HKSAR v. Harjani Haresh Murlidhar

DCCC 1047/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 1047 OF 2014

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REASONS FOR SENTENCE

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Charge

1.Defendant is convicted after trial of one count of conspiracy to launder money.

Facts

2.On 8 June 2014, a company called Dragon Asia Fertilizer Limited (“Dragon Asia”) entered into a fertiliser contract with Dohigh Trading Limited (“Dohigh”), a subsidiary of Sinochem Fertilizer Limited (“Sinochem”).  Dragon Asia was to buy a quantity of fertiliser from Dohigh at USD10,788,000.  The named beneficiary on the documents was Dohigh.  However, some fraudsters intercepted the emails of Dragon Asia and Sinochem which exchanged the documents by email.  The fraudsters changed the named beneficiary to Sino Investment and Trading Limited (SIAT).  SIAT was incorporated in Hong Kong in 2012 by Defendant and Castelino Brian Mario (“Brian”).  Dragon Asia was deceived to cause its bank to deposit 5 per cent of the contract sum (equivalent to USD539,400) as down payment into the US dollar current account of SIAT in the Hong Kong branch of the State Bank of India (SBI).  This account is called Account A in the trial.  After deduction of USD25 as bank charges, USD539,375 was deposited into account A on 9 July 2014.  That is equivalent to about HKD4.2 million.

3.In the trial, I find Defendant was a businessman based in Sri Lanka doing many businesses in different places.  However, he would for reward lend bank accounts under his control to a person nicknamed coolsaintt to conduit money.  The real name of coolsaintt is Diallo Ibrahima.  He is one of the conspirators named in the charge. 

4.I find coolsaintt knew the email fraud but he did not tell Defendant.  Coolsaintt asked Defendant to use SIAT’s Account A to first receive the 5 per cent down payment and later the 95 per cent LC payment when the LC was executed.  Defendant was promised a reward of 12 per cent of the money he helped to receive with SIAT’s Account A.  

5.I find Defendant did not know the fraud, so he did not know the money coming into SIAT’s Account A was proceeds of an indictable offence.  However, he ought to have known that given the highly suspicious circumstance of the task coolsaintt gave him.  Defendant just eyed on the mega profit and turned a blind eye to the situation.  He chose not to enquire from coolsaintt why it was so.  I find anyone looking objectively at the grounds Defendant had would believe the USD539,375 going into SIAT’s Account A represented proceeds of an indictable offence.  Defendant had agreed with his business partner Brian, coolsaintt and the unknown fraudsters to receive such money with SIAT’s Account A.

6.Brian was in India at all material times.  He instructed SBI to make 15 transfers totalling USD327,175 out of Account A between 7 July 2014 and 17 July 2014. 

7.Defendant came to Hong Kong from Sri Lanka on 12 July 2014.  He came here to deal with the money as coolsaintt would instruct him.

8.Between 15 July 2014 and 18 July 2014, Defendant withdrew a total of HKD236,000 from the Hong Kong dollar current account of SIAT in SBI.  In trial, we called this Account B. 

9.I accept Defendant and Brian had taken some of the money from SIAT’s Account A and Account B for their own cash flow needs for the time being.  They had no intention to appropriate them permanently. Defendant would deal with the money according to coolsaintt’s instruction but only later.  I find Defendant stalled on carrying out coolsaintt’s instruction to disperse the money because Defendant was waiting for the LC to be executed. Then he would have enough money from his 12 per cent commission of the whole sum of USD10,788,000 to pay back what he and Brian had temporarily taken out of the 5 per cent down payment.  However, due to Defendant’s stalling behaviour, coolsaintt terminated Defendant’s task on 17 July 2014.  Defendant was arrested on 21 July 2014 after Dragon Asia had reported the matter to the police on 18 July 2014.

10.As at 17 July 2014, only USD211,950 remained in SIAT’s Account A.  There were also HKD62,057.70 (equivalent to about USD8,000) in SIAT’s Account B as at 18 July 2014.  There were also USD5,000 in each of the two Altop companies belonging to Defendant and Brian.  These two sums came from SIAT’s Account A.

Record

11.Defendant is aged 62.  He is Indian by origin but lives in Sri Lanka.  He has no previous criminal record.

