HKSAR v. Chan Ka Wo and Others
Read the full judgment text of DCCC 16/2022 on BabelCite. This District Court judgment was delivered on 28 March 2024.
1. This is a case of insurance fraud in which six defendants, D1 to D6, were jointly charged with one count of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200.
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DCCC 16/2022 [2024] HKDC 488 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NO 16 OF 2022 -------------------------------
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--------------------------------------- REASONS FOR VERDICT --------------------------------------- 1.This is a case of insurance fraud in which six defendants, D1 to D6, were jointly charged with one count of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200. 2.The prosecution alleged, as described in the particulars of the the offence, that D1 to D6, who were employees of AXA China Region Insurance Company Limited (“AXA”), between 25 November 2014 and 28 September 2017, conspired together to defraud AXA by dishonestly and falsely representing that the financial consultant’s declarations in the policy application forms were genuinely made, thereby inducing AXA to approve those policy applications and to pay commissions and bonuses to D1 to D4 in connection with the relevant policies. 3.The modus operandi, as alleged by the prosecution, was that one of the defendants would approach a former schoolmate or a friend or an acquaintance to offer the latter free insurance when the premiums were in fact paid by one or more of the defendants. False representations were made in the relevant application forms by naming uninvolved defendants as the financial consultants, i.e. the handling agents, thereby causing AXA to approve the insurance applications and pay commissions and bonuses to those uninvolved defendants as the handling agents and their upline managers. This practice of “diverting” policies, as described by prosecution witnesses from AXA, would enable the defendants to earn commissions and extra bonuses according to the calculation method of the AXA management. Prosecution case 4.Most of the prosecution case was not in dispute and presented by way of a set of admitted facts (P165) and 10 civilian witnesses[1] (PW1 to PW10) whose evidence were not seriously challenged. 5.In summary, under the admitted facts, all parties admitted that:-
6.The details of all the subject policies, Policies #1 to 10, which were basically covered by the admitted facts, were set out in a table and produced as aide memoire[2] by consent of all parties[3]. Similarly, the fund flow in the account of AXA and the various accounts of the defendants, as agreed under the above admitted facts, are also set out in another table and produced in the trial[4]. 7.The prosecution called a total of 10 witnesses:-
8.The prosecution witnesses can be divided into 2 categories and their respective roles can be very briefly described as follows:-
PW1 to PW4 9.It is the prosecution case that friends of some of the defendants (D1, D5 and D6) were offered free AXA insurance and finally became policyholders of one or more than one policy of different nature. However, for these Policies #1 to 10, the named financial consultants on the relevant insurance application forms were D2, D3 and D4 but not D1, D5 or D6 and therefore not the persons whom PW1 to PW4 had dealings with. Also, the job information of the policyholders i.e. PW1 to PW4, was untrue and in particular their income had been exaggerated. The financial consultant’s declarations in those policy application forms were therefore not genuine. 10.PW1 was D1’s friend and she was the policyholder of Policies #1 to 3. PW2 was D5’s former classmate and he was the policyholder of Policy #4. PW3 was a friend of D1’s mother and he was the policyholder of Policies #5 and 6. PW4 was D6’s former classmate and he was the policyholder of Policies #7 to 10. 11.None of these PWs knew or ever had dealings with D2, D3 and D4 or a person known as TSANG Chun-wa who were the named financial consultants in the relevant application forms of Policies #1 to 10 or presumably the handling agents of those policies in AXA. According to PW1 to PW4, each of them only dealt with one AXA agent, i.e. his or her friend (D1, D5 or D6). When they had questions, they only approached and were dealt with by their respective friends in AXA, i.e. PW1 and PW3 was dealt with by D1, PW2 was dealt with by D5 and PW4 was dealt with by D6. 12.The prosecution therefore contended that the named financial consultants in the subject policies (D2, D3, D4 and TSANG) were not the actual selling agents and that the actual selling agents were D1, D5 and D6. 13.Regarding the circumstances of the selling of the subject policies, PW1 was asked by D1 to sign empty and undated insurance application forms. PW2 could not be sure as to what documents he had signed. Further, the insurance policy submitted to AXA under PW2’s name, i.e. Policy #4, was not only for a sum much higher than that he requested[5] but also on payment instructions different from those given by PW2[6]. PW3 was asked by D1 to sign empty and undated insurance application forms. D1 did not explain to him the contents of the insurance policy. PW4 was not asked by D6 to sign any forms. 14.The prosecution contended that the above practices were in contravention of some of the rules and requirements under AXA’s Compliance Manual for Intermediaries, e.g. paragraph 3.1 (must meet client face-to-face), paragraph 4.4 (full disclosure to customer), paragraph 5.1 (must not sign blank or partially completed forms and must inform customer of contents of the insurance application form), paragraph 5.2 (must witness customer’s signature) [7]. 15.Each of PW1 to PW4 only consented to taking out one AXA insurance policy. However, PW1 had 2 additional policies under her name, PW3 had 1 additional policy under his name and, PW4 had 3 additional policies under his name. 16.All PW1 to PW4 confirmed that their employment information and in particular their income shown on their respective insurance application forms were false. Their income had been exaggerated and they earned less than the stated amounts. PW5 to PW10 17.PW5 to PW10 were managers of different departments of AXA responsible for different work duties. They gave evidence on various matters relating to the business operation of AXA relevant to this case. 18.PW5 was from the Underwriting Department and he assisted in the underwriting and approving duties in his department, which included the assessment and approval of insurance applications. 19.According to PW5, underwriters evaluated various factors, such as the applicant's age, income, occupation and health condition, as stated in the relevant application form. They relied heavily on the information provided in the application form, together with the documents submitted by the handling agent, to conduct a thorough assessment and eventually determine on the approval or otherwise of the application. The underwriting department placed great trust in the accuracy of the information provided in the application form. In the event of any inaccuracies being discovered, the application would not be approved. The reason was that it would jeopardize AXA's interests and might result in commissions being wrongly paid to an agent. 20.The application process began with the completion of the application form, which would then be submitted to AXA and scanned into their computer system. The important details would be inputted into the system, so that the underwriting department could review the case. During the review process, the underwriter might reject the application if anything was found unsatisfactory or might request clarification from the handling agent. 21.PW5 also highlighted the requirement for both the agent and the policyholder to properly sign the relevant application form. If there was any problem with the signatures, the application would not be approved. PW5 added that the underwriting department had no way to verify the authenticity of any signatures on the application forms, nor did they have any knowledge regarding whether the agents had fully explained the contents of the policies to the applicants, as the underwriting department would not contact any applicants directly during the review process. 22.PW6 was from the Customer Payment Management Department and he handled customers payments and back office documentation work. He explained the payment method for premiums and the relevant documentation used. 23.PW7 was from the Imaging Department and her duties involved scanning, imaging and retaining documents relating to the business of AXA. She gave evidence to complete the chain of documentary exhibits relating to all the AXA’s documents produced in this case. Her evidence was not challenged at all. 24.PW8 was from the Distribution Compensation Management Department and her duties included handling and calculation of commissions and bonuses of AXA agents. 25.PW8 gave evidence on calculation of agent’s commissions and bonuses. PW8 explained the contents of some of the consolidated commission reports relevant in this case[8], as examples. 26.According to PW8, AXA made two types of financial payments to its agents arising from the policies sold. The first type was commissions calculated on a certain percentage of the premiums received by AXA, with different percentage for different types of policies or premiums. The second type was bonuses which was not solely calculated on one single policy sold but based on a bundle of deals concluded in a month or a quarter. In other words, bonuses were calculated based on the aggregate number of insurance policies sold by an agent. The higher the aggregate number of insurance policies sold, the higher the bonuses that would be paid to an agent. 27.Therefore, when the bonuses of the agents in this case were calculated, AXA did not only base on these 10 policies alone but also other policies which they had sold. The upline manager of an agent would also receive compensation as overrides from AXA based on the deals completed by the agent. 28.PW8 confirmed that AXA had made additional payments in various types of commissions and bonuses to the agents and the managers involved in the 10 policies in question. 29.PW8 worked out the extra amount of bonuses paid to D1 to D4 in this case by comparing the respective figures with and without the 10 policies in question. According to PW8, the extra amount paid to D2 for the 4 policies he was involved in this case[9] was $134,803.56. The extra amount paid to D3 for the 9 policies he was involved in this case[10] was $76,026.84. The extra amount paid to D4 for the 4 policies he was involved in this case[11] was $54,806.31. The extra amount paid to D1 as upline manager for the 6 policies he was involved in this case[12] was $30,393.60. The total amount was $296,030.31. 30.The total commissions paid to D1 to D4 out of Policies #1 to #10 (or part of them) were $234.78, $226,182.73, $136,952.68 and $89,466.06 respectively. The details and the breakdown of these commissions, including first-year commissions and renewal commissions, paid by AXA to D1 to D4 were set out in the admitted facts[13] as well as the consolidated commissions reports[14]. The total amount was $452,836.25. 31.In summary, the commissions and the extra bonuses paid by AXA in respect of Policies #1 to 10 was in total $748,866.56[15]. 32.PW9 was from the Compliance Department and her scope of duties involved education and training for AXA intermediaries or agents. She gave evidence on the Code of Conduct of the Insurance Authority and AXA’s Compliance Manual for intermediaries[16]. 