Landmark case sets a precedent

A successful trial against Thaksin's wife and her brother on tax charges could lead to reduced corruption

The landmark lawsuit filed by the Office of the Attorney-General (OAG) against Pojaman Shinawatra, the wife of Thaksin Shinawatra, Banaphot Damapong, her brother, and Kanchanapa Honghern, her secretary, on charges of tax evasion in connection with huge share transactions in 1997, is the first criminal case against the deposed prime minister's family. The case was accepted by the Criminal Court following a preliminary hearing yesterday morning.

The three defendants pled not guilty to the charges that they had conspired to fraudulently avoid paying hundreds of millions of baht in taxes. The Criminal Court granted them temporary release on bail at Bt5 million each after their arraignment. The trial date was scheduled for May 14.

The OAG has built the case around findings of the Assets Examination Committee (AEC), which had earlier investigated the tax-evasion charges against the trio and came to the conclusion that they had violated the Tax and Criminal Codes by evading tax obligations linked to the sale of their Shinawatra Computers and Communications shares that had taken place about a decade ago.

The AEC was created by the coup-makers who overthrew the Thaksin government on September 19, 2006. The military junta, now known as the Council for National Security, cited major corruption scandals that had taken place under Thaksin, among other charges, as justification for the power seizure.

The investigation panel concluded in February that Pojaman and Banaphot owed the Revenue Department back taxes and fines amounting to Bt546 million on the transfer of 4.5 million shares of Shinawatra Computer and Communications Plc, which would otherwise be taxable. But the transactions were structured in a way that enabled Pojaman to transfer those shares to a proxy who then sold them on the Stock Exchange of Thailand's trading system so that Banaphot could buy up those shares at the market price with cash provided by Pojaman herself.

In that sense, no actual trading of such shares had taken place and Banaphot managed to avoid payment of capital gains tax that he would otherwise have had to pay. Shares bought and sold on the stock market are subject to brokerage fees plus VAT, but not capital gains tax.

In 2001, responding to Revenue Department tax inspectors' questions, Pojaman and Banaphot lied when they told them the 1997 share transactions were Pojaman's way of giving the 4.5 million shares of Shinawatra Computer and Communications Plc as a gift to Banaphot when in reality they were given as payment for Banaphot's service to the telecommunication businesses of Thaksin's family. According to the AEC findings and a lawsuit filed by OAG, such lies constituted a fraudulent act that again enabled Banaphot to avoid paying personal income tax from the shares he received from Pojaman.

If found guilty by the Criminal Court, Pojaman and Banaphot each face a maximum penalty of 14-years imprisonment and a fine of up to Bt400,000 for two counts of tax evasion, said Attapol Yaisawang, spokesman for the Attorney General's Office. Kanchanapa, who participated in the bogus transfer of shares through the stock market, would face up to seven years in prison and a Bt200,000 fine.

The case is not directly related to the Bt73 billion sale of Shin Corp to Singapore's Temasek Holdings by the Shinawatra and Damapong families, which galvanised anti-Thaksin sentiment among the urban middle class, culminating in the September 2006 military takeover. But it illustrates the pattern of self-serving behaviour by Thaksin and members of his inner circle while in power.

During this high-profile criminal case against Pojaman, Banaphot and Kanchanapa, the Thai public will learn in greater detail how Thaksin's wife and brother-in-law flagrantly violated the laws of the land and how some government officials may have colluded in the wrongdoing or may have been intimidated to let them off the hook.

The AEC deserves credit for its thorough investigation that has led to the lawsuit being successfully filed against Thaksin's wife and her brother. Let's hope that lawsuits against Thaksin himself may not be far behind. The AEC is right to have taken a slow but sure approach to come up with such a strong case. For the alleged worst corruption that Thailand has ever seen, justice must be seen to be done.