HKSAR v. Ho Wing Cheong and Others
Read the full judgment text of CACC 283/2007 on BabelCite. This Court of Appeal judgment was delivered on 30 July 2010.
1. This is the application of the 3 rd defendant herein, Mr Li Wing-Kei, for leave to appeal against both his conviction and sentence in HCCC 10 of 2006 .
Cited by 1 case · Cites 2 cases
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CACC 283/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. CACC 283 OF 2007 (ON APPEAL FROM HCCC NO. 10 OF 2006) ----------------------
---------------------- Before: Hon Stock VP, Hon Yeung JA, Hon Stone J in Court Date of Hearing: 3 June 2010 Date of Additional Written Submission from D3: 14 June 2010 Date of Judgment: 30 July 2010 ---------------------- J U D G M E N T ---------------------- Hon Stone J (giving the judgment of the Court): This appeal 1.This is the application of the 3rd defendant herein, Mr Li Wing-Kei, for leave to appeal against both his conviction and sentence in HCCC 10 of 2006. 2.This appeal originally was scheduled to be heard before this court on 10 and 11 November 2009, together with the appeals of the 1st defendant, Ho Wing-cheong, and the 2nd defendant, Chan Wing-kei, who also had been convicted and sentenced in HCCC 10 of 2006, the judgment in respect of whose appeals was handed down on 18 December 2009. 3.That earlier judgment speaks for itself; save for a reduction in the sentence of the 2nd defendant, the applications for leave to appeal were dismissed. 4.During the course of that initial hearing it became evident that the 3rd defendant, who was unrepresented, found himself in difficulty in terms of preparation of his arguments, and accordingly, with the consent of counsel for the respondent, Mrs Campbell-Moffat, the appeal of the 3rd defendant was ordered to stand adjourned until 3 June 2010. 5.This, then, is the judgment of this court in respect of this remaining appeal, which represents the third instalment in a sequence of criminal litigation involving attempts by three companies dishonestly to mislead the Listing Committee of the Hong Kong Stock Exchange in order to achieve a public listing on the Main Board. The procedural background: HCCC 10 of 2006 6.Together with the 1st, 2nd and 4th defendants, the 3rd defendant was prosecuted under HCCC 10 of 2006, which originally was listed for trial before Lunn J. on 23 April 2007. 7.However, on 14 May 2007 the 4th defendant, Madam Kwok Shu-wah, entered a guilty plea and was remanded for sentence. 8.The result of this development was that on 30 May 2007, on his application the trial/indictment of the 3rd defendant, who had formed an intimate relationship with the 4th defendant, was severed from that of the 1st and 2nd defendants, and he was remanded in custody pending trial. 9.Accordingly, the 3rd defendant stood trial alone on 10 December 2007 before Lunn J and a jury, and after a 42 day trial he was convicted on 19 February 2008 of two counts of conspiracy to defraud. 10.Count 1 charged a conspiracy to defraud the Stock Exchange of Hong Kong (‘SEHK’) between 1 February 2001 and 27 March 2002 - the dates of this indictment subsequently being amended to widen the relevant period from 1 October 2000 to 27 March 2002 - and under Count 2 the 3rd defendant was charged with conspiracy to defraud the investors, shareholders and creditors of Fu Cheong International Holdings Limited and its subsidiaries and SEHK between 1 February 2001 and 22 April 2002, these dates once again being widened by amendment so as to encompass the period 1 October 2000 to 22 April 2002. 11.Upon conviction, the 3rd defendant was sentenced by the learned trial judge to imprisonment for 9 years on Count 1, and to 9 years on Count 2, Lunn J ordering that these sentences were to be served concurrently, but that - and here we quote directly from the words used by the trial judge - “one year of each of those sentences be served consecutively to the sentences the 3rd defendant then was serving.” 12.The latter reference was to the sentences which earlier had been imposed on the 3rd defendant in a preceding case, HCCC 134 of 2004, in which he had been convicted on three counts - two of which were in like form to the counts of which he was convicted in the instant case - and one entirely independent (and unrelated) count of conspiracy to steal. 13.In this earlier case the 3rd defendant had been sentenced by Tong J to 10 years on each conspiracy to defraud, and 5 years on the conspiracy to steal, these sentences to run concurrently, although on appeal in CACC 104 of 2007 the period of 10 years was reduced to 9 years on the conspiracy to defraud counts, resulting in that earlier case in a total of 9 years imprisonment. 14.The effect of the order made by Lunn J in relation to the sentences imposed in these two separate cases has given rise to some confusion. 15.The document entitled “Amended Certificate of Sentences”, rendered under seal of the Registrar of the High Court and addressed to the Commissioner of Correctional Services, records the judge’s order as to concurrent sentences of 9 years on each count, save that one year of each of those sentences be served consecutively to the sentences he then was serving, and thus on its face this Certificate states that this is a “Total period of imprisonment for ELEVEN (11) years”. 16.However, in her address to this court, Mrs Campbell-Moffat has indicated that her understanding of the meaning of this order, both at the time at which it was pronounced and at the hearing of this appeal, was and is that the intention of the learned judge was that the resultant total sentence on the 3rd defendant for these two cases was but one of 10 years. 17.We add that when leading counsel were addressing this court in the initial hearing of this appeal of the 1st and 2nd defendants - which, as we have observed, was adjourned in the case of the 3rd defendant - our notes of the argument concerning sentences imposed on the 1st and 2nd defendants made reference to a total sentence of 10 years in respect of the 3rd defendant for the two cases. 18.Hence the uncertainty, and we revert to this issue when we consider the 3rd defendant’s application for leave to appeal against sentence. The factual background: HCCC 10 of 2006, HCCC 134 of 2004 and DCCC 703 of 2005 19.The case under consideration in this appeal, HCCC 10 of 2006, was the third and last in a trilogy of related cases, all of which involved a substantially like dishonest scheme fraudulently to ‘cook the books’ of companies wishing to list on the Main Board of the SEHK, there being in place a strict set of regulatory financial benchmarks which were required to be satisfied before the Listing Committee of the SEHK would consent to an Initial Public Offering (‘IPO’). 