33.The manual was made available to all agents and upline managers through an intranet platform, which was served as a comprehensive resource for understanding and implementing the necessary compliance practices. 34.In addition, new intermediaries joining AXA would receive induction training to familiarize themselves with the company's compliance requirements. 35.PW9 in her evidence emphasized the importance of intermediaries adhering to the declarations made in the application forms. In the event that AXA became aware that the declaration had been disregarded by an agent, appropriate internal disciplinary measures would be taken and, if any criminal activities were involved, AXA would report to the relevant authorities. 36.PW9 confirmed PW8’s evidence on calculation of agent’s bonuses, namely the higher the aggregate number of insurance policies sold by an agent, the higher the bonuses that would be paid to that agent. PW9 elaborated that this was precisely one of the reasons why AXA did not permit the “diverting” of policies, i.e. one AXA agent who actually dealt with a client recorded the name of another AXA agent who was never involved in the selling process as the financial consultant in AXA documents so that the latter would get commissions or bonuses despite having no involvement. She explained that by diverting policies, the agent who had policies “diverted” to him/her might be able to reach certain performance targets and would be paid additional bonuses by AXA. The upline manager of the agent would also be paid. That agent would not have been entitled to such bonuses in the first place if he/she did not actually sell the insurance policy in question. 37.PW9 stressed that the “diverting” of policies as described above was in direct violation of the code of practice and that AXA would not tolerate or accept such practice. 38.PW10 was also from the Compliance Department and he assisted in formulating the regulations for AXA’s intermediaries and conducting investigation of compliance. He confirmed that an agent was not allowed to pay out of his own pocket insurance premium for a client and offered free insurance to a client. D2’s 3 Video-recorded Interviews 39.D2 participated in 3 cautioned video-recorded interviews (“1st – 3rd VRIs”) (P127 – P129), the voluntariness of all of which was not disputed and those interviews with transcripts were produced under the admitted facts[17]. 40.Briefly, D2 in his 1st VRI said:-
41.In his 2nd VRI, D2 said that:-
42.In his 3rd VRI, D2 said:-
43.In essence, D2 in those VRIs admitted that he had voluntarily entered into an agreement with D1 whereby D1 would submit insurance policies under D2’s name without D2’s involvement or participation in the sales process. D2 was aware that commissions would be paid into his designated payroll account with AXA, i.e. his HSBC account. He had therefore given his HSBC bank card and the password to D1 because the commissions belonged to D1. In the 3rd VRI, as summarized above, D2 for the first time mentioned about certain seminars for mainland clients and that he owed D1’s money. 44.After the close of the prosecution case, the defence did not make any application for no case to answer. I ruled that all D1 to D6 had a case to answer for the sole charge of conspiracy to defraud. Defence case 45.D1, D5 and D6 elected not to give evidence or call any defence witnesses. 46.D2 (DW1) elected to give evidence. D3 (DW2) elected to give evidence and called one defence witness MAK Wing Chung (DW3). D4 (DW4) also elected to give evidence. Finally, D2 to D4 called one common defence witness, a handwriting expert, Emily HUI (DW5). D2’s case 47.To start with, D2 adopted his 3 VRIs as part of his evidence-in-chief and his evidence in court was basically in line with his version in the VRIs. 48.D2 stressed in his evidence that, before he was arrested by the ICAC, he had no knowledge about the 4 policies[18] where he was the named financial consultant or the handling agent and that he had no involvement whatsoever with those policies. 49.D2 explained in court again, as he did in his earlier VRIs, as to how he joined AXA but only as a part-time job when his focus was all along in the finance industry. He said, in 2015, when he intended to quit his job in AXA but D1 warned him that if D2 left he had to repay the allowance which he had previously received. D1 proposed that he had some wealthy clients in the Mainland China. D1 invited D2 to assist in organising investment seminars for those potential clients to promote D1’s sales. If D1’s sales performance was good, he could protect D2 and help D2 to maintain his job so that he did not have to return the allowance. Also, if D2 could refer clients to D1, D1 would pay around $500 to $1,000 each to him. 50.D2 agreed that he did not mentioned anything about the seminars in his 1st and 2nd VRIs. It was because he had been shown a lot of documents and asked a lot of questions by the ICAC officers and that he was eager to leave. He said he later recalled and told the officers about the seminars in his 3rd VRI. 51.D2 said D1 told him that organising seminars required operating costs and that he did not fully trust D2. As such, D1 required D2 to give D2’s bank card to D1 as guarantee. D2 therefore gave his HSBC bank card and the password to D1 in August 2015. At that time, his payroll account in AXA had been changed from his Hang Seng Bank account to his HSBC bank account. Eventually, the seminars idea did not materialise and that D1 returned the bank card to D2 in around July 2017 after D2’s resignation from AXA. 52.D2 also mentioned another reason for handing over his HSBC bank card to D1. It was for repayment of debt. D2 said he had owed D1’s money since August 2014. When AXA paid salary to D2, D1 could use D2’s bank card to get money as repayment immediately. D2 said he settled his debt to D1 in around 2016. 53.When asked about the commissions paid to him by AXA and various transfers of funds, as set out in the admitted facts, D2 gave evidence that he no knowledge about any of them before his arrest. He stressed that he only came to know when he was asked about by the ICAC. D3’s case 54.D3 gave evidence mainly for the purpose of explaining why he gave D1’s control over D3’s bank account. 55.D3 said in evidence that, back in 2011, when he was 17 years old and studying Form 5, he was introduced by his schoolmate and friend Mak Wing Chung[19] to attend a South Korean church named Christian Gospel Mission (in Chinese “韓國攝理教”), which was later well known to be an evil religion or a religious cult. The head of this church was later arrested and imprisoned in South Korea and the matter was exposed to the public. 56.D3 gave evidence that the teaching of the church included strict obedience to the instructors and pastors, full and frank disclosure of one’s own personal matters to the instructors and strictly attending church meetings. D3 said he was even told by the pastor, to which he complied, to move to live in a dormitory provided by the church. During that period of time, D1 was D3’s instructor at the church. D3 had lived in the dormitory for several years since 2011 with D1. D3 said he shared all his personal matters including academic and love affairs to D1 fully and frankly and he followed D1’s instructions. D3 produced various photographs[20] showing the gatherings and activities which he had with D1 and other members of the church. 57.D3 said in evidence that, in the summer of 2014, he was in the process of completing his higher diploma. The school required students to complete a summer internship of at least 90 hours relating to commercial subjects[21]. Upon D1’s suggestion, D3 joined AXA and use the mandatory induction training course offered to new agents to satisfy the summer internship requirement for his higher diploma. D3 said he never intended to earn money as an AXA agent, though he had to sit for regulatory examinations for insurance agents and sign an undertaking. He said he only wanted to fulfil the requirements for his higher diploma. 58.Throughout his engagement with AXA, D3 never met any clients or potential clients to sell insurance policies nor did he introduced any clients or potential clients to D1. 59.D3 described in evidence, how he acted upon D1’s instructions to open a Hang Seng bank account which was to be used as D3’s payroll account with AXA. D3 did not query D1’s instructions at all as D1 was his instructor in church and also his upline manager in AXA. Also upon D1’s instructions, D3 agreed to have the home address recorded with Hang Seng Bank to be D1’s home address. After opening the Hang Seng bank account, D3 changed his payroll account in AXA to that Hang Seng bank account. D3 made this change in payroll account in the same month he joined AXA, in August 2014. 60.On 22 August 2014, D3 handed over his bank card to his Hang Seng bank account to D1 and at a later time provided the password to D1 as well. D3 said D1 told him the bank card had to be photocopied at the office. For the password, D3 provided it to D1 as told because he fully trusted D1. 61.In or around July to October 2015, D3 decided to resign from AXA. It was because at that time, when D3 was still living in the dormitory arranged by the church, he was advised by 3 other instructors that D1 was “unethical” as he owed other people’s money. D3 was told to cut off his contact with D1 and resign from AXA. D3 acted accordingly and spoke to D1 that he wished to resign. D3 fully disclosed the reason behind and as a result, D3 and D1 had a heated argument. Afterwards, the relationship between D3 and D1 turned sour. 62.After D3 had resigned from AXA, he did not attempt to get back his Hang Seng bank card from D1 as he did not expect there to be money in the account and had totally forgotten about it. 63.D3 called a defence witness MAK Wing Chung (DW3) to support his version about that church and D3’s relationship with D1. DW3 gave evidence which was in line with what D3 said about the church and D3’s attachment to D1 at the material time. DW3 confirmed that it was he who introduced D3 to that church which required its members strict obedience to instructors. D1 was D3’s instructor and they lived in the same dormitory. DW3 said D3 fully trusted D1. D4’s case 64.D4 said in evidence that he first came to know D2 who introduced D4 to a company called Royal Bullion Limited, where D4 subsequently worked as a salesperson. In the middle of 2014, D2 invited D1 to share his experience and views on the prospects of becoming an insurance agent at AXA with D4. D4 then recognized the potential in the insurance industry and decided to pursue a licence. 65.To become an insurance agent, D4 needed to pass two subjects in a qualifying examination. In September 2014, he applied for the examination at VTC but only managed to pass one subject. D4 then approached D1 for assisting him to apply for the insurance agent examination held by AXA. With D1's support, D4 attended the examination in October that year and successfully passed. 66.D4 did not immediately quit his job to join AXA due to uncertainties regarding commission and income in AXA. In early 2015, D1 contacted D4 to inquire about his decision not to join AXA, D4 expressed concerns about his income. D1 then introduced to D4 the idea of starting a furniture business which required a capital investment of 10 million. D4 declined due to his limited funds available. 67.D1 soon contacted D4 again, suggesting that D4 should consider joining AXA. D1 said he was earning a good income at AXA and advised D4 to continue his current job while actively seeking potential clients in buying insurance policies. D4 could formally join AXA only after having built a sufficient client base. 68.D4 officially joined AXA as an agent on 15 July 2015, and continued until 2 February 2018. Initially D1 was D4’s direct upline manager in AXA and D4 later became a unit manager on 1 March 2016. 