HKSAR v. Ma Hon Kit Sammy and Others
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CACC148/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CRIMINAL APPEAL NO. 148 OF 2009 (ON APPEAL FROM DCCC 229-240 OF 2008) ------------------------------------ BETWEEN
------------------------------------ Before : Hon Stock VP, Hartmann JA and Lunn J Dates of Hearing : 9 September 2010 Date of Judgment : 12 October 2010 ------------------------- JUDGMENT ------------------------- Lunn J (giving the Judgment of the Court): 1.The applicants, to whom reference will be made by their designation as defendants at trial, seek leave to appeal against their convictions at trial in the District Court, by the Chief District Judge Patrick Li on 11 March 2009, respectively of one separate charge each of insider dealing, contrary to section 291(5)(a) and (8) of the Securities and Futures Ordinance, Cap. 571 (“ the Ordinance”). No application is made in respect of the sentences imposed upon the respective applicants, namely orders that they perform 200 hours of Community Service and pay fines. CHARGES 10-12 2.Each of the respective applicants faced a separate single charge alleging that the respective applicant had dealt in the listed securities of Egana Jewellery and Pearls Limited (“Egana”) on 6 July 2006 whilst possessed of information in relation to Egana which the respective applicant knew was “relevant information”, namely the proposed privatisation of the Egana and the proposed suspension of its shares on 7 July 2006, having received that information directly or indirectly from Ma Hon Yeung, the 1st defendant at trial, knowing him to be connected with Egana and knowing or having reasonable cause to believe that he held that information as a result of being so connected. THE TRIAL The defendants 3.The applicants stood trial together with Ma Hon Yeung (1st defendant) and Ms Lo Yuk Wah Ivy (2nd defendant). Four of the five defendants at trial enjoy a close family relationship: the 1st and 3rd defendants are brothers; the 3rd and 4th defendants are married to one another and the 5th defendant is their son; the 2nd defendant enjoyed a close relationship with the 1st defendant. Convictions of the 1st and 2nd defendants 4.The 1st defendant, was convicted of two charges of counselling or procuring the 2nd and 3rd defendants respectively to deal in the listed shares of Egana knowing or having reasonable cause to believe that they would do so, he being a person connected with the Egana and possessed of what he knew was “relevant information” in respect of Egana, contrary to section 291(1)(b) and (8) of the Ordinance. By Charge 1, he was alleged to have done that in respect of the 2nd defendant in the period 1 June to 6 July 2006 and by Charge 2 in respect of the 3rd defendant on 6 July 2006. 5.The 2nd defendant was convicted of seven charges of insider dealing, contrary to section 291(5)(a) and (8) of the Ordinance in respect of her dealing in the shares of Egana on seven separate occasions, commencing on 20 June and culminating on 6 July 2008. The prosecution case 6.It was an admitted fact that trading in the shares of Egana and Egana Goldpfeil were suspended on 7 July 2006 and that before the market opened on 11 July 2006 an announcement was made by the two companies of the proposed privatisation of Egana. The closing price of Egana shares on 6 and 11 July 2006 was $1.58 and $1.84 respectively. One of the offers made in the privatisation announcement was a cash offer of $1.80 per share for each Egana share, but limited as to the total money amount available to provide payment to persons exercising that option. 7.There was no dispute that the 3rd, 4th and 5th defendants bought shares in Egana for the first time ever on the afternoon of 6 July 2006.
