HKSAR v. Ng Chun To, Raymond
Read the full judgment text of DCCC 405/2009 on BabelCite. This District Court judgment was delivered on 9 January 2015.
1. Defendant faced 4 charges of conspiracy to defraud.
Cites 1 case
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DCCC 405/2009 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CRIMINAL CASE NO 405 OF 2009 ----------------------
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--------------------- Reasons for Verdict --------------------- 1.Defendant faced 4 charges of conspiracy to defraud. 2.The particulars of the charges were that between September 2005 and May 2008 Defendant had conspired with Cheung Ching Ho (CCH) and others to defraud respectively four different liquidity providers and other persons as might be induced to trade in derivative warrants issued by those respective four different warrant issuers by dishonestly
3.The prosecution alleged that the Defendant had orchestrated through CCH and others to operate a warrant pushing scheme based in Mainland office to trade derivative warrants (DW) listed in Hong Kong. The exercises were to employ various trading accounts (dummy accounts) in different brokerage firms to keep on buying and selling selected DWs to create a false impression of active trading, so to enhance the price and lure other investors to trade and be sold for a profit. The prosecution also said that there was/were insiders from respective liquidity providers to help buy back the DWs unsold to ensure the profitability of the scheme. 4.The prosecution called upon the co-conspirators whom worked in Mainland office with CCH and also some dummy account holders to testify under immunity about the circumstances and mechanism of the warrant pushing exercises, and particularly they also related the scheme to a person called Raymond/Sai Ray/Siu But Leung they only heard from CCH as the boss, the boss gave daily instruction to CCH to trade the selected DWs and communicated with the insider(s). 5.The prosecution said the boss was the Defendant, however there was no direct evidence as CCH did not testify. The prosecution thus relied on the circumstantial evidence including the common travel records of the Defendant, CCH and co-conspirators; the handwritten notes containing warrants information and monthly statements of dummy account seized from Defendant’s office; substantial cash found in Defendant’s safe; the surveillance evidence showing close connection between insiders and the Defendant; cash withdrawn from dummy account eventually taken by a lady associated with the Defendant; the device reports indicating Defendant sending warrant information and also with hundreds of telephone calls to the alleged insiders. The prosecution further relied on the co-conspirator’s rule to admit the declarations made by the above witnesses in the course or in furtherance of the conspiracy to implicate the Defendant. 6.For the 4 charges, Annex I of the prosecution opening listed out the respective period, the LP and DW issuer concerned with the alleged insider(s). To further illustrate the pushing exercises, 4 different DWs were selected as samples for each charge, namely DW 1951, DW 4801, DW 3319 & DW 9300 by respective issuers accordingly. Annex I Charges *all until 27/05/2008
7.Annex II of the opening also set out the chronology of posting and employment of the Defendant and the alleged insider(s). The prosecution further said that the Defendant had worked with the alleged insiders Cheung Siu-fai Dickson (Dickson Cheung), Chui Kit-man, Tsang Siu-yuen Eric (Eric Tsang) in the warrant team in Calyon, they first pushed DWs issued by Calyon (1st charge), then when Dickson Cheung and Eric Tsang moved to work in Citigroup and Standard Bank in 2007 respectively, they then traded the DW of Citigroup & Standard Bank (2nd & 3rd charges) and finally with Khalid Chaneb worked in Dresdner they traded Dresdner’s DW (4th charge). Annex II Chronology
8.Mr Bruce SC for the Defendant essentially disputed the admissibility of all hearsay evidence implicating the Defendant and the applicability of the co-conspirator’s rule; it was further submitted that the evidence did not amount to the existence of those four conspiracies as charged and that the circumstantial evidence did not support the participation of the Defendant. Admitted Facts (AF1 & AF2) 9.Substantial part of the prosecution case had been admitted as follows (para 9-80), the background of the Derivative Warrants (DW) market and operation were agreed in details, in gist DWs are listed and traded by the investing public via brokers on the Stock Exchange of Hong Kong Limited (SEHK). DWs are financial instruments which give investors the right, but not the obligation to buy or sell an underlying asset at a pre-determined price prior to a specified expiry date. Since 2002, DW issuers are required to appoint a Liquidity Provider (LP) in Hong Kong for every DW issued. Each LP is identified by a four-digit code prefixed by 95-- or 96--, it will provide liquidity of DWs in the market by being able to continuously quote to the investing public bid and ask prices to ensure that there is a source of DWs that investors can buy from or sell to, thus the LP plays the role of a market-maker. 10.For the trading of DWs, an order could be made through its broker to input the order into the Automatic Order Matching and Execution System (AMS) operated by SEHK, which will match the buy and sell order automatically on the best price. SEHK also assigns unique broker number to different brokerage firms so that when an order is made by a particular broker the assigned broker number would also be shown automatically. The respective assigned broker numbers of different firms are set out in paragraph 10 of AF1. As to charge 1 regarding Calyon 11.In around May 2004 CLSA Limited became a subsidiary of the France-based Credit Agricole Group, of which Calyon SA was a member. At Calyon HK Branch, the duties of traders included managing a portfolio of DWs issued by Calyon Financial Products (Guernsey) Limited in Hong Kong by quoting the bid and ask prices of its DWs to the investing public via the appointed LP in Hong Kong called CLSA Limited. The system of quoting bid and ask prices to the public investors by CLSA Limited was based on largely automatic process since last quarter 2006 through a machine called the “automaton” that automatically sent prices through a gateway after having calculated them. Automaton prices calculation ran at Calyon level which then sent its quotations through the CLSA market gateway. The automaton adjusted the quotations according to changes of market parameters, especially the spot price of the underlying assets. The traders had to input the implied volatility of each underlying stock into this system for calculating the bid and ask prices. After the bid and ask prices had been put on the market, the traders had a discretion to adjust the bid and ask prices so quoted. The warrant issuer and the LP were affiliated companies within the same group. Although the prices are quoted via CLSA Limited, the pricing is performed by Calyon HK Branch. 12.During the period between 1 January 2006 and 27 May 2008 Calyon Financial Products (Guernsey) Limited issued many DWs which were traded on the Hong Kong Stock Exchange, one of which had a stock code of 1951. DW 1951 was listed on 31 October 2007, and its stock short name was CA-HSBC @EC1001. 13.In May 2004, an “Asia Pacific Compliance Manual” was promulgated by CLSA Limited. All staff employed by Calyon HK Branch was required to adhere to the manual while discharging their duties and D, CHUI Kit-man, CHEUNG Siu-fai and TSANG Siu-yuen Eric all received a copy of the manual. According to it, Calyon HK Branch did not allow any of its staff to conduct themselves in their official capacity in such a way constituting any acts of market manipulation to making false or misleading representations as to the market structure, liquidity, activity in or value of an investment. Calyon HK Branch also prohibited its staff from performing any acts leading to disfavours and favours to any particular members of the investing public or brokerages representing them during the course of that staff’s quoting bid and ask price to the investing public via the LP. Defendant (D) 14.On 1 November 1998, D, holder of HKID No. G330769(6), was employed by CLSA Limited in Hong Kong as a Floor Trader (P211, p7946-7949). On 1 December 2004, D was transferred to work for Calyon, HK Branch, as its Senior Trader. D left his employment on 5 October 2005. Between 1 December 2004 and 4 October 2005, Calyon HK Branch paid a total remuneration to D in the amount of HK$1,504,982. 15.During D’s employment with Calyon HK Branch, for the period between 1 December 2004 and 5 October 2005 D, CHUI Kit-man, TSANG Siu-yuen Eric, and CHEUNG Siu-fai Dickson were all posted to the same Warrant Team. All of them were traders, except CHEUNG Siu-fai Dickson who was at the time its Head of Marketing and Sales, Asia. CHUI Kit-man 16.On 12 December 2002, CHUI Kit-man was employed by CLSA Limited as a Warrants Trader.On 1 June 2004, he was transferred to work for Calyon, HK Branch, as its Trader. CHUI Kit-man was promoted to Senior Trader at a grade of Vice President effective 1 January 2005. On 22 May 2007, his title was changed to Assistant Director with local grade of Vice President. His duties included monitoring automaton, hedging risk position explaining daily Profit & Loss to his direct manager, the Head of Trading, Warrants who in turn would report to Regional Head of Global Equity Derivatives. His duties also included the quoting of ask / bid prices through the LP to the investing public. He was made redundant on 17 October 2008 in light of the market. 17.From 18 August 2006 until CHUI Kit-man’s employment was terminated, he was responsible, in particular, for the market making of warrants linked to the underlying stocks of China Life and HSBC. TSANG Siu-yuen Eric 18.On 30 August 2004, TSANG Siu-yuen Eric was employed by Calyon HK Branch as a Sales Trader. His duties included monitoring the automaton, hedging risk position and explaining daily Profit & Loss to his supervisors. He left his employment on 27 June 2006. CHEUNG Siu-fai Dickson 19.On 1 May 2004, CHEUNG Siu-fai Dickson was employed by Calyon HK Branch as Head of Marketing & Sales, of Asia. His duties included implementing the marketing strategy to promote warrants, including direct contact with warrant broker and broadcasting. He tendered his resignation on 29 March 2007 with effect from 31 March 2007. LEUNG Wai-kei Kenny 20.On 20 February 2006, LEUNG Wai-kei Kenny was employed by Calyon HK Branch as Analyst in the Equity Derivatives / Sales Department and worked under CHEUNG Siu-fai Dickson. On 1 July 2006, LEUNG Wai-kei Kenny was transferred to Equity Derivatives Trading / Warrants Department as Junior Trader. He tendered his resignation on 4 April 2007 with effect from 13 April 2007. CHAU Kai-chung, Raymond 21.CHAU Kai-chung, Raymond was a Senior Trader / Director of Calyon HK Branch and his Hong Kong identity card number was C314639(A). The Travel Movement Record relating to him for the period from 1 September 2005 and 27 May 2008 is produced as P247. It shows that he did not travel directly between Hong Kong and Macau for the whole of year 2006 and there is no record in relation to this CHAU Kai-chung Raymond’s travel movement before 1 September 2005. As to charge 2 regarding Citigroup 22.The warrant issuer of the Citigroup DWs was Citigroup Global Markets Holdings Inc., and the LP appointed in Hong Kong was Citigroup Global Markets (Asia) Ltd. They were affiliated companies under Citigroup Inc. which was based in the United States of America. 