HKSAR v. Chan Po Fui Derrick and Others

DCCC 1368/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1368 OF 2010

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Reasons for Sentence

1.This case concerns 2 bankers (D1 & D2) from the Industrial and Commercial Bank of China (Asia) Limited (ICBC) who accepted bribes from a Mainlander businessman (D3) in relation to loans taken out by D3 from ICBC.

2.At the commencement of the trial, D1 pleaded guilty to two counts of accepting advantage (Charges 7 & 14 while his other offences are left on court’s files), the total bribe money accepted is 3.3 million.

3.D2 was convicted after trial of 4 counts of corruption offences (charges 1, 4, 5 & 9)-the advantage accepted includes 2.5 million, 5 bottles of red wine Chateau Lafite (total value about $14,500), a Bvglari watch ($33,000) and 5 counts of money laundering (charges 17-21).

4.D3 absconded and up until the time when the court is passing sentence on the other defendants in the case, he is still at large.

5.Insofar as the corrupt money (5.8 million) is concerned, the prosecution is seeking a confiscation order under section 8 of the Organized and Serious Crimes Ordinance rather than a restitution order under section 12 of the Prevention of Bribery Ordinance, and a hearing date has been fixed for October 2011. 

6.At all the material times, D1 headed the Corporate Banking Department of ICBC, while D2 was his subordinate who headed the real estate and finance section within the same department which was responsible for handling corporate clients; one of their duties was to process their loan applications, renewals and applications for deferring repayment.

7.D3 was a Mainlander businessman who got acquainted with D2 in 2005 and through the assistance of D1 or D2 or both at different times by way of endorsing favourable loan proposals and/or endorsing applications for deferring repayment, D3 was able to take out 3 loans from ICBC within a period of 15 months from August 2006 to November 2007. The first loan was for US$65 million, second loan HK$200 million and the last loan HK$2,000 million. Subsequently, D3 applied six times to defer repayment and 5 of such applications were successful.

8.In August 2009, D1 accepted corrupt money of 1 million in cash from D3 and then on 5^th October 2010 he received another batch of cash, this time 2.3 million, from D3. The handover of the money was done in the lavatory of a hotel in Central, and both D1 and D3 were arrested at the scene by ICAC officers. 

9.D2, while under the employ of ICBC, had accepted 3 bottles of red wine (total value about HK$ 7,500) and a Bvlgari watch (estimated value HK$ 33,000) from D3. After he left ICBC, he continued to receive gifts from D3- two more bottles of red wine worth about $ 7,000, ½ million cash in the first half and 2 million in the second half of 2009.

10.The court was told in mitigation that regarding the 3 loans in question, one of them, the 200 million loan had been fully repaid; as for the other two, the outstanding amount was in the region of 812 million. It was further pointed out that there had not been any defaults in the past and there would not be for the loans were well secured with properties in the Mainland.

11.Defence stressed that the loans as well as the subsequent applications for deferring repayment were all done in a proper manner in accordance with the rules and regulations of the bank. As far as the borrower was concerned, there had not been any misrepresentation made to the bank by the use of false documentation to secure the loans or anything like that. And because of the existence in the bank of a system of checks and balances in the loan approval process, neither defendant could be in a position to influence the final outcome of the applications. And they had done nothing untoward to influence anyone who was involved in the process.

12.Both defendants are persons of previous good character. It is clear from their background information submitted to the court that they came from humble origins, started from scratch in the banking industry, and earned their senior positions in the bank by sheer hard work. No doubt their success is the envy of all the youngsters nowadays.

13.That Hong Kong ranks among the top of the list of the most honest cities is also the envy of people around the world. In combating corruption, Hong Kong has come a long way since the establishment of the ICAC. The majority of people here have pitched in and in this respect we take pride in being a Hongkonger.

14.D2 in his interview with the ICAC told us that the Chinese-funded customers liked to give away gifts of value even up to $10,000 during festive occasions implying that that was the Mainland way of life. The truth is if you give way to a small temptation for a start, then you’ll find yourself unable to resist the major ones that may come later on. Had it not been for the present offences, both men would have been well on their way to attain the pinnacle of their career, but they now plumb the depths. And the moral is that corruption doesn’t pay.

15.The courts have always been tough on corruption, Court of Appeal has said in the case of Kwan Chi-cheong & others CAAR 1/1999,

“……even the first offender charged with an offence of corruption under the Ordinance, unless it is merely a technical breach, must usually expect a deterrent sentence. This will almost invariably involve a sentence of immediate imprisonment.”