8.The prosecution case was that by virtue of his employment as a Vice-President of BNP Peregrine commencing 1 June 2006 and, in particular, his work in June and July 2006 in respect of the privatisation project of Egana, at the material time the 1st defendant was possessed of “relevant information”on 6 July 2006. In consequence of the position he occupied, pursuant to section 287(1)(c)(i)(A), he was a “connected” person in relation to Egana. Case against the 3rd defendant 9.It was the prosecution case that the 1st defendant had passed on to the 3rd defendant that “relevant information” and that he had done so on the telephone. They pointed to regular telephone communication between the two brothers and, in particular, to a telephone call between them at 14:44:35 on 6 July 2006 which lasted 0.7 of a minute. That was immediately before the commencement of purchase orders made on the instructions of the 3rd, 4th and 5th defendants. Also, they pointed to a longer telephone call at 23:57:44 on 5 July 2006, lasting six minutes, when a telephone call by the 1st applicant to the mobile telephone used by the 3rd applicant was forwarded to the 3rd applicant’s family home at which all the applicants lived. The prosecution case was that the 3rd defendant knew the information to be “relevant information” in relation to Egana and that he knew that his brother the 1st defendant was “connected” with Egana through his employment at BNP Peregrine and that he held that information as a result of being so connected. Case against the 4th defendant 10.It was the prosecution case that the 4th defendant had received the “relevant information” from the 3rd defendant and that she knew its provenance to be the 1st defendant, whom she knew to be “connected” with Egana through his employment at BNP Peregrine and that he held that information as a result of being so connected. Case against the 5th defendant 11.The prosecution case against the 5th defendant was that he had received the “relevant information” from either his mother, the 4th defendant, or his father, the 3rd defendant. He knew the information to be relevant information in relation to Egana and that the provenance of the information was the 1st defendant, whom he knew to be connected with Egana as a result of his employment with BNP Peregrine and that he held the information as a result of being so connected. The defence case 12.None of the defendants at the trial gave evidence.
The case of the 3rd defendant 13.It was submitted on behalf of the 3rd defendant that no irresistible inference could be drawn that he received information from the 1st defendant. Further, that it was a plausible inference that he had dealt in the shares of Egana after receiving a tip that the shares of Egana were worth a “punt”, without having received further information let alone “relevant information”. Even if he had received “relevant information”, it could not be properly inferred that he had known it to be such information. Even if it could be inferred that the 3rd defendant knew that the 1st defendant worked for BNP Peregrine, it could not be inferred that he knew him to be working on a project in respect of the privatisation of Egana and thereby a person connected with Egana and that he held the information as a result of being so connected. The case of the 4th defendant 14.It was submitted on behalf of the 4th defendant that even if it could be inferred that the 3rd defendant had told her to buy Egana shares, no irresistible inference could be drawn that he had passed on to her “relevant information”. In any event, it could not be properly inferred that she knew or had reasonable cause to believe that the provenance of the information was the 1st defendant or that she knew that the 1st defendant worked at BNP Peregrine and that he was working on the privatisation project for Egana and thereby a person connected with Egana and that he held the information as a result of being so connected. The case for the 5th defendant 15.It was submitted on behalf of the 5th defendant that even if he had received a ‘tip’ from the 3rd defendant to buy Egana shares, it could not be properly inferred that he had passed on to his son the “relevant information”. Further, it could not be inferred that the 5th defendant knew that the provenance of the information was his uncle, the 1st defendant. Even if the 5th defendant knew that to be the case it could not be properly inferred that he knew of his uncle’s employment at BNP Peregrine and that he was working on a project for the privatisation of Egana and thereby a person connected with Egana nor that he knew or had reasonable cause to believe that he held the “relevant information” as a result of being so connected with Egana. THE REASONS FOR VERDICT Relevant information 16.In his Reasons for Verdict the judge stated that he accepted the opinion of Ms Stella Fung, an Associate Director of the Securities and Futures Commission, that information of the proposed privatisation of Egana and the proposed suspension of trading in shares was price sensitive information not known to the public at the material time which if known to the public, would likely affect the price of Egana shares and it constituted “relevant information”. Findings in respect of the 1st defendant: relevance to the case of the applicants 17.The judge went on to find that the 1st defendant had that “relevant information”. In convicting the 1st defendant of Charge 2, the judge made findings which he adopted in his consideration of the charges faced by the applicants. In particular, having regard to an e-mail, copied to the 1st defendant at 10:43 on 6 July 2006, to which was attached a draft announcement, reference was made in the e-mail to the fact that board meetings would be convened after the close of trading that day and the draft announcement would be submitted to the regulators the following day, he found that the 1st defendant knew that trading in the shares of Egana would be suspended before trading commenced on 7 July 2006. 