HKSAR v. Fan Yung Cheong

DCCC 261/12

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 261 OF 2012

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REASONS FOR SENTENCE

1.The defendant pleaded guilty to five charges of  being an agent using a document to deceive his principal contrary to s. 9(3) of the Prevention of Bribery Ordinance Cap 201

2.The defendant was employed as an Estate Surveyor in the Public Works Department in 1971. He is currently an Assistant Director at the  Government Land Agency of the Lands Department and is on preretirement leave following his reaching the age of 60 on 20 April 2012.

3.The five offences involve a fraud on the government perpetrated between  October 1987 and December 1995  whereby the defendant dishonestly claimed housing benefits under the Private Tenancy Allowance  (PTA) which is subject to the requirements of the Civil Service Regulations (CSR).

4.In essence, PTA is available to public servants of a certain rank as a monthly allowance to be paid towards the rent of the premises being leased.  In order to receive this benefit, it is a strict requirement that the public servant must have no interest in the leased premises.  An alternative benefit available to the public servant is the provision of a monthly allowance for the repayment of a mortgage loan in relation to premises which he is required to occupy.  This is known as the Home Financing Scheme ("HFS") for which a Home Finance Allowance ("HFA") is paid which is payable for a miximum period of 10 years.  The allowance available to the public servant under the former benefit, namely PTA, is substantially greater than that which is payable under the HFA.  One further benefit of the PTA scheme is that the public servant preserves his right to move into non-departmental Government quarters should he wish to do so whereas under the acceptance of HFA excludes this option.

5.In March 1987, the defendant decided to apply for PTA when he acquired a flat on the 25/F of  Yat Tien Mansion Taikoo Shing, (the flat) for HKD900,000. To conceal his financial interest in the flat, D set up  a shell company, Nation King Investment Limited, ( HKIL) using his mother in law, Leung Lai King and sister in law, Fung Yin Fun as dummy directors. When the CSR’ were amended in March 1989 to prevent the allowance being paid to an applicant where he or his relative held an interest in a company owning the property rented, the defendant replaced the original directors with  close personal friends of him and his wife,  Mr Yiu Kwong Yin and Madam Wong See See.

6.Each of the first four charges cover claims in respect of rental payments purported to have been made by the defendant  under bogus two-year tenancy agreements between himself and his company, HKIL.

7.In respect of the fifth charge, D entered into a further agreement in May 1995 but in December 1995 the defendant ceased to claim PTA and opted to claim benefits under the HFS scheme in respect of another property in Taikoo Shing owned by himself and his wife.

8.Between June 1987 and November 1995 the defendant received just over HKD1.6 million under the PTA scheme.  A sum of just over HKD289,000, 7.5% of his salary, was deducted from his salary as a condition of his enjoyment of PTA.

9.The defendant was arrested by ICAC on 4 November 2011. He admitted the offences. He said that he deposited money into the HKIL bank account to create the impression to the Inland Revenue Department that the flat had generated rental income.

Mitigation

10.The defendant is now 60 and on pre-retirement leave from the Civil Service. He has a clear record. The offences were committed several years ago, 24 years in respect of charge1 and 17 years for the latest offence. He was arrested by the ICAC four months before his retirement.

11.The defendant has spent 40 years as a civil servant and there is a substantial risk that he would lose his pension entitlement which amounts to over HKD7 million. He has repaid the amount of his gain and also interest in excess of HKD2.36. The total loss could be in excess of HKD10.7 million.

12.The defendant is very remorseful and embarrassed about his involvement in the commission of these offences. He was arrested in November 2011 and immediately admitted the offences. He pleaded guilty at the earliest opportunity.

13.The defendant is married with a married daughter. His wife retired as an assistant manager in the Foreign Exchange Department of the Bank of East Asia in 2007 and they had been looking forward to a happy retirement when the defendant was due to retire this year. These offences have will mean that their financial situation will be much tighter than they had anticipated.

Psychological and Psychiatric Issues.