23.During the period between 1 January 2007 and 27 May 2008 the Citigroup Global Markets Holdings Inc. issued many DWs which were traded on the Hong Kong Stock Exchange, one of which had a stock code of 4801. DW 4801 was listed on 27 December 2007, and its stock short name was CGCLIFE@EC0808B. 24.Citigroup Global Markets Asia Limited prohibited its staff from soliciting or accepting any advantage from its customers or clients, from manipulating or tampering with the markets or the prices of securities, options, futures or other financial instruments, and from taking any acts favouring any individual investing public in the course of conducting the business of DWs. CHEUNG Siu-fai Dickson 25.CHEUNG Siu-fai Dickson joined Citigroup Global Markets Asia Limited on 30 April 2007 as the Managing Director, Head of Greater China Structured Products Sales. He was posted to the unit of Asia Pacific Structured Product – Hong Kong. Warrant traders may interact with the Warrant Sales Team including CHEUNG Siu-fai Dickson and his two subordinates from time to time. From December 2007, CHEUNG Siu-fai Dickson was also the Head of HK Warrants Sales Team. Since then, LEUNG Chung-man Simon and LIANG Yang-ti who were the only two traders dealing with the HK warrants in the Trading Department also reported to CHEUNG Siu-fai Dickson. From early 2008, CHEUNG Siu-fai Dickson started to give advice to LEUNG Chung-man Simon and LIANG Yang-ti on how to trade the warrants. LIANG Yang-ti would follow his advice. As to charge 3 regarding Standard Bank 26.The warrant issuer of Standard Bank DWs was the Standard Bank PLC, while the LP appointed in Hong Kong was the Standard Securities (Asia) Limited. They were affiliated companies in the Standard Bank Group Ltd of South Africa. 27.During the period between 2007 and 27 May 2008 the Standard Bank PLC issued many DWs which were traded on the Hong Kong Stock Exchange, one of which had a stock code of 3319. DW 3319 was listed on 13 November 2007, and its stock short name was SC-C MOB @EC0810. 28.According to the Staff Handbook of Standard Bank (Asia) Limited, its employees were prohibited from soliciting, accepting or retaining personal benefits from any of its customers, or any individual or organisation doing or seeking to do business with it. TSANG Siu-yuen Eric was provided with a copy of the Staff Handbook. TSANG Siu-yuen Eric 29.On 3 July 2007 TSANG Siu-yuen Eric joined Standard Bank (Asia) Limited (“Standard Bank”) as Vice President of Global Markets Department. One of his job responsibilities included the marketing and trading of equity warrants in Asia. When TSANG Siu-yuen, Eric was working at the Standard Bank, he was responsible for Sales and Structuring as well as warrant market making. Subject to market conditions and the operation of the auto-matching system, he could determine on his own the spot market price of a DW at which the LP would quote to the investors. So long as the loss to the company was not too great, the company would accept it. Standard Bank monitors the profits made and losses incurred in each trading day to review the risks and the value of the warrants. Between late 2007 and February or March 2008, the losses incurred in the daily sale of DWs were relatively greater than in the past. Since Standard Bank wished to increase its market share and DWs only constitute a small portion of its turnover, it considered at the time the loss to be within acceptable range. 30.TSANG Siu-yuen Eric left the employment of Standard Bank (Asia) Limited on 5 September 2008. As to Charge 4 regarding Dresdner 31.At all material times Dresdner Kleinwort Securities (Asia) Limited was a subsidiary of the Dresdner Bank AG of the former Allianz Group based in Europe. Since 2008, the Dresdner Bank AG had been one of the DW issuers authorised by the Hong Kong Stock Exchange, while Tai Fook Securities Company Limited was appointed as the LP in Hong Kong for its DWs so issued. 32.During the period between 2007 and 27 May 2008 the Dresdner Bank AG issued many DWs which were traded on the Hong Kong Stock Exchange, one of which had a stock code of 9300. DW 9300 was listed on 25 March 2008, its stock short name was DR-HSBC @EC0809. 33.The Code of Conduct of Dresdner Bank AG applied to all of its employees and those of Dresdner Kleinwort Securities, including Khalid CHANEB. According to it, the staff are prohibited from accepting gifts and benefits if the interest of the group are affected or the professional independence of the employees are jeopardised. This Code of Conduct was made known to Khalid CHANEB. Khalid CHANEB 34.On 3 April 2007, Khalid CHANEB was offered his employment by the Dresdner Kleinwort Securities as its Vice President with effect from 4 June 2007 and was responsible for its equity derivatives business. Khalid CHANEB resigned on 10 Jun 2008. 35.When Khalid Chaneb was working at Dresdner Kleinwort Securities (Asia) Limited, his duties and those of his two other team members included pricing the DWs issued by Dresdner Bank AG by implementing the computerised pricing tools and manual adjustments during trading hours. Dummy Accounts 36.As to the alleged dummy accounts, paragraphs 39 to 234 of AF1 listed out 30 brokerage firms with 54 accounts concerned, for example in para 39, in Bright Smart Securities International (HK) Limited, the account of LI Kejun was found as the only account at the firm with trade transactions of DW3319 between 13 to 23 November 2007, also as the only account traded in DW 4801 between 22 January to 14 February 2008. Those were all day-trade transactions with no DWs held overnight. In June 2008, the full balance in the account of $346,188.10 was withdrawn. 37.Para 43 of AF1, in Celestial Securities Limited there is an account of Able Fortune Investment Limited, Chung Ming-tru Daniel was authorized to operate the account, similarly it was the only account with trade transactions of DW 3319 between 13 to 23 November 2007, also as the only account traded in DW 4801 between 22 January to February 2008 and only account traded in DW9300 between 25 March to 9 April 2008. Those were all day-trade transactions with no DWs held overnight. In June 2008, the full balance in the account of $144,010.98 was withdrawn. 38.Para 49 of AF1, in Cheer Pearl Investment Limited there is an account of Ko Kwong Fat, it was the only account traded in DW 1951 between 31 October to 20 November 2007, similarly it was the only account with trade transactions of DW 3319 between 13 to 23 November 2007, also as the only account traded in DW 4801 between 22 January to February 2008. Those were all day-trade transactions with no DWs held overnight. On 29 May 2008, the full balance in the account of $166,781.92. 39.For the rest of other 27 brokerage firms, there were other 51 accounts with trade transactions only in the above selected DWs during the specified period, and invariably they were all day-trade transactions and most of which had the balance withdrawn in June 2008. Table A attached to AF1 showed all these accounts with respective deposits and withdrawals. Defendant’s family members 40.Defendant married CHENG Yuen-yi in 1996, CHENG was admitted as a solicitor in 1997 and worked in the law firm of Weir & Associates from 1998 to 2008. During the period from April 2004 to September 2008, she was paid a total remuneration of HK$95,210 and she received no further earned income. 41.CHENG leased a safe deposit box from Bank of China at G/F, 2A Des Voeux Road Central on 26 May 2005 as the only person who could have access. Between 26 May 2005 and 28 May 2008 CHENG accessed the safe deposit box 47 occasions as listed in para 239 of AF1. Companies associated with Defendant Asia Pacific Assets Limitedat Room 1904 42.Since about June 2005, D became one of the shareholders and one of the directors of Asia Pacific Assets Limited, and he has remained so at all material times thereafter. According to its Annual Return made up to 15 March 2007, its registered address was at Room 1904, Sino Plaza, No. 255-257 Gloucester Road, Causeway Bay (“Room 1904”).Apart from the D, Sandy Ng and Ng Chun Hung, Michael were also the directors of the company. According to its Annual Return made up to 15 March 2008, apart from the D, Ng Chun Hung, Michael was also the director of the company. 43.Since July 2006, LEUNG Chi-lap, and Miss SO Chi-wai were employed by the said Asia Pacific Assets Limited. SO Chi-wai was the secretary of NG Chun-hung, Michael but D was also her boss. According to its Form 56F signed by D dated 30 April 2009, MUI Kwong-nok James was employed as its part-time Marketing Executive for the period since 1 April 2008. 44.According to Form 56B filed by Asia Pacific Assets Limited dated 21 April 2006, it employed Miss LAI Hang-fong as a secretary and personal assistant from 21 March 2006. Thereafter, at all material times she continued to be so employed by the said company. 45.On 4 February 2008 a person placed a telephone order with Safewell Equipment Limited (“Safewell”) in the name of “Mr. Chui” for a safe of model MSD-102TDK to be delivered on 14 February 2008 to an address situated at Unit 04, 19/F, Sino Plaza, No.255-257 Gloucester Road, Causeway Bay. The person left his contact phone number “98002530”, and another contact phone number 6239 2064 of “Miss Lai”. 46.According to the subscriber record of CSL Limited for phone number “9800 2530”, CHUI Kit-man was its registered subscriber since 1 June 2001. 47.On 14 February 2008, in the morning Mr. TONG Wai-ming, warehouse clerk of Safewell, phoned “9800 2530” and confirmed with a Mr. CHUI the delivery address. Later in the morning, Mr. LEE Yau-lik, delivery worker of Safewell, used his mobile phone number 94831822 to call “98002530” and confirmed with a Mr. CHUI the delivery time. Later the said safe was delivered to Room 1904. Cash of HK$2,792 for the said safe was collected thereat. Grand Capital Asia Limited at Room 2205 48.The company was incorporated on 28 December 2007. At all material time, CHENG Yuen-yi, LAI Wai-lam and CHAN Wai-kuen Ruby were the directors of the company, and LEUNG Chi-lap was appointed the company secretary. It was signed by CHENG Yuen-yi. Its registered address was at all material times at Room 2205, Sino Plaza, No.255-257 Gloucester Road, Causeway Bay (“Room 2205”). Elegant Crown Investment Limited 49.The company was incorporated in Hong Kong on 20 May 2005. At all material times D and CHENG Yuen-yi were the only shareholders and directors of the company. According to the Annual Return of the company for the period 21 May 2007 to 20 May 2008 its registered address was at Unit 04, 19/F, Sino Plaza, No.255-257 Gloucester Road, Causeway Bay, Hong Kong. 50.At all material times Poon & Tong CPA Limited was the accounting firm of the company. The Statement of Accounts of the company for the period 20 May 2005 to 31 December 2005 prepared by Poon & Tong CPA Limited, stating the business of the company was in car hire, with a revenue of HK$125,294, and a loss before tax of HK$399,286. 51.There was a profits tax return dated 28 December 2006 from the company to the Inland Revenue Department signed by CHENG Yuen-yi on behalf of the company for the period 20 May 2005 to 31 December 2005, in which the adjusted loss was stated to be HK$1,091,618. Artstar Group Limited 52.The company was incorporated in the BVI on 15 November 2006. At all material times CHENG Yuen-yi was the only shareholder and sole director of the company. According to the First Resolution of the Sole Director of the company dated 15 November 2006, it was resolved by CHENG Yuen-yi that the correspondence address of the company be at Unit 4, 19/F, Sino Plaza, No.255-257 Gloucester Road, Causeway Bay, Hong Kong. 53.The company never applied for and was never issued any business registration certificate. At all material times CHENG Yuen-yi engaged Poon & Tong CPA Limited as the accounting firm of the company. Her contact phone numbers were 68383838 and 28336313, and her contact address was Unit 4, 19/F, Sino Plaza, No. 255-257 Gloucester Road, causeway Bay, Hong Kong. Elegant Wealth Limited 54.The company was incorporated in the BVI on 3 September 2004. At all material times CHENG Yuen-yi was the only shareholder and the sole director of the company. Poon & Tong CPA Limited was the accounting firm of the company. Its file P324(94), contained a document it prepared called “Statement of Accounts” for the period from 3 September 2004 to 31 March 2006. Assetslink Holding Limited 55.The company was incorporated in the BVI on 14 December 2007. At all material times the directors of the company were LEUNG Chi-lap, HKID No. P087560(4) and CHENG Yuen-yi. CHENG Yuen-yi was the only shareholder of the company. HK6 Limited 56.The company was incorporated in Hong Kong on 25 May 2007. At all material times the only shareholder and director of the company was Rivot Limited. CHENG Yuen-yi was the sole beneficial owner of the company through Rivot Limited. On 4 June 2007 the company applied for the issue of a business registration certificate. CHENG Yuen-yi engaged Poon & Tong CPA Limited as the accounting firm of the company. There was a copy of a document it prepared called “Statement of Account” for the company for the period from 25 May 2007 to 31 March 2008. It declared a profit after tax of HK$176,812; There was another copy of the profits tax return from the company to the IRD for the year 2007/2008, in which it was declared the assessable profits before tax was HK$13,927. 