18.Having noted that the purchases of the applicants and the 2nd defendant on 6 July 2006 constituted 93% of the turnover in Egana shares on that day, and having noted that all three applicants commenced purchasing their shares within a short time of a telephone conversation that afternoon between the 1st defendant and the 3rd defendant, the judge rejected as “too coincidental to be true” the possibility that they had determined to buy their shares on information other than that received from the 1st defendant. He found that:
19.In stating that he was satisfied in respect of the case against each of the applicants that the ingredients of the offences were proved the judge relied upon the drawing of a series of inferences in respect of each applicant which he said were either irresistible inferences or the only reasonable inferences to be drawn. He said that he drew those inferences from various findings of primary fact that he set out. That analysis and the criticisms mounted of it will be considered later in this judgment. THE GROUNDS OF APPEAL AGAINST CONVICTION Ground 1 20.At the outset of the hearing, Mr Duncan SC abandoned Ground 1 of the grounds of appeal against conviction, namely that the judge erred in finding that information in respect of the proposed privatisation of Egana and the proposed suspension of trading in its shares by itself was “relevant information”. He was well advised to do so, since that information was clearly “relevant information”. Grounds 2 to 4 21.By Grounds 2 to 4 Mr Duncan submitted that the judge had erred in making adverse findings against the applicants in respect of the ingredients of the offence charged by drawing inferences from undisputed primary facts which inferences were not properly drawn, given that in each case there were equally plausible competing inferences. He submitted that the judge had drawn impermissible inferences in determining against each of the applicants that they dealt in the shares of Egana when they:
22.In addition, Mr Duncan submitted that, although the position taken on behalf of the applicants at trial in respect of what was said to be the competing inferences and the impermissibility of drawing irresistible inferences was made clear to the judge, in his Reasons for Verdict not only did the judge fail to identify what were advanced as the competing inferences but also he did not analyse and evaluate the evidence or give reasons for rejecting those competing inferences in favour of the ones he found to be irresistible. The 3rd defendant 23.It was submitted that on a consideration of all of the evidence, the 3rd defendant’s dealing in the shares was equally consistent with the 3rd defendant having been counselled to buy the shares without having been told of the proposed privatisation or proposed suspension of trading Egana’s shares. He could have been given a simple “hot tip” to buy Egana shares that day without more information. The judge had not articulated his reasons for rejecting that possibility. If the 1st defendant had been the source of a simple “hot tip”, there was no need for him to pass on the “ relevant information”. Even if the 1st defendant had passed on the “relevant information”, there was no need for him to divulge that he was connected with Egana. Again, the judge had not articulated his reasons for rejecting those possibilities. The case of the 4th defendant 24.Mr Duncan submitted on behalf of the 4th defendant that even if her husband, the 3rd defendant had told or urged her to buy Egana shares it did not follow that he had passed onto her the reason for so doing, namely the “relevant information”, even if he possessed it himself. Between husband and wife there was no need for him to do so. Also, in not passing on the “relevant information”, the 3rd defendant might easily have been protecting the reputation of his brother. It was an equally plausible inference that the 4th defendant had been counselled simply to buy the shares, without more. Even if the 3rd defendant had passed on the “relevant information” to his wife the 4th defendant and told her that the1st defendant was the provenance of that information, it was not necessary for him to inform her that the 1st defendant was working on a project for BNP Peregrine in respect of Egana, so that she knew him to be connected with Egana. Again, the judge had not articulated his reasons for rejecting those possibilities. The case of the 5th defendant 25.Mr Duncan submitted that there were obvious differences in the evidence relevant to the case of the 5th defendant and that of his parents. His purchase of 60,000 Egana shares was modest compared with that of his parents. Also, his order was executed on the internet, so that he gave no orders that it be executed that day or that the orders be staged so as to avoid pushing up the price of Egana shares. He drew attention to the fact that although the judge determined that one of his parents was the source of “relevant information” received by the 5th defendant, he had been unable to determine which of the two had provided that information. If it was his mother, it was a possibility that she herself was not even possessed of the “relevant information” and therefore unable to pass on that information. In any event, given that he was a young man of 26 years of age, it was a reasonable possibility