HKSAR v. Chiang Chun Wai and Another

CACC000011/2001

CACC 11/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 11 OF 2001

(ON APPEAL FROM DCCC 513 OF 2000)

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Coram: Hon Stuart-Moore VP, Woo JA and Stock JA

Date of Hearing: 12 October 2001

Date of Judgment: 12 October 2001

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J U D G M E N T

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Stuart-Moore VP (giving the judgment of the Court):

1.On 7 November 2000, following a trial in the District Court before Deputy Judge Browne, the Applicants, D5 and D6 respectively, were convicted of conspiracy to defraud. They were each sentenced on 20 December 2000 to three years and eight months' imprisonment. They now seek leave to appeal against sentence.

2.The charge of conspiracy was faced by seven defendants including the present Applicants. It alleged that between 19 November 1999 and 1 March 2000 they had conspired together and with others unknown to defraud such persons as might be induced to give them money to invest, by dishonestly:

"(1) falsely representing to such persons that they were genuinely employed by Sheen Victory Trading Limited;

(2) falsely representing to such persons that Sheen Victory Trading Limited was genuinely engaged in trading, investing and commercial activities;

(3) inducing such persons to invest moneys in investments introduced by Sheen Victory Trading Limited;

(4) falsely representing to such persons that money invested by such persons had been invested in genuine investments;

(5) failing to invest moneys provided by such persons for the purpose of investment;

(6) falsely representing to such persons that moneys invested had incurred losses; and

(7) appropriating moneys provided by such persons for the purpose of investment."

3.The sentencing judge summarised the facts with commendable clarity. He was satisfied that Sheen Victory was a sham company which had been set up solely for the purpose of deceiving unsuspecting members of the public into parting with their money. The scam was a sophisticated one involving detailed planning and not inconsiderable expense. The judge comprehensively described the way it worked and we can see no advantage in attempting further to summarise the facts from the way in which they were expressed by the judge in his Reasons for Sentence. The judge said:

"Sheen Victory had its own suite of impressive looking offices in Wan Chai. Adverts were placed in newspapers offering an attractive salary for an unskilled job. The name of the company never appeared in these advertisements and over the period subject of the charge, eight different telephone numbers were used. The job applicants would normally be told at interviews that the company operated as a sort of food snack trading company and the applicants would be recruited as office assistants .

At the interview they would be invited to fill in their personal details on a form headed 'Application Form'. On the reverse side of this form was a document entirely in English headed 'Agency Agreement'. All the victims signed the agency agreement, but it was clear from their evidence that they had not the slightest idea of what it said or what its effect was. The agency agreement purported to appoint the victims as agents for the procurement of trading orders in spot gold bullion and spot silver trading. Given the backgrounds of most of the victims, such an appointment was clearly ludicrous. They had not the slightest knowledge of this business.

Either at interview or shortly after they started 'work', they would be told to bring to the office and produce to the manager their bank passbooks. They were told that this was necessary to facilitate payment of their salaries. The real reason, of course, for this was to see how much money they had.

On their first day of work the new recruit would be introduced to another purported new recruit - I will refer to these supposed new recruits as 'staff 1' - and it was arranged that the victims and the staff 1 would work together. They would be given documents which appear to relate to food or other products and the purpose of giving them these documents was to enable them to make simple calculations. They were given plenty of time to carry out this relatively simple task. They were generally left alone with the staff 1. The purpose of this was to enable the staff 1 to build up a personal rapport with the victim. Another reason was to create the impression in the minds of the victims that these staff 1 were in the same situations as the victims and this aspect of their relationship would be important when later on the victims started to lose their money.

Throughout the whole period of their employment with Sheen Victory, the victims would spend nearly all their time with the staff ls. They would go for lunch together and often telephone numbers would be exchanged and they would contact each other outside office hours. The purpose of this was not only to build up a rapport between the staff ls and the victims, but also to control the movements of the victims within the company premises.

