COURT: The defendant, Mr Chang Yau-hung Alexander, pleads guilty to 1 count of theft, contrary to section 9 of the Theft Ordinance, Chapter 210.
The particulars of offence are that the defendant, between the 15th day of October 2014 and 20th day of October 2014, both dates inclusive, in Hong Kong, stole a chose in action in the account number 450-581657-833 owed by The Hong Kong and Shanghai Banking Corporation Limited to the said Chang Yau-hung Alexander, namely a sum of $10,000,000 United States currency, the property belonging to ‘X’.
Facts Admitted
The defendant became a solicitor in Hong Kong in 1985 and became a partner of Messrs Gary Mak, Dennis Wong & Chang Solicitors (“the solicitor firm”). He became a consultant of the firm in 2014 and resigned from the job in October of the same year, ceasing to practise as a solicitor in Hong Kong.
In September 2014, X, through the arrangement of one Cheng Pak-wo (“Cheng”) came to know a female named Tsui Kwan-kwan Catherine (“Tsui”) who introduced herself as the China and Asia-Pacific executive representative of an investment programme.
According to what Tsui told X, the investment scheme was known as Cities Upliftment Programme (“CUP”), which was for the development of Alamo in New Mexico of USA and was overseen by the Federal Reserve Bank of New York (“FRB”). The minimum amount of investment was $10 million United States currency, and the investment was subject to the prior approval of FRB.
A final approval notice would be issued by the FRB after approval, and the investment capital would be held unutilised in a trust account by a Hong Kong solicitor for 100 days, after which the investor would receive a return of 40 per cent of the capital every day for 75 days.
The investor and his family members would be eligible for USA permanent residency. Tsui also showed X various documents, rules, regulations, client declaration and confirmation of the CUP programme.
X was interested and signed an investment application form supported by his identification documents and bank statements proving his having sufficient fund for the investment.
On 15 October 2014, Tsui told X that his investment application had been approved. She showed X the final approval notice which was allegedly issued by the FRB and signed by one Rienze Edwards(“Edwards”). She also gave X a set of sovereign guarantee.
In the final approval notice, it was stated, inter alia, that the return on $10 million United States currency would be $20 million of the same currency within 75 banking days. It was also stated that an FRB legal affiliate would receive the fund on its behalf. And the FRB lawyer account for Hong Kong was the defendant of the solicitors’ firm, and the investment was to be paid into the personal account of the defendant. The paperwork was to be processed at the solicitor firm, and the defendant would return the fund to X if X ended the trading for any reason. X signed the final approval notice and Tsui also signed on behalf of Edwards.
On the same day, X transferred $10 million United States currency to the personal bank account of the defendant, and the documentation was completed in the office of the solicitor firm. The defendant identified himself as the appointed solicitor of the CUP programme. He showed X the official investment receipt and told X that the US$10 million would be kept in his account on trust for X and would be returned to X on conclusion of the investment programme. Should X terminate the investment at any time, X would get back the whole sum of money within 2 weeks.
Being confident that the investment programme was managed by a professional, X signed the official receipt and a letter that the defendant was acting as the escrow agent of X to hold the fund.
On 20 October 2014, the defendant, in breach of the trust agreement and without giving notice to X or obtaining the approval of X, transferred the US$10 million to female Su Xuan (“Su”), a Singaporean who appeared to be another investor of the CUP programme and had deposited US$3 million to the account of the defendant on 14 July 2014 which the defendant had then transferred to an account in Sri Lanka.
Being informed by Tsui on 3 March 2015 that there would be a delay in the issue of the profits because of certain issues of the defendant’s account and coming to know that the defendant was allegedly involved in a case of false bank document, X became concerned and demanded the defendant to return his investment.
When X found out that the defendant no longer worked in the solicitors’ firm and that the defendant kept avoiding to make repayment to him, he made a report to the police on 2 April 2019.
The defendant was arrested on 18 June 2019 and he remained silent under caution. In an e-mail between the defendant and one S Herrera, allegedly president of the city of Alamo, the CUP accused the defendant of misappropriating US$15 million which the defendant had received from CUP investors in October 2014.
In a letter from the defendant to the US Consulate General of Hong Kong dated 25 August 2014, the defendant asked for urgent investigation into the CUP investment programme which he said was an international fraud operation and he had been invited by the fraudsters, Michael Alix and F K Ho, who had impersonated FRB officials, to join the programme.