69.Shortly after joining AXA, D4 started achieving business success and D1 once again approached him about the furniture investment and urged him to invest. D4, still believing in that business's potential, decided to invest $50,000 from his first commission earned in August 2015. 70.Since D1 at that time was D4’s upline manager, D1 had knowledge of the number of policies D4 handled and the commissions he received from AXA. Even before D4 had received any income, D1 would encourage him to make investments. D1 advised D4 to transfer money for investment approximately 1 or 2 days before salary payments. Believing in the furniture business's prospects, whenever D4 received income from AXA, he transferred funds to D1 and considered it to be investment in the business. 71.D4 said he had frequently inquired about the progress of the furniture business with D1. D1 had shown him photographs and explained to him the development, highlighting the existence of a factory in mainland China and pending applications for patent. 72.Due to his strong belief in the investment's potential, D4 just retained only the necessary funds for his daily expenses and transferred the remaining balance to D1 for investment whenever he received income from AXA. 73.However, in 2016, D4 decided to halt further investments as he had already committed a significant amount of money to the business. D1 told him that the capital was more than sufficient as there were additional investors involved. Consequently, D1 returned some of the capital D4 had invested. 74.D4 said the furniture business officially opened in 2017, but the capital quickly depleted, leading D1 to request additional investments from D4. 75.In 2018, D4 took the initiative to contact D1 regarding the investment status. Despite having invested over two million dollars, he had not received any returns from D1. Subsequently, D4 discovered that several of his colleagues had also fallen victim to a similar situation. 76.In March 2019, D4, accompanied by a friend and other individuals, went to confront D1 at his shop in Kwun Tong. During the confrontation, D1 called the police and officers turned up in response. D1 confessed to the police officers that he owed D4 and other people money, acknowledging that he borrowed funds from them during their time working together in AXA. This incident was recorded, the relevant video clip and its transcript was produced in the course of D4’s evidence[22]. 77.D4 also gave evidence about his performance in AXA by producing some tax information issued by the Inland Revenue Department[23]. He said his income in the form of commission amounted to approximately 3.6 million, 9.7 million, and 1.2 million in 2015, 2016 and 2017 respectively. He described his good performance in AXA, with a solid client base from mainland China and Hong Kong and a successful team of downline agents. 78.Although D4 achieved success in his performance in AXA, he said he was busy and he rarely reviewed the breakdown of his monthly commission payments. His upline manager, D1, would usually inform him of the expected commission amount each month. This practice continued until he was promoted to unit manager and began assisting his downline agents with their income statements. 79.Regarding the concerned policies in the charge, i.e. Policies #1 to 10 in this case, D4 said he neither filled out nor submitted any forms to AXA in relation to any of them. He did not sign any of the related policy documents and was unaware of who did. It was only after having been arrested by ICAC and having consulted his solicitors that he discovered commissions related to Policy #4 were credited to his account. 80.D4 also gave evidence to the effect that while he was working as D1's downline agent, D1 would instruct him from time to time to transfer money to AXA. According to D4, D1 would provide sufficient funds in cash or online transfers before asking D4 to make the transfers to AXA. The transfers were usually done after the morning tea sessions D1 treated his team. After making the transfers, D4 would place the payment slips on D1's desk or hand them to D1's secretary. D4 was unaware of the purpose of those transfers, as they could serve various functions within the company, such as premium payments or returning excess commissions. Handwriting Expert for D2 to D4 81.D2 to D4 called one common witness, a handwriting expert Emily HUI (DW5) and an expert report was produced[24]. The purpose was to support the common position of D2, D3 and D4 that they did not sign on the relevant application forms where they were named as financial consultants. DW5’s conclusion for the questioned signatures, in essence, was that they were probably not written by the defendants in question. 82.The prosecution did not dispute that conclusion. It was never the prosecution’s case that D2, D3 and D4 had actually signed the relevant application forms. It was their contention that these defendants were parties to the agreement in submitting those application forms with false financial consultant’s declarations to defraud AXA. Closing submissions 83.All parties submitted written closing submissions with authorities and I had considered all of them. I do not seek to repeat them here but would refer to the relevant parts in my subsequent analysis of the evidence when needed. Relevant law 84.I reminded myself of the relevant law in this case:-
Issues 85.In general, the defence, or some of them, disputed the existence of a conspiracy as alleged by the prosecution in the first place. In particular, all defence disputed the individual defendant having been a party to that conspiracy if existed. Also, the defence, or some of them, took issue with the prosecution’s allegation of dishonesty on the part of the defendants. My analysis of the evidence and verdicts 86.At the outset, I am prepared to deal with some relevant but less controversial issues. They are (a) alleged breaches of AXA’s internal rules; (b) issue of economic loss or risk of economic loss suffered by AXA; and (c) issue of dishonesty. Alleged breaches of AXA’s internal rules 87.As I have summarized all the prosecution evidence earlier on, according to the evidence from the policyholders (PW1 to PW4) and the AXA managers (in particular PW9), which were not disputed, that there had been various breaches of AXA’s rules and requirements under its compliance manual in the handling of Policies #1 to 10. Those breaches included, for instance, failing to meet clients face-to-face and witness signatures, signing on blank or partially completed forms, lack of full disclosure to clients or full explanation of contents of application forms. 88.In view of the clear evidence from the prosecution witnesses and the lack of challenge, I find as a matter of fact that those breaches did take place and were committed by those agents (whoever they were) in the handling of Policies #1 to 10. 89.I understand and accept, as submitted by the defence, that contraventions of any rules or requirements of the company manual or any code of practice of the insurance industry by themselves do not constitute or amount to any offence. Nevertheless, the breaches as well as the circumstances in which they took place are matters of importance to be taken into account, in particular when I have to consider in due course the existence or otherwise of the conspiracy as alleged and who the parties were. 90.As a finding of fact, I take the view that all the defendants being AXA’s staff members and having gone through the training and with access to the company manual, must be aware of the various breaches of the company rules and regulations and committed them deliberately in this case, if they or any of them had been involved in the handling of any of the 10 policies in question. Issue of economic loss or risk of economic loss suffered by AXA 91.Although not seriously disputed by all defence counsel for the defendants, I have to consider, as required by the authority Mo Yuk Ming as aforesaid, that if the alleged agreement entered into by the defendants or any of them, if existed, had caused economic loss to AXA or had put at risk AXA’s economic interests. 92.This issue is quite strict forward as there had been clear evidence from PW8 that the commissions and the bonuses paid out by AXA in respect of Policies #1 to 10 were in total $748,866.56. In particular, the bonuses, according to PW8 and PW9, were to be calculated not only based on these 10 policies alone but also a bundle of other policies sold in a month or a quarter. As such, PW8 worked out the figures of the extra bonuses in respect of Policies #1 to 10 paid out by AXA to D1 to D4 to be $296,030.31. 93.Another way of considering that issue of economic loss suffered by AXA was to compare the total premium received and the total amount (commissions, bonuses, overrides included) paid out by AXA arising from these 10 policies in question. According to PW8’s evidence, for Policies #1 to 10, AXA had received total premiums of $815,833.15 and had paid out a total sum of $944,802.36 to D1 to D4. The net loss was therefore $128,969.21. 94.In addition to the above actual economic loss, I also find that AXA was put at risk of further economic loss by having approved and issued these 10 policies. It is apparent that these 10 policies were approved and issued to the policyholders by AXA in the absence of the knowledge of the false representations contained therein (including the false financial consultant’s declarations and other false particulars of the applicants’ employment and income). These policies would not have been approved and issued if AXA was aware of those false representations, as confirmed by PW5 of AXA’s Underwriting Department. It followed that these 10 policies, which would not have been approved and issued in the first place, must have exposed AXA to risks of economic loss arising from any potential claims by the policyholders and/or the beneficiaries. Issue of dishonesty 95.Another issue which was more seriously disputed by the defence was whether the means agreed upon by the defendants in the handling of Policies #1 to 10, if they or any of them did agree as alleged by the prosecution, was dishonest. 96.I also find this issue to be rather strict forward. It was not in dispute that the respective financial consultant’s declarations in the application forms for all 10 policies contained false representations, namely the named financial consultants were in fact not the handling agents and that at least the employment details in particular the income of the applicants were untrue or exaggerated. 97.By submitting those application forms with such false representations, causing AXA to approve them and eventually paid out commissions and extra bonuses to those uninvolved agents and managers, any person of ordinary standards of reasonableness and honesty would certainly consider that to be dishonest, not to mention those working in the insurance industry. 98.The 6 defendants here, if knowingly agreed upon and involved in the above dishonest means, must have realized that it would be regarded as dishonest by the standards of reasonable and honest people, not only as a matter of common sense but also from their insurance licensing examinations, AXA’s training (including knowledge of the rules and requirements under the manual) and practice as insurance agents. 99.I take the view that in fact there are two real issues in this case. First, whether there was a conspiracy as alleged by the prosecution. Second and more importantly, whether a particular defendant was a party to that conspiracy. Whether a conspiracy existed? 100.Before my separate consideration of each defendant’s case, I shall now first consider if a conspiracy, regardless of who the co-conspirators were, existed in this case. 101.Before going in depth the evidence for and against each individual defendant, from a bird’s eye view of all the prosecution evidence, which was basically not in dispute and I accept them as truth, I would summarise it as follows:-
