HKSAR v. Yip Kim Po and Others
Read the full judgment text of DCCC 960/2007 on BabelCite. This District Court judgment was delivered on 8 October 2010.
1. I convicted the defendants after trial of the following offences:
Cited by 4 cases
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DCCC960/2007 & 551/2008 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NUMBER 960 OF 2007 & 551 OF 2008 ____________ BETWEEN
____________ Before: HH Judge BrowneDate of Hearing: 6 July 2009 to 9 June 2010 Date of Sentence: 8 October 2010 REASONS FOR SENTENCE Charges 1.I convicted the defendants after trial of the following offences:
Background 2.The charges all relate to a frauds perpetrated on Ocean Grand Holdings Limited (OGH), a publicly listed holding company. Its subsidiaries were primarily engaged in the manufacture and wholesale of aluminium extrusion products and chemicals for use in electroplating process. During the period covered by the charges the products were produced on sites located in Nanhai and Zhuhai, Guangdong Province, PRC and in Hong Kong. 3.The aluminium side of the business engaged in the design, manufacture, sale and distribution of anodized, paint coated, powder coated and fabricated aluminium extrusion products. Their products included extrusions for electronic components, shipbuilding, aerospace, industrial applications, furniture, window frames and curtain walls. The group also manufactured and sold aluminium alloy ingots used as raw materials in die-casting for the manufacture of aluminium products such as motor engine parts and outdoor furniture. 4.In 2003, the management of OGH proposed the building of a new aluminium production plant on the mainland, at Sanshui in Foshan. The stated ambition of the company was to be one of the top aluminum factories in the world. The company was to target huge international customers which would inevitably mean that there would be very demanding and strict quality requirements. State-of-the-art equipment was to be purchased from manufacturers in Europe or America. 5.The equipment required for the project included extrusion presses with pumps, handling systems and electrostatic painting/powder systems. 6.The other major company initiative concerned the chemical side of its business. In August 2005, at an internal monthly management meeting (IMMM), D1, the executive chairman of OGH, briefed its directors about a proposal to buy gold bond wiring machines for their factory in Zhuhai on the mainland. The company was controlled by a subsidiary company, Kenlap PGC. Negotiations were entered into with local agents for a Swiss company called Soma AG for the purchase of fine wire drawing machines, and with a German company called IWT Industrielle Wickeltechnic GmbH (IWT) for the purchase of winding machines. 7.At the material time, OGH was held out to be the only fully licensed commercial electroplating chemicals manufacturer in China. 8.Underneath OGH there were two further holding companies, one for the aluminium products business, Hing Yip Holdings (Hong Kong) Limited, (Hing Yip), and the other for the manufacture of electroplating chemicals, Ocean Grand Chemicals Holdings Limited, (OGC). 9.D1 was the executive chairman of OGH and the beneficial owner of 31.14% of its issued share capital. 10.D2 is the sister of D1 and was a director of OGH. D2 was also the director of other companies within the group namely, Kenlap PGC Manufacturer Company Limited (Kenlap PGC), Kenlap Chemicals Limited (KCL), OG Development Company Limited ( OGD) and Hing Yip Holdings Limited (Hing Yip). D1 and D2 were authorized signatories of these companies’ bank accounts. 11.D3 was employed as a project director with the OGH group and reported directly to D1. 12.Zhu Weibing (Zhu), named in the first and certain other charges, was employed within the OGH group as an assistant financial controller. He dealt with the fund movements of OGH and all its subsidiaries and reported directly to D1. 13.D4 and D6 were nominee directors of shell companies, Greatson Corporation Limited (Greatson) and Long Asset Limited ( Long Asset) respectively, set up for the purpose of opening bank accounts through which funds could be dishonestly diverted from OGH accounts. D2 had approached a long standing friend, Chung Ngai Man (PW40), to hold a company on behalf of OGH (Pioneer Lane Limited (Pioneer Lane), and to invite some of his friends also to do likewise. D4 and D6 were friends of PW40. 