HKSAR v. Cheung Kin Keung and Another

DCCC 157/2018

[2019] HKDC 1681

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 157 OF 2018

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REASONS FOR VERDICT

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1.The defendants are charged with Theft (D1) and jointly charged with money laundering (D1) and (D2). Totally over 22 million HKD and 2 million USD were said to be stolen by D1 and 11 odd million was disposed of by D1 and D2 in the money laundering charge.

2.D1 was an accounts manager at NEC Tokin HK.  D2 was his boyfriend. There is it appears no dispute that NEC Tokin made the relevant payments particularized in the charges to D1, D2 or other third parties on their behalf.

3.D1 in his defence says that the payments were made for various services rendered to his Employer and commissions payed by them.  Including the provision of sexual services to NEC Tokin clients.

4.Given that D1 explained that he was paid for services rendered.  The issue in his case is whether he has created a reasonable doubt as to whether the inference can be drawn that his and D2’s and those interested parties receipts of NEC funds can only be as a result of D1’s theft (Charge 1).  Were D1 to be convicted on Charge 1, he would have to be convicted on Count 2.

5.D2 has absconded.  I concluded he had voluntarily absented himself and continued with his hearing.

6.The issue in his case is whether a he knew or had reasonable grounds to believe that the monies received by him were the proceeds of an indictable offence.

The Prosecution case (outline)

7.D1 was first employed by NEC Tokin as an accounts clerk in April 1997. On 1 April 2008, he was promoted to be the accounts manager of the Accounting Department.

8.During his employment he served under a number of Japanese Managers.

9.The second defendant had never been employed by NEC Tokin.

10.In May 2012, it was discovered that false entries had been made into the SAP system which was the accounting system, adopted by NEC.  Enquiries followed.

11.The enquiries showed that between 1 January 2005 and 11 July 2012, a total of HKD22,796,865.31 and USD2,256,039.33 were paid out from 3 banks accounts held in the name of NEC.  These payments were made in 537 cheques.  90 Interbank Fund Transfer Funds and 46 Withdrawal Forms of which HKD466,230 and USD883,398.11 were transferred to bank accounts held by D1.  HKD5,579,417.70 and USD1,372,641.32 were transferred to bank accounts held by D2.  HKD135,800 were transferred as payments by D1 and D2.

12.HKD513,154.98 were transferred to Companies and Government Departments to meet payments owed by D1 and D2.

13.HKD16,202,262.63 was transferred to meet credit card payments of D1 and D2.

14.All the payments originated from false entries in the SAP system.

15.The Prosecution say D1 was responsible for the false entries.

16.In April of 2007, D1 was assigned an independent SAP account.  It was evidenced that the records of the SAP system showed that from 1 April 2007 to 31 August 2012 false accounting entries showed the dissipation of NEC funds to D1, D2 and their interested third parties.

17.All these entries were created using D1’s SAP account.

18.D1 was arrested on 19 October 2012.  Items seized included a HSBC Telegraphic Transfer Form that showed NEC was to pay 20,000 to a DBS account held in the name of D2.

19.D2 was arrested on 19 October 2012.  He said that D1 was his lover and had given him money as living expenses.  He did not know they were stolen monies.

20.Cheques issued by NEC payable to D2 were recovered from D2’s home totaling HKD114,000.

Records of Interview

21.On 6 June 2013, D1 conducted a video recorded interview (VRI) with his legal representative.  The interview was requested by D1.  A further VRI was conducted.  He would later contest the admissibility of these interviews in voice dire proceeding.  I would admit the records of interview into evidence.

22.D1 said in 1999 after discovering irregularities in the accounts he reported these to his Japanese Boss Nakano.  He was told to ignore it and was offered promotion.  In 2000 he was promoted to Account Supervisor.  He gave his SAP account user name and password to Nakano on his request.

23.D1 was told to follow Nakano’s instructions in return he would be given commissions.  D1 was also offered ‘hush money’ to cover up Nakano’s irregularities.  Nakano arranged for PW1 to provide sexual services to Japanese clients.