Mitigation

12.Counsel says Defendant is a businessman.  He has two grown-up children now living in the United Kingdom.  His wife is dependent on him.  She is now very ill in Sri Lanka.  However, there is no evidence to show what sickness the lady is suffering or how serious that sickness is.

13.Counsel says Defendant has diabetic and prostate problems.  The present incarceration is hard for him because the medicine prescribed by the prison doctor has not worked well for him.  Counsel says Defendant is trying to obtain the right medicine from outside source through proper channel.

14.Counsel mentions a number of cases, including HKSAR v Hsu Yu Yi CACC 159/2009, HKSAR v Yeung Ka Sing, Carson CACC 101/2014 and HKSAR v Boma CACC 335/2010.  He points out that there are no set guidelines for money-laundering offences. 

15.Counsel particularly refers to the Boma’s case where the Court of Appeal discussed some of the significant features for sentencing in money-laundering offences.  They are (a) nature of the predicate offence; (b) knowledge of the offender; (c) international dimension; (d) sophistication of the deceit; (e) involvement of an organised criminal syndicate; (f) number of transactions and offence duration; (g) continuing to launder funds after the defendant had discovered the truth; and (h) role of the offender.

16.Counsel says the amount of money Defendant in this case dealt with illegally was just one deposit of USD539,375.  The subsequent withdrawals were made by Defendant and Brian for their own cash flow needs. The sum is now short of about USD310,000 (equivalent to about HKD2.4 million).

17.After Defendant has been convicted in early August this year, Counsel says Defendant would endeavour to recoup the spent money to make full restitution to Dragon Asia.  The case has thus been adjourned for more than once but after a lapse of more than two months, no money has come. Counsel says that although Defendant has sought help from others, those parties would not co-operate.  Counsel admits there is no hope of recouping any spent money now. 

18.Counsel points out that Defendant was frank with the investigators and that he is actually convicted on the materials he has voluntarily disclosed to the court, ie those Skype and email communication records with coolsaintt.  That might bring coolsaintt to justice as well.

19.Counsel says Defendant has not challenged Prosecution’s evidence except that of coolsaintt, who is actually PW10 Diallo Ibrahima.  That witness has been found lying in his evidence.  Counsel submits that Defendant only fails to establish his belief as honest and reasonable.  He was deceived by coolsaintt and dealt with the money foolishly.  Counsel says Defendant’s misdeed was an error of judgment rather than an act out of bad faith.  He has learnt a hard lesson now.  He has lost many of his businesses due to his present incarceration.  It is unlikely that Defendant would reoffend.

20.Counsel submits that there are no aggravating factors that can be attributed to Defendant.  He asks the court to be lenient towards Defendant.

21.Counsel mentions a District Court sentence case where the defendant pleaded guilty to four counts of laundering money involving a total of HKD13 million.  The deputy judge sentenced that defendant to 2 years’ imprisonment on each of the four charges upon his plea.  All the four imprisonment terms were ordered to run concurrently.

22.Counsel also says that in the case of Yeung Ka Sing, Carson, the defendant was only given a sentence of 6 years’ imprisonment after trial for laundering over HKD700 million.

23.Counsel says in the present case the starting point should be no more than 2 years of imprisonment and the circumstances were so exceptional that a suspended sentence can be justified.

Sentence

24.In this case, the scam perpetrated by the fraudsters was well organised but I find Defendant was not part of that gang. Defendant’s criminality lies in his letting others to use SIAT’s Account A to receive the money coming from a highly suspicious offer which he accepted blindly.  However, Defendant was not, as his counsel puts it, a duped victim himself.  The communication records between Defendant and coolsaintt reveal that Defendant was always willing and ready to offer bank accounts under his control in different places for coolsaintt’s clients to deposit money.  I reject Defendant’s explanation that it was for confirming house business.  I find that Defendant offered different accounts for money-conduit dealing.  The present case demonstrates Defendant blindly accepted whatever the agent coolsaintt told him.  Defendant chose not to exercise any scrutiny or judgment which he was capable of rendering if he wanted to.

25.Counsel says the circumstances pertaining to Defendant’s committing the crime were so exceptional that a short and suspended sentence can be passed.  I disagree.  The facts of the present case are not exceptional.  In many a case, the masterminds of money laundering would simply make use of those who were negligent or who did not even care about the source of the funds.  Defendant was of the latter category.  Defendant is not as culpable as the fraudsters or as coolsaintt, who knew the fraud.  Defendant is culpable as he cared not about the source of the funds.  

