HKSAR v. Sham Kwok Kee

DCCC No.762/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL JURISDICTION

CRIMINAL CASE NO.762 OF 2012

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DETERMINATION OF NEWTON ENQUIRY

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1.The defendant was charged with offences of bookmaking and money laundering. The second charge averred that he dealt with HKD38,667,986.51 knowing or having reasonable grounds to believe that it represented in whole or in part the proceeds of an indictable offence.

2.The defendant initially pleaded not guilty to both charges. An application to stay the proceedings was rejected by the court. The defendant challenged the admissibility of a record of interview, Ex 258, but after the close of the prosecution case on the voir dire, the court was invited to put the charges to the defendant again and he changed his plea to guilty on both charges.

3.The defendant admitted the summary of facts in respect of both charges.

4.In respect of the money laundering charge, however, the defendant pleaded guilty on the basis that he dealt with only a small part of the sum, namely HKD168,748.89, having reasonable grounds to believe that it indirectly represented the proceeds of  an indictable offence. This was not accepted by the prosecution and a Newton Enquiry was held.

Background

5.The defendant was initially investigated in respect of the first charge. Officers from the Organised Crime and Triad Bureau executed a gambling authorization at his public housing estate unit in Chai Wan at 2340 on 20 November 2004 and discovered he was actively involved in illegal soccer betting. Three betting slips with a face value of HKD41,500 were found on a table in front of the television in the living room and 37 betting slips with a face value of HKD1,126,600 were found in a drawer in the living room.

6.Further investigation revealed that the defendant was the sole signatory of 4 bank accounts. Between November 1999 and June 2004 the sum of money  referred to in charge 2 passed through the four accounts. Interbank payments were not counted as part of the total payments. Three of the accounts were held with the Hang Seng Bank: a current account, a savings account and a Bank-in-one account. The fourth account was held with the Bank of China.

7.The defendant was served with a Production Order and on 8 April 2005 he produced  various documents including exercise books containing handwritten entries with names and dates for the period between January 2001 and December 2004. There was a separate book for each month. Three handwritten notebooks containing details of transactions between 1999 and 2004. The other document included bank statements, passbooks and cheque stubs.

8.It was admitted, at paragraph 18 of the summary of facts, that the examination and analysis of the records the defendant produced appear to represent the “expenses” side of running some kind of business. They appear to show payments that may have been made in connection with running a minibus business as there were entries for payments for such things as fuel/oil, tyres and for  repairs to items such as air conditioners and engine parts.

9.Paragraph 19 states that the police entered the transactions recorded in the defendant’s payment records between 29 November 1999 and 20 June 2004 into a computerized spread sheet. These totaled HKD18,247,262.

10.Paragraph 20 states that a comparison of the business records produced by the defendant with the withdrawals and payments to third parties from his bank accounts over the relevant period show that payments made according to the “business records” amounted to HKD18,247,262 and withdrawals made according to the bank accounts amounted to HKD38,667,986.51, which left HKD20,420,724.51 unaccounted for.

11.The defendant was interviewed under caution on four occasions from 2006 to 2008 about certain  documents he produced consequent to his being served with a Production Order and about the monies passing through his four bank accounts.  He was represented on each occasion and elected not to answer any questions. I bore in mind that he had a right to remain silent and no adverse inference could be drawn against him for doing so. The relevance  of the interviews was that the defendant was made aware as early as 2006 that the police were suspicious about the source of the monies passing through his bank accounts even though he was not charged until 2012.

12.At the Newton Enquiry the prosecution called one witness, Sgt Leung Siu Kei, who at the time of the investigation was attached to the Financial Investigation Division of the Narcotics Bureau. He entered details of the four bank accounts in Excel spreadsheets. An analysis of the four accounts was produced as Exhibit 82 ( Core Bundle Volume 3 from page 301).More detailed analyses of all four accounts were produced as Exhibits 84 to 87 ( Core Bundle Volume 4 pages 682 onwards).

13.The prosecution case was that there were sufficient grounds known to the defendant that would lead a common sense, right-thinking member of the community to believe that the HKD38,667,986.51 represented the proceeds of an indictable offence.