57.At all material times the company engaged Prominent Services Limited for the provision of company secretarial services. CHENG Yuen-yi or her assistant Anna Lai would give it instructions in respect of the affairs of the company. Surveillance evidence 58.Para. 267 to 284 of AF1 summarized the surveillance evidence from 15 June 2007 to 21 May 2008 where there were different occasions Defendant met Chui kit man, CCH, Tsang Siu yuen, Khalid Chaneb and Cheung siu fai Dickson; CCH was also seen passing bags to Lai Hang fong Anna whom took it back to Rm 1904 Sino Plaza Causeway Bay in separate occasions. Chan Chung yan was also seen meeting with some alleged dummy account holders, Cheung Lai fan, Ko Kwong fat & Huen Hoi Fai. 59.Chan Chung yan Stephen also rented a safe deposit box with Wing Lung Bank since April 1999 at Central District branch at No.112 Queen’s Road Central. Between 3 Jan 2006 and 21 May 2008 Chan paid visits for 144 times. Travel Movement Records 60.The respective Travel Movement Records of D, LAM Leo Sze-hang, CHEUNG Ching-ho, PW4 LEE Wai-ming, PW2 CHAN Wing-tung Tony, PW3 LEUNG Yiu-kei, PW1 WONG Ho-yin, PW9 Li Ngai-sang, PW5 LEE Wai-tung, PW6 MAK Kai-tong and CHAN Chung-yan Stephen, including those between Hong Kong and Mainland China, for the period between 1 January 2005 and 30 May 2008 are produced by consent as P236 to P246, p.8149-8640. 61.From the said P236 to P246, the following facts about the departure from Hong Kong to Macau by D and CHEUNG Ching-ho and/or PW4 LEE Wai-ming and/or PW2 CHAN Wing-tung and/or PW3 LEUNG Yiu-kei and/or PW1 WONG Ho-yin and/or PW5 LEE Wai-tung and/or PW6 MAK Kai-tong and/or CHAN Chung-yan Stephen for the period between 1 January 2006 and 5 February 2008 are accurately set out in para 293 of AF1 where one may see that quite some of the persons went to Macau on the same dates about once per month from February to December 2006. Arrest & Seizures 62.On 28 May 2008, D and CHENG Yuen-yi were arrested by the ICAC at their residence at Flat B, 45/F., Tower West, Chelsea Court, Tsuen Wan, New Territories. 63.When D was arrested by the ICAC at his residence, a waist bag was seized from the D. The waist bag contained 9 mobile phones:Five of these phones were Nokia 1110. One of these phones was Samsung SGH-E730. The information stored in the mobile phone was extracted into a device report by an ICAC computer forensic expert. The Samsung SGH-E730 and the device report are now produced by consent as P372 and P372A respectively. One of these phones was LG KE850 Prada. The information stored in the mobile phone was extracted into a device report by an ICAC computer forensic expert. The LG KE850 Prada and the device report are now produced by consent as P373 and P373A respectively. 64.CHUI Kit-man was arrested by the ICAC in the morning on 28 May 2008 at his residence in Hong Kong, and he was subsequently released and no charge has been laid against him. During a search at his residence, a sim card numbered 898520025041378148860 was found. That sim card number was assigned to mobile phone number 9800-2530. 65.TSANG Siu-yuen Eric and CHEUNG Siu-fai Dickson were arrested by the ICAC on 28 May 2008 at their respective residence in Hong Kong, and they were subsequently released and no charge has been laid against them. 66.Khalid CHANEB was arrested by the ICAC in the morning on 28 May 2008 at his residence, and he was subsequently released and no charge has been laid against him. During a search at his residence, a computer was seized. From the said computer, the ICAC retrieved and printed 5 Excel files with the following names, which are now produced by consent:
67.WONG Ho-yin was arrested by the ICAC on 28 May 2008. A computer was seized from his residence. From the said computer, the ICAC retrieved and printed an excel file. The printout is now produced by consent as P235. 68.On 27 May 2008 CHEUNG Ching-ho instructed PW2 CHAN Wing-tung to purchase some new mobile phones in Hong Kong of model Nokia 1110. PW2 CHAN Wing-tung and PW9 LI Ngai-sang purchased 4 sets of such phones in Kwun Tong. They were seized from PW9 LI Ngai-sang on 28 May 2008 by the ICAC. The mobile phones are now produced by consent as P353-P356. Room 1904 69.On 28 May 2008 ICAC conducted a search at Room 1904. In D’s room, ICAC officer found 2 safes one of which was of the same model as that Mr. CHUI had ordered from Safewell as referred to above. D opened the safe with model no. ESD-104A; but for the safe MSD-102TD, D claimed that it belonged to his mother who had deceased and he did not have the key or the pin of the safe. As a result, two police officers were called to the scene and opened the safe. These safes as contained in Safewell Model no. ESD-104A: piles of banknotes to the total value of HK$2,278,500, and in Safewell Model no. MSD-102TD: some brown envelopes containing piles of banknotes to the total value of HK$2,792,000 respectively. 70.In the same room, in the presence of D the ICAC found and seized:
71.On the same day, at Room 1904, the following items were found and seized by the ICAC in the presence of Miss SO Chi-wai from a drawer of her desk:
Room 2205 72.On 28 May 2008, at Room 2205, ICAC officers found and seized:
CHENG Yuen-yi’s safe deposit box 73.On 29 May 2008, ICAC broke open the said safe deposit box in the presence of CHENG Yuen-yi. Inside the safe deposit box were:
74.The stacks of bank notes in the Hong Kong Post carton boxes and in the brown envelopes were tied with rubber bands, or with paper straps some of which bore legible dates of “7 Sep 2005”, “18/09/07”, “04/10/07”, “(illegible)/10/07”, “05/11/07”, “12/11/07”, “17/11/07”, “20/11/07”, “27 Nov 2007”, “28/11/07”, “17/12/(illegible)”, “05/01/08”, “07/01/08”, “17 Jan 2008”, “06/02/08”, and “11/2/2008”. 75.The total amount of cash the ICAC seized from CHENG Yuen-yi’s safe deposit box was HK$34,648,000. Chan Chung-yan Stephen’s safe deposit box 76.On 30 May 2008, the safe deposit box of “CHAN Chung-yan Stephen” at Wing Lung Bank Limited was broken open by the ICAC and 88 pieces of $1000-dollar note were seized from it. Documentary Exhibits & Phone numbers 77.Para 312-323 of AF1 listed out other exhibits admitted including the the Registration of Persons records of D, CHENG Yuen-yi, CHENG Ching-ho (CCH), CHEUNG Lai-fan, CHUI Kit-man, TSANG Siu-yuen, Khalid CHANEB, CHEUNG Siu-fai, LAI Hang-fong, CHAN Chung-yan Stephen, KO Kwong-fat, HUEN Hoi-fai, CHUNG Ming-tru are produced by consent as P328 – P338 and for identification purposes. The respective phone numbers of all relevant persons involved also listed out in para 318 – 321. 78.D has a clear record. 79.As to AF2, it was further admitted that Million Great Corporation Limited was incorporated in Hong Kong on 28 September 2006 and changed its name to Hong Kong Investor Company Limited (HK Investor) on 3 May 2007. According to its Annual Return made up to 28 September 2007, its registered address was at Room 1904, Sino Plaza, No. 255-257 Gloucester Road, Causeway Bay. The Annual Returns of Hong Kong Investor for the period between 2007 and 2008 are produced by consent as P324(25). 80.Further, para 3 & 4 of AF2 also listed out the DWs and the respective stock code, short name, issuer, LP, exercise price, expiry date and the underlying securities. Para 7 also summarized the income of the Defendant and Cheng Yuen yi and companies associated. Summary of evidence 81.The Prosecution called upon the following witnesses including,
as alleged co-conspirators to testify under immunity how they got involved and met CCH, then how they participated in the Mainland operation and the details of DW pushing exercises, they may be collectively referred to as the Mainland crew. PW1 Wong Ho yin 82.PW1 is a former schoolmate of PW 4 Lee Wai ming (nickname Ah Sup or Sup Chai), they worked together with Cheung Ching Ho (CCH) in the same brokerage firm Chi Hing. In or around 1995 the company closed down and they joined another company called AFS. CCH and Lee Wai-ming also worked for the same company. 83.In about 2003 CCH asked PW1 to speculate in warrants issued by CLSA with the base operation in Sheung Wan. He worked with CCH, PW4 Lee Wai-ming, PW3 Leung Yiu kei (Ah Kei), Chan Chung yan (nickname Ah Chik) and his nephew Leo. They would control about 10 accounts to push the DW, that was to buy and sell as false trades, back and forth. They got daily instruction from CCH about which account to use, what quantity to trade and was told that insider of CSLA would take back at the end of the day and he heard that person named Raymond worked there. They used mobile phone with pre-paid SIM card for communication, SIM card would change but with fixed phone. He would use the computer screen online to monitor pushing the DW. The operation in Sheung Wan lasted until September 2005. PW1 was unemployed until CCH recruited him again to do the false trade of DW in November 2005. 84.PW1 also concerned the legality but then it was proposed to change the base to mainland to make more money in shorter time. They then met in a Chinese Restaurant in Sheung Wan, with CCH, PW4 Lee Wai-ming, PW3 Leung Yiu-kei, Chan Chung Yan and Leo also present. They talked about tidying up the loose end at the Sheung Wan office. PW1 was assigned for removing computer from Sheung Wan to set up the base in mainland and he would replace the hard disks. PW1 then got back the computers from Sheung Wan, took them home and thereafter to the Mainland when the operation was set up. 85.CCH told PW1 a scheme similar to Sheung Wan would be set up in Mainland to push DW, his salary would be $15,000 and $2,000 as travelling expenses for working in mainland. PW4 Lee Wai-ming, PW3 Leung Yiu-kei, Chan Chung-yan and Leo would also involve, PW1 agreed to participate. 