequencing identification, and hopes to provide inspiration for handling such similar cases. On the other hand, in order to completely avoid such disputes, it is suggested to enhance management on the official stamp and establish the procedure for stamp use. If possible, regarding the documents relevant to employee’s interest, e.g. salary confirmation, position change letter, resignation, mutual termination agreement, etc., they shall proceed with written documents signing and also email confirmation, to avoid legal risk as far as possible.

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