20.The first such case was DCCC 703 of 2005, held in the District Court before Deputy Judge Dufton, which concerned a company known as Yue Fung International Holdings Limited (‘Yue Fung’). This was the case which set the pattern for what was to come: the inflation by the Lee brothers of Yue Fung, of the gross profit margins of that company, via the use of fraudulent Letter of Credit transactions, had enabled Yue Fung to list on the SEHK in October 1997. 21.The second trial in the series has come to be known generally as the ‘Gold Wo case’, since it concerned a company known as Gold Wo International Holdings Limited, and wherein substantially a like modus operandi was employed by the owners, the Fu family, to present to the Listing Committee an false and misleading picture of Gold Wo’s financial position and annual turnover, and to obtain the grant of a public listing in April 2001. 22.This second case was presided over by Tong J, and, as earlier noted, also had involved the 3rd defendant, whom in that case was convicted of three counts of conspiracy to defraud, two of which were, methodologically, ‘carbon copies’ of Counts 1 and 2 of which he was convicted in the case now under consideration. 23.This third and final case involved Fu Cheong International Holdings Limited (‘Fu Cheong’), and a similar sequence of fraudulent events whereby the defendants conspired to present a false financial picture to the Listing Committee of the SEHK - and indeed initially succeeded; Fu Cheong, which was the holding company of the ‘Fu Cheong Group’, became listed on the Main Board on 27 March 2002, although subsequently it was de-listed. The fraudulent conspiracy: the circumstances 24.We earlier have referred to the two counts of which the 3rd defendant was convicted. In fact, the conspiracies as charged were aimed at defrauding different entities. 25.Count 1 alleged a conspiracy to defraud the Stock Exchange in its consideration of the application by Fu Cheong to list on the Exchange by dishonestly misrepresenting the sales turnover and profits of Fu Cheong and its subsidiary, (Fortune Conductive Carbon) PCB Factory Company Ltd, for the 3 financial years 1998, 1999, and 2000, and the period from 1 January 2001 to 30 September 2001, in order to meet the requirements of the Exchange. 26.Defrauding the shareholders of Fu Cheong had its focus in Count 2, in that a conspiracy was alleged to defraud the shareholders, investors and creditors of Fu Cheong by dishonestly misrepresenting the sales turnover and profits for the financial year ended 2001. 27.The 1st defendant to the severed indictment, Mr Ho Wing Cheong, was the founder of a group of companies, the “heart of which”, as the learned trial judge expressed the position, was Fortune (Conductive Carbon) BVI (‘Fortune’) of which, in March 2002, Fu Cheong was the holding company incorporated in the Cayman Islands. The parent company of Fu Cheong was Advanced Technology International Holdings Limited (‘Advanced Technology’), which in turn was owned by an American company, Score One Inc.; it is the affairs of Score One, or, more particularly, the falsified accounts which were used to ‘float’ that company in the United States, which forms a significant focus of the present application on behalf of the 3rd defendant for leave to appeal against conviction and sentence. 28.The 2nd defendant, Mr Albert Chan Wing-kui, was the financial controller of Fu Cheong, whilst the 4th defendant, Ms Connie Kwok Shuk-wah (whose guilty plea had caused severance of the original indictment, and thus had precipitated the separate trial of the 3rd defendant), had become an executive director of Fu Cheong in April 2001, and had significant responsibilities in relation to the intended proposed listing on the HKSE. 29.Fortune manufactured printed circuit boards (PCBs) at its Dongguan Fortune Circuit Factory Company in the PRC, which sold and delivered that product to mainland factories of Hong Kong corporate customers. A company called Horn Kingdom Limited was a sham entity allegedly providing Research and Development services, and another company named Ford Reach Limited was a subsidiary which traded in place of Fortune for a limited period between January and September 1999. 30.The nub of the prosecution case upon Count 1 was that when it was determined to try to list Fu Cheong on the HKSE - in this connection following the example of the Lee Brothers of Yue Fung (listed in October 1997), and the Fu family of Gold Wo (listed in April 2001), the owners of Fu Cheong were faced with the requirements of the HKSE listing rules, in particular that which was known as the ‘profit test’ rule, which required there to be demonstrated a track record of aggregate profits over the 3 years immediately preceding the listing; the aggregate profits of the first 2 years needed to be HK$30 million, and in the final year not less than HK$20 million. 31.In fact, in the circumstances of the present case the total period at issue was one of 3 years 9 months, wherein the conspirators including (so the prosecution alleged) the present appellant, the 3rd defendant, agreed to manipulate the accounts of Fortune to make it falsely to appear that the requisite profits threshold had been attained. 32.This was achieved by the creation of false Letters of Credit (representing illusory sales transactions) issued by Yue Fung in favour of Fortune, in respect of which monies reverted, upon receipt by Fortune, to Yue Fung; in other words, a quintessential ‘money go-round’, with nothing underpinning the alleged transactions. 33.Notably, in information presented to the ‘reporting auditors’, Ernst & Young, the monies received under these so-called ‘letters of credit’ were characterized as monies received from customers in respect of supposedly legitimate sales transactions - albeit such sales never had taken place, nor had there been any purchases, and all that had been achieved was that the turnover of Fortune had been falsely and dishonestly inflated. 34.Concomitant with these false documentary credits, ‘profits’ which were not real profits were created, which required numerical dexterity in giving the appearance of consistent gross profit margins; additionally, in terms of explanation as to where such fictional profits had gone, so-called ‘dividends’ and ‘set-offs’ were created by manipulating the accounts in order to hide and to account for such fictional profits. 35.Such manipulation of the figures, which was the subject matter of the conspiracy in Count 1, in turn led to the conspiracy in Count 2, which had as its focus the annual report of Fu Cheong for the year ending 31 December 2001, whereby shareholders, creditors and investors were misled by the misrepresentations and financial misinformation appearing therein. 