86.There was another meeting at Best Club in Causeway Bay before the Mainland base was set up. PW1, CCH, PW4 Lee Wai-ming, PW3 Leung Yiu-kei, Chan Chung Yan and Leo were present. CCH confirmed the setting up in mainland and asked PW1 to be in charge of computer matters. PW1 created an Excel file to calculate the profit and loss of each warrant and with which account. (See P235 V18 p8147 showing sample excel file with average buy and sell, net and total turnover with which account & DW). Chan Chung-yan was responsible to arrange the head accounts (dummy accounts) at the securities firms. PW2 Chan Wing-tung, Tony 87.PW2 was a secondary school friend of CCH. PW2 had been a driver until 2006 when CCH contacted him to join the scheme in Mainland but he had no prior experience. He agreed to join the Mainland operation and then travelled daily to the Mainland premises. He also worked with CCH, PW4 Lee Wai-ming, PW5 Lee Wai-tung, Chan Chung-yan, PW 3 Ah Kei, Leo, PW6 Mak Kai-tong, Ms Zhou and PW1 Wong Ho-yin in the same premises for warrant trading. PW3 Leung Yiu-kei 88.PW3 had worked as a securities broker since 1993 and he came to know CCH in 1996 when working in the same securities firm. In 2003 CCH asked PW3 to join the activities to push warrants, that was to push up trading volume of DWs to attract genuine investors to buy, he was also told which accounts could be used beforehand, the issuer would recognize which securities firm on their side and would use lower price to sell to us and get back at higher price then we would get profit, they would also use accounts of different firm to push DW. PW3 agreed to join this scheme. The base was initially set up in Hong Kong, CCH, PW4 Lee Wai-ming, PW1 Wong Ho-yin, Chan Chung-yan also involved. CCH told that the boss was Siu But Leung, also called Sai Ray or Raymond, who worked in CSLA. 89.The pushing exercises were day trades and they would not be held overnight to reduce risk be cause if the other day the market dropped a lot then great loss would be resulted. The operation in Hong Kong came to an end in 2005. Then CCH contacted PW3 and told him that the operation would continue but move to Mainland so that it could be less easily detected. CCH said mainland boss was Siu But Leung. PW3 knew the activities were illegal but after thinking about one or two weeks he agreed to take part in the operation because it was an easier way to make money. 90.Then there was a meeting at Fung Shing Chinese Restaurant in Sheung Wan. CCH, PW4 Lee Wai-ming, PW1 Wong Ho-yin, Chan Chung-yan and PW3 were present. CCH asked PW3 to collect the statements and trading documents left at Sheung Wan office, then either had them burnt or thrown away. CCH told him that his salary would be increased to $32,000, CCH said paid by Siu But Leung. 91.There was another meeting at the Best Club in Causeway Bay before the Mainland base was setting up. CCH, PW3, PW4 Lee Wai-ming, PW1 Wong Ho-yin, Chan Chung-yan were present. Different tasks were assigned, Chan Chung-yan was to find premises, Wong Ho-yin on computer matters, to replace hard disks and take some home. PW3 also helped taking some computers home and then moved to Mainland. When moved mainland, CCH told Siu But Leung no longer worked in CSLA. PW4 Lee Wai-ming 92.In 1992 PW4 joined Chi Hing and knew CCH there, he also recommended PW1 Wong Ho Yin to join. In 1994 CCH got his broker license and joined Asia Financial Securities Limited. Then PW4 also got his broker license and later on, both PW4 and CCH joined Hong Tong Hai Securities firm. 93.In around 2003 CCH invited PW4 to help him push warrants, that is to achieve trading volume so the genuine investors would be attracted to buy the warrants. PW1Wong Ho-yin, PW3 Leung Yiu-kei, Chan Chung-yan were also involved. They would push the warrants issued by Credit Lyonnais (later known as Calyon), CCH mentioned that Raymond worked there. 94.In Sheung Wan, every morning PW4 waited for CCH’s instruction as to which warrants to trade, CCH said he got it from Raymond by mobile phone. They would then contact the securities brokers which they called “hands” by mobile phone. The Sheung Wan operation ended in 2005. 95.In October 2005 CCH met PW4 in Whampoa and asked him to push warrants in Mainland so that they could avoid the law enforcement agencies in Hong Kong. CCH said his salary would be $20,000. Although PW4 was concerned about the risk, he nevertheless agreed to join in to make a living. 96.There was also a meeting in the Elizabeth House at Causeway Bay. CCH, Chan Chung-yan, PW1 Wong Ho-yin, PW3 Leung Yiu-kei and Leo were present. At the meeting CCH said that they were going to push warrants in Mainland, Raymond was the boss. Various tasks were assigned, Chan Chung-yan was to contact the brokers from various securities firms and Wong Ho-yin was responsible for setting up computer network in mainland. PW5 Lee Wai-tung 97.PW5 was the younger brother of PW4 Lee Wai-ming. CCH was a friend of his elder brother. He came across CCH when his elder brother got married. PW5 worked in the transportation business in 1997 and became unemployed in 2005. PW4 Lee Wai-ming asked PW5 to work in warrant trading but he had no previous experience. PW5 then worked at home until November or December PW4 Lee Wai-ming contacted him to trade warrants in Mainland to avoid legal liability in Hong Kong. PW5 was concerned about the illegality but he agreed to participate because his brother said there was no problem as they had moved to the Mainland. PW6 Mak Kai-tong 98.PW6 was a high school schoolmate of CCH. In 2006 PW6 set up sound equipment company and CCH joined, however the business was not good and it closed down in April 2007. Then CCH asked PW6 to work for him. CCH then took him to securities firm to open account. PW9 Li Ngai-sang 99.PW9 was the brother-in-law of CCH. He graduated from VTC in 2006 and then he worked as merchandiser and clerk. In January 2008 his elder sister enquired whether he would work for CCH. They then had a meal with CCH whom explained the work to PW9. The work was to take place in Mainland and PW9 had to work 5 days a week from Monday to Friday. His duty was to trade warrants in Hong Kong by phone, salary of $15,000 per month but his sister said it was too much and she would keep $3,000 for PW9 as saving. Mainland operation PW1 100.PW1 described that the first Mainland base was set up in early 2006 at a residential premises in Huangyuyuan, Huanggang. CCH told that Raymond no longer worked in CSLA but would still play the same role as in CSLA. CCH also told that Raymond’s role be replaced by Eric, Dickson and Man Chai. In mainland base, they also traded DW by Calyon, later traded Standard Bank with insider of Eric, also Citigroup’s DW with insider Dickson, then Dresdner’s with insider called French Boy, PW1 was also told that the insiders would assist to buy back DWs, but how insiders were remunerated PW1 was not clear. 101.There he worked with PW9 Li Ngai-sang, PW5 Lee Wai-tung and PW6 Mak Kai-tong later on joined the Mainland base. Chan Chung-yan and his girlfriend Ms Zhou also took part in it. They later moved to JiangHuang Ming Ju to avoid being detected as they cannot stay in a place too long for engaging illegal activities. 102.PW1 lived in Hong Kong and he worked in mainland 5 days a week; every day CCH would instruct them which DW to be pushed and how much, CCH would talk to Raymond every morning through pre-paid mobile phone, that phone with a sticker stuck, they would then use different dummy accounts to engage pushing exercises as the same account cannot be traded too much or large quantity would be resulted. He would contact Hong Kong brokerage firms through pre-paid mobile phone Nokia 1110 with pre-set fast dial in 2 digits, say 14#, 28#, 29#, 78#, 79# & 88#. The 2 digits numbers were taken from the first two digits of the broker numbers. 103.The broker numbers PW1 used included 888, 833, 887, 379, 395, 621, 179, 082, 714, 288, 142, 788, 787, 185, 540, 682, 229, 228, 322, 141, 780 and 393. PW1 knew the names of some of the brokers. The one for 141 was called Brother Lin, 787 was Kangaroo, 288 was Ah Ko. 104.The model of phone used by the group was Nokia 1110 and the telephones had pre-paid SIM cards. The premises rented were close to Hong Kong which had the benefit of Hong Kong phone network coverage such that the calls made were all local calls. The warrants were also traded by internet. PW1 could see from the computer the information about warrant trading through ETNet and AA Stock. After he phoned the hands telling them to place an order the transaction would appear on the ETNet and AA Stock. If the order was executed immediately, the executed volume, price and warrant numbers would be shown on the screen. He could see if the transaction was completed. Sometimes the prices would increase and other times decrease as if this was a genuine trading scenario so the genuine investors would be attracted to buy the warrants. They then conducted the false trades, if there were “fish” (individual investor), they would sell DWs to fish to make profit, if not, then they would ask the marker maker to take back. 105.The insiders at the market-maker LP would use “double order” as an instruction to the group to buy the warrants. For example, LP 9605 would put up two bid prices at 0.94, PW1 would put up a ask order at 0.95 which is a bit higher and the market maker would sell the warrants to him. They could conclude the trade at a faster rate that way. 106.At the commencement of the scheme MSN messenger was used to communicate with the insider of CLSA for a short period of time for about one month. The account [email protected] was used. The group would type in letter B and letter S to ask the insider to buy or sell the warrants to them. 107.They traded so that there was active trading in such DWs to attract general public to buy. They would do through “hands” who worked in those security firms. They would buy and sell through different accounts till the close of Hong Kong market. They checked through computer internet to see the profit and loss 15 mins before close of morning trade i.e.12:15noon and would tell CCH and thereby Raymond would be informed of the holding. If they were holding warrants CCH would be asked to call for instructions using the designated telephone. PW1 witnessed such call being made. PW1 would receive instruction as to what price to put up the warrants for sale. PW1 would then put up the offer by the phone and he would see on his computer that the warrants were sold. 108.They would also check 15mins before close of day trade at 4pm and would also call hands to check balance. PW1 would then input the data into an Excel file and calculate the profit or loss in certain warrants or in certain accounts. P235 was a sample of the Excel file. The Excel form would be shredded after Ms Zhou had checked the profits and loss with the hands. The records would be kept for 7 days in a memory card after which it would be destroyed. 109.After day trade closed they would report to CCH, CCH then talked to Raymond through that specific phone. PW1 had heard the report from CCH to Raymond, when CCH absent, PW4 Lee Wai Ming would report. He did report it but very infrequently. For the Excel form, he would shred it after Ms Zhou check the balance with hands of profit and loss of DW. After checking, he would also input to computer. V1 P1-6 photos showed the computer in mainland base when arrested on 28/5/06 and P3 photo showed the shredder. 110.CCH told that Raymond was the boss, but he no longer worked in Calyon, when Raymond left, Dickson, Eric and Man chai as insiders. CCH also said as told by Raymond, Eric would change to work in Standard Bank, Dickson in Citigroup. In early 2008, French boy in Dresdner. They helped to buy back the DW. 111.PW1 did stop work in March to May 2007, then he resumed duty in mainland base, salary was later increased because he also used his own security account to trade. 112.For the profit in 2006, CCH said if Raymond needed money, Raymond would tell CCH to ask Chan Chung Yan, whom was responsible for head accounts and he would tell account holder to collect money from the account. Chan Chung Yan then gave money to CCH to Raymond. As working in the same place, he knew the arrangement. 113.CCH also distributed money to us to bring to Macau as a safer way. PW1, Chan Chung Yan, PW4 Lee Wai Ming, PW3 Leung Yiu Kei, PW6 Mak Kai Tong and PW5 Lee Wai tung would in Hong Kong collected the money and took ferry to Macau. I had looked at the brown envelope given, the size was not fixed. The amount was about $100,000 to 200,000. When arrived in Macau, we handed it back to CCH after passing custom. CCH said he would go to Sands casino VIP room to meet Raymond. 114.There was once that CCH told Raymond was just next to them, PW1 did glance at Raymond once and he was aged 35-40, around 5’7” high. Similar trip continued until CCH said his wife was pregnant and he did not want to waste time to Macau, so by then CCH give money to Raymond in Hong Kong. 115.Apart from the $17,000 salary and travel allowance PW1 also received bonus. The amount depended on the performance of PW1’s work. On average PW1 earned several ten thousand dollars to two hundred thousand dollars per month. 