HKSAR v. Leung King Kei and Another

DCCC 992/2021

[2022] HKDC 840

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 992 OF 2021

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REASONS FOR SENTENCE

D1 and D2 are jointly charged with an offence of "Conspiracy to defraud" (Charge 2). D1 also faces 3 charges of "Conspiracy to defraud" (Charges 1, 3 and 4)  and 5 charges of "Fraud" (Charges 5 to 9).

2.D1 and D2 both pleaded guilty to their respective charges.

Summary of Facts

Background

3.AIA International Limited ("AIA")  is an insurance company. 

4.When a client takes out an insurance policy, AIA requires its agents to personally meet the client and complete an insurance application form ("IAF"). The information stated on the IAF must be true to the best of the client's and the agent's knowledge.  AIA will release commission to the agent and overriding commission to his/her up-line managers when the insurance application is approved.

5.When processing an IAF, AIA will consider, amongst other things, the client's occupation, annual income, assets and medical history.  Such information will be used to determine the annual premium.  For a policy with accident riders ("AR"), the policy holder should inform AIA when he/she changes his/her occupation, so that AIA could conduct further risk assessment to set the premium.  For high risk occupations, the premium would be higher.

6.A policy holder with AR is entitled to claim reimbursement of medical expenses on an accountable basis with an extra compensation of 0.25% to 1% of the insured sum per week.  Each claim needs to be supported by an accident claim form ("ACF"), the relevant medical consultation/ treatment receipt(s)  and sick leave certificate(s).  The amount of compensation is commensurate with the insured sum.  AIA requires its policy holders to sign on the ACF to declare that all information submitted is true, accurate and complete.  AIA does not allow any handling agent to sign the ACF on behalf of a policy holder.

7.D1 was an insurance agent of AIA.  He was promoted to Unit Manager on 1 December 2017 and was entitled to overriding commission.

The modus operandi

8.During the offence period, D1, either personally and/or through his down-line agents (including D2), arranged for clients to falsely state their occupations and to inflate their income on their IAFs.  After their insurance applications were approved by AIA, D1 arranged for and accompanied those clients to seek medical consultation/treatment for physical injuries which they did not sustain.  D1 then submitted ACFs purportedly signed by the clients together with the relevant receipts (all of which contained false information)  to AIA to claim compensation.  As a result of such fraudulent practice, D1 received commission and some clients received compensation from AIA.

Arrest and admissions

9.D1 was arrested by ICAC officers on 9 April 2019.  Under caution, in relation to Charge 1, he admitted having exaggerated the client's salary on the IAF.  In relation to Charge 2, D1 admitted that he was in fact the handling agent of the client's policy, but had put down another person's name as the handling agent and forged that person's signature on the IAF for getting a promotion.  D1 had also overstated the client's income on the IAF.  In relation to Charge 3, D1 admitted having falsified the client's employer and inflated the client's income on the IAF.  In relation to Charge 4, D1 made similar admissions.

10.In relation to Charge 5, D1 admitted having overstated the client's income on the IAF.  In relation to Charge 6, D1 admitted having falsified the client's employment and income on the IAF.  In relation to Charge 7, D1 admitted having falsified the client's income on the IAF.  In relation to Charges 8 and 9, D1 made similar admissions.

11.D2 was arrested by ICAC officers on 12 April 2019.  Under caution, in relation to Charge 2, he admitted that he had approached the client for selling insurance products.

Mitigation

D1

12.He is 36 and has a clear record.  His counsel Mr. Lau informed me that D1 is a hardworking person.  He joined AIA in November 2015 and left the company in January 2020.  After that, D1 joined his elder brother in running their family's metal recycling business.  D1 has a stable girlfriend who relies on D1's financial support.

13.In mitigation, Mr. Lau submitted that D1 is truly remorseful for his wrongdoing.  He cooperated with the ICAC throughout the investigation and decided to plead guilty to the charges in the very early stage.  A bundle of mitigation letters was placed before me; their contents are duly noted.

D2

14.He is 36 and has 1 conviction of a C&E summons in 2016 (for which he was fined $3,900).  His counsel Ms. Wong informed me that D2 is single and resides with his father.  D2 joined AIA in July 2017 and left the company in January 2020.  He now works as a driver earning about $20,000 per month.  A bundle of mitigation letters was placed before me; their contents are duly noted.

15.In mitigation, Ms. Wong submitted that D2 received no benefit of any kind.  He merely contacted the client and referred him to D1.  D2 did not handle the IAF or ACF and was not involved in the compensation claim.  D2 did not arrange for the client to see a doctor or accompany him to the clinic.  Ms. Wong stressed that D2 knew about the scam but did not know the details.  He did what he did because he was D1's down-line agent.

Sentence

16.Both defence counsel acknowledged that this case involves the Barrick type of breach of trust. They accepted that the sentencing guidelines laid down by the Court of Appeal in HKSAR v Ng Kwok Wing [2008] 4 HKLRD 1017 are applicable.