that, in counselling the 5th defendant to buy Egana shares that day, it was not necessary for either one of his parents to provide him with the “relevant information” or to go on to inform him that his uncle, the 1st defendant was the provenance of that information or that he was working on a privatisation projects for BNP Peregrine in respect of Eagna. Again, the judge had not articulated his reasons for rejecting those possibilities. A CONSIDERATION OF THE SUBMISSIONS 26.At the outset of his ‘Analysis of the Evidence’ in his Reasons for Verdict the judge resolved the issue, which had being fiercely contested at trial, of whether or not information of the proposed privatisation of Egana and the proposed suspension of trading in its shares was “relevant information”. Further, he found that the 1st defendant possessed that information and knew it to be “relevant information” (paragraphs 53 and 54). 27.In convicting the 1st defendant of Charge 2, the judge made findings which he adopted in his consideration of the charges faced by the applicants (3rd defendant—paragraph 85; 4th defendant—paragraph 94; and 5th defendant—paragraph 105). 28.As noted earlier, the judge found that, having regard to an e-mail copied to the 1st defendant at 10:43 on 6 July 2006, the 1st defendant knew that trading in the shares of Egana would be suspended before trading commenced on 7 July 2006. Further, having regard to the evidence of the instructions that they had given when they placed orders with the brokers he found that the 3rd and 4th defendants were:
He noted that the 3rd defendant had stressed that his order be executed in stages, in order not to push up the share price and that he had asked the broker to report the status of his order before the close of trading. Similarly, the 4th defendant had also given instructions that her orders be placed in stages and that they be executed before the end of the day. 29.Having noted that the purchases of the applicants, together with those made by the 2nd defendant, on 6 July 2006 constituted 93% of the turnover in Egana shares on that day, that all three applicants commenced purchasing their shares within a short time of a telephone conversation that afternoon between the 1st defendant and the 3rd defendant at 14:44 and that they were all close relatives of the 1st defendant, the judge rejected as “too coincidental to be true” the possibility that they had determined to buy their shares on information other than that received from the 1st defendant. He found that:
The drawing of inferences adverse to the applicants 30.In his consideration of the respective cases of the 3rd, 4th and 5th defendants, the judge stipulated a number of primary facts from which he made determinations of fact by way of drawing the only reasonable/irresistible inference relevant to the ingredients of the offence in each of the charges. 31.The judge did not identify any competing possible inferences to which he had regard in the process of determining facts in that way. Further, he did not articulate or engage in any analysis or evaluation of any competing inferences. Other than identifying the primary facts upon which he relied to reach a factual determination by the drawing of an irresistible inference the judge made no further elucidation. 32.There is no doubt that many of the alternative inferences identified at the trial and repeated before this court by counsel representing the applicants as competing with inferences that might be drawn adverse to the applicants, and directly relevant to findings related to the ingredients of the offence, were not merely fanciful alternatives. Accordingly, it would have been of assistance if the judge had provided a short articulation of his reasons for rejecting those alternative inferences. However, it is not suggested that, having received both full written submissions and lengthy oral submissions by counsel on behalf of the applicants, the judge was not aware of the alternative inferences that he was invited to find existed. 33.By contrast, the judge did state the basis of his findings that the inferences that he drew to be the irresistible/only reasonable inferences to draw. Obviously, in so doing he rejected the suggestions that those alternative inferences were plausible and prevented him from making the determinations that he did. Consideration of the case against the 3rd defendant: Charge 10 34.In determining that the 3rd defendant was possessed of “relevant information” received from the 1st defendant, the judge merely adopted his analysis in respect of his conviction of the 1st defendant in respect of Charge 2. The nub of the judge’s reasoning is to be viewed against the undisputed fact that none of the applicants had dealt in Egana shares prior to 6 July 2006 and that the purchases of the 3rd and 4th defendants were significant purchases, in the range of $800,000 each. All of their purchases commenced within a few minutes of the phone call at 14:44 between the 1st and 3rd defendants. The judge had found that the 3rd and 4th defendants were both “keen” to buy that day and were “cautious” in that they bought in stages. Clearly, in context the judge was addressing why it was that mother, father and son had embarked in making purchases for the first time in this manner. In resolving that issue, in determining that the 3rd applicant received the “relevant information” from the 1st defendant, the judge referred to their family relationship and rejected the possibility that it was based on information from another source. There was no dispute that there were regular telephone conversations between the brothers, including six telephone calls in the three