14.D5 was a friend of D1 and the sole director and bank signatory of a company called Good Light Limited (Good Light). He allowed his company’s bank account to be used for channeling monies dishonestly diverted from OGH accounts. 15.There are two groups of charges. The first group, charges 1-13, relate to a conspiracy whereby OGD entered into a sham contract with Greatson. Monies were diverted from OGH purportedly pursuant to this sham contract. The second group, charges 14-18, concerned a similar conspiracy whereby sham contracts were entered into by and another OGH subsidiary, Kenlap PGC, with Long Asset and another company called Fong Long Overseas (Industrial) Limited (Fong Long). The funds were diverted from Kenlap PGC through the bank accounts of Long Asset and Fong Long purportedly pursuant to these sham contracts. Charges 1-13 – OGD/ Greatson Contract 16.These charges arose from a dishonest and fraudulent scheme whereby OGD was procured to enter into a contract, (the OGD Contract), to purchase items of machinery from Greatson for HKD153 million. Equipment was not purchased pursuant to this contract but HKD136.7 million was paid to Greatson by OGD and Hing Yip, purportedly pursuant to the contract, and thereafter, disbursed contrary to the economic interests of OGD and Hing Yip (charge 1, D1-D3). 17.Under the OGD contract, OGD purportedly contracted to buy four aluminium extrusion presses and handling systems from an Italian company, Trevisan Cometal Industrial Machinery Company (Cometal) and electrostatic painting and powder systems from a Swiss company called ITW Gema and an American company called ITW Ransberg. 18.Machinery was purchased for the Sanshui plant but not pursuant to this contract. Only the handling systems were purchased from Cometal and this was under another agreement negotiated between D3 on behalf of OGH and Cometal. At the last minute, D3 requested that the contract be put into the name of Greatson, a company with which Cometal had had no dealings. 19.Extrusion presses of identical specifications to those set out in the OGD agreement were purchased from a mainland company, Yong Chang Metal Machinery Company (Yong Chang) for a fraction of the price of the Cometal presses. The Yong Chang presses were very much inferior to the Cometal presses. The Cometal handling systems were able to deal with a much greater volume of aluminium extrusion than the Yong Chang presses were capable of producing. After OGH went into provisional liquidation in July 2006, the presses were inspected at the Sanshui plant and found to have false Cometal plates attached to them. 20.The electrostatic powder and painting equipment was purchased by OGH from ITW Gema and ITW Ransburg but under separate contracts negotiated by D3 on behalf of OGH and the Hong Kong agents of the companies. Neither agent had had any dealings with Greatson. 21.The total price paid for the equipment purchased was just over HKD39 million. 22.Greatson was set up in March 2004. D2 contacted PW40 and arranged for him and some of his friends to act as nominee directors for certain shell companies. PW40 gave evidence under immunity. These nominees were put in touch with D3 who arranged for them to be appointed as sole directors of these companies and for some of them to open corporate bank accounts for which they would be the sole signatories. D4 was a friend of PW40 and it was arranged that he would become the sole director of Greatson and sole signatory of its two bank accounts. 23.Because of the amount to be paid for the machinery, the purported purchase was a discloseable transaction under the Stock Exchange Listing Rules. On the 4th November 2005 OGH published an announcement (the Announcement). The Announcement falsely stated, inter alia, that Greatson was an independent third party and the transaction was conducted at arm’s length (charge 2, D1-D3, Charge 3, D3 only). D1 – D3 knew this statement was false. 24.On the 21st November 2005 a circular (the Circular) was issued by OGH to its shareholders repeating the false representations made in the Announcement ( Charge 4, D1). Payments pursuant to the OGD Contract 25.Between 21 November 2005 and 21 March 2006 payments totaling HKD136.7 million were made by the OGH group to Greatson, purportedly pursuant to this contract. 26.HKD121.2 million of the HKD136.7 million paid to Greatson was then paid to other companies whose directors were connected to D1 and D2’s friend, PW40, and used for purposes unconnected with the OGD contract and that such payments were for a purpose other than the benefit of OGD. 27.Payments were made by Greatson to Crown Regent (HKD80 million, Strong Sense (HKD15.26 million) and Pioneer Lane (HKD24.9 million). Tsui Sze Lam was the sole director of Crown Regent and Strong Sense and the sole bank signatory of their bank accounts. Tsui was the bodyguard of D1. 