HKSAR v. Cheong Bun Kwan

DCCC1173/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1173 OF 2011

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Reasons for Sentence

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1.The defendant was convicted after trial of one charge of fraud, preferred against her pursuant to section 16A of the Theft Ordinance, Cap.210.

Facts

2.The defendant was at the material time the only person with authority to instruct J P Morgan Chase Bank to negotiate Letters of Credit issued in favour of Long Label Limited, of which she was the sole director. 

3.After a series of 10-odd such transactions without incident, the business of Long Label nose-dived in 2007.         

4.On 18 June 2007, the defendant presented to the bank a full set of documents, including a fictitious Bill of Lading, for negotiation of a Letter of Credit in favour of Long Label in the sum of US$299,997. That was the only transaction of its kind that year. 

5.The negotiation was successful, and a sum of US$299,705 was credited to Long Label’s account.  

6.Almost immediately afterward, the defendant sent the bank instructions to transmit to a Taiwanese company the sum of US$287,997.  The bank processed the remittance as instructed.

7.In accordance with established commercial practices and as a part of the negotiation process, the bank sought repayment from the Taiwanese issuing bank.  The bank’s request was denied, the Bill of Lading was found to be irregular.

8.The bank sought repayment from the defendant, instead.  Up to 5 February 2008, the defendant had made repayment totalling US$77,632.17.

9.On 19 February 2008, the police raided the defendant’s home and seized the full set of negotiation documents, together with paraphernalia suitable for making the false Bill. 

Conviction

10.On the totality of evidence, the court finds the defendant guilty as charged.

11.The defendant has had a clear record prior to her current conviction. 

Background Report

12.According to her background report, the defendant’s father had been an officer of the PLA; as such, the defendant was brought up with a military background.  Due to her weak physique, the defendant was unable to join the army upon her graduation from school and became a clerk at a construction company. 

13.Defying her parents’ wish to the contrary, the defendant married Mr Yeung who was 15 years her senior.  Disillusioned by the living conditions of Hong Kong, she returned to Guangzhou with her infant son to live with her elder sister. 

14.When her son was about to enter primary school in 1999, the defendant and her husband purchased a flat under the Home Ownership Scheme.  At that time, her husband would contribute $20,000 a month towards the household expense.    

15.Arising from the negotiation of Letter of Credit on 18 June 2007, the defendant had used up all her finances to make repayment to the bank.  Her savings were all given up to the bank, her flat was foreclosed, her father’s property in Guangzhou was sold, and her credit cards’ limits were all exhausted.  In the end, she was declared bankrupt. 

16.The defendant’s husband has gone missing since January 2008.  Despite her best effort, the defendant has been unable to find him in Taiwan or Japan. 

17.The defendant’s son is now 18 years old, and is to take the Diploma of Secondary Education examinations commencing this month.  Due to his mother’s situation, he has been entrusted to a friend for boarding for the last two years.  According to his school master, the defendant’s son is a well- behaved student, but he has never mentioned his family problems to the school.  

Mitigation

18.The defence puts forward the following plea in mitigation.

19.The defendant is now 48 years old.  Her son is 18.  Her husband, Mr Yeung, has disappeared shortly after the event of June 2007. 

20.Mr Yeung, well-educated and familiar with shipping documents, was responsible for running the business.  It was later on, counsel submits, that the defendant was asked to stand as director or shareholder of companies dealing with negotiation of Letters of Credit. 

21.The defendant asks to be leniently dealt with on the following grounds:

(1) she was not the mastermind of the scam;

(2) she was left alone to face the problem after the disappearance of Mr Yeung;

(3) she has done her very best to make part restitution to the bank, including selling her late father’s property and using up the limits of her credit cards;

(4) all along, she had to provide for her young son and to look after her aged mother-in-law;

(5) despite all these difficulties, she managed to repay the bank some half a million dollars;

(6) in this process, she lost her home;

(7) her son had to be entrusted to a friend; her mother-in-law has been sent to a home for the aged; and

(8) for the last four years, the defendant has been living under tremendous stress and pressure.

22.Counsel for the defence submits that the defendant is very remorseful.  She has committed the offence out of misguided loyalty to her husband.  The sudden disappearance of the husband has resulted in a lasting state of desperation for her.

23.It is pressed upon the court that the defendant has not obtained any huge benefits arising from the transaction.  Counsel argues that in all the circumstances of this case, there are exceptional circumstances justifying lesser forms of punishment.  In this regard, counsel refers the case of SJ v Grossman [2008] 1 HKC 273.         

Discussion

24.There is no sentence guideline for the offence of fraud, so each case depends on its own facts.

25.While its degree of sophistication can vary from case to case, fraud as a criminal offence is necessarily serious; it is always premeditated. 

26.Hong Kong is an international city of commerce.  It takes pride in a world-class financial system of which the banking sector constitutes the backbone.  Fraud involving Letters of Credit damages Hong Kong’s good reputation and undermines its ability to provide efficient banking services; such reputation and ability are essential for its current and continuing status as a world financial centre.      

27.The amount involved in this case is in the order of HK$2 million.  While this should not the sole or even determining factor to be considered in sentencing, the court is of the view that the amount of money is not insignificant. 

28.In the case of HKSAR v Ng Siu Ling CACC160/2011, the Court of Appeal was referred to the cases of HKSAR v Ng Kwok Wing (transliteration) [2008] 4 HKLRD 776 and HKSAR v Yeung Chiu (transliteration) [2010] 3 HKLRD 334.  In paragraph 33, the court said that for an offence of fraud involving $1 million to $3 million, a suitable starting point should be between three to five years.  The court approved a starting point of four years for the fraud charge in that case which involved $1.7 million. 

29.The offence of which the defendant stands convicted stems from a one-off, low scale Letter of Credit fraud.  The victim was a financial institution and was more capable than a private individual of absorbing the loss.  Further, the evidence shows that Long Label stood to gain but an insignificant amount. 

30.In the court’s view, a starting point of two years and nine months’ imprisonment would be appropriate to reflect the gravity of the charge. 

31.The defendant has made part repayment of the amount defrauded of the bank.  She has had a clear record before her current conviction.  It has taken the prosecution some time to institute the proceedings against the defendant – through no fault on the part of the prosecution, the court stresses.  The court would exercise its discretion to grant the defendant a nine-month discount in sentence.   

32.Nothing in the defendant’s personal or family circumstances would call for any further discount in sentence.  There exists no special circumstance in this case which could allow the court to consider any lesser forms of sentences.  The case of SJ v Grossman (supra) is clearly distinguishable in that neither the negotiation nor the issuing bank had suffered a loss.  

Order

33.For the offence of which she stands convicted, the defendant is sentenced to a term of imprisonment of two years.