HKSAR v. Chan Man Chuen

DCCC1060/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1060 OF 2009

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Reasons for Sentence

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1.The defendant has been convicted after trial of four charges. The first two charges are for conspiracy to defraud which carries a maximum of 14 years’ imprisonment. The 3rd charge of falsifying accounts carries a maximum of 10 years and the 4th charge of publishing false statement by company directors carries a maximum of 10 years.

2.I have found that the defendant had participated and concurred in setting up bogus companies in relation to Charges 1 and 2 to issue false invoices to draw down the invoice financing loans that BII and JSB, that is Jian Sing Bank, had extended to his company.

3.According to Mr Richmond, the amount outstanding remaining owed to BII was $2 million in May 2001 after a total loan draw down of $6,138,662. In relation to Jian Sing Bank, a total of 4.8 million is still owed.

4.Mr Richmond submitted in mitigation that the defendant did not personally gain from these frauds, and I have certain reservations on that point.Although there may not be personal gain, if the company was able to stay afloat longer, the defendant and his co-directors could continue to enjoy their salaries and benefits of the company.

5.Furthermore, these invoice financing loans were guaranteed by the defendant and Luen Cheong Tai International Holdings, so it benefited the defendant to keep the fraud going as long as possible.

6.Mr Richmond also submitted that all the four co-conspirators, the four directors, played equal roles and therefore the defendant should not be singled out for special treatment. Whilst to some extent I agree with that that there is no evidence to show who was the mastermind of the scheme or played what is called a prime mover role as noted by Deputy Judge Chan in sentencing Mak Kwun-yiu and Chan Kai-yiu in DCCC771/2008, nevertheless, the defendant appeared to have started the ball rolling together with Vong by persuading PW2 Mr Mui to co-operate in setting up Cheung Shing and Chung Fai.

7.The defendant was also instrumental in obtaining the invoice financing loans from BII as he was one of the guarantors to the loans.

8.In these two charges, Charges 1 and 2, I have no doubt that the defendant and Vong’s roles were certainly more important than that of Mak and Chan.

9.Conspiracy to defraud covers a wide range of culpability and each case has to be looked at individually. There is no tariff or guidelines. In my view, these two charges are very serious and involve a lot of planning and the consequences are also very far-reaching as they affect not only our banking system and may affect the trust built up between companies and bankers and thus may affect the smooth flow of commercial transactions.

10.These two charges have caused the banks to lose almost $7 million, and if this type of offence is allowed to continue unabated, it will lead to increased banking charges, thus affecting all other genuine businesses struggling in these tough economic times. Further, this type of offence affects the reputation of Hong Kong internationally.

11.There is a letter signed by the defendant’s children testifying to the fact that the defendant is a self-made man and a good father and good family provider. Unfortunately, this pales in comparison to the harm that such offences do to the community and it merits a deterrent sentence because of the difficulty of detection.

12.I consider, therefore, that an appropriate starting point for Charges 1 and 2 would be 3½ years’ imprisonment on each charge.

13.I do take into consideration that the defendant is 62 years old and it is the first time that he shall be going to prison. So I will make a deduction of 4 months to take into account those facts and so the total sentence on each charge would be 38 months.

14.Although I must say that I would have only deducted 3 months to take into account the defendant’s age and that it will be the first time he is going to prison, but since Deputy Judge Chan gave 4 months in the case of Mak Kwun-yiu and Chan Kai-yiu, I do also give 4 months to avoid any sense of grievance the defendant might feel.

15.On Charge 3, the defendant was also heavily involved with Nelson Chan Kai-yiu in this conspiracy to falsify accounts which, as Deputy Judge Chan noted, involved elaborate planning and false documentation and bogus transactions on two websites and almost $60 million of apparent assets were written off from the books of the listed company Luen Cheong Tai International Holdings Limited.

16.This not only tarnished Hong Kong’s image as a financial centre, I would go further to say that it also affects the interests of members of the public, at the very least the confidence of the share buying public in the integrity of our listed companies. An appropriate starting point, therefore, for this charge is 3 years and I reduce it by 4 months because of the defendant’s age and clear record. So on Charge 3, the defendant is sentenced to 2 years and 8 months.

17.Now, finally, Charge 4 is also a serious offence, and what I have said about Hong Kong’s international reputation being affected also applies in this charge. The defendant not only concurred in publishing the annual report, he put his name to the annual report as chairman. I consider that a starting point of 18 months is appropriate and in view of the defendant’s age and clear record, I reduce it by 4 months to 14 month.

18.Now, I have to consider the totality principle. Charge 1 and Charge 2, the 38 months’ sentence for each will be served concurrently. Charge 3 and Charge 4, I agree with Mr Richmond’s submission that Charge 4 flows from Charge 3. So Charge 3 and 4 will be served concurrently, but one year out of that concurrent sentence of 2 years 8 months will be served consecutive to the 38 months for Charges 1 and 2. So that will give us a total of 4 years and 2 months. So the defendant is sentenced to 4 years and 2 months.