24.The Japanese Bosses retained the cheque books they would issue cheques to D1 who would fill in the payee and amount.  The Japanese Boss would sign. On receipt of the monies he would remit half of the sum to the Japanese Boss or use the money to purchase jewellery for them.

25.The Japanese Boss would make the false entries into the SAP system using his account.

26.Nakano’s successors continued with this practice.

27.The prosecution case was that D1’s explanation in the record of interview is an obvious fabrication upon which he embellished whilst giving evidence.

28.The second defendant made two video recorded interviews.

29.He said on 19 October 2012 that he worked as a stockbroker.  He and D1 became lovers in 2003.  He knew D1 worked as an accounts manager at NEC.  D1 payed his living expenses since 2007 by transferring money to his bank account.

30.He said D1’s salary was HKD40,000 – 50,000 and that he also sold electronic components.

31.D1 gave him cash and two supplemental credit cards in 2009.  D1 settled his monthly credit card bill of around HKD100,000.

32.He was not aware D1 payed NEC cheques into his account.

33.In his 2^nd video recorded interview on 2 May 2014.  He confirmed his receipt of monies from D1 and that he had bought 3 properties during the relevant period.

34.During the prosecution case, PW2 gave evidence he was from MAWSL Consulting Limited who investigated the matter of the manipulation of the accounting system.  There were three methods employed in the manipulation, this evidence was not challenged.  However, access to and use of the SAP system was evidenced at trial.  D1 said that although his account was used to process the payment from NEC accounts, it was not done by him he inferred that it must have been the work of the Japanese Bosses.  However, to input the system you had to be a person authorized by NEC and the software interface was accessed by a personalized user name and password.

35.Prior to the system upgrade in 2007, the system was accessed by a generic user name ACCLERK but after that date the authorized user had a unique user name and password.

36.D1’s user name was HAC102, this was the name that appeared on all the SAP entries by which D1, D2 and 3^rd party payment to their benefit were made from the system upgrade in 2007.  Again, this was not disputed.

37.The prosecution called Katsumi Nakano

Nobuyuki Nukamura

Takaharu Sasaki

Mr Hojo

Kazuhiko Yoshimaru

Hirotaka Tagashira

The relevant Japanese bosses during D1’s time at NEC

38.They all confirmed they never authorized payments to D1, D2 or 3^rd parties on their behalf.  They emphatically rejected the defendants case.

39.They all denied with the exception of Sasaki signing the cheques telegraphic transfer forms or withdrawal forms that purport to bear their signatures.

40.Mr Sasaki was unable to confidently make the assertion due to the passage of time.  However, in respect of Mr Hojo his signature appeared on telegraphic transfer forms for over a year after he had left Hong Kong.

The defence case

41.D1 gave evidence.

42.He admitted he could access SAP by using HAC102.  He had a password but it was shared with others such as co-employees Karen and Chester.  This was the case when anyone was on leave and work on the SAP was required.  He shared the SAP on Nakamura’s instructions in 2008.

43.In 1999, the SAP accounting system was introduced.  D1’s boss was Nakano.  In 1999, Nakano approached D1 to talk about promoting him.  He asked D1 for his user ID and password for the SAP system.

44.D1 was told to follow Nakamura’s instructions after Nakano left.  In 2000, D1 was promoted eventually to Manager in 2008.  Then Nakamura asked D1 to help the Sales Department.  D1 agreed to take up sales duties.  He was introduced to a Japanese client.  He received commission from sales.

45.D1 had been told that the company VIP’s were males and that D1 would provide homosexual sexual services to them.  He would receive a reward and also sales commission.

46.D1 could not ask for money directly from the clients.

47.D1 thereafter serviced NEC’s clients at hotels where a sales contract would also be signed.

48.D1 was then payed.  He was told the company had already payed the tax due.

49.D1 also knew of Nakano’s problem with ‘Swaps’ up to USD500,000 had been lost, and up to USD1 million a year when Nakano left.  D1 was told to continue the same service for his successor Nakamura.

50.D1’s benefits would remain the same.  D1 shared his user ID and password with Nakamura as well.