days, 4-6 July 2006, before the close of trading on the Stock Exchange of Hong Kong on the latter date. 35.Obviously, in so determining the judge rejected the suggestion that the 3rd defendant was told simply to buy the shares, without being provided with the “relevant information”. Although he did not advert to it specifically, evidence was before the court of two telephone conversations in the morning of 6 July 2006 between the 3rd defendant and his broker, Ms Fanny Wong, in which he had requested information about Egana by reference to its stock code number only. On any view, it appeared that he knew very little about the company and the information with which he was supplied was in no way encouraging of a buyer. The 3rd defendant took no steps to buy Egana shares subsequently in the morning or early afternoon. He placed his order only after his telephone conversation with the 1st defendant at 14:44. In that regard, the judge determined subsequently in his findings that the first defendant had “counselled D3 to buy Egana shares in the afternoon of 6/7/06”. No doubt, that was a reference to the phone call at 14:44. Earlier, the judge had noted that the 1st defendant had been copied with an e-mail at 10:43 on 6 July 2006, in which reference was made to the prospective board meetings that day and submission of the announcement to the regulators the following day. Clearly, the 1st defendant knew that the probability that the shares of Egana would be suspended the following day and an announcement made in due course of the proposed privatisation had hardened very considerably. 36.In finding that the 3rd defendant knew that he was possessed of relevant information when he dealt in the shares of Egana, the judge stated that he had regard to the size of his purchases, against the background that he had never purchased Egana shares before, together with what he described as his caution and his keenness to complete execution of his order that day. As to the latter issue, there was evidence before the court that the defendant had asked his broker to contact him 15 or 20 minutes before closure of the market if the order was not executed. The judge concluded of the 3rd defendant’s conduct, that he must have been “expecting a rise of share price”. That was an obvious determination for the judge to make. 37.In drawing the inference that the 3rd defendant knew that the 1st defendant was involved in the privatisation project of Egana, and thereby connected to the company, the judge stated that he had regard to the fact that the relevant information that he found to have been given to the 3rd defendant was not generally known to the public, a determination that he had made earlier in relation to his finding that the information was relevant information. Also, he found it to be “… very specific and limited access”. No doubt, by the latter phrase he meant that only a limited number of people had access to the information. It was in the context of their relationship as brothers, that the judge found that the 3rd applicant knew the 1st applicant to be a Vice-President of BNP Peregrine. Not surprisingly, it was those factors that led him to find that the 3rd defendant had reasonable cause to believe that the 1st defendant held the information because he was so connected to Egana. 38.In all the circumstances, we are satisfied that the judge was entitled to draw the inferences that he stated he did that led him to be satisfied that all the elements of the offence in Charge 10 against the 3rd defendant were proved. Consideration of the case against the 4th defendant: Charge 11 39.Having noted that, in common with the 3rd defendant, the 4th defendant had never traded in Egana shares before, had given instructions that the share purchases should be made in stages so as not to force up the share price, that she too was keen to complete the purchases that day and that she had sold all those shares within two weeks of the resumption of trade, the judge determined that the 4th defendant had received the relevant information “indirectly from (the 1st defendant) through (the 3rd defendant)” and that she knew that the information was “relevant information”. 40.Relevant to the context of the simultaneous placing orders by the 3rd defendant and his wife, the 4th defendant, was the evidence that part of the conversation between his wife and her broker in which she was placing orders was audible on the tape recording of the 3rd defendant’s conversation with his broker. They were together. Further, of importance was the fact that the orders were co-ordinated, as evidenced by the 3rd defendant’s instructions to his broker that his order was not to compete with that of his wife’s “... let hers be done first”. It is in that context that, in finding that the 4th defendant received the relevant information from her husband, the judge was clearly rejecting the suggestion that he held back part or all of the relevant information from his wife. They were operating as a team, each knowing what the other was doing. Of that conduct, it is to be noted that they were in business together: each of them was one of its two directors and were the two and equal shareholders of the family business, Grand Harvest International Limited, and each authorised to sign solely in dealings with its bank accounts with HSBC. Similarly, they were also directors and ultimate beneficial owners of the British Virgin Islands company Loyal Pacific Management Limited in the account of which with HSBC the 4th defendant purchased Egana shares on 6 July 2006. 