28.Crown Regent paid 26.9 million to Good Light Limited. 29.Charges 5,9,10 11 and 12 concern funds dealt with under this illegal scheme. 30.Good Light Limited (Good Light) was purchased in the name of D5, a friend of D1, who was its sole director and shareholder and sole signatory to its bank account. HKD26,944,000 was moved through this account pursuant to the illegal scheme. 31.Crown Regent paid $10,810,000 of the money it received from Greatson to a company called Nanfang Galvanized Aluminium Sheet (Hong Kong) Company Limited (“NGAS”). D2 was a director of this company and D1 owned all of its 156,000,000 issued shares save one. 32.Crown Regent paid $6,686,000 of the money it received from Greatson to a company called Nanfang Alloy-Sheet (Hong Kong) Company Limited (“NAS”). D2 was a director of this company and D1 owned 90% of its issued share capital. 33.In March 2006 some HK$8.8M was paid by Strong Sense and Crown Regent to You Shuiqing, who was a friend and business partner of D1 and a director and bank signatory of Fong Long. 34.Most of the balance was remitted back to Hing Yip and another OGH company, KCL, falsely described as being payments for goods supplied. 35.D3 dishonestly sent false e-mails from an OGH computer in relation to this dishonest scheme (Charges 6 to 8). The e-mails were sent to the company secretary, PW7, and were prompted by enquiries from an OGH independent non-executive director about the contract and the provenance of Greatson. The false information contained in the e-mails were echoed in the false representations made in the Announcement. Charges 14-18 – The Kenlap PGC – Long Asset/ Fong Long Contracts 36.D1 and D3 entered into a fraudulent and dishonest scheme whereby Kenlap PGC was purported to purchase items of machinery for HKD28.2 million, a price far beyond their true value. Payments were made to Long Asset and Fong Long purportedly pursuant to these contracts and that the economic interests of Kenlap PGC and its shareholders were thereby adversely affected – Charge 14. 37.The OGH management discussed at their internal monthly meetings the acquisition of gold bonding wire machines and winding machines for a factory of Kenlap PGC in Zhuhai on the mainland. D3 was the person to deal with this matter. 38.The purchase was to be made via Shanghai WACmach Corporation Limited (WACmach) an agent of the European manufacturers of gold bonding wire machines. Fine wire drawing machines were to be purchased from a Swiss company, SOMA AG, and the winding machines from a German company, IWT Industrielle Wickeltechnik GmbH ( “IWT”) 39.By a contract dated the 23rd March 2006, Kenlap PGC purported to buy five Soma fine wire drawing machines from Long Asset for an amount equivalent to about HKD18.9 million. 40.By a contract dated the 27th March 2006 Kenlap PGC purported to buy five IWT winding machines from Fong Long for the equivalent of approximately HKD9.3 million. 41.D6, a friend of PW40, was the sole director and shareholder of Long Asset and the sole signatory of its bank account. It was alleged that Fong Long had three directors, two being mainland citizens and a Macau citizen. One of the mainlanders was You Shuiqing, a friend and associate of D1. 42.Pursuant to these contracts, deposits of HKD7,014,016 and HKD7,580,520 were paid by Kenlap PGC to Long Asset and Fong Long respectively. 43.OGH had been in communication with the general manager of WACmach, PW63, about purchasing machinery from Soma and IWT. On the 4th April 2005, PW63 was asked by D3 that the contracts relating to the sale of the equipment be made in the names of Long Asset and Fong Long. 44.By a contract dated 18 April 2006, Long Asset agreed to buy five fine wire drawing machines from Soma for the equivalent of about HKD5.94 million, a price much lower than the price in the contract made with Kenlap PGC. 45.By contract dated the 18 April 2006, Fong Long agreed to buy three IWT winding machines from IWT for the equivalent of about HKD740,000, again a price much lower than the price in the contract made with Kenlap. 46.The 18th April contracts were made after lengthy negotiations between D3 on behalf of OGH and WACmach. It was only toward the end of these negotiations that WACmach were informed by D3 that the contracts were to be in the names of Long Asset and Fong Long. WACmach had at no time had any dealings with either company. 