102.Leaving aside the versions or explanations provided by D2, D3 and D4 for the time being, which would be carefully considered by me in due course, I take the view that the above when considered as a whole could hardly be coincidences and apparently looked suspicious in several ways. 103.First, all 6 defendants were not only AXA agents but also happened to be in the same team under D1. Second, each of the 10 subject policies was taken out by one of the defendant’s acquaintance. Third, one or sometimes even two of the defendants was or were the named financial consultant(s) in all the relevant application forms but in fact had no involvement whatsoever. Fourth, either D1 or D4 was the named manager in 9 out of 10 policies in question. 104.It is therefore too much a coincidence and the 10 policies could not have been isolated or unrelated incidents. I find the only reasonable inference is that someone must have pulled the necessary strings to orchestrate this as a scheme. 105.Even forgetting about AXA’s prohibition for an agent to pay premium for a policyholder, it is most unusual if not impossible for an agent, who is supposed to earn money by selling insurances, to pay out of his own pocket the necessary premium for a client and buy him free insurance. It is a striking feature in this case that the payment was not one-off and more significantly, the total premiums paid were very substantial amounts. D4 paid a total sum of $72,830.90 on 10 different occasions in respect of Policies #2, 4, 6 to 9. D1 even paid a staggering sum of $730,610.70 in total by 3 payments respectively for Policies #2, 4 and 6. 106.The matter did not end there. The strangest and most suspicious part is that, all the handling agents on paper (D2, D3 and D4), in 5 out of 10 policies in question[35], after having received the relevant commissions and bonuses from AXA, paid very substantial sums through several bank transfers totalling $768,920 to their upline manager D1. 107.This most unusual feature has to be looked at with two additional matters. First, the payments made through bank transfers from D2, D3 and D4 to D1 were made on the same day and/or shortly afterwards after commissions and bonuses had been paid by AXA to the respective salary accounts of D2, D3 and D4. Second, according to the evidence of D2 and D3 in court, which was not disputed by D1, their respective bank cards (and password) for their salary accounts in AXA were kept by D1. In other words, D1 was in control of the respective salary accounts of D2 and D3. D4 gave evidence by agreeing to having paid D1 but for an innocent reason (investing in D1’s furniture business), which would be considered later. 108.All the above could not have done without prior agreement and subsequent coordination by those involved in this case, in view of the timing and the amounts of the payments. Apparently, the undisputed evidence showed that the participants in this case could only be the 6 defendants here or some of them but no one else. I am sure it was not ordinary and proper insurance business here and it went well beyond mere suspicion of something sinister in the handling of those 10 policies. 109.I find the only reasonable inference is that, what the defendants or at least some of them did in this case was exactly what PW8 and PW9 described as “diverting” of policies. 110.As all the defendants were AXA agents, if any of them was knowingly involved, he or she must know and understand the company calculation method for commissions, bonuses and overrides and that by “diverting” the policies in this case it would enable them or some of them to earn more. 111.The simple reason was that, as described by PW8 and PW9, bonuses were not solely calculated on one single policy sold but based on a bundle of deals concluded in a month or a quarter. Bonuses were calculated based on the aggregate number of insurance policies sold by an agent and that the higher the aggregate number of insurance policies sold, the higher the bonuses would be. By “diverting” policies, the agent who had policies “diverted” to him or her might be able to reach certain performance targets and would as a result receive additional bonuses from AXA. Further, not only the agent but his or her upline manager would also receive overrides based on the deals completed by the agent. The above explains precisely why AXA strictly prohibited such “diverting” of policies as its interests would obviously be jeopardized. 112.I therefore find that, there was an agreement to use dishonest means with the purpose of causing economic loss to or putting at risk the economic interests of AXA, or with the realization that the use of those dishonest means might cause AXA loss or cause its interests at risk. 113.In other words and more specifically, I find as a matter of fact that there was a conspiracy, by at least some of these 6 defendants, to defraud AXA by submitting application forms with false representations on the financial consultants’ declarations and the applicants’ employment details, thereby inducing AXA to approve and issue Policies #1 to 10 and to pay commissions and bonuses to D1 to D4. 114.Having concluded that there was a conspiracy as aforesaid by at least some of the 6 defendants in this case, I shall now proceed to consider each individual defendant’s case and reach a verdict for each defendant. Was each individual defendant a party to the conspiracy? 115.To begin with, I noted from the particulars of the offence, which was consistent with the evidence unfolded in the trial, that it was the prosecution case that all the 6 defendants (D1 to D6) conspired together to defraud AXA by dishonestly making false representations in the financial consultant’s declarations in the subject application forms, thereby inducing AXA to approve those policy applications and to pay commissions and bonuses to only 4 defendants (D1 to D4) (my emphasis). 116.The fact that there were altogether 6 defendants being alleged in the subject conspiracy but only 4 of them had been paid by AXA is understandable. The simple reason is that there were just those 4 defendants (D1 to D4) having been named as the financial consultants (i.e. the handling agents) or the managers in the subject applications so that only those four of them had been paid by AXA. 117.As such, it is fair and reasonable for me to divide the 6 defendants into two categories, the first category (D1 to D4) being more heavily involved by (a) having their names on AXA’s documents and (b) getting paid by AXA whereas the second category (D5 and D6) being not that involved. 118.I am of course aware that having one’s name on paper and/or having received a financial advantage is not conclusive proof of one’s guilt, and on the other hand, the lack of which does not automatically exonerate one from responsibility. Those are however significant matters to be taken into consideration. It is fair to say, the evidence in totality against the first category of defendants (D1 to D4) is much stronger than that against the second category (D5 and D6). Case against D5 and D6 119.I shall first deal with the second category of defendants, i.e. D5 and D6, as the case against them was more simple and straightforward. 120.The respective sets of prosecution evidence against D5 and D6 were almost identical. In fact the evidence against them was rather limited. None of their names, let alone signatures, were found on any documents relating to any of the policies in question. There was no evidence of any fund flow or bank transfers (relating to any premiums or commissions or bonuses) involving them either. The only evidence against them was that they were the respective former classmates of PW2 and PW4 and had introduced them to buy insurance from AXA in this case[36]. 121.The prosecution submitted that the involvement of and the cooperation by D5 and D6 was indispensable if the conspiracy was to work out. It was submitted that, not only that D5 and D6 were the respective referrers of PW2 and PW4 to the subject policies, but it was also they who could have contacts with PW2 and PW4 on the one hand and the other defendants on the other. It was submitted that D5 and D6, if not involved in the scheme, could have reported the anomaly (i.e. they being the actual selling agents but not named as such on the application forms and therefore not paid) to AXA and that D1 and D4 needed information from D5 and D6 to avoid double payment of premiums. 122.The prosecution’s above suggestion is possibly true but I do not find it to be the only possibility. The prosecution’s theory was based on the assumption that D5 and D6 were the actual selling agents of the relevant policies. That might or might not be the case. They could possibly be referrers only. In fact, neither D5 nor D6 had much to do with the application for or the issuance of the subject policies, in particular they did not sign the relevant application forms or paid any premiums. Whoever filled in and submitted the relevant application forms to AXA as well as paying the necessary premiums did not require any assistance from PW2 and PW4 or through D5 and D6. The perpetrator(s) could simply decide by himself/themselves on whose names were to be submitted as named financial consultants (when D5 and D6 were not and had no further involvement in “diverting” the commissions and bonuses) and paid the necessary premiums depending on how much the relevant insurance policies were worth. 123.The case against D5 was further complicated by the fact that PW2 might have taken out a genuine policy from AXA through D5 around the relevant period of time, which was not Policy #4 in question. If that was the case, PW2’s personal details could have been available to other staff members of AXA, in particular those from D5’s team, and could possibly be misused in this case. 124.Similarly there was also a complication in D6’s case which further casted doubt on the case against her. D6 joined AXA as an agent on 1 October 2016[37] but all the relevant policies under PW4’s name were approved and issued between 9 August and 30 September 2016[38]. In other words, all those policies were approved and issued prior to D6’s joining of AXA. That apparently adds to the possibility that D6 was merely the referrer as opposed to the actual selling agent as alleged by the prosecution. 125.After all, the main difficulty of the prosecution case against D5 and D6 is the lack of evidence to show their further involvement except that they were the respective referrers of PW2 and PW4 to AXA policies. They could be knowing parties and assisting throughout the whole process of this scheme of “diverting” policies or, they could simply be referrers and then had no further involvement in the handling of the subject policies. 126.The circumstances were suspicious but I could not be sure that D5 and D6 were parties to the conspiracy in this case. I therefore find D5 and D6 not guilty. Case against D1 to D4 127.I now proceed to deal with the first category of defendants, i.e. D1 to D4. What I am prepared to do is to consider all the evidence against them in the first place and then consider separately their individual cases (in particular the evidence from the defendants who testified) before I come to an independent verdict for each of them. 128.For easy reference, I set out again and with more details, all the evidence against D1 to D4, which were not only in the admitted facts but also in the exhibits in the trial bundle which were undisputed throughout the trial and now accepted by me as truth, as follows:-
129.It can be seen from the fund flow of the above policies, there were some remarkable features in Policies #2, 4, 6, 7, 8 and 9:-