He had found out that F K Ho was holding a false passport, and the letter presented by Edwards as having been signed by Mr Eduardo Rizo of the Royal Bank of Canada was false. The defendant also said in the letter that Edwards had told him that Tsui was about to deposit US$200 million from clients into his bank account.
The defendant also made a report to the Hong Kong police on 9 September 2014. In the statement he gave, he said he had received an e-mail from Edwards on 10 November 2013 asking him to invest US$40 million in CUP, and he had agreed. He received a guarantee letter of title from Edwards when he visited the United States of America in November 2013. F K Ho was assigned to follow up his investment, and between 20 December 2013 and 18 January 2014, he had deposited US$13.5 million into a Sri Lanka bank account.
When Edwards and F K Ho asked him to pay the remaining US$26.5 million in July 2014, he did not have enough money. F K Ho had e-mailed a letter of the Royal Bank of Canada to the defendant, stating that the bank would lend the money to the defendant.
The defendant did not receive the money and he had found out that the letter was a forgery. He had asked Edwards and F K Ho for refund of his investment of US$13.5 million but to no avail. He was worried that he had been deceived, thus making the report to the police.
In a statutory declaration dated 11 October 2014 made in the USA, the defendant declared, inter alia, that he had found that the FRB letter and documents Edwards and F K Ho had supplied to him to be untrue, and he had made reports to the US Consulate General in Hong Kong and various law enforcement agencies in the United States of America.
In the WeChat messages between the defendant and Tsui in the smartphone of the defendant, there were exchanges, inter alia, of:
(a) Tsui telling the defendant on 12 October 2014 that 2 customers would be transferring US$5 million and US$10 million to the defendant. Subsequent investigation by the police revealed that the defendant received US$10 million from X on 15 October 2014 and US$5 million from a male on 16 October 2014.
(b) The defendant telling Tsui on 18 October 2014 that Edwards and F K Ho were fraudsters.
(c) Tsui advising the defendant on 4 November 2014 to refund the US$5 million and US$10 million, and the defendant said he would return the US$5 million but having problem with the US$10 million.
(d) The defendant telling Tsui on 5 November 2014 that the US$10 million had been taken away from him and a “she” complaining about him to his partner and the “she” would in theory giving him back the US$10 million. Tsui criticised the defendant for transferring the money to Su. Subsequent investigation by the police revealed that on 20 October 2014, the defendant transferred US$10 million to Su’s local bank account, and on or about 5 November 2014, the defendant returned US$5 million to the male who had deposited the same sum to his account on 16 October 2014.
The report made by the defendant to the Hong Kong police was curtailed for being a criminal matter occurring overseas.
According to the analysis of a treasury accountant, the yield of the CUP was 200 per cent which was 263 times of the highest interest yield of US treasury bills with maturity of 52 weeks in 2014 and 2015.
X has not received any return or profits of his investment in CUP.
Criminal Record
The defendant has a clear criminal record.
Mitigation
The defendant is aged 70, married with no children. He was admitted as a solicitor in Hong Kong in 1985 and is a devoted Christian. His 2 nephews whom he had treated as his own sons passed away one after another of heart disease in 2021 and 2022.
The defendant has always dreamt of building an East Jerusalem in China to preach the gospel to the people there. The fraudsters told him that the profits generated from CUP programme could finance the Eastern Jerusalem project and other humanitarian projects. They showed him letters purportedly issued by FRB and City of Alamo Navajo of New Mexico to win the trust of the defendant.
The defendant used his own savings of 4 to 5 million Hong Kong dollars and loans from other people to make a huge investment in the CUP. He was issued a sovereign guarantee and was appointed attorney of FRB.
Counsel for the defendant, Mr Leung, cites some messages in the WeChat between the defendant and Tsui to show that the defendant was manipulated to invest and take part in the CUP programme to realise his dream.
The defendant suspected that the CUP was a scam in August 2014 and was concerned about the funds invested by investors. He made reports to the Hong Kong police, various banks and other law enforcement agencies but the defendant still harboured the hope that the programme was genuine. Mr Leung cites some other messages in the WeChat between the defendant and Tsui to illustrate this point. Mr Leung emphasises that the defendant was a victim rather than one of the fraudsters.