Defence Case

14.Counsel for the defendant said that the defendant pleaded guilty on the basis that he admitted that part of the sum referred to in charge 2 indirectly represented crime proceeds. The defendant conceded that he was unable to explain some of the monies going through his bank accounts and there were therefore sufficient  grounds that would lead a right thinking member of society to believe that such a sum represented the proceeds of an indictable offence.

15.The defence case was that most of the monies going through his four bank accounts were from his dealings as a Public Light Bus (PLB) agent. He said that the money was from fellow-traders in the PLB business. He said that he was entrusted to deal with the business as they trusted him and he was eager to serve them. The defendant elected to give evidence at the Newton Enquiry and called one witness,  Wong Chi Keung, Wallace, a certified public accountant, DW1.

16.The defendant maintained that a substantial part of the money referred to in the second charge related to his involvement in the operation of most of the red PLBs operating between Chai Wan and Kwun Tong. The defendant described himself as a PLB agent. He said that he was involved in the operation of  about 15 to 20 buses. He said that he would arrange drivers, deal with repairs, cleaning and bus advertising. The defendant said that on occasions he would drive minibuses if he could find no driver. He said that this would happen about 10 times per month. The defendant admitted that his involvement required him to do a great deal of work. The bank transactions alone involved over 8000 transactions over 5 years. The defendant said that his earnings were only HKD10,000 per month, the same as the earnings of  a PLB driver. The defendant said he did this work because it gave him satisfaction and it enabled him to help friends involved in the PLB business who trusted him to deal with money on their behalf.  He claimed that he was eager to serve them.

17.DW1 was called to give evidence for the defence, not as an expert witness but as a witness of fact, to produce calculations based on what he was told by the defendant about the matters recorded in his bank accounts. DW1 said that he was not concerned with, nor could he vouch for, the accuracy or veracity of the information supplied to him by the defendant. He said the defendant produced to him no underlying commercial documents such as receipts or invoices to support any of his assertions. He produced his report and calculations as Exhibit D1. This arrived at a figure of HKD168, 748.89 as the amount unexplained by the defendant and I was invited by defence counsel to accept this as the amount in the charge with which the defendant dealt for the purposes of sentencing.

18.I reminded myself that the burden of proof was on the prosecution and the standard of proof  beyond reasonable doubt. There was no burden on the defendant. I also reminded myself that if I disbelieved the evidence adduced by the defence that did not mean that I would therefore accept the case advanced by the prosecution.  I had to consider the evidence which I did accept and decide if that established what the prosecution alleged to the required standard. I reminded myself that where I relied on circumstantial evidence, I could only draw inferences from facts proved beyond reasonable doubt and such inferences must be the only reasonable inferences that could be drawn from such facts, they must be irresistible.

Evaluation of the evidence

19.The defendant admitted the summary of facts. It was stated that the defendant was the sole signatory of 4 bank accounts mentioned in the charge sheet. Between 29th November 1999 and 20th June 2004 a total sum of HKD38,667,986.51 passed through the defendant’s bank accounts.

20.The defendant further admitted that neither he nor his wife had filed any tax return with nor made any tax payments to the Inland Revenue Department between 1 April 1999 and 31 March 2004.

21.No companies were registered in the name of the defendant or his wife. The defendant owned 3 vehicles, none of which were of  much value. He did not own a minibus at any material time. His wife had no vehicles registered in her name. Neither of them held properties in their names. The defendant was living in a public housing unit.

22.Pursuant to the Production Order, on 8 April 2005, the defendant produced records consisting of handwritten notebooks which he said were for the periods from 1999 to 2004. The police entered the transactions recorded as payments in the defendant’s records between 29th November 1999 and 20th June 2004. The total came to HKD18,247,262. The difference in the amount of payments recorded in the business records of the defendant and withdrawals made in the bank accounts is $20,420,724.51HK.

23.The prosecution called one witness, SGT 52789. This officer had prepared various schedules from the bank records of the 4 bank accounts. He produced the following exhibits: Exhibit P82,  an integrated analysis of the 4 bank accounts (pages 301-486 of core bundle vol.3); Exhibit P84, a schedule of transaction records of Hang Seng Bank current accounts (pages 682-859 of core bundle vol.4); Exhibit P85, a schedule of transaction records of Hang Seng Bank savings account (pages 741-869 of core bundle vol.4); Exhibit P86,  a schedule of transaction records of Hang Seng Bank Bank-in-one account (pages 860-864 of core bundle vol.4); Exhibit P87, a schedule of transaction records in Bank of China bank account (pages 865-869 of core bundle vol.4).