36.The complex accounting exercise which constituted this overall fraud required considerable professional expertise. 37.The prosecution case was that to this end the 3rd defendant, a qualified and experienced accountant and auditor - he had become a certified public accountant in Hong Kong in 1992, and in the years 1996-1999 he had operated his own accountancy firm, and had gained significant IPO experience having been involved in listing 10 IPO’s - was introduced to the company, as earlier he had been introduced to Gold Wo, and prior to that to Yue Fung. The prosecution case was that the 3rd defendant was the accountant/auditor with the knowledge and experience who had been engaged to ‘marry’ all the figures in the various sets of accounts in order to produce a cogent and convincing set of accounts, the broad picture thus created being required to pass regulatory scrutiny prior to listing authorization being obtained from the Stock Exchange. 38.As earlier observed, there was little difference of substance in the modus operandi used to obtain the fraudulent listings in each case; in particular the 3rd defendant calculated the Gross Profit Margins and allegedly master-minded the complex adjustments to the Fu Cheong accounts necessitated by the artificial and fraudulent inflation of sales and purchases/expenses: as the fund flow in and out was the same, the differences between the fund flows into the company and the inflation of purchases, taking into account the gross profit margin, required consequential adjustment elsewhere in the accounts. 39.In summary, therefore, the thrust of the prosecution case against the 3rd defendant was that he was the mastermind in the construction of the false financial picture, although he was not involved in the mundane exercise actually of creating the fraudulent documentation; for this task, said the prosecution, he had introduced Ms Connie Kwok, the 4th defendant and his erstwhile girlfriend, to Fu Cheong, and it was this lady who had taken the day to day role of producing under his supervision all necessary documentation, and thereafter posting such documentation in the general ledger of the company. 40.At the outset it was the prosecution case that the majority of the false accounting was carried out in 2001 in preparation for the Ernst & Young ‘reporting audit’, the results of which would be placed before the HKSE, hence the original commencement date of the conspiracy as February 2001. 41.At trial the 3rd defendant gave evidence. 42.As the learned trial judge observed to the jury, his case at trial was conducted on two levels. 43.First the prosecution was put to proof that indeed there had been an underlying fraud in relation to the letters of credit raised by Yue Fung in favour of Fortune, and that thereafter there had been a reversion of these monies to Yue Fung. The prosecution further was put to proof that the various records which had been created pursuant to the movement of these monies then had been used as the basis of the falsification of the accounts of Fortune in order to present a false turnover picture, and thus ultimately achievement of a successful public listing of Fu Cheong. 44.The second level of the defence raised by the 3rd defendant was a denial that he had known of the fact of the falsification of the accounts, and that he had not been party to any conspiracy to falsify documents to inflate turnover and profit margins in order to misrepresent the financial position of the company, and thereafter to submit documents to defraud the Listing Committee of the Stock Exchange (Count 1), and/or that by publication of such false information in the Annual Report for the financial year ending 2001, that the shareholders, investors and creditors would be defrauded. 45.The 3rd defendant was disbelieved and convicted by the jury on both Counts 1 and 2. He is dissatisfied and vigorously asserts that these convictions were wrong. Hence this appeal by the 3rd defendant against both conviction and sentence. Written representations: by the 3rd defendant 46.Although represented by counsel at trial, on appeal the 3rd defendant represented himself; presentational difficulties created by this fact effectively necessitated the adjournment of his appeal, with the result that it was not heard at the same time as the appeals of the 1st and 2nd defendants, and thus it was that this matter has had to be revisited at a later date. 47.In total, this court has been in receipt of several handwritten documents containing the 3rd defendant’s representations which he wished to place before the court: these documents, of varying length, respectively are dated 4 December 2009, 29 January 2010, 30 April 2010, and (after the hearing of this appeal) 14 June 2010. 48.This last document came into being because during argument a point had arisen as to an application to dismiss the jury, which was said by the 3rd defendant to have been made on his behalf by his counsel, Mr Percy, at trial, and a transcript of the identified period thus was ordered to be produced. However, no such application appears on the face of this transcript, as the 3rd defendant now acknowledges, notwithstanding his insistence that such application in fact was made. 49.Since there is no reference thereto on the face of the verbatim transcript, it seems to us that this point can be taken no further, nor at this late stage, having accommodated the 3rd defendant with yet a further written submission, are we minded to accede to the 3rd defendant’s request to mount an additional argument in favour of his application of leave to appeal, and which appears in any event to cover substantially similar ground (namely the late amendment of the indictment) which already fully has been argued. Grounds of application for leave to appeal I. Against Conviction 50.If we may say so, the arguments mounted by the unrepresented 3rd defendant upon his application for leave to appeal against conviction tended to the repetitive and to a significant extent overlapped; hence we attempt under the subheads following to extract from this hearing and from the written material submitted to the court the main issues which were presented for consideration. (i) Late amendment of the indictment 51.The 3rd defendant complains vigorously about the lateness of the amendment of the indictment against him, and says that the learned trial judge ought not to have permitted such amendment: he says that not only did the trial judge insufficiently explain the reason for the amendment, but that by so permitting such amendment the 3rd defendant was prejudiced in the conduct of his defence. We note that in oral submission at the hearing of the appeal this matter clearly represented a very significant element within the 3rd defendant’s series of complaints. 