The forms for calculation were given to the victims by another member of staff or a manager. This second member of staff - I will refer to that person as staff 2 - would drop in from time to time for what appeared to be innocent and casual chit-chat with the victim and staff 1. This chit-chat, of course, was far from innocent. Again, it was a confidence-gaining tactic to enable a dialogue to develop between these members of staff and the victims. The talk would gradually and inevitably move towards the issue of investments and staffs 2 would mention very favourable investment opportunities available to certain employees of Sheen Victory.

The methods of raising these issues varied. On occasions, envelopes containing money would be handed to the staff 2 by another member of the staff. In the case of some of the victims, the staff 2 would leave a file on the desk of the victim and staff 1. These staff ls would look at the file and ask questions of staff 2 about the file and the staff 2 would tell the staff ls and the listening victim that the documents related to investment opportunities offered by the company where substantial profits had been made. The victims and the staff ls would normally be told that although these investments were open to employees, the opportunities were limited and required the consent of the manager or some other fictitious manager in Taiwan who owned the company. The staff ls would then show a very great interest in the investment schemes and would encourage the victim to invest as well.

The description of the investment was always nebulous. Sometimes mention of silver bullion investment would be mentioned, but generally it was described as being in some way connected with the government. The purpose of this was to give it an aura of solidity and reliability. In whatever manner the investment was described, the victim would be assured that it was a safe, profitable and with a quick return. Indeed, some of the victims, for example, PW11, were told that profits could be made as soon as the account was opened and the capital could be retrieved, leaving the interest earned to appreciate.

Once the victims agreed to the investment, they would be encouraged to withdraw cash from the bank the same day and they would always be accompanied to the bank by at least the staff 1. The cash would later be handed to the manager. A receipt would be given and the victim would sign a client agreement, which was purportedly explained to them by the manager. This client agreement related to the making of margin deposits for bullion trading. Though few of the victims had any idea what it was about, they were never given copies of the document.

The victims and the staff ls, who apparently would also invest at the same time as the victims, would then be given buying and selling forms to enable them to trade. The procedure would be explained to them either by the manager or one of the other members of staff. Shortly afterwards, they would be told that they had over traded and needed extra funds to square their accounts. Some of the victims were told that what they had done was illegal and the manager would appear to be very irate. These shock tactics were designed to harass the victims into producing more money as soon as possible and it was at this stage in their relationship that the relationship with the staff ls was particularly important, because the victims would be under the impression that the staff ls were in the same situation and they would discuss what their options were and how to raise further sums of money.

Most of the victims did make further deposits. After these further deposits had been made, the opportunity for further trading was given to the victims and the staff ls. Eventually the victim would again be informed by an apparently irate manager that they had traded recklessly and illegally. Many of them were told that they owed substantial further sums of money to the company and were invited to leave straightaway. Many of them were told not to tell anyone about what had happened or to make a report to the police because they had acted illegally. To add insult to injury, a number of the victims would be asked to hand over what little money they had left on them as a form of handling charge. For example, PW2 said that she was invited to pay $366 to D1 before she tearfully left the company........ Many of the victims who gave evidence in court were obviously distressed, not only because they had lost money but also because they had been so cynically exploited by the defendants. Over the period of days they had spent with the company, they had come to trust the defendants.

The role of staff 1 was particularly distasteful. This person would need many talents. They would need to have good interpersonal skills and also to be good actors. They would also need to be completely devoid of any sense of morality or compassion.

It was not just that some money was taken from the victims, all of their money was taken. Most of the victims lost all their life savings. For example, the second prosecution witness, she was in tears in the witness-box as she told the court how she had lost $100,000. She was one of the older victims, she was in her 50s and had been educated only to primary level. Her previous employment had been working with machines in a publishing company. The money she lost represented her life savings. She clearly found it very difficult to recount the memories of what happened to her during the course of this incident. She clearly had been frightened, intimidated and humiliated by her experience.

What was surprising in this case was that many of the victims were initially suspicious of the company. Indeed, some of them in fact raised the point directly, 'Is this the sort of company that would deceive us?' One of the very important duties of the staff 1 was to allay such suspicions. They would claim that they had made enquiries about the company with a responsible person such as police officers or people employed by the government and that those persons had reassured them that Sheen Victory was a reputable and well-established company......