47.Fong Long and Long Asset distributed the money received by them in various ways. The money paid by Kenlap PGC to Long Asset and Fong Long was almost immediately paid back to Kenlap PGC or its subsidiary, KCL, via various companies controlled by persons connected with D1 or via a company purchased on behalf of OGH. The payments were falsely described in the books of account of Kenlap PGC and KCL as income from sales of metal salts. Individual Defendants D1 48.D1 was convicted of four charges, charges 1,2,4 and 14. Charges 1 and 14 were charges of conspiracy to defraud, charges 2 and 4 concerned publishing false statements, the public announcement and the announcement to OGH shareholders concerning the OGD/Greatson contract. 49.D1 is 51 years of age and has been in custody since his arrest in September 2007. He was divorced in 2008 and his mother is in her 70’s. 50.Counsel for D1 submitted an unsolicited testimonial handed to him just before the court sitting by a pastor who visited D1 whilst he was in Lai Chi Kok. The letter refers to D1 being a good character who is enthusiastic in helping others. 51.Positive evidence of good character was given about D1. He was held in high regard on the mainland and had donated to charitable causes. D2 52.D2 is 45 and the younger sister of D1. As with all the defendant she has a clear record. D2 was born on the mainland and holds a master’s degree in construction economics from Harbin Institute of Technology. She came to Hong Kong in 1991. 53.Before the OGH provisional liquidation in July 2006, her main source of income was from Global Credit. She earned in the region of HKD80,000 per month. That company was owned by D1 and her father. 54.D2 was married in 2006. Prior to then she was living with her mother and visited her mother daily after her marriage. 55.In 2009, D1’s 24 year-old son returned to Hong Kong from studying in California and is unemployed because of a back condition for which he requires medical treatment. She has taken care of him since his return and treats him as her son. Delay 56.Counsel urged upon the court that the delay in bringing these proceedings has caused significant problems for D2 who has been suffering from severe depression whilst these offences have been hanging over her. She has also been most anxious to start a family. She was married in February 2006 at the age of 41. In June 2006 her father became terminally ill and she was forced to put on hold her plans to start a family. 57.D2 was arrested in October 2006 and charged with Charge 17. She was later charged with charge 5 and before the trial started in 2009 charges 1 and 2 were added. 58.Her father died in February 2007. 59.The trial started in July 2009, 2 years after she was first charged. She had to appear before the magistrates several times in 2007 and the case was transferred to the District Court in December 2007. 60.In 2007 D2 started to suffer from depression for which she received psychiatric treatment from a Dr Fung. She was given a variety of medications and tranquilisers and advised to suspend her plans to start a family. 61.In 2008 there were a few hearings in the District Court. D1 faced a trial in the High Court and that was held in January to April 2009 with the District Court trial listed to commence in July 2009. The trial date was fixed in June 2008 and would normally have been listed within 6 months. 62.Throughout this period D2 continued to receive medical treatment. At the start of this year she stopped taking drugs and resumed plans to start a family. This conviction and the inevitable sentence would obviously extinguish her hopes to have a family. Medical Report 63.The medical report submitted covers the period from November 2007 to March 2010 during which period D2 suffered severe depression. That condition has improved and she last consulted Dr Fung in March 2010. Counsel for D2 submitted that her conviction for these offences will increase significantly the risk of the recurrence of her psychiatric problems. Letter from Dr Pastor Lee Man Fong 64.Counsel for D2 submitted an unsolicited letter of reference from Pastor Lee who has known D2 since the start of the year. He states that she is a kind and low-key person, who loves her family, lives a simple life and has a strong interest in religion. He asks of a light sentence. Role of D2 65.It was submitted that D2 played a secondary role in the offences, that she acted out of blind faith in D1 and received no monetary gain. 66.Counsel for D2 submitted that D2 had merely a cheque signing role as a back up signatory. She had no office in OGH until 2006 and then only dealt with administration and personnel. She attended no management meetings until February 2006 and was never part of the senior management involved in the implementation of the projects in Sanshui or Foshan. 