52.In its original form Count 1 alleged a conspiracy to defraud between 1 February 2001 and 27 March 2002, whilst Count 2 alleged a conspiracy between 1 February 2001 and 22 April 2002. 53.On the 39th day of evidence, and toward the end of the cross-examination of the 3rd defendant, the prosecution applied to amend the time period within both Counts 1 and 2 from the previous commencement date of 1 February 2001 to 1 October 2000. 54.Mrs Campbell-Moffat, who prosecuted this case against the 3rd defendant before Lunn J, has told the court that the committal papers had not indicated at which stage the 3rd defendant had joined the two conspiracies as charged; whilst it was clear by reason of the Gold Wo trial that the 3rd defendant had been involved with the Lee brothers of Yue Fung, it was not known when he had been introduced to the 1st defendant in this case, Mr Ho, for the purpose of supervising/facilitating the Fu Cheong listing. 55.In fact, counsel submitted, it was only as the result of the 3rd defendant’s own evidence in the witness box that the application was made to amend the indictment by bringing forward the relevant commencement date from 1 February 2001 to 1 October 2000. 56.Unlike the information earlier gleaned from his interview records, the 3rd defendant’s evidence at his trial was that he had been involved in discussions about the listing of Score One in the United States in 1999, and had known about its successful ‘backdoor’ listing in the United States, albeit on the basis of fraudulent accounts, in October 2000; in fact, said Mrs Campbell-Moffat, it was only when the 3rd defendant had given evidence that the relevance to his case of Score One Inc properly was understood, since it was at this time that the 3rd defendant first had mentioned a meeting at the Dongguan factory of Fu Cheong in October 2000. In the circumstances, she said, this was a “crucial admission” of the state of his knowledge, acquired from that meeting, of the parlous state of the accounting practices of the Dongguan factory, wherein he had been made aware of the fact that internal sales in the PRC had not been entered into the accounts of the PRC factory in order to evade PRC tax, and wherein he also had been told by Mr Ho, the 1st defendant herein, that unrecorded sales also had been entered in the books of the BVI company, Fortune Hong, that ‘goods received’ and ‘goods delivered’ notes were missing, and that thereby the 3rd defendant had gained knowledge the false state of the group accounts. 57.Thus, counsel argued, it was directly as the result of the evidential admission of his October 2000 visit to the Dongguan factory, and of the knowledge he had gained as a result of that visit, which prompted the altering of the date of the indictment; it made no sense, said Mrs Campbell-Moffat, to allege a conspiracy start date of February 2001 when the 3rd defendant himself had said that he had had direct knowledge of the false accounting practices of part of the Fu Cheong group by October 2000, and had been recruited at that time specifically to assist in the Fu Cheong listing. 58.Mrs Campbell-Moffat thus submitted that it had become clear only during the course of the trial that it was the 3rd defendant’s case that the Fu Cheong listing in Hong Kong had not been his creation, and that his position was that he had arrived on the scene only after this whole false endeavour had been agreed upon, and well after the prior fabrication of the 1998-2000 Score One accounts (which had been used in the US listing, and which had pre-dated the audited Fu Cheong accounts), and thus that his position was that the relevant fraud in misrepresenting the figures already had taken place, since the false L/C monies already had appeared in the Advanced Technology books; thus it was these accounts, for which allegedly he had borne no responsibility, and which then had been utilized for the false Fu Cheong listing application, which had formed the subject-matter of the conspiracies alleged against him. Hence, she said, upon fully appreciating the position, never earlier canvassed in interview, the prosecution made its indictment amendment application at what was an admittedly late stage, since now it had become possible to tie the 3rd defendant to the conspiracies at a significantly earlier date, namely the October 2000 meeting in Dongguan. 59.We recognize that Mr Li’s case on this appeal was that as the result of the amendment of the indictment in this manner, at the very end of his evidence, that he had been severely prejudiced, and that this was a material irregularity which meant that he had been unable to have a fair trial. 60.However, after consideration of this argument we are unconvinced that the amendment made any material difference, and certainly there has been no indication of how cross-examination of prosecution witnesses would have differed had the true chronological position earlier been appreciated by the prosecution, and thus the indictment amended at the outset. 61.Looked at in the round, we agree with Mrs Campbell-Moffat’s submission that, at bottom, what this argument amounts to is that although the 3rd defendant knew that he had been involved in the conspiracies charged earlier than the 1 February 2001 commencement date on the indictment, the prosecution did not, and thus he had thought it safe for him to show that relevant account falsifications had occurred before the prosecution had thought that he was involved; in other words, effectively he had been saying that whilst he had volunteered knowledge of the falsification of the Dongguan accounts prior to 2001, nevertheless it was unfair to use that evidence against him in order to suggest involvement in that conspiracy prior to February 2001 - accordingly, he would say, the conspiracy date of 1 February 2001 was too late, given that the fraud had been effected before he had become involved (since the 1999 accounts of Ford Reach and of Fortune Hong Kong had been declared as the 1999 and 2000 accounts of Advanced Technology and, in turn, of Score One Inc), and that since he had played no part in any earlier fraudulent manipulation of the books, it therefore should be others before the court who should be held accountable, and not him. 62.In the context of the belated amendment to the indictment we bear in mind the submission made by Mrs Campbell-Moffat that although there was one relevant prosecution witness, Mr Raymond