The conspirators showed not only a considerable degree of cunning, but also a great deal of audacity. They operated in the face of much media coverage of scams of a similar nature." (Tr. pp. 63-68)

4.The judge noted that after the first police raid on the premises on 21 January 2001, all of the defendants who had until then been involved, except D5, were soon back in business on precisely the same scam. In D6's case, she had only joined the conspiracy after that date.

5.Importantly also, the judge observed that save for some equivocal remarks made by D5 in a background report, the defendants had otherwise shown not the least sign of remorse. No cooperation was forthcoming during the investigation, no admissions were made and there was not one single offer of any restitution. Bearing in mind the loss to the victims of $1.6 million and the fact that none of the seven defendants who came before the court was considered by the judge to have been the "brains" behind the scam, he took a starting point of four years' imprisonment saying:

"I make no differentiation between them for the purposes of sentence; they were all working towards a common objective. Whether they played the role of manager or new staff or other staff, in my view, does not affect their criminal culpability." (Tr. p. 69)

6.The slightly reduced sentences received by the present Applicants, and also by D7, were given in the light of their clear records. All the remaining defendants received four-year sentences.

7.With this background, Mr Grounds, on behalf of D5, submitted that the starting point which the judge adopted was manifestly excessive and that it was wrong for a generalised starting point to have been taken without having any regard to the particular role played by individual defendants in the scam. He particularly highlighted the position of D1, and to an extent D2 also, who had played more prominent roles on the evidence than the others. This is plainly shown from the Reasons for Verdict. Mr Grounds also emphasised that D5 had not continued with his criminal activity after he had been arrested in January, unlike all of the others who had been involved up to that time.

8.We consider, in view of the value of the losses and the sophisticated nature of this fraud, that those who played a part in both phases of the conspiracy were fortunate to have received sentences of only four years. Those who enter into heartless and cruel scams of this kind, and who are prepared to fleece gullible and blameless victims of as much of their hard-earned savings as they can lay their hands on, should expect to receive heavy sentences, not merely as punishment for the offence but as a deterrent to others with a similar mind.

9.With regard to the submission that D5 had not continued with the commission of the offence following his arrest, this was a factor which the judge had not overlooked but, curiously, he gave no effect to this. In our view, the other defendants who carried on the conspiracy as if nothing had happened, were extremely lucky not to have received longer sentences on account of this aggravating factor. It was to be directly equated with a further offence committed whilst on bail for which a consecutive sentence, in whole or in part, is generally imposed. As to D7, not only did he escape an increase of sentence on this account, he was even given a discount from the starting point for good character.

10.We readily see the force of the argument, so far as D5 is concerned, that the judge had failed properly to apportion blame. We should say, for the purposes of completing the picture as regards D3 and D4, that by the time they received their four-year sentences for this conspiracy, they were each already serving a sentence of four years' imprisonment for yet another identical scam. The judge, with totality in mind, ordered that two years of the sentences he imposed on D3 and D4 should run consecutively to the four years they were already serving, making six years in all. This, however, only serves to heighten the distinction between D3 and D4, and D1 and D2 to whom we have referred already, and the role played by D5.

11.In D5's case, we consider that the trial judge should have taken a lower starting point for him to reflect the fact that he was not involved in both phases of the conspiracy but in one only. Having said this, we wish to emphasise that we make no criticism of the four-year starting point for D5 in itself. The real criticism we make is aimed at the inadequacy of this starting point for the other defendants involved in the whole of the conspiracy.

12.Although Mr Grounds did not appear on behalf of D6, the same arguments put forward on D5's behalf could equally have been advanced for D6 who was only involved in the second phase of the conspiracy.

13.We propose, in view of what we have said, to grant leave. Treating the hearing as the appeal, we propose to reduce the sentences of D5 and D6 by six months in each case. To the extent that both of their sentences are reduced to three years and two months, their appeals succeed.

Representation:

Mr P.K. Madigan, SGC, of the Department of Justice, for the Respondent.

Mr Christopher Grounds, instructed by Messrs Jal N. Karbhari for D5/Applicant.

D6/Applicant in person.