130.In summary, in the above policies, D1 paid for all the substantial yearly premiums ranging from $190,000 odd to close to $300,000[51]. D4 paid for the small premiums (and renewal premiums). D1 was never the handling agents on paper of any of those policies (D2, D3 and D4 were). D4 was on paper only one of the two handling agents for Policy #4. 131.However, whenever commissions were paid by AXA into the accounts of D2, D3 and D4 (as they were handling agents on paper), almost every time on the same day or shortly afterwards, similar sums were paid out from those accounts to D1’s account (or account of D1’s mother) and cash withdrawals were made. Sometimes even much bigger sums were paid out to D1’s account. It was not in dispute that D1 was in possession of the relevant bank cards of D2 and D3 with passwords so that D1 was in control of those accounts. It was also not in dispute that D4 had paid D1 money on those occasions, although claiming for an innocent reason of investing in D1’s furniture business. 132.Although D1 was not the policyholders or even the handling agents, he paid for the very substantial premiums of about $730,000[52]. If that is the end of it, it would be most unusual and unreasonable for D1 to do that. It simply does not make any sense. 133.The matter of course did not end there. Almost simultaneously on each occasion (on the same day or shortly afterwards), the commissions and bonuses totalling close to $770,000[53] paid out by AXA to the respective accounts of D2, D3 and D4 (who were the handling agents on paper) were transferred to D1’s account (or that of D1’s mother). D1 was in control of those respective accounts of D2 and D3 as D1 had the relevant bank cards and passwords. D4 agreed that he did pay out of his commissions and bonuses from his account to D1, but claiming for an innocent purpose of investing in D1’s furniture business. 134.Also, as can be seen from the above fund flow, at or around the relevant times when all those transfers took place, there were in addition several cash withdrawals totalling $140,000[54] from the respective accounts of D2, D3 and D4. 135.Therefore, all of the above when looked at together would provide a bigger and clearer picture which makes much better sense. D1 who paid out all the substantial premiums (about $730,000 in total[55]) in the first place was well compensated when all the commissions and bonuses (about $770,000 in total[56]) eventually found their way back to D1. This is already excluding the total cash of $140,000 withdrawn from the respective accounts of D2, D3 and D4 at around the same time. 136.D1 exercised his right by not testifying or calling any defence witnesses. Although no adverse inference should be drawn from that, it means there is nothing to explain or cast doubt on all the above movement of funds relating to the subject policies. 137.More importantly, as said, not only that there was no evidence from D1, but also there was no dispute from D1 over the evidence of D2 to D4 that (a) D2 and D3 had given D1’s control over their respective accounts by giving their bank cards with passwords to D1 and that (b) D4 had transferred money into D1’s account (though claiming for an innocent reason for investment which would be considered later). 138.I find as a matter of fact that D1, by having control of the respective accounts of D2 and D3, was the person who made all the above bank transfers and cash withdrawals in their respective accounts. I also find that D1 had received money as aforesaid out of the commission received by D4 relating to Policy #4. As a result D1 was able to recoup the premiums which he had paid for the subject policies and obtained a benefit. 139.As what I have found earlier on, what had been done in this case was exactly what PW8 and PW9 described as “diverting” policies, a dishonest scheme by agents to obtain monetary rewards prohibited by AXA. No doubt D1 played a pivotal role in that scheme, as can be seen from his significant involvement as described above. 140.Before coming to the above conclusion that D1 being integral to that dishonest scheme of “diverting” policies, I have considered and decided to reject all the arguments or submissions put forward by the defence for D1. Those submissions basically centered around (a) lack of proof of the actus reus on the part of D1; (b) lack of dishonesty and at most breaches of AXA’s internal rules; and (c) the evidence of D2 to D4 showed no agreement or conspiracy with D1. 141.The defence argued that there was no or insufficient evidence to prove that D1 had handled the policies in question and therefore lack of proof of the actus reus of the defrauding by D1. This argument is misconceived and must be rejected. The subject offence is one of conspiracy, the crux of which is the agreement between those participated in this dishonest scheme of “diverting” policies. There is no need for the prosecution to prove and, it had never been the prosecution case, that D1 had personally handled all those subject policies and how. 142.The issue of dishonesty had already dealt with in my earlier analysis and, for those stated reasons, I found this scheme of “diverting” policies dishonest under the Ghosh test. 143.The defence also submitted that, according to PW6, that cases of agents paying premiums, though forbidden by AXA, had happened in reality and that AXA’s “turning a blind eye” showed no dishonesty on the part of D1. The defence also submitted that there were doubts as to whether the alleged conspiracy was in fact approved by the higher management of AXA. I found no substance in all those criticism. The fact that AXA knew there were agents misconducted themselves by paying premiums for clients did not mean AXA condoned or turned a blind eye to it. PW8 never said so and PW9 mentioned in particular about internal disciplinary measures or even reporting to authorities if criminal activities were involved. Defence’s suggestion of someone senior in AXA might be involved in this conspiracy, by relying on just one whatsapp message where D1 claimed he would pass on a copy of D3’s bank card to another[57], was pure speculative and of no evidential basis. 144.For reasons which would be apparent in my subsequent consideration of the evidence of D2 to D4, I find that their evidence did not assist or lend any support to D1’s case of no agreement or conspiracy with them. 145.Having carefully considered all the above circumstances, I find, by drawing the only reasonable inference, that D1 could not have worked on and executed this dishonest scheme of “diverting” policies alone. D1 needed and in fact had obtained the cooperation of D2, D3 and D4, in particular but not limited to transferring the commissions and bonuses from their accounts to his. This conclusion so far, is subject to my subsequent separate consideration of each of the versions provided by D2, D3 and D4 respectively. 146.As can be seen from the above evidence, on the face of it and subject to my subsequent consideration of the versions of D2 to D4, apart from D1, all D2 to D4 were also involved and had a part to play in that dishonest scheme. The undisputed evidence against D2 to D4 included three important aspects:-
147.It is also worth noting another piece of evidence, again undisputed, that the respective telephone numbers of D1 and D4 had been found on various AXA’s payment slips relevant to the subject policies[59]. That supports the inference that both of these defendants being the named managers of the subject policies had been monitoring or keeping track of the operation of this dishonest scheme. 148.Now that I have found so far, subject to my subsequent consideration of the respective versions of D2 to D4, that D1 to D4 had all been involved in this dishonest scheme of “diverting” policies. 149.Notwithstanding my above finding, it is open to two possibilities, namely (a) D2 to D4 or any of them were knowing and willing participants of that dishonest scheme in the handling of those subject policies and the transferring of their relevant commissions and bonuses to D1 under a conspiratorial agreement, and (b) D2 to D4 or some of them were just innocent dupes having been used by D1. 150.Therefore, the next issue that I have to consider is whether D1 was acting alone and using some others as innocent dupes or D1 was acting together with any of D2 to D4 under a conspiratorial agreement in this case. This requires me to look at the respective versions put forward by D2, D3 and D4 through their evidence, which I now do. Consideration of D2’s case 151.D2’s case, put it simply, was that he was ignorant of the existence or the handling of all those policies[60] where he was falsely named as the financial consultant and that he had been paid commissions and bonuses into his salary account in AXA. His version was that he had given the relevant bank card with password to that account to D1 who was in full control over it at all material times. D2’s case was that he was never involved in the handling of any of the policies in question and never a party to any agreement or conspiracy with D1 or anyone. 152.To begin with, as a matter of common sense, anyone would find it strange and unreasonable for someone like D2, who was mature and working in the finance and insurance business, to give up and let another person to have full control over his bank card to his salary account. 153.D2 had of course provided his reasons for so doing. When I had considered all of D2’s evidence, as contained in his 3 VRIs and his testimony in court, my first observation was that he had not been consistent and had provided 3 different reasons at different stages. 154.The first reason came out first in D2’s 1st VRI and maintained in his 2nd and 3rd VRIs, all were adopted as part of his evidence-in-chief in court. D2 claimed he treated his job with AXA as a sideline but still wanted to keep it so that he would not be required to return his allowance to AXA. He therefore agreed to D1’s proposal of putting insurance business under D2’s name and having the relevant commissions paid into D2’s account by AXA. As D2 knew he had no involvement in the business and the relevant commissions should belong to D1, he gave his bank card and password to the relevant payroll account to D1. 155.The second reason, which was first mentioned in D2’s 3rd VRI and elaborated in his court testimony, was that D2 agreed to D1’s proposal of arranging investment seminars for some Mainland clients. As it required operation costs and D1 did not fully trust D2, D2 agreed to give his bank card to D1 as guarantee. 156.The third reason, which was also first mentioned in D2’s 3rd VRI and elaborated in his court testimony, was that D2 owed D1’s money and, by giving his bank card to D1, D1 could obtain repayment when AXA paid commissions into D2’s relevant account. 157.I had no hesitation in rejecting the second and the third reasons put forward by D2. I found them to be false excuses put up by D2 attempting to cover up the genuine reason for giving his bank card to D1. It was not simply due to the fact that those reasons only came out at a much later stage (only in D2’s 3rd VRI and elaborated in his court testimony) but for a more compelling reason that those versions were inherently unreasonable and incredible. 158.Apparently, D2’s two versions of holding seminars and owing D1’s money were both in lack of substance and details. The seminars had never been held. D2 was never able to tell how those seminars as proposed by D1 were to be prepared or arranged. D2 did not mention anything at all about the scale of the seminars, the venue, the date and the costs involved, let alone the most important matter as to how he and D1, and if any others were involved, were to share the operation costs. D2’s version was to the effect that he blindly gave his bank card to D1 with no prior agreement in the relevant details. 