As the defendant still had a glimmer of hope that the programme was genuine and was afraid that if he refused to accept the investment of US$10 million from X, the fraudsters would become alert and disappear. He accepted the money paid into his account and completed the necessary procedure and documentation with X as instructed.
The fraudsters kept pushing the defendant to transfer the money to Sri Lanka, and the defendant put up different excuses not to do so because he knew that X would probably lose all his money if the defendant did so. Mr Leung again cites some of the messages in the WeChat between the defendant and Tsui to support this assertion. As a result, the fraudsters accused the defendant of stealing the money.
The defendant transferred the money to Su Xuan, one of the CUP investors who was a red second generation with power and wide personnel connections. Su had told the defendant that she was working on a project with promising returns.
The defendant hoped to earn money through Su’s projects to compensate the victims who had deposited money into his account but Su disappeared after receiving the money. Again, Mr Leung cites some of the WeChat messages between the defendant and Tsui to show the intention of the defendant in passing the money to Su.
Mr Leung submits that the defendant’s judgment was clouded by his religious fanaticism. He committed the offence out of his urge and obligation to return money to those CUP victims who had invested through him.
Mr Leung asks the court not to adopt the maximum imprisonment term of 10 years of the offence of theft as the starting point in this case. He says that the maximum sentence should be reserved for the more serious cases, citing the case of HKSAR v Leung Chi Yuen HCCC 218/2017 in support. He relies on HKSAR v Lee Chun Wai HCCC 434/2010, to submit that 9 years imprisonment is the appropriate starting point in the present case.
He explains that the defendant pleads guilty late because he initially wanted to seek legal advice from a senior counsel. As he could not afford the legal costs, he was not represented in the committal proceedings. The defendant was of the view that he was a victim and only accepted his guilt after being advised by the legal team assigned by DLA.
Mr Leung submits that the defendant reported the case to various law enforcement authorities, resulting in arrests made in different countries in 2016, and some of the arrested persons pleaded guilty to the charges against them in USA.
Mr Leung says that the defendant had given full and frank information to those authorities which turned out to be useful to them. He urges the court to give a discount of 40 to 45 per cent in sentence to the defendant. He cites Z v HKSAR [2007] 10 HKCFAR 183 and HKSAR v Lo Sze Tung Stephanie CACC 190/2017 for reference of the court.
Mr Leung further submits that the defendant did not commit the offence for personal gain and asks the court to give further reduction in sentence to the defendant. He cites the authority of HKSAR v Poon Tak Lok CACC 323/2005 and R v Helen Roberts [2011] EWCA Crim 772.
Mr Leung submits to court a mitigation letter from one Freddie Wu who is a Christian friend of the defendant living in Canada. Mr Wu expresses good opinion of the defendant and urges the court to give a chance to the defendant.
Sentence
It is sad to see a solicitor who has established his career in Hong Kong fall from grace. Looking at the circumstances of how this happened, the court is of the view that the defendant himself is to be blamed. The CUP programme was tainted with the appearance of a scam at the very beginning. According to the treasury accountant, the yield was at least 200 per cent which was 263 times of the highest investment yield of the US treasury bills with maturity of 52 weeks in 2014 and 2015. The return of the programme, in the view of the court, can only be described as too good to be true.
Mr Leung explains that the defendant committed the offence because at the time X invested in the programme, the defendant still had a glimmer of hope that the programme was genuine.
Although Mr Leung refers the court to some of the WeChat messages between the defendant and Tsui to support his contention, the court is of the view that those messages do not help the defendant in his mitigation.
Firstly, it can be seen in the messages that there was no basis for such a hope. On the contrary, there were messages indicating that the defendant had known that there were problems with the CUP because he said in a message of 18 October 2014 that he did not believe anything Edwards said and he had suffered every day in the past year living an inhuman life.
He added that he had been hopeful but he was then in despair. Although he said in the messages that he would be doomed if Edwards was false, he was no doubt not expressing a hope but was saying that to comfort himself. He also said in the messages that everybody was chasing him for money. There was in fact no room at all for him to hold any hope that the CUP was genuine.