51.Payments were also made to third parties.  The company would provide him with the benefit of the cheque to pay third parties.

52.He said that on a trip to Hokkaido in 2004.  Nakano asked him to pay back to him 50% of the sales commission.  D1 ignored him.

53.In 2008, an apartment in Waterloo Road was located by D1 as Nakamura said some clients did not want to be entertained in hotels.

54.In 2008, Yoshimaru took over, Nakamura told D1 to continue with the VIP service.  D1 shared his user ID and password for the SAP with Yoshimaru.

55.In 2011, the provision of VIP sexual services ended.

56.In August or September 2012, Nakano returned to Hong Kong and asked for 300,000 to be returned to him.  D1 also said that property was also purchased under D2’s name after Nakamura asked D2 to purchase them for him.  All the properties were to belong to NEC.

57.D1 said he never doubted the legality of any of the requests of the Japanese heads.  He said they were legitimate.

58.D1 acknowledged that his evidence differed from his account in the video recorded interview (VRI) given by him.

59.He said that the share of commission for Nakano was an exaggeration to get the police to assist in getting the documents from NEC so he could establish his case.

60.In his VRI he told police that Nakano gave him hush money because D1 had found out he sold things below cost.  This was not true.  He said it because he thought it would help him get access the NEC’s accounting documents.

61.D1 also called a programmer Mr Wong who gave evidence about the user names and password situation on the SAP system after the upgrade.

62.The first defendants case had to acknowledge that his user name and password were used to make all the false entries in the SAP system and also that he, D2 his boyfriend and third parties to whom D1 and D2 owed money were the beneficiaries of the payments procured by the false entries.

63.However, the defendants case was that he had not procured the false entries in the SAP system and that the inference should not be drawn that he was the responsible person for the false entries.  That it was possible that others could have accessed the SAP system to make those entries.

64.D1 submitted that his password of HAC102 was also shared with other staff in accounts to cover leave periods and updating of the USD exchange rate which occurred monthly.

65.Reference was also made to D1’s leave periods when he was on condolence leave from 28 April 2008 to 5 May 2008, someone other than D1 needed to update the USD exchange rate.  D1 said he did not return to work at all during that period therefore someone else must have used HAC102 to do the update.

66.Also if D1 returned to work on a public holiday, he would take substituted leave.  It was said if there was no substituted leave record then D1 could not have been at work.

67.On 1 January 2009 and 27 December 2019 both public holidays.  False transactions occurred using HAC102 yet D1 did not have any substituted leave for those days.

68.PW15 Tagashira, the immediate supervisor of D1 had been given D1’s SAP password others such as PW34 Chester Wong confirmed SAP passwords were shared.

69.D1 in his evidence denied forging the signatures on any of the cheques, withdrawal forms and telegraphic transfer forms that were questioned.  He submitted Sasaki PW7 had difficulty in identifying his own signature.  PW28 Yoshimaru also had the same difficulty.

70.Also PW15 Tagashira said D1 did not possess the cheque books and that PW13 Karen Lee prepared the cheques for Tagashira from a cheque book retained by her.

71.D1 also submitted it was unlikely that NEC would have been unaware of these transactions until 2012.

72.It was PW15 Tagashira who initiated an investigation into the accounts due to an increase in accounts receivable.

73.D1 said all the Japanese heads of accounts knew about his arrangement with NEC.  That they were all parties to the scheme.  If PW15 Tagashira discovered a problem after been at the office for a short time how was it that his predecessors were unaware?  That any irregularity would easily be discovered during the monthly reconciliation statements.

74.D1 also dealt with P70 a telegraphic transfer form found at his home. He said PW28 Yoshimaru asked him for D2’s particulars for the form.  He bought the form home to check but misplaced it.

Resolution of Issues

75.The first issue to be resolved was the Prosecutions application to proceed to trial against D2 in his absence.

76.The case against both defendants initially proceeded in the High Court. D2 was represented and indicated a plea of not guilty.

77.A third pre-trial review was held on 23 January 2018.  D2 failed to appear and an warrant of arrest was issued.  D2 has not appeared at any subsequent hearing.