159.Similarly, D2 never provided any particulars of the alleged debt owed to D1 and in particular, he never mentioned anything about the repayment plan or schedule which should be the crucial matter if there was in fact a debt in existence. Again, D2’s version was that he just blindly surrendered his bank card to D1, giving the latter complete control over his salary account with AXA. Further, there was another problem with this version which made it even more incredible. D2 all along maintained that his was a part-time job in AXA and that he did not bring in any or much business (so that he was worried about being fired and required to return the allowance). If that was the case, then his salary account with AXA could not have been used for any repayment purpose. D1 as his upline manager must know that and would not have accepted such proposal. 160.On the other hand, I find D2’s initial version, that was the first reason he disclosed to ICAC for giving his bank card to D1 to enable the latter to use his name and obtain the commission, to be the genuine reason and representing the truth. 161.It is important to note that, as I have already set out when summarizing D2’s versions in his VRIs, D2 knew full well that by agreeing to D1’s arrangement of submitting policies under D2’s name when D2 in fact had no involvement would result in D1 earning overriding commissions and extra remuneration. D2 knew such arrangement was “problematic”, he was aware of the compliance requirement, AXA would not accept that arrangement and that it was actually deceiving the company. D2 was in fact consistent in this version throughout about his intention to keep his job in AXA and therefore no need to return the allowance. 162.The defence for D2 also argued on the issue of dishonesty, for which I have already decided in my earlier determination. To recap, not only that I have found this scheme of “diverting” policies a dishonest means but now I also find D2 having been acting dishonestly by having full knowledge of the scheme and willingly participating. 163.The defence for D2 had criticized that the ICAC officers had on a few occasions interrupted D2 during the 1st VRI.[61] I do not accept them to be improper or unfair interruptions and in any event, I find that D2 had never been prevented from freely providing his explanations. D2 was given the opportunity on all the occasions at the end of his VRIs to supplement or clarify and in fact he did supplement to stress his innocence when approaching the end of his 3rd VRI[62]. 164.The defence for D2 had also criticized AXA for its lax supervision over the conduct of its agents and that if at the end suffered any loss in the subject policies was at its own fault. I find these to be unfair criticisms. As PW5 had said in his evidence, the Underwriting Department of AXA relied heavily on and placed great trust in the accuracy of the information provided in the application forms and the documents submitted by the agents, and that they would not contact or verify from the applicants during the review process. In any event, whether AXA was at fault or could have exercised tighter supervision in its business was immaterial and irrelevant for my determination on the issues of this case, which all along remained the existence or otherwise of a conspiracy and its participants. 165.The evidence of DW5, the handwriting expert, did not assist D2. Her evidence could only show that D2 did not sign on any of the relevant application forms, which was never the prosecution’s case. If it had been proved that D2 did sign any of the relevant documents, it could have become further evidence against him, the absence of which by itself would not have casted doubt on the existence of the conspiracy in question or D2’s involvement. 166.In the circumstances, I find that there was in fact an agreement and therefore a conspiracy at least between D1 and D2 in the aforementioned dishonest scheme of “diverting” polices, i.e. for D2 to lend his name to D1 to falsely represent D2 as the financial consultant in the subject policies where D2 in fact had no involvement in order to defraud AXA to pay out commissions and extra bonuses. I found D2 to be a knowing and willing party to that agreement. It was his intention, as he repeatedly stated in his VRIs, that he wanted to keep his job in AXA, not to be fired and not to be required to return his earlier allowance received from AXA. Consideration of D3’s case 167.In simple terms, D3’s case was that he was told by D1, who was his instructor in a church, to attend the AXA’s induction training course so as to satisfy his then school internship requirement, then to open a bank account to be used as his AXA’s payroll account and hand over the bank card with password to D1. D3 claimed that he never met any clients or potential clients to sell insurance and therefore had no involvement in any of the subject policies in this case. D3 claimed that he fully trusted D1 and did all as told. 168.Similar to the case against D2, on the face of it, the fact that D3 being the named financial consultant in various application forms of the subject policies[63] and involved in various transfers of funds out of the relevant commissions and bonuses from his salary account in AXA to that of D1[64] was very suspicious. D3’s version of handing over his bank card with password to his AXA’s account to D1 (which was the same case as that of D2) appeared equally strange and unreasonable. Nevertheless, all the above had to be considered together with D3’s explanation given in his evidence. 169.D3’s case was rather peculiar. His evidence, in essence was that he blindly placed his full trust on D1 and just followed his instructions without any questioning. The reason was that D1 was his instructor in a South Korean church named Christian Gospel Mission, which the defence described as a well known evil religion or a religious cult. 170.There was no admissible evidence to prove that church which D3 went to was a religious cult, but I found there were at least some very unusual features about that church as disclosed in D3’s evidence. 171.D3 testified that the church required its followers to have strict obedience to the instructors, full and frank disclosure of all personal matters and even living in a dormitory provided by the church. D3 was able to produce several old photographs[65] to support the above. 172.More importantly, D3’s version about his affiliation to that church and his relationship with D1 was well supported by the evidence of his defence witness DW3. DW3, who was D3’s secondary schoolmate and is now a school teacher, was also previously a follower of that church. In fact he was the one who first introduced D3 to join that church back in 2011 when they were both teenagers. DW3 was able to confirm D3’s version that D3 fully trusted D1 as they were usually together in the church. He also described D3’s personality as gullible and that he easily trusted people. 173.D3’s evidence about his affiliation to that church and his relationship with D1, as supported by DW3, was not challenged by the prosecution. 174.Also, I had observed D3’s demeanour when he testified and that he appeared to be a naïve and simple-minded person. I had to bear in mind that he was only a Form 5 student of about 17 years old back in 2011 when he was introduced to that church and started residing in its dormitory. 175.I did not lose sight of all the prosecution’s criticisms of D3’s evidence, for instance, it was implausible for him to join AXA and go through the onerous induction course merely to satisfy the higher diploma requirement, and it was incredible for him to hand over his bank card to D1 out of trust. 176.As said, all the above had to be looked at in the context of D3’s evidence about his affiliation to that church and his relationship with D1, as well as his young age and personal circumstances at the time. 177.In addition, it is worth noting that there were two pieces of undisputed evidence which also lent support to D3’s evidence. 178.First, from the defence exhibits[66], it could be seen that D3 was pursuing his studies in IVE at least between 2013 and June 2016 and that there was in fact a 90-hour-internship school requirement. As such, D3’s claim that he was during that period of time a student and uninterested to work as AXA’s agent but just to join AXA’s induction programme, as onerous as it was, to satisfy his diploma requirement was possibly true. 179.Second, it was noted that, when D3 applied for the relevant Hang Seng bank account and obtained the bank card, it was D1’s home address which had been provided as the correspondence address[67] and that D3 was instructed by D1 to go collect the card and then hand it over right away[68]. All the above was unusual and, to a certain extent, supported D3’s claim that it was all along D1’s idea to obtain that account to be used in AXA and that D3 simply followed D1’s instruction. 180.Having carefully considered D3’s evidence, which was supported by defence exhibits and his defence witness DW3, I accept D3’s evidence about his affiliation with the church and his relationship with D1 at the material times. Against that background, I find D3’s version of having full trust on D1 by joining AXA just for school requirement at the latter’s suggestion and handing over his bank card to D1 just as instructed by D1 could possibly be true. 181.I find it is at least possible that D3 had been manipulated by D1 as described and that D3 could possibly be an innocent dupe having been used by D1 in the handing of the subject policies. In other words, I could not be sure that D3 was party to the agreement or conspiracy which I found existing. I find D3 not guilty. Consideration of D4’s case 182.D4 did not dispute all the prosecution evidence about his involvement on record linking him up to the handling of some of the subject policies, which included he having been the named financial consultant or manager in some of the relevant policies[69], his transfers of funds allegedly out of his commissions from one of the subject policy to D1[70] and his various payments for the premiums of the relevant policies[71] . 183.D4’s case was that he had never signed any of the subject policies in any capacity nor was he involved in the submission of any of them to AXA. He had no knowledge of having paid for the relevant premiums to AXA and had no knowledge of the relevant commissions having been paid into his account either. He just followed D1’s instructions to deposit money into AXA’s account without knowing the nature of the payments. D4 provided his explanation for transferring money to D1’s account from time to time, namely for investing in D1’s furniture business. D4’s defence was that he was not a party to the agreement or conspiracy in this case, regardless of its existence. 184.The main thrust of D4’s evidence centered on his explanations about his numerous transfers of funds into D1’s account and those he made into AXA’s account. D4 claimed he transferred funds into D1’s account for investing in the latter’s furniture business. Though he did make those transfers of funds into AXA’s account, he claimed he did not know he was in fact paying premiums for the subject policies but simply following D1’s instructions. 185.I had carefully considered D4’s version of investing in D1’s furniture business and therefore having a legitimate reason for paying into D1’s account. I found such version full of holes and had no hesitation in rejecting it as blatantly untrue. 