67.It was pointed out that when she signed the OGD/Greatson contract it had already been approved by management. She was not asked to answer any of the questions raised by the independent non-executive director in relation to the OGD/Greatson contract. 68.In relation to charge 1 it was submitted she was not involved the more serious of the two allegations, namely, she did not cause or permit OGD to enter into the contract with Greatson. 69.Counsel submitted that from all the evidence, D2 was acting out of blind faith and loyalty to D1. He was the chairman of OGH and her elder brother. 70.It was also submitted that D2 had cooperated in the trial process by agreeing many of the admitted facts. 71.Counsel reminded the court that much of the money paid out by OGD and Hing Yip was channeled back to the OGH group. Charge 5, dealing with the proceeds, was a mechanism which facilitate this arrangement. The same applies for Charge 17. It was submitted that this was a very unique form of fraud. I was also reminded that D2 remained in the jurisdiction throughout. D3 72.D3 is 47 and has a clear record. He is married with two sons aged 7 and 3. 73.He graduated from a university in Canada with a degree in business administration. He initially worked as a trader in securities. He then worked for 8 years as a sales and marketing executive for an interior design company. 74.He joined OGH in 2000. Since his arrest four years ago he has been unable to find stable employement. This conviction will have very serious implications for him as far as future employment is concerned. When release he will be in his 50’s and his prospects of work in his field of training and expertise is not good. His conviction will have serious repercussions for his wife and family. 75.It was submitted that he was not motivated by self gain or monetary reward. He acted out of loyalty to D1. He was under a duty to the chairman and had faith in him. The initiatives were commenced by the chairman and he was committed to his work. He and his wife were expecting their second child during the time D3 was involved in the conspiracy. D4 76.D4 is 37 and lives with his parents whom he supports. His family members have been supportive and attended the trial. 77.Numerous reference letters and letters of support were submitted to the court on behalf of D4. They included letters from his former headmaster, former colleagues and friend, relatives, neighbours, reports from his existing employers, Cathay Pacific and glowing testimonials from satisfied customers. He has also assisted in charitable work. The letters testify to the high regard in which D4 has been held by all these persons and the deep concern and anxiety on the part of family members about these offences. His parents in particular consider themselves largely to blame for his involvement in the theft offences which were motivated by a desire to pay off his father’s debts. 78.D4 has worked for Cathay Pacific for five years. Prior to that he had worked in the insurance industry under PW40, who became D4’s mentor. It was submitted that he considered PW40 to be trustworthy and honourable which is why he agreed to open the account. It was submitted that D4 was never aware of the whole scheme and played a minimal role. It was submitted that the lai see of a few thousand dollars was all he received from his involvement. 79.D4 has had this matter hanging over his head since his arrest in February 2007. He deeply regrets his involvement. As regards the two theft charges, D4 has made full restitution. D5 80.D5 is 60 and has been married for 29 years and has a son aged 26 and a daughter aged 22 who are both working. He has lived in Hong Kong all his life and has worked steadfastly throughout. 81.He has had various jobs and worked most recently in the electronics trade. This has required him to travel to the mainland. He was earning some RMB22-25,000 per month. 82.He met D1 on a social occasion in the 1990’s. D1 was well known in Hong Kong and OGH was a large corporation. D5 felt it was a great honour to know D1. 83.Letters of support were submitted from friends, a colleague and relatives. He is regarded as a helpful and reliable and a good husband and father. 