24.The overall picture obtained from the 4 bank accounts is that deposits were made into the savings account in cash, cheque or ATM transfers. The amounts were often relatively small and made on a daily basis. Every 7 days the defendant transferred a sum of money from his savings account to his current account. These amounts were always rounded into thousands and, usually, they  were large sums of between HKD50,000 to HKD100,000. On the same day or on subsequent days, a large number of cheque payments  were made from the current account. The remaining balances in the current account were relatively small compared with the amounts transferred from the savings account. In Exhibit P84, the payees and/or the bank account numbers of the payees had been identified for many of the payments. It was clear that these accounts needed careful and detailed management and monitoring.

25.Most of the payments made into the defendant’s savings account were made in cash. The name of the payer can rarely be seen except when payments were made by way of ATM transfers in which case the bank account number of the person making the transfer can be seen.

26.Between 29th November 1999 and 20th June 2004 there were 2227 transactions in the current account and 5941 transactions in the savings account.

27.The Bank-in-one account only became operational on 14th December 2000 and almost all the transactions were made via ATMs. Credits were received from the savings account and debits were payments out of the account made shortly afterwards. The Bank of China account had mainly cash deposits and ATM withdrawals. There were only 177 transactions in the Bank of China account.

28.I noted that the defendant did not have any receipts covering either payments in or out. This is despite there being a large number of transactions going through his bank accounts. No independent commercial records whatsoever were produced to explain why the defendant had HKD38,667,986.51 going through his bank accounts. On the face of it, there is no reason why a person not paying tax, not having any registered business and not having full time employment should have so much money going through his bank accounts.

29.The defendant said that people dealt with him because he was clear and fair. He admitted that he was the only one who could understand the records he kept.

30.The defendant kept no record of cash payments or transfers through ATM machines made to his savings account. He said he wrote these down on pieces of paper which he would throw away a few days later. He said that none of the persons with whom he dealt kept receipts.

31.The defendant was asked about payments to certain finance companies including Hang Seng Finance HKD16,360 item 778 page 14226; Dah Sing Finance HKD21,740 item 694; Dao Hang Finance HKD15,217 item 751 page 14202; and ICBC (Asia) HKD17,500 item 797 page 14401. The defendant said that in relation to these payments he had issued cheques to PLB agents which did not include the names of the payees and that the agents completed the payee details on the signed cheques which he gave them.

32.It is obvious that it must have taken considerable amount of time, effort, and organization to receive and dispose of the substantial amounts of  money handled by the defendant. The defendant claimed that his monthly earnings for this work and his 10 odd days per month as a PLB driver came to about HKD10,000 per month, about the same amount as a PLB driver would earn.

33.DW1 prepared the accountant’s report (Exhibit D1) without the assistance of any underlying commercial documents. DW1 made it clear on page 2 of his report that he relied for explanations of payments and receipts on what he was told by the defendant in the most general terms. The defendant provided DW1 with a soft copy computer file which he had prepared, namely an Excel spreadsheet.

34.As part of his report, DW1 prepared a “ Summary Report of Minibus Business Surplus/(Deficit)”(the defence summary report). In this report, DW1 breaks down the receipts and payments into three categories: operating business, agent business and advertising business. DW1 said that the minibus operating income receipt was assumed to be the receipt transactions below HKD25,000. The minibus agent business income receipt was assumed to be the receipt transactions equal to or more than HKD45,000. The minibus agent business cost payment was assumed to be the payment transactions equal to or more than HKD45,000. The minibus advertising business income receipt was assumed to be the receipt transactions equal to  or more than HKD25,000 but below HKD45,000. The minibus operating costs were estimated on an average rate basis supplied by the defendant. These were daily rental costs from HKD650-660, daily fuel costs at HKD800, daily driver salary costs at HKD650. The monthly operating number of days was calculated by reference to the number of calendar days per month minus 2 rest days.