Cheng (an auditor with HLB in the United States who had audited the accounts of Score One) who had been present and had participated in the October 2000 meeting with the 3rd defendant at the Dongguan factory, and who, according to the 3rd defendant, could have given evidence favourable to him, the fact remained that after the amendment of the indictment no application was made on behalf of the 3rd defendant to recall him. 63.Equally, in terms of other, non-prosecution witnesses, who could have advanced this defence case, no application was made to call anyone else. 64.Accordingly, having considered the issue, we do not think that in these particular circumstances the ‘late amendment’ point has merit, notwithstanding the vigorous complaint in this regard mounted by the 3rd defendant, and in our view it does not constitute an irregularity nor did it preclude a fair trial, which was the 3rd defendant’s strident contention to this court, since the overwhelming conclusion in light of his undoubted involvement from as early as October 2000 was that the agreements constituting the conspiracies in reality dated from that time. 65.We are minded to go further. Even without such amendment to the indictment – which, as earlier noted, ultimately was permitted by the learned judge, after argument and objection from the 3rd defendant’s counsel, on the 39th day of the trial and the beginning of the 8th day of evidence of the defendant and the start of the 5th day of his cross-examination - given all the other evidence as to the 3rd defendant’s involvement in the fabrication/matching up of the documentary materiel relevant to the ‘cooking’ of Fu Cheong’s books in order to attempt to meet the requisite listing financial benchmarks - we have in mind particularly the false aligning of the appropriate gross profit margins - we are satisfied that after taking all the evidence into consideration (in interview, for example, the 3rd defendant had accepted that he had been to the offices of Fu Cheong and that he knew of the falsity of the ‘internal sales’ and that he had supervised the 4th defendant, Connie Kwok, in the manipulation of the accounts), the amendment to the indictment does not merit the condign significance now accorded to it on this appeal, nor that it materially undermined the conduct of the defence - to the contrary, it simply more accurately aligned the charge with the true state of affairs. 66.Putting to one side the October 2000 meeting, and the necessary inference of the 3rd defendant’s earlier involvement, the trial judge’s summing up of his post-October 2000 conduct as revealed on the admissible evidence was in our view impeccable, as was his direction to the jury of the parameters of the competing cases. 67.After dealing with the 3rd defendant’s own evidence that he knew, in October 2000, of tax evasion by Dongguan Fortune and of missing goods receipt notes and goods delivered notes, and also of the unrecorded sales that had been booked retrospectively in the BVI companies - “in other words, not done at the time of the sales, but done later” - the learned judge continued [at AB3239P-3240H]:
68.It follows, therefore, in terms of the amendment as made to the indictment, that in our view this does not amount to a material irregularity which places at risk the conviction of the 3rd defendant upon either of the conspiracy counts preferred against him. 69.Having reached this conclusion, as a matter of completeness we refer also to the 3rd defendant’s allegation that the amendment to the indictment - which in fact was a re-re-amendment - was not referred to by the learned judge in his summing up. 70.As noted, the amendment in question came at the beginning of the 5th day of the cross-examination of the 3rd defendant, and yet, on completion of such cross-examination, the fact remains that defence counsel chose neither to re-examine nor to apply to adjourn to consider calling further evidence in light of such amendment; either option was clearly open. 71.In this circumstance we thus fail to see why this amendment to the commencement date of the alleged conspiracies in consequence should have merited particular mention or profile in the judge’s summing up; to the contrary, having been made at such a relatively late stage we are inclined to think that Mrs Campbell-Moffat is correct in her submission that, in not emphasizing the lateness of the amendment this effectively served to avoid according undue emphasis to the revised dates, which in turn would have emphasized the significance of the October 2000 meeting, the fact and content of which obviously was highly prejudicial to the 3rd defendant, not least since there was simply no evidence before the jury as to what had occurred other than that from the 3rd defendant himself. 72.It follows from the foregoing, therefore, that this application for leave to appeal against conviction on the basis of that which can be termed the ‘amendment of indictment’ ground – which as we have observed appeared to us in the oral hearing of this appeal effectively to be the main ground of the 3rd defendant’s application for leave to appeal against conviction – must fail. (ii) Interview admissions 73.The 3rd defendant makes reference to the fact that his interview admissions should not have been used against him. 74.We see no reason why not. 75.As prosecuting counsel has pointed out, admissibility of these admissions was fully canvassed in the voir-dire at trial (on days 5-10), and these matters were raised again during the trial. 76.The judge also dealt fully with this element in his summing up, and we agree with Mrs Campbell-Moffat that the evidence as given by the 3rd defendant at trial is “wholly compatible” with the admissions made in interview. 77.These clearly were admissions made against interest. 78.The 3rd defendant accepted that he had been to the offices of Fu Cheong [AB 3475K], and he accepted in interview that he had known of the internal sales and that he had supervised Connie Kwok in respect of the manipulation of the Fu Cheong accounts. We are able to see nothing in his grounds of appeal, nor in his evidence, which is probative of the contention that his admissions as made in interview were untrue, and in fact, as Mrs Campbell-Moffat has pointed out, the evidence he gave of his earlier involvement as from October 2000 made considerable sense and “filled in a number of gaps” which, on behalf of the prosecution, she accepted that she had not foreseen. 79.It follows that we see no reason why these admissions legitimately should not have been considered as probative of guilt. (iii) Failure of the judge to sum-up as to the correct ‘admissions time-frame’ 80.Complaint is made that the learned trial judge erred in that part of his summing up as to the 3rd defendant’s knowledge regarding the existence of certain companies, since this was prejudicial because it was said that the 3rd defendant knew at the time that these companies were false: in this context reference is made to the summing up (at AB3375C-3377O), which canvasses the contradictions found in the company books, and suggests that these contradictions were such that any competent accountant could not but fail to notice, with specific reference being made to the admission of the 3rd defendant, under cross-examination, that the company ‘Blooming Sky’ appeared not to exist. The actual passage wherein this reference appears reads thus:
81.As Mrs Campbell-Moffat has pointed out, it was defence counsel who raised the matter of the time at which the 3rd defendant accepted such a company did not exist: (see AB3468K), and that the learned judge appears to have taken the view that there was no need to elaborate further as the point as to time-frame was “perfectly obvious” since in his evidence the 3rd defendant had said that he didn’t even know a ‘Blooming Sky’. She further submits that cross-examination of the 3rd defendant on the point was lengthy and detailed, that it was entirely clear that the 3rd defendant’s case was that he did not know what was happening with the accounts at the time of offending, but nevertheless that he had accepted that, when properly analysed, it was clear that the accounts were false. 82.After reviewing this particular complaint, we fail to see any merit in this point nor any basis for making any criticism of the summing up in this regard. (iv) Link between the VIR and the expert report 83.The 3rd defendant makes further complaint that in his summing up the learned judge had relied on the expert report before him with regard to the manipulation of the GPM (‘Gross Profit Margin’) and had wrongly linked this to the Video Interview Record (at Counter 822-834). In fact, this complaint is based on a question posed by the judge to the jury, wherein he was identifying the issues in the case which he perceived the jury would need to resolve. 84.In this context the judge (at AB3246O) had prefaced this recitation of the relevant issues with this observation:
and thereafter one of the 12 separate issues he enumerated for the jury was in the following terms:
85.It is perfectly clear, therefore, that this simply was a question posed for the consideration of the jury, no more and no less. 86.However, as Mrs Campbell-Moffat has noted in response to this criticism, the learned trial judge elsewhere in his summing up, in reciting the evidence to the jury, nevertheless does rely upon the content of the expert report and the opinion as to the GPM, and the fact that the 3rd defendant had admitted in interview to providing the relevant GPM for Fu Cheong via Connie Kwok [D4]: (see AB3396P-3397U), and that this was not the only point on which the jury could infer guilt. 87.She also pointed out that the relevance of the GPM figure in the Fu Cheong Prospectus was different from the equivalent figures in the accounts for Advance Technology and Score One, and that if the jury accepted that he was telling the truth in interview, then the 3rd defendant must have been calculating the GPM for the benefit of Connie Kwok, and thus that this must have taken place after the introduction of Ms Kwok to Fu Cheong, and after the filing of accounts for Advanced Technology and Score One Inc., which would place this exercise in the early part of 2001. Whilst there was no definitive indication of the date of the physical adjustment to these accounts, said Mrs Campbell-Moffat, the overwhelming inference on the evidence indicated that the 3rd defendant had continued to participate in the fraud well up to the listing of Fu Cheong, and that he must have received his payment of HK$2.3 million after that listing because it was from these very funds that that sum derived. 88.Once again, we are unable to see anything of significance in this ground after looking at the evidence, and the summing up, as a whole. (v) Inability to call evidence 89.In his further written submissions the 3rd defendant makes a variety of complaints to the effect that he was hindered in his ability to call evidence, ranging from the seizure of working papers by the ICAC and intentional non-reliance thereon to the original choice of a conspiracy commencement date of 1 February 2001 in order to avoid the contradictory nature of the evidence against him from 2000 - which would have indicated, he asserts, that he had no involvement in the initial falsification of accounts - to not being able to call certain working auditors or other witnesses whom he had introduced to Mr Ho and the Lee brothers, nor being permitted to rely upon unused materials, and not being allowed to explain, upon amendment of the indictment, what had happened before and after the October 2000 meeting, and finally that he had not been allowed to cross-examine Mr Raymond Cheng as he would have wished because certain documents [D33 and D34] had been ruled inadmissible, and thus in their absence any such cross-examination would have been incomprehensible. 90.Mrs Campbell-Moffat’s crisp response to this litany of criticisms is that the defendant had accepted that he had planned his defence over a 2 year period, and in that time he must have considered what witnesses to call, be they auditors HLB (who oversaw the US listing) or Ernst & Young (who were engaged as Reporting Accountants for the purposes of the Hong Kong listing) or otherwise; indeed, it had been open to him to ask the prosecution to call any witnesses or to tender them for cross-examination, but conspicuously this had not been done, nor had any application been made to the judge in this regard. 91.Nor, she said, had trial counsel for the 3rd defendant asked to call, or to recall, witnesses after the grant of the late application to amend the indictment by bringing forward the commencement date of the conspiracies alleged in Counts 1 and 2; moreover, with regard to Mr Raymond Cheng of HLB, who had been with the 3rd defendant during his visit in October 2000 to the Guanggdong factory, no attempt was made further to examine him, with regard, for example, to the pre-existing fabrication of accounts of Fortune Hong Kong and of Ford Reach, which, as earlier observed, were declared as the 1999 accounts of Advanced Technology and, in turn, of Score One Inc, and which were used to support and to facilitate the US listing of Score One. 92.In fact, said Mrs Campbell-Moffat, in his cross-examination of Mr Raymond Cheng the 3rd defendant’s counsel had not put to him any part of the 3rd defendant’s case that as at the date of this October meeting, although he had known of the substantial differences in the trading history of Yue Fung with Fortune, that this had pre-dated his client’s involvement, and that by the time that the 3rd defendant had come onto the scene the manipulation of accounts already had taken place [vide Exhibits D33 and D34 reflecting the Score One Inc accounting periods 1998-2000], nor had any false accounting or tax evasion allegations been put to Mr Cheng; in fact, counsel asserted, the lateness of the amendment of the indictment in part had been due to the failure of defence counsel properly to put the 3rd defendant’s case to Mr Cheng, of auditors HLB, in cross-examination. 