As can be seen from his statement to the Hong Kong police, he was no doubt fully aware that the CUP was a scam when he made the report to the police on 9 September 2014. He said in the statement that a letter e-mailed to him by F K Ho purported to be signed by Mr Rizo of the Royal Bank of Canada was a forgery, and F K Ho and Edwards ignored him when he asked for the refund of US$13.5 million. There was no justification at all for the defendant to have the faintest hope of the CUP being a genuine one.
He further said in the statement that he filed the case with the police because he was worried that he had been deceived. This shows clearly that his motive of making the report was for his own sake, obviously in an attempt to get back his money. No doubt his motive of making the reports to other organisations were for the same purpose. His motive was not to offer assistance to the authorities in the sense of helping the law enforcement agencies as disclosed in the authorities cited by Mr Leung.
Worse still, when X was going to invest in the CUP, the defendant helped him complete the procedure and accepted his money despite knowing full well that the programme was a scam. He even went further to misappropriate the money in breach of the trust of holding the money for X. All this showed that he was only trying to help himself to get back the money when he made those reports.
The court is of the view that he is not entitled to any discount for furnishing the information to the authorities for a self-served purpose and then went on to commit an offence himself through the CUP programme.
The court is, however, minded to give him a small discount in sentence on the basis that the scam had stopped with some culprits arrested because of what the defendant had done.
Mr Leung says that the defendant did not refuse to accept the money of X because he was afraid that the fraudsters would become alert and disappear. If that was his intention, he should not have appropriated the money to serve his own end. It seems that he was not worried that his refusal to transfer the money to Sri Lanka as demanded by the fraudsters would produce the same effect of alerting them.
The explanation of the defendant for transferring the money to Su Xuan is hard to believe. In the WeChat messages between the defendant and Tsui, there was no mention at all for what purpose the money had been given to Su, let aside for investment. The defendant even said in an uncertain tone that the “she” would give him back the 10 with no mention of any profits made. The court has no doubt that the “she” he referred to was Su and the 10 was the US$10 million.
In any event, misappropriating the money of X with the intention or hope to earn money to repay other victims of the CUP who might have been defrauded is something the law cannot encourage. This certainly cannot constitute a valid ground of mitigation.
Mr Leung further submits that the defendant committed the offence not for personal gain. The court has no hesitation to reject such a contention.
As the defendant said in the WeChat messages with Tsui on 18 October 2014, the whole world was chasing him for money. He further said in the messages on 1 November 2014 that they should discuss a plan to seduce Ho, presumably F K Ho, and Edwards to go to Shenzhen where they would restrain them so that they could get back their own money and money of other victims. This shows that he was concerned about his own money.
Even if the purpose of giving the money to Su was to make investments to earn money to pay back the victims of the CUP fraud, the defendant was trying to buy his way out and that must be a personal gain for himself. And from all the materials that have been presented to this court, it is of no doubt that the defendant also had in mind to get back his own money. That must be a personal gain for the defendant.
The defendant was a trustee of the money and he was a solicitor and must be fully aware of the duty and obligations of a trustee. The offence, no doubt, has a serious impact on the confidence of the public in the legal profession in Hong Kong.
It is stated in the mitigation letter of Mr Wu that the motto of the defendant’s life is “Owe no man nothing”. Ironically, he allowed X to invest a huge sum of money in CUP despite knowing full well it was a scam and that X was unlikely to recover his money. It turns out that X really has lost all his investment.
Having considered the whole circumstances of the case, the court is of the view that there is no justification to depart from the sentencing tariffs set out in HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776, as modified by HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1017. The court therefore adopts a starting point of 10 years imprisonment in this case.
The defendant himself was a solicitor and he should know the importance of getting legal advice timely. The explanation of the defendant as to his failure of not pleading guilty at the earliest opportunity is unacceptable. The court is of the view that the principles laid down in HKSAR v Ngo Van Nam [2016] 5 HKLRD 1 should be followed.
The defendant only indicated his desire to plead guilty after the trial date had been fixed during the CMH. Under such circumstances, the court is of the view that he is only entitled to a discount of 25 per cent for his guilty plea. Taking this into account, the starting point of 10 years imprisonment is reduced to 7 years 6 months imprisonment.
Giving a discount of 3 months for the reports the defendant made to various law enforcement agencies, the court sentences the defendant to 7 years 3 months imprisonment.