HKSAR v. Ma Fa Keung
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DCCC591/2010 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NO. 591 OF 2010 ----------------------
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-------------------------- Reasons for Sentence -------------------------- 1.The defendant has pleaded guilty to one charge of fraud, contrary to section 16A of the Theft Ordinance. He has admitted that between 4 January 2006 and 25 March 2009 in Hong Kong by deceit he presented fictitious invoices and bills of lading to CITIC Ka Wah Bank Limited and falsely represented to the bank that goods as stated in the said fictitious invoices and bills of lading were sold by Chi Wo Fresh Fruit Company with intent to defraud and induced the bank to approve and pay to the fruit company invoice loans in the total sum of US$34,499,740 which resulted in the benefit to the said Chi Wo Fresh Fruit Company and/or or in the prejudice or a substantial risk of prejudice to the Bank. 2.In March 2002, the defendant set up a company named Chi Wo Fresh Fruit Company Limited. It engaged in the business of trading fruit. The defendant and his wife, Lau Fung-kuen, were the only directors and shareholders of Chi Wo. In the name of Chi Wo a bank account was opened at the CITIC Ka Wah Bank on 16 September 2002. The defendant and his wife were the authorised bank signatories. Since 2002, credit facilities were granted by the bank to Chi Wo and they had been progressively increased. In 2005, the credit limit of invoice discounting loan was increased to HK$13.5 million, eventually to 2007 where the credit limit was increased to HK$25 million. Since 2002, the defendant had been applying for invoice discounting loans from the bank for trade financing. In order to apply for a invoice discounting loan, the defendant had to submit invoices together with bills of lading to certify that the goods were sold and shipped to overseas buyers. Between January 2006 and March 2009, on behalf of Chi Wo, the defendant had applied to the bank for a total of 346 invoice discounting loans and the total amount of loans to Chi Wo was in a total sum of US$34,499,740 equivalent to HK$268,407,977.20. 3.In respect of the 346 invoice discounting loans, invoices were submitted by the defendant to the bank purporting to show that Chi Wo had commercial transactions with six overseas buyers. In fact the overseas buyers had never entered into the transactions with Chi Wo and the invoices were fictitious. The bill of ladings submitted by the defendant to the bank in support of the 346 invoices discounting loans were issued by three different companies. The companies operating the relevant liners had confirmed the bill of ladings were false. The shipment in relation to the alleged export transactions in fact did not exist. 4.In May 2009, 35 of the 346 invoice discounting loans remained outstanding in the total sum of HK$21.5 million. As there was no repayment made by the defendant, the bank realised the properties of the defendant and his relatives and reduced the loan outstanding to an amount of HK$11.49 million as at 17 July 2009. Interest has continued to accrue on that sum and as of today the total amount outstanding is HK$12.95 million. 5.The defendant was arrested on 9 February 2010 and was interviewed under caution on three occasions. He admitted that he had submitted these false export invoices and false bill of ladings. He had copied the information in the false invoices and bill of ladings from some past transactions between Chi Wo and overseas buyers. As his fruit packaging business in China had lost HK$8 to HK$10 million in 2006, he started to falsify export invoices and bill of ladings in 2006 in order to support his fruit packaging business in China. In March 2009, as he had used up the credit limit of HK$25 million and could not make any repayment, he could not obtain any further invoice discounting loans from the bank, he therefore self-petitioned for bankruptcy and he was declared bankrupt around May or June 2009. 6.The police seized a desktop computer from the office of the defendant and some false invoices issued by Chi Wo and false bill of ladings of various dates between July and December 2007 which had been submitted by the defendant to the bank were retrieved from his computer. 7.The defendant’s counsel, Mr Raymond Chan, mitigated on his behalf and I have taken into account all that he has said. In short, the reasons put forward for him committing the present offence was that in 2006 the defendant was too ambitious in his business and suffered a huge loss of about HK$10 million and therefore to provide for him financially he applied for these discounting loans to cover that loss. The defendant had a business in China selling fresh fruit and he continued to trade at a loss over the three years and that is why he kept having to borrow these sums. When, however, he was unable to repay the loan he endeavoured to do his best he could to pay what he could and sold one property in his name, one property in the joint name of him and his wife and a property in the name of his sister to repay the bank. After the sale of the property the loan had been reduced by about HK$10 million to the amount outstanding of HK$11.49 million. 8.The defendant is aged 58, he is married and has a son aged 24. The defendant has education up to Form 5, he has been working since he was 15 years of age and gradually after working as an employee and after some 12 years commenced his own company which was the Chi Wo Company. The defendant has written me a letter in mitigation setting out the background of his employment and how his business trading suffered such a huge loss and why he then committed this offence. It is clear from the letter that the defendant is deeply remorseful and he knows that he has to face the consequences of what he has done and he knows that he has let down his wife, his parent and his son. At his age he suffers from various illnesses, the most serious is his high blood pressure. 9.Mr Chan, his counsel, has submitted to me the case of HKSAR v Cheung King, [2001] 3 HKLRD 68 for the purposes of assisting me in the guideline starting point for this offence and for the same purposes the prosecution has submitted to me three cases: Lam Tze Leung CACC476/2004; Lee Wing Kwan CACC288/2003 and Chin Kam Chiu CACC179/2004. As in all cases, each case depends on its own particular facts. The closest case to this case of all those cases submitted is that of Chin Kam Chiu. In that case it was a conspiracy to defraud shareholders and creditors of the Sing Wah Bank by letters of credit to the knowledge of the defendants where there were no underlying transactions. In about six months there were 25 letters of credit which generated sums to the order of some $222 million. In that case the bank had not suffered any loss and the Judge in that case took a starting point of 7 years’ imprisonment after trial and in effect the Court of Appeal said that that was not manifestly excessive but eventually in that case the Court of Appeal held that there was an unusual feature and that unusual feature was that the instigation of those offences were emanated from the staff within the bank and that the applicant in that case should not have a more severe sentence than the staff of the bank and the Court of Appeal reduced the sentence appropriately. 10.In this case the defendant defrauded the bank by applying for 346 discounting loans by submitting false documentation of invoices and bill of ladings. This was to certify that there were goods sold and shipped to the overseas buyers when in fact there were no such transactions. The 346 invoice discounting loans were in the total sum of about US$34 million and equivalent to HK268 million over a period of about three years from January 2006 to March 2009. This on any terms can be described as a very large sum of money. 11.In this case, as distinguished from the other case of Chin Kam Chiu, the bank has actually suffered a loss of HK$11.49 million as of July 09 and as of today including interest of HK$12.95 million. The defendant was the sole applicant and the sole beneficiary of the loans, his benefit was that his business would not foreclose and he could continue to operate it. This scheme was solely orchestrated by him. As recognised by the defendant himself and his counsel, Mr Chan, this offence is a very serious offence. As Stock J said in the case of Chin Kam Chiu at paragraph 7:-
12.Defendant, you have shown a concentrated effort of abusing the documentary credit system of the bank and defrauding the bank of the money. You were the sole beneficiary of the scheme that was operated by you. The total sum defrauded, as I mentioned, was about HK$268 million and the loss to the bank approximately $12 million. You are a man of clear record. I accept that there is a genuine remorse on your part. I also take into account the effort you have made in repaying the loans and particularly by the selling of the properties you own. 13.Taking all these matters into account, had I convicted you after trial I would have taken a starting point of 6 years' imprisonment. Giving you, however, full credit for your plea of guilty, I reduce that term by one-third and you shall be sentenced to 4 years’ imprisonment.
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Cases cited in this judgment