41.In determining that the 4thdefendant knew that the 1st defendant was “connected” with Egana, the judge determined that, having regard to the fact that he was her brother-in-law, the 4th defendant knew that the 1st defendant was Vice-President of BNP Peregrine. Also, he noted that having received the information from the 3rd defendant, the 4th defendant had given instructions to a broker that the purchases of Egana shares began in stages so as not push up the price and that they be completed before close of trade that day. Further, he noted that the information was “specific and of limited access” and had been passed to her by the 3rd defendant. In consequence, he found that the 4th defendant knew that the 1st defendant “... was involved in the privatisation project of (Egana)”. 42.In determining that the 4th defendant had reasonable cause to believe that the 1st defendant held information because he was connected with Egana, the judge noted that the information passed to her from the 3rd defendant had come from the 1st defendant and was “not generally known to the public.” 43.Clearly, the judge’s findings were based on an analysis that, given that the information was not known to the public but only known to a limited number of persons with limited access to the information, and the not surprising finding that the 4th defendant knew of her brother-in-law’s employment at BNP Peregrine that led to the obvious conclusion that the 4th defendant had reasonable cause to believe that it was as a result of his position that he was connected with Egana and thereby held the information. 44.In all the circumstances, we are satisfied that the judge was entitled to draw the inferences that he stated he did that led him to be satisfied that all the elements of the offence in Charge 11 against the 4th defendant were proved. Consideration of the case against the 5th defendant: Charge 12 45.In determining that the 5th defendant had received the “relevant information” indirectly from the 1st defendant, through either the 3rd or 4th defendants, the judge had regard to the fact that not only were they his parents but also, like him, that was the first time that they had bought Egana shares. Further, that he had sold the shares that he bought on the day after the resumption of trading. In determining that the 1st defendant knew that the information was “relevant information”, the judge found that the 1st defendant had been speculating in the shares. In determining that the 5th defendant knew that the 1st defendant was connected with Egana and that the 5th defendant had reasonable cause to believe that the first defendant held the relevant information as a result, the judge noted that the latter was his uncle and found that he knew that he was a Vice-President of BNP Peregrine. Also, that the information was specific and of limited access, not generally known to the public. In consequence, he found that the 5th applicant knew that the 1st defendant “was involved in the privatisation project of (Egana)”. 46.An important distinction between the family relationships of the applicants was that the 5th applicant was a young man of only 26 years at the material time. He worked for his parents, the 3rd and 4th defendants, in the family business. Both at work and in family relations he occupied a subordinate position. He was not a director, shareholder or signatory of the bank or securities accounts of Grand Harvest International Limited or Loyal Pacific Management Limited. Careful consideration was required of those circumstances by the judge in his consideration of whether or not, whichever of his parents counselled him to buy Egana shares, that parent felt it necessary to give him the relevant information of which they were possessed. The judge articulated no such consideration. 47.Other evidence that serves to emphasise the importance of careful consideration of that issue, is the difference in the orders placed by the defendant in contrast to those of his parents. His order was for 60,000 shares only and was placed on the internet and executed immediately. There was no evidence of where the 5th defendant was at the time that he placed the orders. Further, the order that he made was a full $0.11 above the market price of Egana shares suggesting, perhaps, that whatever information he had received was or may have been garbled or misunderstood. 48.For the reasons set out above, we are not satisfied that the judge was entitled to determine that it was an “irresistible inference” that the 5th defendant received the “relevant information” indirectly from the 1st defendant through his mother or father. Absent that finding, the prosecution case fails in proof of a critical ingredient of the offence alleged against the 5th defendant. CONCLUSION 49.Accordingly, for the reasons set out above the applications of the 3rd and 4th defendants for leave to appeal against conviction are refused. We allow the application of the 5th defendant for leave to appeal against his conviction in respect of Charge 12 and, treating the hearing of the application as the hearing of the appeal, we allow the appeal and quash that conviction and the consequential orders made in sentencing and in respect of costs, namely that he perform 200 hours of Community Service, pay a fine of $17,000 and costs of $64,548 in favour of the Securities and Futures Commission.
Mr Robert SK Lee, SC, DDPP, leading Ms Wong Kam Hing, SADPP, of the Department of Justice, for the Respondent Mr Peter Duncan, SC and Mr Keith Yeung, SC, instructed by Messrs Cheung, Tong & Rosa, for the Applicants Application for leave to appeal by the 1st and 2nd Applicants refused by Court of Final Appeal. Please refer to FAMC82/2010 dated 18 March 2011 | ||||||||||||||||||
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