78.On 14 February 2018, an order was made to transfer the hearing to the District Court.

79.Since the issue of the warrant of arrest, the police attended the address of D2’s father on more than one occasion.  The last reported address of D2 where his uncle lived, who indicated D2 had never lived there.

80.The police visited these addresses on a number of occasions up to 24 September 2018.

81.The 2^nd defendant is on the stop list.   The hospital authority, utility companies have been contacted without result.  D2’s mobile number has no call records.

82.D2 was well aware of these proceedings and the charges.  The defendant had ample time and opportunity to present a defence.

83.D2 had not reported to his bail since 24 January 2018.

84.It is clear law that a defendant has the right to be present at his trial and to be legally represented.

85.A discretion exists in a judge as to whether a trial should continue in the absence of a defendant particularly if he is unrepresented.

86.The discretion should be exercised with great care.  It should rarely be exercised in the absence of a defendant especially where he is unrepresented.

87.Clearly a defendant who has chosen voluntarily to abscond will not have strong grounds for resisting the continuance of a trial.  It is naturally important to determine whether a defendant has deliberately chosen to absent himself.

88.In the case of R v Hayward 2001 3 WLR 125, the general principles to be applied are set out.

In respect of these principles

89.As an issue of fact the defendant absence is clearly voluntary and he has plainly by his conduct waived his right to be present.

90.An adjournment of any length would not provide an resolution.  The defendant appears to have waived his right to representation his representation is discharged.

91.The offence itself is serious, it requires a resolution.  The trial should be conducted within a reasonable time.  The facts date back to 2005 with arrest in 2012, it is now 14 years later.

92.Although a large body of evidence was documentary.  It was necessary to call witnesses whose memories were affected by the passage of time.

93.I also bore in mind that it was important to ensure D1 and D2’s trials proceeded together, due to the duplication of witnesses.  The common ownership of properties, valuables and common credit card spending.  The cases of the defendants were intertwined.

94.I found that D2 had waived his right to be present in court and that I should in my discretion order the trial to continue in his absence.

D1’s video record of interview

95.D1 objected to two VRI taken from him on respectively 6 June 2013 and 29 July 2013.

Grounds of objection

96.D1 actually filed two grounds of objection, one in the High Court on 24 January 2018, the other in the District Court on 29 October 2018.

97.The grounds and basis of objection appeared to differ.

98.Originally D1 said that a Mr Yau, a person working for Johnnie Yam Jacky Lee & Co, a solicitors firm representing him had told him that it would be better to give an explanation to Police as it would enhance his success in defending NEC’s Civil Claim against him as a result of this explanation and Mr Yau telling D1 that if he lost the criminal case he would lose his civil case. D1 made the statements to the Police.

99.Clearly this on the face of it does not present any legal basis for excluding his statements.  Except possibly for a self-generated unfairness. The clerk of the solicitors could not be a person in authority to D1.

100.The 2^nd set of particulars avoided this defect by alleging that DSPC 52227 had told D1 to tell him everything to clear his name and that he could act as a prosecution witness after clearing his name, that if he cleared his name in the criminal matter he could win the civil case against NEC.  D1 was told he would be trouble free if he testified against the Japanese.  This was used in addition to whatever Mr Yau said to generate an inducement in D1’s mind whereby, he agreed to take part in the two video recorded interview to enhance him position.  It was also said that the Police had allowed NEC’s solicitors to serve civil papers on him during his detention.  This led to D1 believing that the civil and criminal cases were intimately linked and could not be distinguished.  The service of the documents was not contested.  However DSPC 52227 denied he ever said any of the things attributed to him.  The defendant gave evidence in support of his case in the voir dire hearing.

101.In essence the issue in the voir dire hearing was presented as one of Inducement held out by a person in authority with a fall back of unfairness. The prosecution are required to prove beyond reasonable doubt that the statements were given voluntarily and should not be excluded under the rubric of unfairness.

102.The inducement is said to arise out of the verbal exchanges with DSPC 52227 and also Mr Yau (although he cannot be a person in authority).