16.The defence have not asked this court to treat the present case as a case of technical breach, but nevertheless submitted a number of cases on sentence for the court’s consideration, namely Daniel Jonathon Berman & others DCCC 979/2002, Li Defan & another FACC 5/2001 and Li Man Tak CAAR 1/2005.

17.In the District Court case (Berman), the corrupt money involved was about $2,760,000, the sentencing judge took 3 years as starting point.

18.In Li Defan, Li was the head of the business development department of a bank, was paid $3,696,706 by D2 to facilitate the approval of a loan to D2 of US$ 40 million, D1 was convicted after trial and sentenced to 2 ½ years.

19.In Li Man Tak, it was a review by the prosecution against sentence but the application was refused in the end. It is worth mentioning the comments of the Court of Appeal towards the end of the judgment

“We can see some force in the applicant’s submissions in so far as these sentences were, in our opinion, plainly on the low side. This is not, however, to say that we consider that they were so inadequate as to call for our intervention. In this respect, the respondents can regard themselves as having been fortunate to have received merciful sentences which, on these facts, were undeserved.”

20.I accept that neither defendant had exerted any undue pressure on anyone involved in the loan approval procedure. And they were not in a position to influence the outcome of all the applications relating to the loans.

21.The facts of the present case are similar to the case of Wan Charn Leung CACC 194/2002; Wan, a business manager of the Trade Finance Department of a bank, had recommended the approval of certain changes to credit facility as applied by a corporate client which enjoyed a credit facility in the sum of $11 million at the bank. The application had to be considered first by the Credit Department and then the Credit Committee which only approved one of the changes in the end. Wan accepted a loan of $500,000 from the client and it was for his acceptance of such a loan that he was convicted of a section 9 offence.

22.The loan was repaid after 3 months, the trial judge in sentencing though rejected the suggestion that the offence was technical, he nonetheless took the view that “this was an offence at the lower end of the scale because there was in existence a check and balance system in the bank; that the facilities which were granted were in the event properly granted; that the loan was repaid; and there was no fraud perpetrated upon the bank”. On the question whether Wan had gained from the offence, the trial judge said, “You certainly gained the interest-free use of $500,000 for 3 months or so even if it was in the hands of another”. His sentence of 9 months was upheld on appeal. 

23.Here I echo the words of the Court of Appeal in Wan’s case “This offence……was not an offence the commission of which can properly be described as technical. The applicant knowingly accepted an advantage which he knew he should not be accepting. As was said in Kwan Chi-cheong, the Ordinance is in its effect intended to be draconian and a punishment that fails to deter will produce all the wrong signals. Mr. Wong has said today that no one was worse off because there was no loss to the bank. The very point, however, is that someone was worse off. The integrity of banks is worse off. The trust reposed in bankers is damaged by every such corrupt act whether it is large scale or small. And it is the need to ensure total honesty and cleanliness in the conduct of banking and public affairs that calls for the firm approach by the courts.”

24.Comparing it to the present case, their (D1 and D2) splendid gifts (5.8 million cash received) really put Wan’s interest-free use of half a million loan for 3 months into the shade. In accepting such large sums of money corruptly, each defendant had breached the trust the bank reposed in them to act honestly in relation to its business.

25.Both defendants have indicated through their counsel that in the event of the prosecution seeking to forfeit the corrupt money, they have no objection to it. Counsel for D1 submitted that a full restitution is to be regarded as strong mitigation. I think it is more logical to say that it adds no aggravation the fact that they gave up the ill-gotten gains; they were in any event not entitled to it because the law would not allow an offender to benefit from his own crime. And strictly speaking, the money for restitution does not come from the defendants’ own pockets.

26.Taking into account all the positive features relating to each defendant that have been put forward in mitigation; for D1, I take 3 years as starting point for each of the offence (3.3 million altogether), reduce it to 2 years to reflect the plea, and order the terms to run concurrently with each other, the total term is one of 2 years imprisonment.

27.As far as D2 is concerned, he was convicted after trial, for each of the two corruption charges involving wine and watch, I sentence him to a term of 18 months, and for the other two corruption charges (2.5 million altogether), a term of 3 years each. All terms are to run concurrently with each other.

28.As regards the money laundering charges, the total amount of money laundered as found by the court is $860,000. For each of the charge, I sentence D2 to a term of 18 months. This was the corrupt money D2 put into his various bank accounts after he had received it from D3 that in my view has not added anything further to the overall criminality of D2. I therefore order all the terms to run concurrently with one another and also with that of the corrupt charges.

29.The total term for all these offences is one of 3 years imprisonment. 

Please refer to CACC353/2011 for the relevant appeal(s) to the Court of Appeal.