186.First of all, there was no documentary proof of any kind to support D4’s version of investing in D1’s furniture business. This is of course not fatal and by self would not have caused me rejecting this version right away. 187.What is important is that, D4’s description of why and how he invested into D1’s furniture business was nonsensical and in defiance of logic. It was particular so when it was from a person like D4 who was a mature, experienced and successful person in the insurance industry. 188.According to D4’s evidence in court, apart from some photographs of a “production site” (which had never been given to or retained by D4 and therefore not produced as exhibits), D1 had never showed D4 any documentation, plans or details of that furniture business. There were no contracts or agreements, books of account or financial statements. There was even no shareholders’ agreement or any document to record the investment and the share of D4 in that furniture business. D4 did not know who else, if any, were investing in that business and their shares. According to D4, he could decide on his own as to how much he wanted to invest and he could simply deposit money into D1’s account in whatever amount and at any time as D4 wished. That obvious did not make any sense. 189.It was ridiculous for D4, as he claimed, to have invested over $2 million by numerous deposits over the course of 2 years, yet no written agreement or document of any kind to record D4’s total or individual investment. It was even more ridiculous for D4 to claim, at one stage, that he even had to borrow a loan of $300,000[72] to invest. Notwithstanding all the above, D4 had never received any return from this investment nor did he see any progress of this furniture business. D4 agreed that he had never invested that way with any other people. 190.I take the view that no genuine investment would have taken place in the way or in such manner as described by D4. No reasonable person would have invested such large sum of money with such frequency over such a long period of time like that. 191.There was also another strange feature. When D4 was asked about various transfers of very substantial amounts of money[73] going the other way round, that is from D1 back to D4, D4 said D1 at one stage told him that there were other investors and the capital was in surplus so that D1 could return some of D4’s earlier investment. That could not be true. I noted that, only in the week of 19 to 26 May 2016, D1 had transferred a total of $3 million to D4’s account[74], which was already more than the total sum of over $2 million allegedly invested by D4. I am sure that all those transfers of money between the respective accounts of D1 and D4 had nothing to do with any furniture business investment as D4 described. 192.I did not lose sight of the video footage[75] taken at D1’s shop in Kwun Tong in March 2019, which was heavily relied upon by the defence. I had carefully watched the video and considered the relevant transcript[76]. That video, even if accepted, could at most show that there was a monetary dispute between the parties. At no stage did anyone mention anything about D1’s furniture business, let alone D4’s investment. I did not find that video lending any support to D4’s claim of investing in D1’s furniture business by depositing sums of money into the latter’s account. 193.D4 also said that he was busy, he rarely reviewed the breakdown of his monthly commission payments and he relied on D1, his upline manager, to inform him of the expected commission amount each month. This is again incredible as no reasonable person would have been so indifferent to or carefree about his own monthly earnings and just relied on what his senior told him. 194.For the above reasons, I am sure that D4’s claim of investing in D1’s furniture business is nothing but a lame excuse to explain away the various transfers of money between his and D1’s respective accounts. 195.I reject D4’s version in its entirety of his reason for depositing money into D1’s account. That investment claim was apparently irrational and devoid of any common sense. It is simply D4’s frail and unsuccessful attempt to look at the relevant transactions between D1 and himself in the bank statements and to tailor his evidence accordingly. 196.I find that D4’s transfers of money into D1’s account were related to their insurance business in AXA and in particular, the various transfers of money by D4 to D1’s account on the same day and shortly after his receipt of the commission from AXA were related to Policy #4 in this case[77]. I find the only reasonable inference is that such transfers of money by D4 to D1 was for partial compensation of D1’s prior payment of the premium of $294,307 for that particular Policy #4[78]. 197.D4’s claim of simply following D1’s instruction to deposit money into AXA’s account without any knowledge of the true nature of the payments (i.e. as payments for premiums for the subject policies) was also not worthy of belief and clearly untrue. 198.As discussed in my earlier analysis, it is most unusual if not impossible for an agent, who is supposed to earn money by selling insurances, to pay out of his own pocket premium for a client and buy him free insurance. Here, although the sums paid were not as substantial as those paid by D1, D4 had paid premiums for 6 out of the 10 subject policies belonging to 4 different clients on 10 different occasions[79], some as the first premiums and some as renewal premiums. 199.Further, according to D4’s bank statements[80], his payments into AXA’s account in fact occurred many times every month in the relevant conspiratorial period of 2015 to 2017. For example, on 31 December 2015, when D4 made a transfer of $16,269 to AXA’s account for payment of premium for Policy #2, he made 3 more transfers of different sums to AXA on the very same day[81]. On 9 August 2016, when D4 made two transfers of different sums of $1,324 and $652 respectively as premium payments for Policies #7 and 8, he was on the same day making another 14 transfers of different sums to AXA[82]. Just for half a month on 9 to 25 April 2016, there were altogether 17 transfers of funds of different amounts from D4’s account to AXA’s account[83]. The frequency of these transfers must have caused any reasonable person suspicion and concern. 200.Not only that D4 had been working full time in AXA but he had also been promoted to a unit manager since 2016. He must be fully aware that AXA account was for or at least mainly for clients to pay their premiums. 201.D4’s version that he was blindly following D1’s instructions without questions and therefore without any knowledge clearly did not hold water. D4 further said that he had been provided with funds by D1 beforehand and that subsequently he had to return the deposit slips to D1 or his secretary. If that was the case, his claim of no knowledge of what he was in fact doing for was even more incredible. It was simply unnecessary and unreasonable for D1 to ask D4 (who had become a unit manager since 1 March 2016 and no longer D1’s downline agent) but not his secretary or someone junior to do that simple and tedious task. Of course there would be a valid reason and it would therefore be necessary for D4 but not someone else to do it when both D1 and D4 knew what they were doing was in fact for the execution of their dishonest scheme. 202.I find it most unreasonable for D4 to have asked no question and claim to be ignorant as to what he was doing but simply did as told by D1. On the contrary, I find the only reasonable inference is that D4 was knowingly assisting D1 as part of their agreement in this case. 203.If D4 did receive instructions from D1 and was knowingly paying for those premiums so that the subject policies could become effective or continue to remain effective, which I found to be the case, it would be strong evidence as proof of an agreement between them in this dishonest scheme of “diverting” policies. 204.The defence for D4 had produced certain tax information from the Inland Revenue Department[84] to show that D4 achieved great success in his insurance business and therefore it was unlikely that he would risk his reputation and financial stability by engaging in fraudulent activities for a modest sum in this case. I was not convinced by such defence argument that the fact that one could generate significant income would suggest no motive to engage in any fraudulent acts. It is the overall circumstance to be fully canvassed. The mere fact that D4 was making good money in the conspiratorial period, even if true, did not cast any reasonable doubt on the comparatively strong case against him. 205.Just like what I had considered and decided in the case against D2, for the same reason and logic, the evidence of DW5, the handwriting expert, did not assist D4 either. 206.Having rejected D4’s innocent explanations as aforesaid, all the prosecution evidence against him remained intact. 207.I did not forget what I observed when dealing with the case against D1, which could also be applied in D4’s case. The respective telephone numbers of D1 and D4 had been found on various AXA’s payment slips relevant to the subject policies[85]. That supports the inference that both of these defendants being the named managers of the subject policies[86] had been monitoring or keeping track of the operation of this dishonest scheme. 208.In view of all the circumstances, in particular D4’s numerous transfers of funds to D1 and AXA as described above, I find the only reasonable inference is D4 being a knowing and willing party to this agreement and conspiracy to defraud AXA. I find that there was in fact an agreement and therefore a conspiracy between D1 and D4 in the aforementioned dishonest scheme of “diverting” polices, i.e. for D4 to assist D1 in submitting those relevant application forms with false representations in the financial consultant’s declarations, to defraud AXA to pay out commissions and extra bonuses. D4’s role was essential as it included paying for the premiums and renewal premiums to cause the subject policies to become effective or continue to remain effective. In addition to that, D4 also lent his name to become the named financial consultant in one subject policy and named manager in 3 others, as well as leaving his mobile phone number on some AXA’s payment slips to maintain contact and keep track of some of the subject policies. 209.It is important to note that, in the conspiratorial period of 2015 to 2017, not only that there were transfers of funds from D2 to D1 as well as from D4 to D1 as set out in my earlier analysis of the respective cases against D1, D2 and D4, there was also undisputed evidence of numerous transfers of funds from D4’s account to D2’s Hang Seng Bank account under D2’s own control (not D2’s HSBC account the control of which had been given by D2 to D1). 210.It can be seen from the respective bank records of D2[87] and D4[88] that, between 9 January 2016 and 13 March 2017, there were at least 14 transfers of different sums ranging from $2,500 to $185,000 from D4’s account to D2’s Hang Seng Bank account (202-114898-882) which according to D2’s evidence was all along under his own control. 211.The only reasonable inference is that both D2 and D4 knew, apart from D1, there was at least another person involved in this dishonest scheme. 212.Having considered all the evidence against D1, D2 and D4, I find the only reasonable inference is that they were all parties to an agreement and therefore a conspiracy of this dishonest scheme of “diverting” policies to defraud AXA. D1 was the key figure or the main character assisted by D2 who was the second-in-command and with D3 as a willing and knowing party lending his name and his bank account to facilitate the execution of this plan. 213.For the above reasons, I find D1, D2 and D4 guilty. Conclusion 214.For this sole charge of conspiracy to defraud, I find D1, D2 and D4 guilty and, D3, D5 and D6 not guilty.