26.Counsel says there are no aggravating factors in this case.  I also disagree.  There is at least one such factor, ie Defendant came from overseas to follow up on the disposal of the money that had gone into SIAT’s Account A.

27.In the case of Ivanovs Eriks CACC 93/2014, the appellant pleaded guilty to one count of conspiracy to launder money.  He in the space of five months conspired with another to deal with USD604,582, (USD237,150 of which were the proceeds of an international commercial fraud).  During that period, USD491,662 had been drawn out of the said account.

28.That appellant was aged 25.  He had a clear record.  He came from Latvia.  When he was in the United Kingdom, someone recruited him to come to Hong Kong to register a company and to open a bank account in that company’s name.  That account was later used to launder money as aforesaid.  During that five-month period, there were 29 deposits and 20 withdrawals.

29.The sentencing judge accepted there was no evidence that the appellant knew the nature of the predicate offence.  However, that did not lessen the appellant’s culpability.  Considering his role, the amount of money laundered and the serious underlying offence, the judge adopted 4 and a half years’ imprisonment as the starting point.  The appellant was sentenced to 3 years’ imprisonment for his own plea.  

30.His Lordship McWalters JA agreed with the judge’s assessment on the seriousness of the offence and the appellant’s culpability.  His Lordship noted that different judges might impose different sentences but he deemed the sentence passed on the appellant was within the range of appropriate sentences for an offence of such seriousness.  His Lordship thus dismissed the applicant’s application for leave to appeal against sentence.

31.Defence Counsel submits that the Eriks case was more severe than the present case because that appellant came to Hong Kong to open bank accounts specifically to launder money, while Defendant in the present case only allowed an existing account of his company (SIAT) to be used.

32.What Counsel submits is a matter of fact but there is little distinction between the two situations, especially when Defendant always made available different accounts under his control for coolsaintt’s money-conduit arrangement.

33.Defendant had many businesses but one of those was holding out accounts to conduit money for others.  It is always these people that would be recruited to launder money.  Defendant is the maker of his own incarceration.

34.The predicate offence was a well organised and serious fraud.  Defendant had no knowledge of it.  The money deceived and went into SIAT’s Account A was USD539,375.  It was in one deposit.  Because Defendant and his partner Brian had taken out some of the money for their own needs, Defendant was only to disperse the money pursuant to coolsaintt’s instruction when he (Defendant) had enough money to pay it out.  Due to Defendant’s stalling, coolsaintt terminated the conspiracy after two weeks.  The conspiracy only lasted from around 3 July 2014 to 17  July 2014.  Now, about USD210,000 odd remains in Account A.  Another amount equivalent to USD8,000 is in Account B.  The two Altop companies associated with Defendant each has USD5,000 in their account. The money that had gone into SIAT’s Account A is now short of about USD310,000 and there is no hope of recouping any part of it now.  That missing amount is equivalent to HKD2.4 million.

35.I regard the starting point for such serious conspiracy to launder money in the said circumstances should be one of 4 years’ imprisonment.  I take into account Defendant has a previous clear record and he in the trial agrees to all of Prosecution’s evidence except that of PW10 (which Defendant has rightly challenged).  I would reduce the starting point by 3 months.  There are no other factors that justify further reduction of sentence.  I thus send Defendant to prison for 3 years and 9 months.

Ancillary Order

36.Prosecutor asks this court to disqualify Defendant from acting as a director, liquidator of any company or as a receiver or manager of any company’s property.  Prosecutor relies on section 166D and 168E of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32, alleging Defendant is now convicted of an indictable offence and which conviction necessarily involves a finding that Defendant had acted fraudulently or dishonestly.  

37.Defence Counsel objects to that application on the ground that the application is erroneous.  Counsel contends that Defendant is only found to have turned a blind eye to the highly suspicious situation pertaining to the money deposited into SIAT’s Account A.  Defendant is found not to be one of the fraudsters.  He had neither acted fraudulently nor dishonestly.

38.I agree.  Defendant had turned a blind eye in his money-laundering activity.  He is convicted on that basis.  In law, that is not a fraudulent or dishonest act.  The words “fraudulent” or “dishonest” cannot be given wider meanings than they should have.  I find the basis of Prosecution’s application is misconceived.  I have to refuse that application.