116.Under cross-examination, he admitted sometimes he just queued up to take the DWs from open market, he did not know who was the fish and he never contact the market maker direct. He further agreed that in the volatile market, the price could just go up or down sharply, he was just told to prevent losing too much. PW2 117.In 2006 he worked in mainland and had been in 2 to 3 residential premises, with CCH, PW4 Lee Wai Ming, PW5 Lee Wai Tung, Chan Chung Yan, PW3 Ah Kei, Leo, PW6 Mak Kai Tong, Ms Zhou & PW1 Wong Ho Yin. In the morning, CCH arranged us which DW to trade, ususlly one DW, occasionally 2 for day trade, the issuers included Calyon. He would use mobile phone to call brokerage firms to conduct. CCH provided the number of DW and the turnover volume, as it could not be too large as there was set limit. 118.As to the brokerage firms, he recalled it included 787, 788, 395, 077, 323, 888, 833, 576, 714, 704, 682, 082, 036, 058, 141, 185, 228, 288, 379, 621 and 540. 119.PW2 would look at the computer of underlying asset, speculated in line for up and down and tried to push and avoid loss. He would buy the DW first, waited to be given and then contacted the brokers to buy and sell, he would mark up the price to sell and asked other brokers to buy. 120.By the end of day, after pushing sometime to reach turnover, if nobody bought, he would sell back to issuer. CCH would give instruction to set certain price, CCH would also contact insider to buy back. CCH called Siu But Leung, PW2 heard about it, probably his superior or supervisor, usually referred him as Siu But Leung. PW2 observed CCH making and receiving telephone calls on the specific mobile telephone. 121.These were false trades, the pushing purpose was to create turnover and to make profit as far as possible, the price would increase or at same level if underlying stock did not move. After pushing for some time, if none wanted it, it would be returned to issuer. 122.The decision was made by CCH and sometimes through Siu But Leung to CCH. Only CCH spoke to Siu But Leung, sometimes PW4 Lee Wai Ming would also do. He knew from the number of broker used to tell whether other genuine buyer bought. Before lunch and close of trade report was made, if still holding DW CCH would be told, CCH then informed to set certain price and the marker maker would take back. The trading volume in respect of one warrant on a day would be hundreds of thousands to one million. All the transactions were day trades. 123.P1-6 photos showed the computer used when arrested on 28/5/08. The day trade record was input to computer, other people together were doing the same for pushing and input. His salary was 10,000 odd to 20,000 paid by cash, later the profit was paid through account when he opened one. 124.PW2 also recalled some days will incur loss but overall taken into account trades by other people there was overall net profit. If price dropped, CCH would call Siu But Leung, talked to him to put offer at a certain price and waited for the market maker to get it back. PW2 had also overheard conversation of CCH with Siu But Leung to inform the market maker to get it back. PW3 125.At China mainbase, CCH gave instruction after talking to Siu But Leung and told us which DW to trade more or less, and also to choose which firm to use because if profit too much then they had to lose some as account holder cannot get too much cash from account which would arouse suspicion. 126.PW3 had discretion when he pushed the warrants. Sometimes PW3 received instructions from CCH on the volume or trading and on a particular price but on some other occasions PW3 could make his own decision. Usually PW3 would not buy too many or keep too many warrants at hand. The maximum quantity of warrants was around 1-2 million. PW3 would only purchase a larger amount if CCH instructed him to do so. 127.PW3 then wrote on a piece of paper which firm to use, the next step be through the teletext (tai lei see) screen to see which underlying shares went up to trade, he would put up bid price say bit higher than last trading price, waited marker maker to sell to us, then he would use another account to buy. He would use mobile phone to call securities firm, the firm knew us, we used pre-paid sim card phone with fast dial say 1410 broker then dail 14#. 128.He had used the brokerage firms 036, 058, 077, 082, 141, 185, 228, 288, 323, 379, 395, 576, 621, 682, 704, 714, 787, 788, 888. 129.CCH used the special phone to contact Siu But Leung, the phone was on his desk. MSN was used for first 2 months to contact insider of Calyon, Siu But Leung was also called superman, there was also Eric, Man Chai called as KaShing. He used MSN because of the bad reception of mobile phone and MSN used to do it faster. We put up bid price, displayed on the screen, the insider Calyon would know. CCH also said they would recognize and DW would be sold to us. If underlying stock goes up, we would asked broker to put higher price to sell , then another account to buy, just circulated among us, then put up higher price for market maker to buy back. For MSN, we type B to buy or CCH will tell those people to buy back. CCH used the special phone to Siu But Leung that he would fix it, and we could check from broker number to tell who had bought the DWs. 130.Each day 2 or 3 DWs were selected, we would report to CCH for any profit or loss before 1pm, briefly what was still holding and quantity, CCH would reported to Siu But Leung through the designated phone placed on CCH’s desk. 131.For afternoon trading, we continued to create volume to give false impression to investors of active trading, if that could not attract investors to buy, we just do it casually and there was no need to create large volume. If DWs were pushed couple of days but still not attractive, then we moved to other DW. 132.Before 15mins before closing at 4pm, we would call all brokers to see whether still holding any DW, we checked bid price and quantity and we knew from hands the brokers to see profit and loss. For example if there were 20 brokerage firms employed by 4 members in the group each of the members would make enquiry with 5 brokerage firms to see if they were still holding any warrants. We also waited market maker to buy back and tried not to suffer loss. As there was pre-arrangement made, we just told CCH, CCH would call Siu But Leung to fix it using phone. 133.V18 P235 p8147 showed sample of Excel file we kept in mainland to reflect trading done, with quantity and price, net profit and loss. CCH, Chan Chung Yan, PW4 Lee Wai Ming, PW1 Wong Ho Yin and I, later PW5 Chan Wing Tung, PW6 Mak Kai Tong, PW9 Lee Ngai Sang and Leo also joined, a female Ms Zhou was also there to do miscellaneous chores. 134.For profit collection, CCH asked Chan Chung Yan to collect cash. We went to Macau with CCH and gave to Siu But Leung, CCH said he would meet Raymond in Sands Casino. Usually each one maybe 200,000 to 300,000 in the envelope I had once opened to see. We carried it through ferry terminal, and passed to CCH after Macau custom. It lasted about some months till CCH’s wife pregnant and he said it was not convenient to go to Macau. There was once CCH in ferry said Siu But Leung in about 7-8 rows in front. 135.CCH paid me bonus other than 32,000 salary, it was about 100,000 odd per month, later changed when CCH told to open account. PW3 also used it to push DWs, say if the profit earned was $500,000 CCH would tell me to withdraw $300,000, then $200,000 left in my account as bonus. 136.The said Siu But Leung, surname Ng, CCH told as Raymond Ng PW3 heard when working with CCH in a small room of Hong Tong Hai Securities firm when there were only 2 of us trading DW with 2 phones, I contacted the security firm, the other contacted CSLA. If CCH not present, I would answer call on that phone, I just did according to instruction by other party. I did ask CCH who was the boss, CCH said it was Siu But leung working in CSLA, who was also called Raymond Ng or Sai Ray. CCH would liaise with the insider, CCH also said Siu But Leung would continue to trade DW but the base be moved to mainland. Then when in mainland, Siu But Leung no longer worked in CSLA as said by CCH. 137.In mainland, when CCH was too busy, I answered that special phone where just simple instruction given, said which DW to trade higher or smaller volume or buy more DWs. When PW3 received instruction, he also told fellow persons working together. Within about 2.5yrs he heard some 10 odd times. PW3 did not make call, only when CCH desk too busy I answered for him, I told everybody the instruction in a loud voice. E.g. 1234 more, 4567 buy 10M. 138.MSN was used when asking CSLA to sell me some DW or asking to buy back DW if necessary. After not using MSN, there was no direct contact with the insider. I was only responsible to contact brokerage firms and he would ask CCH to contact insider for me, CCH would call by special phone to Siu But Leung to contact the insiders. CCH mentioned their names on computer, said superman for Siu But Leung; KaShing meant Man Chai or Eric the insider. For profit taking, CCH said not all earned by them, other people could have share. 139.Under cross-examination he admitted that his principal concern was getting instruction from CCH to deal with the DW, he had discretion to trade in volume, quantity or price, and he did not need to inform CCH everytime, he could also just queue to wait to buy, sometimes only PW3 queued. 140.PW3 controlled one or more account through the trading day, he could tell from screen identity of customer other than his group, say just another broker but unable to tell behind the firm, it could be just individual or institutional investors, there could have smart or foolish investor. 141.MSN PW3 did use but not very often, either to buy or sell DWs to or from market maker, sometimes just putting ask price the market maker would buy back, or market maker saw our bid would sell to us automatically. MSN could be recorded, then later used pre-paid sim card and there was no record. 142.PW3 did not ask identity of other party on special phone, but CCH told me at the outset that this special phone was to contact Siu But Leung. PW4 143.PW4 lived in Hong Kong and travelled to mainland base every trading day, first to wait for instruction from Raymond by special mobile phone. PW4 used that phone as well when CCH was too busy. Together with PW1 Wong Ho Yin, Chan Chung Yan, PW3 Ah Kei , Leo , CCH & I. PW4 used mobile phone to contact brokers to push DW, by holding DW and selling to other broker, then arranged another broker to buy to achieve trading volume, the issuer CSLA would buy back the DW, some at higher price, some lower. PW4 also push DWs from Standard, Citibank and Dresdner. 144.For the mobile phone PW4 used pre-paid sim card, with speed dial using code , including 888, 185, 850, 235, 243, 379, 179, 576, 714, 833, 141, 360, 036, 323, 288, 787, 780, 229, 228, 621,704, 682, 393. PW4 also recalled that 393 of Fai Gor and 888 Ricky. 145.For daily operation, there were reporting at the close of morning session, before day end and after trading close. 146.Before morning close, PW4 reported what DWs still held, CCH would tell Raymond by mobile phone. After reporting, PW4 would get from CCH which DW traded more or which account with higher profit, sometimes even instructed to lose. CCH said from Raymond, some DWs to earn money, some need not and he would follow instruction. It was only day trade to reduce risk, with market risk unknown the following day, sometimes overnight but seldom. At trading day end, he would see which broker still held DWs, then told CCH to tell Raymond to buy back. 147.Ms Zhou there also helped to input information we got from brokers into computer for the profit and loss. CCH would make report to Raymond. PW4 also recalled having talked to a lady after close of day on Raymond’s side. For the account used to make profit, cash would be withdrawn to CCH to Raymond. 