84.He lost his job when arrested for this offence as it attracted much publicity. His wife has had to return to work. He has used up all his savings and his daughter could not complete her tertiary education. 85.It was urged upon the court that there was no evidence that he had benefited from the offence. He had blind faith in the good name of D1. He never asked any questions when he signed the blank cheques and gave them to OGH. He was motivated by friendship. D6 86.D6 is 28 now and was 25 at the time of the offences. At that time she lived with her parents, elder sister and younger brother. 87.She was educated to Form 5 level and worked for a retail company. It was submitted that she was very much a victim in this case and was sold out by PW40 whom she trusted. Observations 88.The OGD/Greatson conspiracy was a substantial and elaborate fraud on the company shareholders and creditors. The fraud covered a period of several months, involved complex transactions and protracted dealings with a large number of companies. The execution of the fraud required very detailed and time-consuming planning. The fraudulent scheme was concealed by a plethora of bogus accounting and contractual documentation. Investigation and prosecution of this fraud involved an enormous investment in terms of time and expense on the part of the investigating and prosecuting authorities. 89.The conspiracy constitutes a major breach of trust on the part the senior officers of this publicly listed company. It not only breaches the trust of the shareholders of the company it greatly undermines public confidence. Fraud on this scale affects the international reputation of Hong Kong as a financial centre. Publicly listed companies are subject to very strict regulations to ensure high standards of accountability for and stewardship of corporate resources. The system relies on those holding high office in such companies to act with honesty and integrity. 90.An unusual feature of the two conspiracies was that most of the money paid out pursuant to the bogus contracts was channeled via various companies back to OGH companies. 91.Of the HKD136,708,000 paid into the Greatson account, over HK89 million was paid back to Hing Yip and KCL falsely recorded in the books of account as payments for goods sold. HKD15.5 million was paid to Cometal, HKD 24.9 million to the Nanfang group which was substantially owned by D1 and HKD 8.8 million to D1’s friend, You Shuiqing. 92.The company paid for the purchase of machinery from Yong Chang, Bosch Rexroth, ITW Gema and ITW Ransburg. The arrangements and negotiations were confused and confusing. For example, as part of the deal with Yong Chang, OG agreed to pay for Bosch Rexroth pumps to be supplied to Yong Chang but which were in fact delivered to Sanshui. The OG contract with Yong Chang lapsed and was taken up by Skybright Import and Export Trading Company which acted as a go-between on the instructions of a Mr Yu from Hong Kong. The presses, bearing false Cometal plates, were delivered to OG Sanshui. HKD1.2 million was paid for the pumps. Yong Chang received RMB2.5 million from a company called Crownica Development Limited, a company set up on the instructions of OGH, and RMB800,000 from Mr Yu. 93.For the electrostatic painting and powder equipment, HKD1.3 million was paid to ITW Gema and HKD1.5 million to ITW Ransberg. As the balance was not paid, ITW Ransburg made no delivery of any goods. 94.Of the HKD14.5 million paid out under the Kenlap PGC/ Long Asset/ Fong Long contracts, all the money was paid back to Kenlap or KCL falsely described as sales of metal salts. 95.The effect of these bogus contracts was to cause monies to be diverted away from OGH, channeled through shell companies and other companies. Most of the funds were diverted back to OGH companies. Shareholders, the public and those directors and managers not party to the conspiracy were deceived as to the financial condition of the company and the manner in which corporate resources were being used. They were given the false impression that the company was making a significant investment in the state of the art machinery for Sanshui plant. They were misled as to what the company was paying for the winding and drawing machines for the Foshan factory. The OGH books of account falsely showed that substantial sales of goods to a variety of companies, most of which were shell companies set up by OGH. The arrangements were supported by a plethora of bogus accounting and contractual documentation. 