103.It is said to be reinforced by the unchallenged fact of the service of civil documents in NEC’s claim against D1 during his initial detention by Police.  D1 said he believed that if he assisted the Police by giving a statement he would be successful in the claim by NEC as he would be able to get the Police to obtain the necessary documentation from NEC.

104.The sequence of events is that D1 was interviewed on three occasions with legal representation on such occasion namely:-

(1) 12.10.2012 – where there was a refusal to give a video recorded interview.

(2) 6.6.2013 – interview given

(3) 2013 – further interview given.

105.DSPC 52227 gave evidence and denied any inducement was made to the defendant.  Mr Yau from the solicitors gave evidence about the service of documents, the defendant also gave evidence.  My resolution of the issues was as follows:-

- I found nothing improper occurred in the service of the NEC civil documents in 2012. There is no requirement for the Police to explain the documents. They cannot stand in the way of a court process. The defendant was legally represented throughout there was no basis for any misunderstanding. DSPC 52227 denied making the alleged inducements. He was clearly truthful and reliable. In further video recorded interviews, D1 makes no mention of these alleged conversations.

- I found the defendants credibility was seriously in doubt. I found he lied and misled the court in relation to what was said and also about his own interpretation of those events.

- I rejected his evidence in its totality.

106.I noted D1 had never referred to his alleged conversations with DSPC 52227 in the High Court voir dire grounds of objection filed with the court. He appears to have made this up to enhance his position.

107.There is therefore no evidence that any inducement was held out to D1 by a person in authority.

108.I note that during the interview process, Inspector Lau did field an enquiry as to whether D1 could be a prosecution witness.  This was dealt with by him in an entire of proper manner.

109.There was no need for it to be reiterated in the later video recorded interview.  I found both interviews were given voluntarily and there was no basis upon which to exercise my residual discretion to exclude them.  They entered into evidence accordingly.

Legal requirements

110.The prosecution must prove the case against such defendant on each charge beyond a reasonable doubt.  The burden of proof remains upon the prosecution at all times.

111.The case against each defendant on each charge must be considered separately.

112.The defendants are of clear record this is relevant to their propensity to commit offences of the nature and to the credibility of anything said by them.

113.Where an inference needs to be drawn to establish a fact.  That fact must be proved beyond a reasonable doubt.

114.Any inference drawn must be the only reasonable inference that can be drawn.

115.The D1 is charged with theft.  Thus the prosecution must prove that the defendant dishonestly appropriated property belonging to another with the intention of permanently depriving that other of it.

116.Both defendants face a single charge of dealing with property known or believed to be the proceeds of an indictable offence.

117.In respect of D1 the prosecution say that the monies that flowed to D2 for on his behalf come solely from funds stolen by D1 which were the subject of the first charge.  It therefore follows that in respect of D1 the prosecution maintains that he knew that the monies were the proceeds of the indictable offence committed by him.  They say D1 committed the offence and arranged through the cheques, telegraphic transfers and withdrawals to make payments into D2’s bank account or to third parties.

118.In respect of D2 on this second charge the prosecution concede that there is no direct evidence that D2 knew that the monies he received or were paid to him or third parties on his behalf were the proceeds of an indictable offence.  The prosecution primarily relies upon the 2^nd limb under s25(1) that he had grounds to believe the monies were the proceeds of an indictable offence.

119.The test to be adopted for D2 is did, D2 have grounds for so believing and were those grounds reasonable, would anyone looking at those grounds objectively so believe.

Resolution of the Issues

D1: Theft (Charge 1)

120.PW2 the director of MAWSL showed that there were three ways in which the SAP system accounts had been falsified and manipulated to hide the details of the ongoing theft. 

121.Firstly the use of the uncleared cheque account.  These were issued but not presented cheques.

122.Secondly to input fictitious accounts receivable.

123.Thirdly to create fictitious expenses, and then draw them on different expense accounts ie office supplies, repair and maintenance.

124.All monies drawn on the bank accounts of NEC HK were entered into the SAP system access by an authorised user name and password.  All the fictitious SAP entries post 2007 (when the system upgraded) were performed using D1’s user name and password.