148.Between March to December 2006 we went to Macau about 10 times, CCH distributed cash to us to take to Macau, together with PW1 Wong Ho Yin, PW3 Ah Kei, Chan Chung Yan and Leo. After arriving at Macau we gave money to CCH to Raymond. There was once CCH told PW4 that Raymond was in a far away distance at the pier. The trip to Macau stopped in 2006, CCH then paid money to Raymond in HK. 149.PW4 on average got some ten thousand per month as bonus and CCH said when more earned more would be given. PW4’s account was also used to push DW, he also received some money from PW5 Lee Wai tung’s account as told by CCH that some money be deducted to give to PW4 as he made more effort when worked for 2 to 3 extra DWs. 150.P1 (1-6) photos shown computers in mainland base before arrested to push DW, they moved 2-3 times to other residential units because of poor reception. The party had pushed DW of Calyon, Citigroup, Standard Bank and Dresdner. Though knowing as illegal activities PW4 still agreed to participate as he was then unemployed and so was his younger brother PW5. 151.PW4 said the insider was important to sell and buy DW from us, they could sell us at lower price & buy from us at higher price but he did not know if insider got payment. He also handed cash to Chan Chung Yan but did not collect cash from him. 152.For Mainland operation, when CCH was too busy I would answer the special phone and PW4 also reported as CCH also traded. He recalled always talking to the same man, but sometimes to a lady but never got instruction from that lady. PW5 153.In mainland, every trading morning he would switch on computer to monitor the price movement, He got instruction from CCH and CCH talked to someone over the phone, it was our boss Siu But Leung as told. CCH then told which DW to trade and said the insider Man Chai from Calyon would collect our DWs. The trades were to create large volume of active trading as false appearance to actual investor. 154.PW5 worked together with PW4 Lee Wai Ming, PW1Wong Ho Yin, PW3 Leung Yiu Kei, PW5 Chan Wai tung, Leo, Ah chik, Fei Chai and Ms Zhou. He would contact broker to trade, volume not fixed. There were few DWs to trade but not held overnight and for day trade only. He would phoned to brokers using pre-paid Sim card by speed dail code associated to brokers no. 288, 788, 787, 036, 393, 576, 141, 395, 833, 323, 077, 179, 704, 621, 888, 780, 243,185, 540, 082, 235. 155.He knew 1 or 2 above say Ms Zhou 833 and Fei Chai 784. He used various account to trade DW and outsider investor be attracted to buy. He was requested to report progress before morning, it helped to square the position, and had to sell back to DW issuer. If still held DW, he would put up offer of DW to be bought back. 156.For the afternoon session before close at 4pm, it was the same as morning, he put up DW to be bought back, if not successful, he would tell CCH, CCH would phone up the boss Siu But Leung to contact issuer to buy back whereas when issuer bought it back this could be seen from the computer screen. He heard that Man Chai from Calyon, sometimes CCH also told what price to put up the offer as CCH got it informed from the boss. At most occasion issuer bought back at higher price so that we could be profited. After day close, trade information would be input to Excel file and profit and loss would be known. The Excel file form was the same as V18 P235 at P8147. 157.Normally the communication was between CCH and the boss Siu But Leung after and before day close using specific phone. I also answered that phone when CCH and my elder brother PW4 not working at the time, then he was told which DW to trade, at that time there was no others perhaps just 1 or 2 persons working then I just contacted brokers myself. 158.P1 (1-6) photos showed mainland base before arrested on 28/5/08 but they did move premises during the mainland operation. In the end of 2006 they traded Calyon DW, they then also traded other DWs, like Dresdner, Standard and Citigp. From computer screen of ETNET or AASTOCK, either one had bad reception in mainland, he would know the real time price of underlying share and DW to trade. He was paid 20,000 per month with bonus 20,000-30,000 extra. Though the false trading was illegal, his brother said no problem when crossed broader. He was also paid through his brother PW4 in cash, and later from his account at GOA securities. 159.CCH told me to open an account, seemed arranged by Ah Chik, then withdrawal of profit more easily in this way. The DW profit was withdrawn and given to CCH personally, sometimes through other to CCH. He collected cash from bank, was arranged to meet CCH in street for about $300,000 as per instruction from CCH. He could not recall times, but did arrange to meet him in Mongkok street. 160.The pushing of DW involved a number of securities firms by contacting brokers to trade DW back and forth using different securities firm. His GOA account was used for pushing but not everyday. The purpose was to create as appeared that the DW was heavily traded. 161.PW5 said the bonus was calculated by CCH and he did not know the basis. If still held DW at day end, he would tell CCH and put up same price offer and waited the issuer to get back but he did not know of any prior arrangement. CCH would call Boss to ask somebody to get back but he could not know what the other side of the phone said. PW6 162.PW6 lived in mainland and he went to the mainland base Monday to Friday and worked with PW2 Chan Wai Tung, Sup Chai bro of Ah tung, Ho Yin, Ah tung, Ah Chik & Leo nephew of Ah Chik, there were also female Ms Zhou and CCH was there as well. 163.On the 1st day, mobile phone with pre-paid SIM card and computer was given, he worked in the same room as Ms Zhou, others worked outside. CCH and Sup Chai would call me, gave me DW number and asked me to call securities firm to put up offer through Get Nice Securities account. It was usually day trade, very few maybe once or twice overnight he cannot recall. But the price was not determined by me, they just called me and told me the price to sell and PW6 was not concerned about profit or lose. He did question about legality but still agreed to participate because he was then unemployed and had to make a living. 164.He also confirmed P6 (1-6) photos shown the mainland base before arrest on 28/5/08 PW9 165.In January 2008 his elder sister enquired whether he would work for CCH and in mid-Feb 2008 he had meals with sister and CCH whom explained the nature of work and he agreed to work in mainland 5 days per week, 10am to 4pm, the duty was to access computer to place DW order by phone. The salary was 15,000 per month but his sister would keep 3,000 saving for him. 166.In the end of February he went with CCH to work in Shenzhen, he worked together with Ah Tung, Ho Yin, other present full name not known. Ah Tung opened the door and inside were some computers. Other people working there included Sap Chai, Ms Zhou, Ah Chik, Ah Kei, Leo & Fai Chai. In March they moved to other residential unit as shown in P1 (1-6) photos the place before arrest. 167.For daily work, he placed order by Nokia mobile phone with pre-paid SIM card as applied by CCH. When the phone ran out of cash they would replace. CCH gave instruction of DW number, to do as much as he could place order. The phone was with short-cut dial connected, to place order to unknown person. CCH taught me how to do it, the DW number, the amount of order, the quantity or turnover. After placing, it would be shown in the computer, if someone wanted to buy, we would see it. 168.PW9 would keep a record of the trades. When the market was closed in lunch time a list of numbers and turnover would be handed to CCH. Before the close of the afternoon session PW9 would sell out all the warrants he was holding. After the close of the market the trading information of the warrants was input into the computer and PW9 had to check the information. 169.On the day before arrest on 27/5/08, Ah Tung and CCH asked me to buy some Nokia 1110 in Kwun Tong, Ah tung paid me. P353 – P356 were Nokia 1110 purchased by PW9 on 27May 2008 in Kwun Tong and seized by the ICAC when he was arrested on 28 May 2008. 170.PW9 was concerned about the illegality in the warrant trading but he did not have a good job and he made a better living so he continued to do so. Dummy accounts PW1 171.PW1 said he had used his Sanfull account (dummy account no. 45& V.13 P165 p5873) to push the warrants issued by Calyon, Standard Bank, Citigroup and Dresdner as part of the scheme. . Examples of pushing DWs as follows, see
172.As the settlement date was 2 days after the transaction date. By buying and selling the DWs on the same day and while selling the DWs at a higher price it was always the securities firm that owed PW1 money. PW1 did not have to use his own money to trade in the warrants. 173.The securities firm would deposit the cheques into PW1’s bank account when PW1 wanted to withdraw money, he would then physically go to the bank to collect the money and gave the cash to CCH in Hong Kong as directed. PW1 gave the money to CCH either by driving to the vicinity of CCH’s residence or CCH drove to the vicinity of PW1’s residence. Part of the profit was kept by PW1 as his salary. 174.For example, P5873 4/9/07 PW1 earned 17,392,19/9/07 PW1 withdrew $110,000 which may be told by CCH to withdraw profit made, PW1 had to use his account because CCH told that other head accounts did not want to withdraw so much money. P5877 5/11/07 PW1 withdrew 1.5 M for the same purpose, but on 7/11/07 the cheque deposited $200,000 was his own investment. 175.Also see AF1 Table A account no. 45 p22/34 & bank statements;
176.All the cash withdrawn as above was pursuant to CCH’s instruction as CCH said cash would then be given to Raymond. CCH did not say how Raymond would treat the cash, but he heard from CCH that Raymond would give Man chai his share while he did not heard about that of Eric, Dickson or French Boy. PW2 177.PW2 was also asked to open an account to push warrants and he opened an account in Hantec Securities (dummy account no.24) on 30 July 2007 P86 V8 p3340. The account was used to push CA, SB, CG and DR warrants as part of the scheme. CCH would ask PW2 to withdraw the profit made. PW2 usually gave the money in cash to CCH in the street. 178.P3360 30/7/07 PW2 deposited $100,000 into the account but that was later reimbursed by CCH ; For examples on 30/7/07 PW2 buy 8M CA-CLIFE, CCH asked me to buy DW by my account to push. P3361 1/8/07-21/8/07 PW2 also traded CA DWs. 179.Some earning as follows,
180.CCH asked me to buy which DWs, then PW2 put up higher price to sell, usually with profit as part of the scheme. P3361 10/8/07 shown payment out 300,000 as CCH asked PW2 to withdraw. (Also see V.B4 P325 B1442 Bank Statement, B1444 Hantec cheque to PW2 on 10/8/07 300,000; B3361 15/8/07 200,000 B1447 cheque 200,000 WD to CCH; B1442 18/8/07 WD 210,000 but 10,000 as PW2 own spending, 200,000 to CCH.) 181.I went to the bank to collect cash and passed to CCH at street with prior arrangement. (See P3363 19/9/07 Withdraw 300,000 to CCH B1450 the cheque was 300,000 B1452 15/9/07 WD 300,000 as requested by CCH to WD & passed at street.) 182.All these were reflected in AF1 Table A, account no. 24. PW3 183.PW3 was asked by CCH to open a securities account. PW3 used his account held with Head & Shoulders (dummy account no.28) to push the warrants in Mainland. PW3 also opened an account with Winfaith (dummy account no.53) because they had a “hand” at Winfaith and profits would be made in that accounts. The accounts were used to make withdrawals and could be used as a way to pay PW3’s salary. For example if profit of $500,000 was made in that account CCH would ask PW3 to withdraw $300,000 and the balance of $200,000 would be given to PW3 as his salary. The same brokerage number 1410 was used such the market maker would know they were in the same group. 184.For Head & Shoulder account, PW3 used the statement to prepare chart Annex G for profit and loss.