35.DW1 said that, since he could not distinguish the payments out between operating business and advertising business, the payments out of advertising business should be included in the operating business. However, DW1 calculated the money received from the minibus advertising business was HKD9,077,099.30.

36.DW1 calculated that there was a deficit in the minibus operating business of HKD9,272,214.56 whereas there was a surplus in the minibus advertising business of HKD9,077,099.30.

37.I noted that the defendant said in evidence that he had no receipts for the advertising income because a third party arranged the advertisements and paid the defendant in cash. I had no doubt that if such substantial payments were in fact made in relation to matters of advertising, given the amounts involved, records would be easy to obtain.  The defendant said that all payments in relation to such transactions were made by way of cash rather than company cheques. Again, if this had been the genuine reason for such payments I found it implausible that none of such large payments would have been made by way of cheque. Not one underlying business record or any other evidence was adduced to support the defendant’s contention that such payments related to advertising.

38.DW1 said that the defendant told him that the minibus agent income receipt was for the purchase of minibuses. DW1 said that the defendant told him he received deposits from purchasers and handed them on to the owners.  DW1 said that, according to what he was told by the defendant, he calculated that the amount involved was over HKD6.1 million. These dealings formed a separate column of DW1’s Summary Report under the heading of “Minibus Agent Business”. There were numerous entries involving substantial sums of money in the hundreds of thousands of dollars, one for over a million dollars and another for in excess of HKD2.4 million. I  noted that the defendant, in his evidence, made no mention  of being involved in buying minibuses either for himself or on behalf of anybody else. If what the defendant told DW1 about these payments were true, I had no doubt that it would not have been difficult to obtain supporting documentation or other credible evidence for transactions involving such considerable sums of money.

39.According to the defendant’s evidence, although his name did not appear in any contracts, agreements or documents, he was controlling most of the red minibuses on the Chai Wan to Kwun Tong route. He claimed he was in control at every stage: the drivers went through him to get work; the drivers made the payments to him; any repair bills would be paid by him; he would pay the cleaning costs; the cost of replacing tyres would be paid by him; he arranged the advertising and received the advertising payments; the owners of the minibuses and the minibus agents went to him to get drivers.  DW1 said that the defendant told him he was also responsible for handling the deposits for purchasing the minibuses.

40.I did not believe that the defendant would take part in such  time consuming and complex business arrangements involving significant sums of money for the very small monetary reward he claimed to have received. I found ludicrous his assertion that he did all this work for the benefit of his fellow traders whom he was eager to serve.

41.In HKSAR v WAN Yet Kwai CACC 372/2008 the Court of Appeal  stated:

“What cannot be ignored is that money laundering is invariably a devious activity, its purpose being to appear what it is not. In our view, it would therefore undermine the purpose of the legislation if a person was able to ‘turn a blind eye’ to a reasonably held belief that certain property represents the proceeds of an indictable offence by being able to focus instead on some alternative reasonably held belief as to its provenance. (para. 33 ditto)

As we have indicated earlier, we are satisfied that the judge was entitled to conclude on the evidence before him that a common sense, right-thinking member of the community would consider that evidence sufficient to found a belief that the $1.7 million, wholly or in part, represented the proceeds of some kind of serious crime. That being the case, even if on the evidence it could be said that there were reasonable grounds to believe also in some alternative scenario, it would not assist the applicant. . (para. 35 ditto)

We accept that in many instances the evidence will give rise to only one reasonable ground of belief. In the present case that was clearly the determination of the judge. But even if it could be said that he was wrong in this regard and that there may have been reasonable grounds to believe also in some alternative scenario, on the facts of the present case we are satisfied that it would not have assisted the applicant.” (para. 36 ditto)

42.I did not believe the defendant’s account in relation to the monies passing through the four bank accounts. Looking at the totality of the evidence, I had no doubt whatsoever that the monies with which the defendant dealt had nothing to do with any legitimate PLB or any other business. I was sure that the prosecution had established beyond reasonable doubt that there were sufficient grounds known to the defendant that would lead a common-sense, right thinking member of the community to believe that the HKD38,667,986.51 represented the proceeds of an indictable offence.