125.All the relevant SAP entries and accompanied documentation were evidenced.  D1, D2 and third party payments on their behalf were the sole beneficiaries of the falsified SAP entries and their relevant disbursements.

126.In relation to TT transfers on a search of D1’s premises P70 was discovered on unsigned TT form with a payment to D2 of 20,050.00.  NEC had no relationship with D2 whatsoever.  In fact D2 benefited from TT payments from 20.11.2006.

127.On examination of the thefts using cheques it is apparent that the cheques follow a sequential order meaning that specific cheque books were used to make these payments from the falsified entries.  The only beneficiaries of these cheques were the defendants.

128.All the relevant Japanese managers/directors denied they had approved these payments.  They all disagreed with the defendants case when it was put to them.

129.In respect of credit cards:-

- HKD11 million was paid to settle D1’s credit card payments;

- HKD5 million was paid to settle D2’s credit card payment.

130.The evidence from the prosecution on the face of it provides on overwhelming case that D1 as HAC102 falsified entries in the SAP system to procure the payments of sums of money from his employer NEC to the benefit of himself and his boyfriend D2.  That would also provide an overwhelming inference that prior to 2007 and the system upgrade that D1 used similar methods to steal from NEC using the SAP System.

131.The defendant has provided a number of explanations.  Sometimes in conflict with each other.  They all do however bear the hallmark of being totally incredible and unbelievable.

132.The idea that NEC HK would employ D1 as a male prostitute to service their clients who strangely appear to include large numbers of homosexual Japanese men is simply a bizarre fantasy without a single shred of supporting evidence.  It is simply non-sense and totally incredible and unbelievable.  A blatant and obvious lie.

133.The second part of D1’s explanation for the payments of these monies was that they were commission payments, initially in his video recorded interview D1 had said the payments were “hush money” for D1 to keep quiet about goods being sold at a discount.  That NAKANO had lost money in “swaps” that had been covered up.  That D1 could keep payments relating to sexual services, but that the hush money for discounted goods sales had to be returned in any arrangement.  This account was not pursued by D1 in evidence and he simply attributed it to exaggeration in order to try to get the Police to investigate NEC.

134.The suggestion that these payments of large sums of money to D1 represented commission is frankly ridiculous.  NEC had a sales department. They had no need to engage an accounts manager who is only skill in the area was to provide sexual services to homosexual businessmen and thereby earning millions of dollars in commission whilst his Japanese boss earned HKD40,000 per month.

135.D1 also made reference to money paid to D2 which he said was part of an investment arrangement between D2 and Nakamura.

136.This is clearly non-sense D2 had no association with NEC all the properties he purchased were bought in his own name.  NEC had no interest in any of them.

137.Also inside D1’s computer there were three letters which purported to show D2 was engaged by NEC as a consultant.  These letters appear to have been created to facilitate D2’s application for mortgages.

138.D1 denied all knowledge of the letters despite them being found on the hard disc of D1’s computer and them bearing his name as their author and also asking the recipient to contact him for enquiries.  D1 was clearly their creator and lies about not so being.

139.D1 did raise in his defence certain matters that it was submitted could create a reasonable doubt and support the inference from his evidence that the successive Japanese bosses had created the false entries using his user name and password to engage in a fraud on NEC through which he has unwillingly benefited.

140.D1 said his computer was password free so it could have been accessed by others that his SAP password and ID was used by other’s and known by his Japanese bosses so the SAP entries could have been altered without D1’s involvement.

141.That it was impossible for the Japanese bosses not to be aware of the false entries, and that his leave record showed he was not at work on days when there had been alterations made to the SAP entries.

Conclusion

142.There were two witnesses PW 33 and 38 who evidenced that D1’s computer was password protected.

143.The defence witness Mr Kong said he believed the password could be circumvented but was not able to detail how.

144.The author of the D2 letter’s in the hard disk in D1’s computer is identified as Kenneth in the metadata of the computer hard disk.

145.The leave records produced his show that on days that D1 had leave no entries by HAC102 were made on the computer.