185.When asked why DW held overnight, PW3 said there should have phone call to contact Siu But Leung to fix it out, however if it was unable to be bought back, it may be that the other side was too busy or could not be contacted. 186.For July 10/7-27/7/06 Profit $433,394, handed up to CCH $300,000 therefore PW3’s profit (salary & bonus) was $133,394.14. For Aug 16/8-31/8/06 Profit $352,092, handed up to CCH 200,000 and PW3’s profit (salary & bonus) was $152,092.63, see Annex G. 187.Cash was withdrawn from securities account to PW3’s settlement account at HSBC, then PW3 went to withdraw cash to CCH at vicinity of CCH’s residence. 188.For Winfaith securities V17 P198 AF1 Tab A a/c 28 & 53 p7564, account opened on 24/8/07 p7570. 189.Winfaith Annex H
190.Examples of DWs pushing,
PW4 191.PW4 opened an account with Vermont on 6 August 2007 (dummy account no.50, V16 P186 p7223) and he used the account to push the warrants. Profits made in the account would partly be salary and other part passed to CCH. The money would be deposited into his bank account and he would make cash withdrawals and give it to CCH in the street. 192.Examples of DWs pushing,
193.PW4 did trade DW of DR- Dresdner for a very short period, be heard a person called Kwei chai in DR. After arrest, still ongoing trading only as my own speculation on DW only. PW5 194.PW5 was paid in cash salary of $20,000 by his brother PW4. Then CCH asked PW5 to open an account so it was easier to withdraw profits made from the warrant trading. PW5 opened an account with GOA on 26July 2007 (dummy account no.17) with arrangement made by Ah Chik. V5 P61 p2048. The GOA account was used in the pushing but not everyday. 195.PW5 would withdraw cash and give to CCH, the amount was not fixed but around $300,000. It happened at least once per month and gave to CCH personally at street but on some occasions he also gave cash to PW2 Chan Wing-tung for him to pass to CCH. 196.Also see AF1/Table A account no.17 and,
197.Altogether PW5 had 4 accounts, i.e Bank of China, HSBC, Hang Seng Bank 888 & 001 accounts. The accounts were opened as instructed by elder brother, there were 4 accounts so that all withdrawals need not from the same bank. 198.After arrest on 28/5/08 PW5 still traded DW for himself, he hoped to make profit but not really successful (For GOA p2094 27/5/08 CG). PW6 199.PW6 was also asked by CCH to open a securities account. It was Ah Chik who took him to open the account with Get Nice on 19 April 2007 (dummy account no.16, V5 P56 p1861). The deposit of $300,000 was not made by PW6. PW6 used the account to trade in DWs as per the instructions he received over the telephone with pre-paid SIM card. Usually all DWs sold on the same day. 200.The profits made in the securities account would be transferred to his bank account and PW6 withdrew money in cash and handed to CCH as instructed by CCH. 201.Any profit transferred to bank, PW6 did according to CCH (see B2985 15/5/07 WD 300,000 handed over to CCH all in cash; B6934 20/8/07 1.3M to Cheung King Wah, CCH instructed PW6 to issue cheque and handed to CCH, then not know how CCH treated it). 202.PW6 had 2 accounts, HSBC & Standard Chartered to receive money from securities firm, then by cheque or cash to CCH, all withdrawals from securities account according to instruction of CCH. 203.For withdrawals at Get Nice account (see AF1, Table A, account 16),
Dummy account holders: PW7, PW8 and PW10 PW7 Cheung Lai Fan 204.PW7 started working in a brokerage firm called Asia Financial in 1990s as trader, there was a colleague Chan Chung-yan Stephen (nickname Ah Chik). In 2003 she joined Victory Securities Company Limited as trader then an account executive and worked at home. 205.In 2006 Chan Chung Yan asked her for using her account for warrant trading for Chan whereby she would just earn commission as reward. Chan then gave PW7 $100,000 to deposit into the account and provided her of phone with pre-paid SIM cards. Pre-paid SIM cards were used because Chan said that it would not be detected by the SFC. Chan also told her that people calling the phone to place order for them in her account. Then a number of people made phone calls to her, all were males but PW7 did not know them nor familiar with anyone, they would tell her the DWs numbers, the quantity and the price to buy and sell and she just placed the orders online on internet according to the instructions. The quantity was large sometimes. After the close of the trading day PW7 would receive a telephone call to check the details of the transactions conducted that day. PW7 earned approximately $10,000 commission each month. (V17 P193 p4793 victory Account opened on 20/4/07, P194 p7517 deposit 100,000, 21/4/07 100,000 deposit from Chan p1811) (also see examples of trades P7537 9/11/07 Buy 4.4M DW CA 1951; Sell 4.4M 1951; 13/11/07 Buy & Sell 1.7M DW 3319 SB; p7550 4/2/08 Buy & Sell 4M 4801 CG) 206.PW7 opened a bank account in Hang Seng Bank to separate the money earned from this operation from her own money at Bank of China. Chan would instruct PW7 to withdraw the money and arrange to meet PW7 on a certain day. PW7 would give the cash to Chan. 207.At 11:48 am on the 3rd May 2008 Chan Chung-yan Stephen received a yellow and a white envelope from PW7. PW7 confirmed it was cash which had been originated from her Victory account, AF1/281(a). 208.As the remuneration was just the commission, which was 0.15% of transaction, then in March and April 2008 when PW7 did not have much business, Chan gave her $10,000 as “head account” fee. PW7 explained because her account was used, the money was given to her like an income. 209.PW7 once asked Chan about the legality of such activities, Chan did not answer but told her just take it as work done for the market maker. The trading stopped at the end of April 2008 when she got a new employment to work at a securities firm. However PW7 was arrested by the ICAC shortly afterwards and she remained unemployed since then. (See examples of withdrawals for Chan. AF1 Table A account no. 52)
PW8 Wong Lok Him Howard 210.PW8 joined LT Gold Online Limited in 2006 as a sales manager. His duties included placing orders for stocks and derivative warrants. LT Gold has been renamed Gold In Securities Limited. 211.LT Gold was an online brokerage firm. To open an account with LT Gold, a client must fill an opening form in person. Bank account must be provided so that money withdrawn from the securities account could be transferred to the bank account. Once the account was opened the client would receive an online login name and password. The client was required to deposit some money into the account in order to get it underway. However, the LT Gold would also provide a credit limit for a client depending on his or her individual situation. The general commission charged for was 0.025% of the transaction amount with a minimum fee of $100. The commission is negotiable depending on trading volume and upon request. 212.Leo Lam Sze-hang came to LT Gold office after the close of trade on 7 December 2007 to open an account. PW8 signed all the documents with Leo Lam and collected all the necessary documents such as his ID card, his address proof. The commission 0.025% was replaced with 0.02%. The trading limit of the account was $1.2 million. This was a credit limit given to the client depending upon actual money deposited. No supporting document (e.g. a bank statement) was provided to support this trading limit. It was also stated in the account opening form that the transactions would be “day trade”. This is dummy account no.32 P112 V10 p4130. 213.For the account of Yang Aizhen, it was opened on 4 August 2007 (dummy account no.33, P114 p4181)) and PW8 was the account executive of this account. On 4 August 2007 after the close of trade Yang Aizhen, a mainland resident was accompanied by a male called Stephen came to office to open an account. The commission was negotiated and reduced to ‘one drop’, that was 0.01% because the account was for a large amount trade. It was indicated that LT Gold would receive at least $40,000 as commission per month, that would be about 20 million turnovers per day. If trading not reaching that amount, it was that LT Gold would still receive $40,000 commission. The trading limit of this account was $1.5 million. 214.PW8 told Stephen and Yang Aizhen how to operate online but Stephen said the software was difficult and Yang would place the order via phone and let PW8 operate the account for her. Stephen asked PW8 to get a phone with a pre-paid SIM card and let them have the number. Stephen mentioned that people would call to place orders and the phone with the pre-paid SIM card was used only for receiving instructions to do transaction. Later PW8 did receive calls on that phone but the calls were not made by Yang Aizhen but two to three males making calls to that phone to place orders on DWs trading with warrant numbers, the quantity and the price for day trade. 215.At lunch time, a male would call for summary of transaction as well as before day trade close, if there were still DWs holding, all would be sold and very seldom held overnight. After the day close, males would call PW8 up and crosscheck the transactions conducted on that day. 216.Apart from placing orders by phone, male would also phone PW8 to withdraw money from the account. PW8 would then arrange for the withdrawals of money. This would be done by issuing cheque of LT Gold to deposit into the bank account of Yang Aizhen. PW8 did enquire with his senior about all such practice but was told that there was no problem (see monthly statement for trade and withdrawals P115 v10 p4223). For examples of DWs trading, p4242 2/11/07 Buy 4.2M CA-HSBC@EC1001 DW 1951 $1,198,251 S4.2M CA-HSBC@EC1001 $1,198,748 2/11/07 Buy & Sell 15M CA-C TEL; Buy & Sell 2M CA- HKEX; Buy & Sell 13.1M CA-CLIFE, CACCOAL
Note that all these DWs were issued by Calyon, Standard Bank, Citibank and Dresdner. For examples of withdrawals, see AF1, Table A account no. 33. PW10 Tse Tai Tai 217.PW10 said she knew Wong Kit-ling many years ago. Wong got married and had several children including CCH and he was engaged in securities trading. CCH and sibling referred PW10 as aunt. PW10 divorced with her husband and she had difficulty in living. 218.In or about March 2007 CCH contacted PW10 by phone asking her if she would like to earn some money. What she had to do was to buy and sell derivative warrants pursuant to instructions. PW10 did not have to put up any funds as all the funds would be provided by CCH. PW10 were not concerned if there would be loss or profits and she would receive about $20,000 a month. Though she thought that there might be something improper she nevertheless agreed to do so. 219.On 7 March 2007, PW10 opened an account at HSBC, she deposited $500 into the account. On 29 March 2007 the account was credited $10,000 and the money was given to PW10 by CCH (see P325, B9/B3407). 220.On 26 April 2007, a male accompanied PW10 to open an account at Newpont under the arrangement of CCH (AF1 Table A dummy account no.35, 36, P126 v11 p4577). PW10 also had a Hang Seng bank account, Bank. CCH gave PW10 a mobile phone with pre-paid SIM card to receive instructions to trade in warrants. When the credit in the SIM card used up PW10 would tell CCH to replace, CCH also arranged someone to install some software on her computer to show the price of DWs. 221.PW10 received calls initially from CCH but later other males called to give instructions as to warrant numbers, price and quantity to be bought and sold. PW10 would phone up the Newpont securities firm to place the orders as per instructions. 222.Money was withdrawn from the securities account to the Hang Seng Bank account and drew in cash per CCH’s instructions. PW10 would collect cash at the bank and give it to CCH.
