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KUOK PHILIPPINE PROPERTIES, INC. INTER-OFFICE CORRESPONDENCE To Copies To FGN MMS From Date Ref. No.

Subject Credit Card Fraud ALVIN G. 11.19.03

This has reference to the Edsa Shangri-La Hotel and Resort, Inc.s (the Hotel) query as regards its legal rights/obligations/liabilities vis--vis the credit card fraud perpetrated by three of its employees. As we understand it, the Hotels specific queries are as follows: 1. 2. Can the Hotel file a criminal suit against the said three employees? What are the rights/obligations/liabilities of the Hotel:

a. Under the Labor Code vis--vis the three employees; and b. Under the Merchants Agreements (the Agreements) vis--vis the credit card companies (the Companies)? I. Can the Hotel file a criminal suit against the said three employees?

The Hotel cannot file a criminal suit against the three employees for the following reasons: a) the Hotel is not a natural person; and b) it is not an access device or credit card holder, whose rights can be violated under the Access Devices Regulation Act of 1998 (ADRA), the applicable law punishing credit card frauds. Generally, the right to bring a criminal suit arises from the moment an act is deliberately committed by an offender against a person which causes damage/injury to the latters self or property; or such damage/injury has resulted from the offenders omission, with such act or omission being punishable by Revised Penal Code or special laws.

However, based on ADRA, the requisites for filing a criminal suit for credit card frauds are the following: 1. The offender, with intent to defraud, committed any of the prohibited acts enumerated in Sec. 9 or any of the circumstances provided for by Secs. 11, 12 and 13 of ADRA; 2. The offended party is an access devise or credit card holder; 3. The act was done without the consent of the offended party; and 4. As a result of such act, the offended party suffered damages. Therefore, the proper parties who can file criminal charges against the three employees are those Hotel customers who used their credit cards as payment for goods or services obtained from the Hotel and whose credit card accounts were copied by the said employees by means of devices or machines. II. What are the rights/obligations/liabilities of the Hotel: (a) Under the Labor Code vis--vis the three employees Under the Labor Code, the Hotel can terminate the services of the three employees after giving them due process the legal requirements of notice and hearing. The commission of any of the prohibited acts under ADRA within the Hotels premises by the said employees constitutes a just cause for termination by the Hotel management as provided under Article 282 of the said Code. (b) Under the Merchants Agreements (the Agreements) vis--vis the credit card companies (the Companies) Based on the Agreements, there is no obligation on the part of the Hotel to inform the Companies of any credit card fraud committed by Hotel employees within its premises as regards the accounts illegally used. As a matter of fact, the Agreements require the Companies to furnish the Merchants or Establishments from time to time a list containing the accounts data of lost, stolen and/or cancelled credit cards. The Merchants, in turn, are mandated to dishonor or refuse any purchase using the credit card accounts included in the list. Although the Agreements are silent about this, the Hotel is nevertheless obliged to notify the respective Companies of the confiscated credit cards and/or accounts used in the commission of any of the prohibited acts punishable by ADRA within the Hotels premises after discovery of such commission. The confiscated cards shall then be surrendered to the respective Companies.