14.The defendant has been extremely distressed and distraught since his arrest.  A report was submitted by a Dr Yip, a psychiatry specialist,  dated April 2012. This report states that since 2002 he had been suffering from hypertension, sleep disorder and diabetes. Since his arrest he had become very anxious and started to experience disturbed sleep and various other symptoms. He began suffering nightmares, leg tremours and fasciculation of  thigh muscles. He avoids company and has lost weight. He has had suicidal thoughts.  He was diagnosed as suffering from depression and was prescribed anti-depressants. It is anticipated that he will require further psychiatric treatment for about 6-9 months.

15.The defendant’s wife has also been suffering from anxiety attacks and had been receiving psychiatric treatment.

Letters of support

16.A number of  most impressive letters of support were placed before the court. The defendant is a respected member of the community and was highly regarded professionally. A very large number of friends and former collegues attended court to show their support for the defendant.

Authorities

17.In Secretary for Justice v.  Pao Wai Hong CAAR 3 of 2004, a case very similar to the case before this court, Hon Stuart-Moore VP referred to the findings of the trial judge who stated that the Respondent had  

“…. knowingly involved in a trust arrangement to conceal from the government the fact that he had a financial interest in the property. With this trust scheme, the defendant had dishonestly obtained PTA pursuant to his applications. I also found that when he made the declarations in the PTA applications he knew that the declaration was not true…..

It was one of the major criteria for receiving of this fringe benefit that the claimant of PTA must not have a financial interest in the property in respect of whichPTA is claimed. What the defendant did was to put in place a scheme to cheat the government. The scheme involved a substantial degree of planning and also other people. The government was cheated for about 7 years. Though in a scheme like this, once the vehicle starts it tends to continue running, the defendant did submit seven separate applications, each time repeating the same false declaration.

The government is entitled to place a significant degree of trust in its staff and the defendant betrayed this general trust reposed in him…..

By the deceptive scheme the defendant had received a total of $1.87 million. I accept that the defendant was in any case entitled to some sort of housing benefit by virtue of his seniority and therefore the monetary advantage which the defendant had actually obtained was much less than what it appears to be.

I am told today that had the defendant sought to apply for a home finance allowance which the defendant was also entitled at the material time and with which he is free to choose between buying or renting a flat he would have obtained an allowance to a total of $1.49 million for the same period of time. The net gain from this dishonest scheme was therefore in the region of $380,000.

Learned senior counsel described the act of the defendant as foolish and unnecessary. I am not going to accept this view readily. The defendant had much to gain in this dishonest scheme. Apart from the monetary advantage, the defendant retained his right to live in a non-departmental quarters, whereas if he claimed other form of housing benefit this entitlement would have been forfeited. In any case, what the defendant tried to do was to obtain the best of both worlds…..

These were offences dated back to 1991. They were old offences. On the other hand, the purpose of the scheme which the defendant put in place was to conceal the offence and avoid investigation.

Investigation of the defendant started in (2003). Though I appreciate the pressure which the defendant had to stand, there is no delay in prosecution.

The defendant is a first offender with unblemished character. He is an intelligent, hardworking person, and enthusiastic to help others. With this conviction he stands to lose his job, his pension and everything which he has built through the hard work over the years. It is a real risk that he might lose his professional qualification as well. However, this is something which a person in the position of the defendant must stand to face when he embarks on commission of a criminal offence, let alone offences of serious nature." (Appeal bundle pp. 87-89)”

18.Stuart – Moore went on to say that “ It was plainly the intention of this court to state that a custodial sentence should normally be imposed.  In all cases of this kind, it is to be expected that such offenders, who are invariably to be regarded as having exemplary character by virtue of their position as senior Government servants, will normally go to prison for fraudulent behaviour on this scale.  They are people who will have had every advantage in life and who, motivated by reasons of sheer greed, have acted not only in breach of the general trust reposed in them to act honestly towards the Government which has employed them but also fraudulently towards the public whose taxes are utilised in the payment of such benefits as these”.