93.It follows therefore, that so far as this court is aware, post-amendment to the indictment the 3rd defendant asked to recall no prosecution witnesses, including Mr Raymond Cheng (whom in any event apparently had had no direct knowledge of the accounts of Score One), nor is there any suggestion that had any such request been made that it would have been refused. 94.It also appears to be the situation that neither did the 3rd defendant through his trial counsel at any time, either prior to or after amendment of the indictment, make any suggestion to the effect that he had had restricted access to unused materials - in fact, this court has been told that all defendants in this case had been given unrestricted access to all the materials in the possession of the ICAC – nor, as earlier observed, consequent upon the amendment, had the 3rd defendant’s counsel chosen to re-examine or to ask the 3rd defendant to elaborate on any matter arising as the result of that amendment. 95.It seems to us that Mrs Campbell-Moffat therefore must be correct when she submits that if the 3rd defendant had wished to establish that the misrepresentations/falsifications in the books of the company for 1998 and 1999 had been made before the Score One acquisition (which would have been contrary to his VIR), and thus before he actively had become involved in the affairs of Fu Cheong, then it always had been open to him to have adduced evidence to that effect, and we are wholly unconvinced by his protestations to the contrary; alternatively that if his case was that the manipulation of the accounts already had taken place, and were not in fact completed until 2001, then equally he could have shown a relevant witness a document or documents from the Ernst & Young working files, and cross-examined thereon. 96.Accordingly, we do not consider that this particular segment of complaints comes close to demonstrating an irregularity in the trial or otherwise suffices to justify interference with the 3rd defendant’s conviction upon Counts 1 and 2. 97.Looking at the matter in the round, it is hard to see any merit in the points made, nor to avoid the conclusion that in this instance the belated amendment to the indictment, to bring forward the date of commencement of the conspiracies, has been used as a convenient ‘hook’ upon which to mount this appeal, and that there is nothing of substance underpinning these arguments, which regrettably, due to the delay in the hearing of this appeal and the complex facts of this case, have taken some time properly to enumerate and to sort out. (iv) Evidence in respect of Count 2 98.Complaint is made that evidence prayed in aid with regard to Count 1 was wrongly used to obtain conviction on Count 2. 99.Chronologically there was an overlap between Counts 1 and 2, and the evidence against the 3rd defendant in respect of Count 2 was canvassed by the learned trial judge in his summing up as follows [at AB 3239C-J]:
100.We are unable to understand this complaint. The counts as charged are sequential, and are reflective of a continuous course of fraudulent conduct. Evidence arising regarding Count 1 cannot simply be divorced from that relating to Count 2. In any event, publication of a company Annual Report is a necessary concomitant of a public listing, and as Mrs Campbell-Moffat has submitted, any conspiracy to list must of necessity involve a conspiracy to publish the Annual Report which contains within it the very same false accounts/accounting information as appeared in the Listing Prospectus prepared for the listing of the company on the Exchange. 101.In short, this complaint is misconceived and in our view is entirely without merit. Decision on application for leave to appeal against conviction 102.It follows from the foregoing that we are unable to perceive any legitimate basis wherein it is open to us to interfere with the conviction of the 3rd defendant, and accordingly the application for leave to appeal against conviction is dismissed. II. Against Sentence 103.At the beginning of this judgment (vide paragraphs 14-17) we made reference to that which appeared to be an element of confusion in the total period of imprisonment for which the 3rd defendant was sentenced at trial. 104.After reviewing the background, and the 3rd defendant’s conviction in March 2007 in the ‘Gold Wo’ case, and after further referring to the conviction and sentences passed on the co-conspirators in this ‘Fu Cheong prosecution’, namely the 1st defendant, Mr Ho Wing-cheong, the 2nd defendant, Mr Chan Wing-kui, and on the 4th defendant, Miss Connie Kwok (who had pleaded guilty late in the day, thus precipitating the severance of the trial of the 3rd defendant), the learned judge continued as follows [at AB3419T-3420O]:
105.Following upon this pronouncement, it is a matter of history that the Gold Wo sentence was reduced on appeal from 10 to 9 years in CACC 104 of 2007; we are told by Mrs Campbell-Moffat that this reduction was to mark the distinction to be made as between the role played by the 3rd defendant and the 1st defendant in that matter, and thus in our view the ‘Amended Certificate of Sentences’, which records a total period of imprisonment of 11 years, factually represents the correct post-appeal position (ie. 9 years plus 2 years), hence presumably the use of the term ‘Amended’. 106.In his application for leave to appeal against sentence, the 3rd defendant mounts several arguments which he maintains in the circumstances should redound in his favour. 107.He says that the trial judge erred in not taking proper account of the differing roles played by the 1st defendant, Mr Ho Wing-cheong and himself, and that he should receive a lesser sentence because Mr Ho had gained financially from the listing itself. 