[1] PW1 to PW4 being policyholders whereas PW6 to PW10 being AXA managers of different departments [2] Marked as MFI-1 [3] Except the identity of the actual selling agents which was in dispute [4] Marked as MFI-2 [5] PW2 said he requested to purchase a policy with a monthly premium of just around $1,000. The yearly premium for Policy #4 however turned out to be $294,307 [6] PW2’s evidence was that he instructed for payments of premium to be deducted automatically from his own bank account. Policy #4 was nevertheless paid for by transfers from D1’s and D4’s bank accounts [7] Manual produced as P17, see paragraphs at [161, 163 and 165] of Bundle [8] For example, P98 and P99 at [621 – 637] of Bundle [9] Policies #2, 4, 6 and 10 [10] Policies #1 to 3 and 5 to 10 [11] Policy #4 as agent and Policies #7 to 9 as upline manager [12] Policies #1 to 4, 6 and 10 [13] P165 at paragraphs 11, 15, 20, 24, 28, 32, 36, 37, 39, 43, 46 and 51 [14] P98 – P126 at [621 – 959] of Bundle; P98 – P111 for D3, P112 – P122 for D2, P123 – P125 for D4 and P126 for D1 [15] $296,030.31 (extra bonuses) + $452,836.25 (commissions) = $748,866.56 [16] P17 at [158 - 178] of Bundle [17] P165 at paragraph 58 [18] Policies #2, 4, 6 and 10 [19] That is, D3’s defence witness, DW3 [20] D3-5 [21] D3-1 [22] D4-1 (video) and D4-2 (transcript) [23] D4-3 [24] D2-5, D3-6 and D4-4 [25] Admitted facts P165, at paragraphs 3 – 8 [26] Policies #1 – 3 and 5 – 6 by D1’s friend or his mother’s friend; Policy #4 by D5’s former classmate; Policies #7 – 10 by D6’s former classmate [27] D2 in Policies #2, 4, 6 and 10; D3 in all 10 policies except Policy #4; D4 in Policy #4 [28] Except in Policy #5 where a person named LI Chung Hing was the named manager; D1 was the named manager in Policies #1 – 4, 6 and 10; D4 was the named manager in Policies #7 – 9 [29] Policies #1, 3, 5 and 10, premiums paid by cash or untraceable source [30] Policies #2, 4, 6 – 9, premiums paid through a total of 10 bank transfers by D4 [31] Policies #2, 4 and 6, premiums paid through a total of 3 bank transfers by D1 [32] Policies #2, 4, 6, 8 and 9 [33] A total of 13 bank transfers totalling $753,920 under Policies #2, 4, 6, 8 and 9 [34] One bank transfer of $15,000 under Policy #4 [35] Policies #2, 4, 6, 8 and 9 [36] PW2 bought Policy #4; PW4 bought Policies #7 – 10 [37] P165, the Admitted Facts, at paragraph 8 [38] P165, the Admitted Facts, at paragraphs 41, 44, 49 and 54 [39] Policy #7 was issued on 9 August 2016 [40] [565 – 567] of Bundle [41] P88 at [474] of Bundle [42] P88 and P89 at [490] and [547] of Bundle [43] [391] of Bundle [44] [471] of Bundle [45] [392] of Bundle [46] [608] of Bundle [47] Transfers of $196,920 ($50,000 x 3 + $49,600) + cash of $60,000 = $256,920 [48] Transfers of $78,000 ($23,000 + $40,000 + $15,000) + cash of $20,000 = $98,000 [49] Transfers of $150,000 ($50,000 x 3) + cash of $40,000 ($20,000 x 2) = $190,000 [50] Transfer of $50,000 + cash of $20,000 = $70,000 [51] $195,395.10 for Policy #2, $294,307 for Policy #4 and $240,908.60 for Policy #6 [52] $195,395.10 for Policy #2, $294,307 for Policy #4 and $240,908.60 for Policy #6, totalling $730,610.70 [53] $196,920 in total for Policy #2, $228,000 in total for Policy #4, $185,000 in total for Policy #6, $59,000 for Policy #8, $100,000 for Policy #9, totalling $768,920 [54] $40,000 in total in D2’s account, $60,000 in total in D3’s account, $40,000 in total in D4’s account, totalling $140,000 [55] $195,395.10 for Policy #2, $294,307 for Policy #4 and $240,908.60 for Policy #6, totalling $730,610.70 [56] $196,920 in total for Policy #2, $228,000 in total for Policy #4, $185,000 in total for Policy #6, $59,000 for Policy #8, $100,000 for Policy #9, totalling $768,920 [57] As shown in D3-3, at p.1, D1 said in whatsapp that he would pass on a copy of D3’s bank card to “fei lo” (allegedly one “Alan Chan”, whose position was higher than that of D1) [58] Policies #2, 4, 6 – 9 [59] D1’s mobile number on P20, 21, 24, 26, 27, 31, 35, 39, 43, 47, 49, 51 and 65; D4’s mobile number on P37, 38, 56 and 61. [60] Policies #2, 4, 6 and 10 [61] For example, in paragraphs 420, 605 – 606, 618 and 656 of the 1st VRI [62] At paragraphs 911 – 921 of D2’s 3rd VRI [63] Policies # 1, 2, 3, 5 – 10 [64] Relating to Policies #2, 6, 8 and 9 [65] D3-5 [66] D3-1 [67] D3-4 [68] As discussed in a contemporaneous whatsapp record on 22 August 2014 at D3-3 [69] D4 was the named financial consultant in Policy #4 and the named manager in Policies # 7 – 9 [70] On 8 October 2015, AXA paid out $212,955.82 including $87,805.66 for Policy #4 to D4; on the same day of 8 October as well as 9 and 24 October 2015, D4 transferred $50,000 on each occasion totalling $150,000 to D1; also on 8 and 9 October 2015, 2 cash withdrawals of $20,000 each totalling $40,000 were made from D4’s account [71] D4 had paid the premiums or renewal premiums for Policies # 2, 4, 6 – 9 by way of 10 transfers [72] P88 at [474] [73] P88 at [476 – 544], ranging from $100,000 to $1 million [74] P88 at [484 – 485], $1 million each totalling $3 million were transferred from D1 to D4’s account on 19, 23 and 26.5.2016 [75] D4-1 [76] D4-2 [77] D4 received commissions of $212,955.82 ($87,805.66 for Policy #4) from AXA on 8.10.2015; D4 transferred 3 sums of $50,000 each totalling $150,000 to D1’s account on 8, 9 and 24.10.2015 and that D4 made 2 cash withdrawals of $20,000 each totalling $40,000 on 8 and 9.10.2015 respectively [78] The other partial compensation came from D2’s transfers of a total sum of $78,000 to the respective accounts of D1 and D1’s mother plus cash withdrawal of $20,000 on the same day of 8.10.2015 and the next day [79] D4 paid a total sum of $72,830 for Policies #2, 4, 6 – 9 belonging to PW1 – PW4 by way of 10 bank transfers [80] P88 [81] P88 at [474] [82] P88 at [496] [83] P88 at [481 – 482] [84] D4-3 [85] D1’s mobile number on P20, 21, 24, 26, 27, 31, 35, 39, 43, 47, 49, 51 and 65; D4’s mobile number on P37, 38, 56 and 61. [86] D1 was the named manager of Polices # 1 – 4, 6 and 10 whereas D4 the named manager of Polices #7 – 9 [87] D2-2 [88] P88 at [474 – 531], in particular [474, 476, 480, 484, 488, 491, 495, 502, 506, 511, 515, 522, 527 and 531] |
Cases cited in this judgment
Further hearings and rulings under DCCC 16/2022