146.Some entries were made on public holidays but on such days were always made within a short time.  The fact that D1 did not apply for compensatory leave for these days simply show he was aware that it would produce a paper trial identifying him.

147.It is said to be strange that the Japanese bosses only appeared to notice the problem of account receivables when Mr Hirotaka Tagashira took up the role of the manager of accounts department in 2012.

148.He interviewed D1.  D1 provided an explanation by way of a note produces as  exhibit P27.

149.D1 denied producing this note in explanation.

150.But why would Mr Tagashira do this if some large conspiracy existed amongst the Japanese bosses to implicate D1 in Thefts.

151.It is absolutely clear to note that the only person with the motive and opportunity to commit these thefts by way of falsifying the SAP records is the person who benefited from them that is D1.

152.That is the only possible inference that can be drawn from the proven facts.

153.D1 had clearly invented a story a manifestly incredible, preposterous and unbelievable story to try and implicate others and clear himself.

154.I dismiss all D1’s explanations whether in his video recorded interviews or his evidence in court as obvious falsehoods.

155.The only possible conclusion is that D1 stole the monies set out in Charge 1 he will be convicted.

156.In respect of Charge 2 there can be no doubt he dealt in the money set out in the particulars of Charge 2 by stealing the money in the first place and transferring them to the recipients and accounts set out in the evidence.  He must have known that it they were proceeds of his indictable offence.  He must also be convicted of the second charge.

D2: Charge 2

157.D2 had never been employed by NEC and had no dealings with NEC in any capacity.

158.D2 was arrested at his home on 12 October 2012.  He said D1 was his lover and gave him money as living expenses, he did not know it was stolen money.

159.At D2’s home, two cheques issued by NEC were found payable to D2 in sums of $38,000 and $76,000.  The total sum of HKD11,078,965.27 and USD1,372,641.22 particularised in Charge 2 these monies were proved to be from NEC and dissipated between by being received by D2 between 1 January 2005 and 11 July 2012.  They were transferred to D2’s personal bank account or credit card accounts or dissipated to D2’s benefit by way of the settlement of his personal payments namely:-

(1) HKD5,479,417.70 and USD1,372,641.22 were transferred to 4 bank accounts held in the name of D1.

(2) Nearly HKD4 Million paid to D2’s credit card accounts.

(3) The balance paid to meet D2’s expenses to third parties.

160.D2’s records of interview showed his available income and resources could not explain the sums paid to him.  That NEC was the source of those monies,  That he had no connection with NEC that D1 regularly paid his living expenses by transferring money to his DBS accounts.  He knew D1 earned between HKD40-50,000 per month.  He knew D1 did freelance accounting and sold electronic component.

Resolution

161.The prosecution proved the receipts of the relevant monies set out in charge by D2.

162.The prosecution proved the voluntariness of the video recorded statements made by D2.

163.In so far as D2 established an explanation for the receipts of these monies, he admitted they originated from D1.

164.He said he did not suspect the monies originated from D1’s criminal activities at NEC.

165.D2 said that he did not know the monies originated from NEC.

166.Given that the actus reus of dealing was not disputed by D2 the element of the offence in dispute was D2’s mens rea.

167.Mens rea is established in this offence by proof that D2 had grounds for belief of the origin of these monies from an indictable offence and that those grounds were reasonable would anyone looking at those grounds so believe.

168.It must be that the given the duration of and large amounts of the payments D2 had clear and reasonable grounds to believe that D1 had obtained the monies given to D2 from D1’s criminal enterprise.  D1 was known to be an accounts manager with a sideline of selling some electronic goods this employment could not begin to explain the large benefits received by D2 from D1.  D2 had extensive grounds to believe these monies must have originated from D1’s criminal activities.  D2 was not telling the truth when he said that he did not suspect that the monies originated from D1’s criminal activities at NEC.  No reasonable person in D2’s position would have failed to believe that the monies originated from D1’s criminal activities.  It is not possible to see any other explanation.  For these reasons the prosecution has proved Charge 2 against D2 beyond reasonable doubt and he is convicted.