D1

17.Notwithstanding his clear record, an immediate custodial sentence is inevitable.

18.For Charge 1, D1 received commission in a sum of HK$8,822.93 and the client received compensation in a sum of HK$20,294.  A sum of US$5,077.64 was claimed but not approved by AIA. The total amount involved was HK$68,722.52.  I adopt a starting point of 9 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 6 months' imprisonment for Charge 1.

19.For Charge 2, the handling agent received commission in a sum of HK$8,932.57 (from which HK$5,493 were given to D1)  and the client received compensation in a sum of HK$22,185.  A sum of US$5,493.31 was claimed but not approved by AIA.  The total amount involved was HK$73,965.39.  I adopt a starting point of 9 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 6 months' imprisonment for Charge 2.

20.For Charge 3, the handling agent received commission in a sum of HK$2,657.53 and D1 received HK$757.40 as overriding commission.  A sum of US$1,657.08 was claimed but not approved by AIA.  The total amount involved was HK$16,340.15.  I adopt a starting point of 3 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 2 months' imprisonment for Charge 3.

21.For Charge 4, the handling agent received commission in a sum of HK$12,867.60 and D1 received HK$3,667.27 as overriding commission.  A sum of US$4,017.69 was claimed but not approved by AIA.  The total amount involved was HK$47,872.85.  I adopt a starting point of 6 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 4 months' imprisonment for Charge 4.

22.For Charge 5, D1 received commission in a sum of HK$8,943.51 and the client received compensation 3 times in a total sum of HK$33,295 and US$3,868.90.  A sum of US$6,286.97 was claimed but not approved by AIA.  The total amount involved was HK$121,454.30.  I adopt a starting point of 12 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 8 months' imprisonment for Charge 5.

23.For Charge 6, the handling agent received commission in a sum of HK$21,226.07 and the client received compensation in a sum of HK$22,159.  A sum of US$6,396.26 was claimed but not approved by AIA.  The total amount involved was HK$93,275.90.  I adopt a starting point of 9 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 6 months' imprisonment for Charge 6.

24.For Charge 7, the handling agent received commission in a sum of HK$7,088.72 and the client received compensation in a sum of US$2,837.57.  A sum of US$5,723.18 was claimed but not approved by AIA.  The total amount involved was HK$73,862.57.  I adopt a starting point of 9 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 6 months' imprisonment for Charge 7.

25.For Charge 8, the handling agent received commission in a sum of HK$7,716.75 and the client received compensation in a sum of US$2,343.07.  A sum of US$5,711.33 was claimed but not approved by AIA.  The total amount involved was HK$70,541.07.  I adopt a starting point of 9 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 6 months' imprisonment for Charge 8.

26.For Charge 9, D1 received commission in a sum of HK$12,582.76 and the client received compensation 3 times in a total sum of HK$59,220.  A sum of US$7,015.49 was claimed but not approved by AIA.  The total amount involved was HK$126,523.58.  I adopt a starting point of 12 months' imprisonment for this charge.  With the timely guilty plea, I sentence D1 to 8 months' imprisonment for Charge 9.

27.A grand total of approximately HK$692,560 was involved in Charges 1 to 9 (of which approximately HK$323,300 were paid out by AIA), I consider a global starting point of 2.5 years' imprisonment appropriate for all 9 charges.  With the timely guilty pleas, the overall sentence becomes 20 months.  Mr. Lau has informed me that D1 has already returned HK$40,536.87 (the total sum which he personally received)  to AIA.  I will grant him a further discount of 2 months, reducing the overall sentence to 18 months.  To achieve this, I order the sentences for Charges 1 to 4 to run concurrently; Charges 6 to 8 to run concurrently but consecutive to Charges 1 to 4; and Charges 5 and 9 to run concurrently and 6 months of which consecutive to Charges 1 to 4 and 6 to 8.

D2

28.For Charge 2, D2 received no benefit and his role was not essential.  He knew about D1's scam but still referred a client to D1.  I would not expect D2 to report D1 to AIA's senior management but the least he could do was to refuse to participate in what D1 was doing.  Now D2's character and integrity are tarnished.  He is unlikely to be able to return to the insurance trade again.

29.I accept that it is easier said than done to ask a subordinate to refuse to follow the instructions (albeit unlawful ones)  given by his/her superior at work.  But when it comes to a choice between committing a criminal offence and losing your job, the answer should be clear to most people.  D2 made a wrong choice and needs to live with this mistake for the rest of his life.  At the end of the day, I think he deserves a chance.

30.I adjourned sentencing to obtain a Community Service Order Report on D2.  The comments in the report are positive.  I consider that a Community Service Order is the appropriate and just punishment for D2.

[Requirements of Community Service Order explained. The defendant understood and is willing to comply.]

I sentence D2 to 160 hours of Community Service for Charge 2.