19.In Yick Tze Kai CAAC 485 of 2006 Stuart-Moore VP said

“This court, in that review of sentence ( PAO Wai Hong), had considered two other cases in one of which suspended sentences were imposed and in the other community service was ordered after contested trials as the judge in the present case had noted. However, as my judgment went on to state (in paragraph 20):

“We can accept, however, the criticism which can be made of the judgment in Secretary for Justice v Leung Yat-ming and Anor [(1999) 2 HKLRD 402], to which I was myself a party, that the message may not sufficiently have been conveyed that a prison sentence, following a conviction after trial, will normally be the inevitable result.” (Emphasis added.) This passage may be taken to be an indication to those who plead guilty in similar circumstances to the applicant in the present case, where the offences are stale, timely pleas of guilty have been entered and compensation to the government has been made, that an immediate term of imprisonment will not necessarily be imposed. Here, all the criteria for imposing a sentence which might avoid an immediate term of imprisonment were met.”

20.Many of the observations made by the trial judge in Pao Wai Hung are pertinant to this case.

21.These are stale offences. The last offence occurred 17 years ago. There is of course no question of delay on the part of the prosecution and the defendant had gone to considerable lengths to conceal his criminality.

22.The defendant has fully co-operated with the ICAC and has pleaded guilty at the earliest opportunity. Many defendants in the past facing similar charges have chosen to put the prosecution to strict proof on all issues.

23.The defendant has a clear record and there is ample evidence of positive good character. The defendant is clearly held in high regard by many prominent members of  the community , by members of his profession, his colleagues and those for whom he has worked. He has given much to the community.

24.Evidence  from Dr Yim, a psychiatrist, is proof of the profound effect these proceedings have had on the defendant and his family.

25.The defendant has made full restitution of the amount claimed plus interest and stands to lose his pension amounting to approximately HKD 7 million.

26.As the Court of Appeal has said, these offences are serious. The defendant was knowingly involved in an arrangement  which concealed his interest in the flat. Others were drawn into the arrangement. His mother-in-law and sister-in-law agreed to become dummy directors of  HKIL. When the CSR’s governing PTA’s were change in 1989 so as to forbid applicants from making claims in respect any premises in which they or their relatives had any financial interest, he replaced the directors of HKIL with two close personal friends of him and his wife. The charges relate to five fraudulent applications for PTA. On each occasion the defendant made false declarations and submitted fraudulent tenancy agreements. This elaborate scheme of concealment and deceit lasted for over 8 years. The defendant  betrayed the general trust place in him by the government and his actions were fraudulent towards the public whose taxes are utilized in the payment of such benefits.

27.The offences were motivated by greed rather than need.

28.There is no doubt that as a senior employee the defendant was entitled to housing benefits, either PTA or HFS. However, under the HFS he could only have claimed benefits for 10 years and thereafter would not have been entitled to any other benefits or government accommodation. When he made the first fraudulent claim for PTA in 1987, if he wished to remain a government servant, he had 25  years left to serve. He claimed PTA for over 8 years in respect of  the first Flat which he had purchased at Taikoo Shing. Thereafter he switched to HFS to purchase a second flat in the same complex. Both these properties would have appreciated  considerably in value over the years. The appreciation in the value of the flat would offset the cost to the defendant of having to repay principal, plus interest and any loss of pension rights there might be. In addition the defendant would have had the opportunity to derive substantial income from renting out the Flat after he moved into the second flat in 1995.

29.However, taking into account all the circumstances, I take the view that there are exceptional circumstances in this case that permit the court to pass a sentence other than one of  immediate imprisonment.

30.Given the defendant’s health problems, I do not feel that a Community Service Order is appropriate.

31.I take a starting point of 12 months imprisonment for each offence and order that the sentences shall run concurrently . I reduce those sentences by one third to reflect the guilty pleas. Given the exceptional nature of the mitigation that has been placed before the court, I order that the sentence shall be suspended for a period of 2 years.

32.The defendant will serve a sentence of 8 months imprisonment  on each charge to be served concurrently suspended for 2 years. If you reoffend within the next two years you will go to prison for 8 months in addition to any other sentence that might be imposed.

33.Under the provisions of s.12(1) of the Prevention of Bribery Ordinance Cap 201, I make a restitution order in the sum of HKD3,689,451.64 being advantages received by the defendant plus accrued interest.