96.I was satisfied from all the evidence that D1 had initiated the conspiracies and used Zhu and D3 to carry out the principal accounting and contractual arrangements. He was the group chairman and no money could leave the group without the signature of himself or his sister, D2, an executive director of OGH. In order to carry out the conspiracies it was necessary to make arrangements to use the bank accounts of existing companies or newly established companies as money transfer vehicles to channel the funds from the OGH companies to their intended destinations. The bank accounts of the companies used for channeling funds were operated by persons known to D1 or D2’s friend, PW40. All the money obtained from OGH in respect of the OGD contract went initially to accounts controlled by D4. All the money from the bogus Kenlap PGC/ Long Asset contract was initially transferred to the Long Asset account controlled by D6. Both D4 and D6 were introduced to OGH by PW40 at the request of D2. 97.Money laundering is a very serious offence as it is an attempt to legitimize proceeds from criminal activities. Those who assist criminals in money laundering, indirectly encourage them in their criminal activities. Successful deterrents against money laundering could be effective measures against crime. 98.The maximum sentence for a money laundering conviction on indictment is a fine of HKD5 million and 14 years imprisonment, which is perhaps a reflection of how such an offence is viewed. 99.In the cases of D4 – D6, I was satisfied that they each had reasonable grounds for believing the monies they dealt with were the proceeds of indictable offences. Sentences D1 Charge 1 100.The amount of money involved in this offence was substantial. I noted that the majority of the money was channeled back to the OGH group. HKD24.9 million went to the Nanfang group of companies and HKD8.8 million went to D1’s friend You Shuiqing. The OGD contract was a sham. It misled shareholders, the public and those managers and directors not involved in the conspiracy that HKD153 million was being invested by OGH in state-of –the –art machinery for the Sanshui plant. The contract provided for four sets of presses and handling equipment to be purchased from Cometal at a price of HKD109,695,683. In the event only the handling equipment was purchased from Comtal for HKD26.6 million and the presses were purchased from Yong Chang for RMB 9 million. 101.D1 was guilty of a gross breach of trust in respect of this offence. In my view he is fortunate this offence was dealt with in the District Court as the maximum sentence I am able to impose is 7 years imprisonment which in my view does not adequately reflect the criminality involved. 102.In respect of the first charge I sentence D1 to 7 years imprisonment. 103.In respect of charges 2 and 4 relating to the publication of false statements, I impose concurrent sentences of three years imprisonment. 104.In relation to Charge 14, I take into account that the amount involved is much less than for charge 1 and all the monies were channeled back to OGH. The amount involved was just over HKD14 million and did not require a public announcement. As with charge 1 the offence required time-consuming and elaborate planning and was supported by a plethora of false accounting and contractual documentation. The books of account would falsely show the receipt of these monies as sales of goods by Kenlap PGC and KCL. 105.I take the view that a sentence of five and a half years imprisonment adequately reflects the criminality involved in this offence. I order that this sentence should run concurrent to the sentences on the other charges. D2 106.I convicted D2 of charges 1,2,5 and 17. 107.I noted what has been said in mitigation with regard to D2. It was suggested that she was acting out of blind faith in D1, her elder brother. She certainly did not play as prominent a role as D1 in the running of the company notwithstanding her position as executive director. She received no monetary gain from the offences. As a director of a publicly listed company she had a duty to the company’s shareholders and her actions constituted a major breach of trust. 108.A major feature of the fraud was the channeling of company funds through bank accounts of other companies. She prevailed upon PW40 to hold a company and open a corporate bank account and to secure some of his friends to do likewise. In relation to the OGD contract HKD136.7 million was channeled through the bank account of Greatson which was held by PW40 ‘s friend, D4 and HKD24.9 million was channeled through the account of Pioneer Lane which was operated by PW40. 