108.The 3rd defendant further says that he should have received some discount from the starting point of 9 years on the basis that the 1st defendant had received a discount due to the wait for the conclusion of the Gold Wo trial, but that no discount was given to him notwithstanding the delay caused by his severed trial, which arose, he maintained, because the trial judge had erred in accepting the plea of Miss Kwok, the 4th defendant, and that such plea had prejudiced his position in terms of the first HCCC 10 of 2006 trial. He also says that the severance as occurred resulted in considerable financial loss to him. 109.As to totality, the submission made under this head is that it was the Lee brothers of Yue Fung who were the ‘masterminds’ behind what was in real terms but one criminal venture, and that as a consequence the sentences passed in HCCC 134 of 2004, the Gold Wo trial, should be wholly concurrent with those passed in this case, HCCC 10 of 2006. 110.The 3rd defendant subsequently also argued that in terms of his involvement other lesser statutory offences were available which could and should properly have been charged. There is nothing in this particular point. The charges proffered were appropriate. 111.In terms of the ‘starting point’ argument, Mrs Campbell-Moffat submitted that the parity of a starting point of 9 years adopted by the learned trial judge for both the 1st and 3rd defendants was not incorrect, given the degree of manipulation required and the controlling influence over the fraudulent process exercised by the 3rd defendant, and not forgetting the very substantial remuneration the 3rd defendant himself had received for his supervising efforts. Decision on application for leave to appeal against sentence 112.Having fully considered the matters variously raised under this head, we consider that the trial judge was correct in taking as a starting point a period of 9 years upon both counts. 113.This fraud, as with the two preceding, could not have been carried out without the overarching expertise of the 3rd defendant, in effect the ‘financial ringmaster’, who in blunt terms knew what figures to alter, where and why without causing or stimulating regulatory concern or inquiry - indeed he was successful in this endeavour because until these frauds came to light, Fu Cheong in fact successfully did become listed on the Main Board. 114.We agree with the submission, and indeed with the decision of the learned judge, that part of the concurrent sentences passed upon the 3rd defendant in terms of his conviction upon Counts 1 and 2 should be made consecutive to the sentence he already is serving for his Gold Wo defalcations; these were separate companies and separate fraudulent acts, and repeated fraudulent conduct of this type deserves to be recognized in sentencing terms. 115.We stress that we take a serious view of these offences. The harm to the investing public and the HK Stock Exchange caused by this type of fraud is incalculable, and certainly unless stringent punishment is adopted confidence in the probity of Hong Kong’s financial system necessarily will be affected; in addition the element of deterrence is an important factor to be weighed in the balance, not least given the financial benefit that accrued to the 3rd defendant as a result of his nefarious efforts. 116.We note also that in this case the 3rd defendant conspicuously made no real effort to do other than to challenge the prosecution case, root and branch, and we are inclined to accept the prosecution submission that such facts as were admitted/agreed by or on behalf of the 3rd defendant arose solely because such matters plainly could be seen to be wholly incontrovertible. This does not go in aggravation of sentence but is illustrative of the entire absence of mitigating features. 117.There is some, albeit limited, merit in the suggestion that some deduction from the sentence was warranted given the disadvantage accruing to the 3rd defendant consequent upon the severance of his trial from that of the other defendants after Miss Kwok’s guilty plea. Her guilty plea came after the commencement of the trial and the application to sever was made on the understandable basis that in the eyes of the jury her guilty plea was likely to prejudice the 3rd defendant. Whilst this development cannot be laid at the door of the prosecution, neither was it a matter to be laid at the door of the applicant. It caused a delay of several months to his trial plus additional expense although, as to the latter, one’s sympathy, if that be the right word, necessarily is curtailed by the unnecessary expense to which the prosecution was put by the insistence of those acting for this applicant at his trial in putting them to strict proof of almost everything. We are inclined in the circumstances to make but a minor adjustment to the sentences passed by the trial court. What we shall do is to reduce the sentence in relation to Counts 1 and 2 to terms of eight years and six months imprisonment for each, to run concurrently. 118.But that is not the end of the matter, for this leaves the question of the order made by the judge that one year upon each count was to run consecutively to the overall sentence imposed in relation to the Gold Wo convictions. 119.We have earlier referred to some confusion caused by the judge’s order when he said that “one year of each of those sentences be served consecutively to the sentences the third defendant then was serving”. We rather think that by that order the judge had in mind an addition, in effect, of two years to the sentence imposed in the Gold Wo case, making a total of 12 years imprisonment (bearing in mind that as at the date of the order made by Lunn J - which antedated the Gold Wo appeal - the total sentence in the Gold Wo case was one of 10 years imprisonment.) Were it otherwise, the judge would not have used the word “each”; it would have sufficed for him to say that one year in relation to only one of the counts was to run consecutively to the term imposed in the Gold Wo case. 120.Be that as it may, it falls for us to re-examine the matter in the light of the adjustment to individual sentences we have made and in light of the overall justice of the matter. The two extensive courses of criminal conduct reflected by the two cases warrant consecutive sentences, to be adjusted only by what is an appropriate totality. We consider that eighteen (18) months of the sentences we now impose should run consecutively to the sentences ultimately imposed by this court, as differently constituted, in the Gold Wo case, thus making a total of 10 years 6 months imprisonment. Order 121.Accordingly:
Mr Li Wing-kei, 3rd defendant/appellant, in person Mrs Audrey Campbell-Moffat, instructed on fiat by the Department of Justice, for the respondent |
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