109.There was delay in bringing the proceedings but this was inevitable given the nature of the case, the complexity of the evidence and the fact that D1 was tried first in the High Court. 110.I accept that D2 has suffered enormous stress and depression as a result of these proceedings. This has affected not only her mental health but has frustrated her desire to start a family. Sadly, her father passed away whilst she was awaiting trial and she had been looking after her mother and also the son of D1. D2 was cooperative in agreeing many of the facts adduced in evidence. 111.Charge 1 is a very serious offence. As I said in relation to D1, the sentence I was able to pass was limited by my jurisdictional powers. I take a starting point of six years and 6 months in view of the secondary role played by D2. I have decided to reduce that sentence further to reflect the mental anguish and illness the defendant has suffered and also her cooperation in agreeing facts. I sentence D2 to six years imprisonment. 112.In relation to charge 2 I impose a sentence of 2 years imprisonment. Charge 5, four years imprisonment and Charge 17 three years imprisonment all to run concurrently. 113.A total term of imprisonment of 6 years. D3 114.I convicted D3 after trial on charges 1,2,5,6-8,9 and 14. He was the subordinate of D1 and reported directly to him. D3 was substantially involved in the execution of the conspiracy and worked hand in glove with Zhu who dealt with the financial arrangements for the fraud. D3 dealt with the contractual arrangements and the arrangement for PW40, D4 and D6 to hold companies and open bank accounts. 115.In respect of charge 1, I impose a sentence of 6 years imprisonment. In respect of charge two I impose a sentence of two years imprisonment. In relation to charge 5 I impose 4 years imprisonment, charges 6-8, two years imprisonment, charge 9, five years imprisonment. In relation to charge 14 I sentence D3 to five years’ imprisonment and order that all sentences should run concurrently. D4 116.I sentence all those charged with dealing with the proceeds of an indictable offence on the basis that I was satisfied that they had reasonable grounds to believe, rather than they knew, that the funds represented the proceeds of an indictable offence. D4 operated the Greatson bank accounts through which HKD136 million was channeled. As with all defendants, I have born in mind the mitigating factors urged upon me by his counsel. I sentence him to 5 years imprisonment. 117.In relation to the charges of theft, charges 10 and 11, I note that the money has been repaid and I therefore impose sentences of 3 years and 18 months to run concurrently and in considering the question of totality, I have decided that four months of that sentence should run consecutive to charge 9. The defendant will therefore go to prison for 5 years and four months. D5 118.I convicted D5 of one charge of dealing with the proceeds of an indictable offence, charge 13. The amount involved is HKD26,944,000. I sentence the defendant to 4 years imprisonment. D6 119.D6 is convicted of one offence of conspiring to deal with the proceeds of an indictable offence, charge 17. The amount involved just over HKD7 million. I sentence her to three years imprisonment. Disqualification of Directors on conviction of an indictable offence S. 168E of the Companies Ordinance Cap 32 120.At the time of the commission of the offence D1-3 were directors of companies and I was satisfied that all three had acted fraudulently. 121.In the case of D1, I was of the view the sentencing powers of the District Court were inadequate to reflect the criminality involved. The maximum period of disqualification that can be imposed by a judge of the District Court is 10 years. I disqualify D1 from becoming a director of a company for 10 years without leave of the court. 122.In relation to D2 and D3 I disqualify them from becoming directors of companies for 8 years without leave of the court.
Mr. Peter Duncan, S.C. leading Mr. Bernard Ryan, Counsel on Fiat, for Prosecution. Mr. Ching Y Wong, S.C. leading Mr. Jon Wong and Ms Sylvia Tung, instructed by M/s KM Cheung & Co. for D1. Mr. MK Wong, S.C. leading Mr. Michael Delaney, instructed by M/s Richards Butler for D2. Mr. Kenneth Chik, instructed by M/s Chong & Yen for D3. Mr. Duncan Percy, instructed by M/s Jennifer Lee & Co (DLA) for D4. Mr. Osmond Lam, instructed by M/s Tang & So (DLA) for D5. Mr. Suen Kam Hay, instructed by M/s Li Wong Lam & WI Cheng (DLA) for D6. |
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Further hearings and rulings under DCCC 960/2007