Identifying the dummy accounts 223.PW1 to PW8 and PW10 had confirmed in their evidence that the account nos.16, 17, 24, 28, 33, 35, 36, 45, 50, 52, 53 were dummy accounts used in pushing warrants. The witnesses from the Mainland operation also gave numbers of 27 brokerage firms. To this the defence criticized that without the direct evidence of all the dummy account holders nor from all the hands, the alleged conspiracies to such a scale merely remained the prosecution’s theory or proposition, however, if one may go through the detail trading transactions of all these dummy accounts, one must find it so surprising or astonishing to see the similarities or matching of those selected DWs regarding the volume, focus or concentration of active trading particularly on the respective dates or period of time, not to mention it was mostly the case that these dummy accounts were also the only account in those brokerage firms with trades on the selected DWs and had the full balance been withdrawn in May or June 2008 in quite some accounts, so that it must go without saying of their participation or involvement in the conspiracies as stated. (Also see the full analysis of dummy accounts in Annex 1 of the Prosecution Closing Submission). 224.Perhaps it should also be noted the prosecution had pointed out that none of the witnesses had in evidence related the broker number of Salisbury Securities, KGI Group Securities or Head & Shoulders Securities (but PW3 did say his account in Head & Shoulder had been used), so at least a total of 27 brokerages firms had been identified with dummy accounts. It should also be stated even without the unstated 3 amongst the 30 firms, the impact on the final figures in the expert report should remain minimal or insignificant. The table below as set out by the prosecution stated the respective firms as used by PW1 to PW5 (also as listed in AF1 Table A),
Evidence from LP & DWs issuers 225.PW11 Lam Lok Kay joined Calyon in 2004 and became VP in 2007 and left in 2008. Calyon was an issuer of DW, CLSA as LP providing bid & ask prices. On trading day, depending on how many DWs we issued, we would evenly distributed to different trader, about 20-30 DWs per person/day. During course of trading day, traders were constantly trading in different DWs, the price was set by computer system but trader had discretion to adjust manually. Difference of bid & ask price was called spread. Higher turnover of DW is more likely to attract investor. 226.Defendant was employed by Calyon as trader, also called Sai Ray. (AF1 paras 15-19), Chui Kit Man, Tsang Siu Yuen Eric & Cheung Siu Fai Dickson also as traders. (between 2005-2007, AF1 para 22-23). Leung Wai Kei Kenny and Raymond Chau Kai Chung called Tai Ray also as traders of Calyon. Dickson Cheung was managing DW in HK. 227.PW14 Hon Sau Yee Kenneth was the Head of equity Derivative Trading of Citigroup Global Markets Asia since 4/07. Cheung Siu Fai Dickson (Cheung) joined Citigroup on 30/4/07 as Managing Director to Asia Pacific Equity Derivatives. (P217 v18 p7963 Offer letter signed on 23/3/07, Resume submitted P218). Between 5/04-07, he was employed by Calyon Corporate & Investment bank as Managing Director & Head of Equity Derivatives marketing & Sales Asia ex-japan) PW14 was not aware of other Dickson Cheung in Citigroup between 4/07 – 5/08. 228.There was Citigroup code of conduct signed by Dickson Cheung prohibiting manipulation or tempering of shares and stocks. Dec 07 Cheung was assigned the Head of HK Warrant Sales (P219, P210 p7974 -7978). 31/10/08 Cheung was notified & terminated on 31/3/09. 229.Since 2003, Citigp Global Market Holding Inc (CGMHI) was DW issuer, it appointed Citigroup Global Market Asia Ltd (CGMAL) as LP to uses its reasonable endeavour to make a market in DW by responding to request for bid and ask prices. Prices is based on its pricing model including the volatility, level of price of underlying, time left for expiry, exercise price, expected dividends and prevailing interest rate, market sentiment and competition from other DW. Manual adjustment are sometimes required by warrant trader due to changes of these factors. 230.There are circumstances LP may not be obliged to provide liquidity as set out in Listing documents. HK warrant team employed by CGMAL, also for marketing and promoting DW issued. 231.Warrant trader act as market makers to quote bid and ask prices, manage the risk and carry out hedging transaction up to maturity. Warrant traders was not involved in promoting DW, marketing and promoting were functions of HK warrant sales team. Traders were not required to contact brokerages but may interact with sales team. Since Cheung in Dec 07 as head of HK warrant sales, Cheung also provided traders with client feedback and market colour, he also circulated focus list to traders every trading day. There was focus list for traders because there were more than 1,000 DWs from competitors and they had more than 100 DWs which included some most frequently traded, Cheung did not perform any function of trader nor did he have any influence over DW trading by traders. 232.PW15 Reynolds Andrew was the Chief Operating Officer of CLSA since 2008., CLSA is owned by Calyon Capital Markets International SA, which in turn owned by Calyon SA, Calyaon SA owns Calyon Financial Products (Guernsey) Ltd, an authorized Derivative Warrants issuer of HKSE, a statutory requirement for DW issuer to appoint Liquidity Provider LP in bid and ask prices for its DW to the general public. 233.Since 2005, Calyon Guernsey appointed CLSA as a LP for its DW. CLSA provides services to Calyon Guernsey for commission and Calyon SA employs traders to compute bid and ask prices quoted for general public via the trade name of CLSA. CLSA received commission depending on total consideration of transactions made by CLSA on behalf of Calyon Guernsey and no CLSA staff was involved in computation process of quotes. CLSA provide LP services to Calyon SA, had CLSA known any trades involved had breached any rules, it would not continue to offer any service and would report such acts to regulatory bodies include SEHK, SFC and other law enforcement agencies. 234.PW25 Chung Koon Wah was the Ex-Head of Standard Bank, Tsang Siu Yuen Eric (Eric Tsang) was employed as VP of Global Markets Equities Asia since 3/7/07 (p7981-7985). Eric Tsang was responsible for Sales and Structuring of DW, he can determine spot market price as long as no heavy losses, the bank will accept and SB will monitor profit and loss daily to review risks and values of DWs. 235.Between late 2007 and Feb, Mar 2008, there were continued losses, we held two informal meetings with Francis Elliot, Louis Chan, Alex Tso and Eric Tsang to reduce losses. SB as LP was under duty to quote price. As we intended to increase market share, DW only constitute small portion of turnover, the aforesaid losses were acceptable range. 236.The trader has the right to override computer price and could aggressively set slightly lower price to entice customer and try to tight spread bid/ask gap to encourage trading. The price could be put by trader and the spread up to individual trader which could be widened any time. However any overriding input may not be picked up by the head trader. 237.By s.65B of Criminal Procedures Ordinance, there were other statements from traders of Citigroup admitted, Mr Simon Leung and Mr Liang Yang Ti (P393 & P394) essentially stated that Dickson Cheung had given advice on some bid and ask price of DWs, Liang would follow as Dickson had more experience. 238.There was also a statement of Miss So Chi Wai (So) be admitted P391, she was the secretary of Fund Base Investment Limited in Oct 2004 handling accounting work. Fund Base engaged selling overseas property, Ng Chun-hung Michael was the boss and the company closed down late 2005 & 2006, its business transferred to Asia Pacific Assets Ltd (APA). Ng Chun To Raymond (Defendant) joined APA as boss. At about Oct 06 Michael and Raymond set up Million Great Co Ltd organizing investment seminars for income. In early 2007, Million Great changed name to HK investor Co Ltd, So handled both APA and HK Investor accounting work. 239.In 2007, Defendant asked So to handle mobile phone to record some figures and jotted down on piece of paper, several row of figures each ten-odd numerals, 5 to 6 times where Defendant speaking to other on phone, usually Defendant asked his secretary Lai Hang Fong Anna to answer phone but when Anna absent Defendant would ask me. 240.In Jan 2008, Defendant introduced Chui Kit Man to So, Chui came to HK Investor each month, they closed door and So know not what happened inside. 241.Defendant mother died in Dec 2007, about that time he wanted to buy a safe, Anna asked So for information for the safe currently used by HK Investor, So passed to Anna, later she saw a white safe in Defendant’s room. Expert evidence 242.Ms Stella Fung Sau Hong, an Associate Director of the Securities and Futures Commission had complied an expert report P389 to study the activities of those dummy accounts in 30 brokerage firms (the Group) as stated above. By reference to the Stock Trade Detail Reports where full history of all trading transactions of a particular DWs were recorded and the MSS Stock Trade Summary Reports as recorded by SEHK at broker level, Ms Fung was able to analyse the Group’s activities in the selected 4 DWs, namely DW 1951, DW 3319, DW 4801 and DW 9300 in details. These DWs were chosen as they had continuously recorded high trading volume and the Group also traded during the review period (P389/29). 243.Ms Fung concluded during the review period the Group’s trading activities had boosted the market turnover substantially which accounted for 94% to 99% of the market turnover. If the Group was controlled by the same person(s), it would have given the market a false and misleading impression that there was a wide spectrum of investors from a number of brokerage firms and that the warrants were liquid that could be traded easily. 244.It was also found that the Group featured day trading and that DWs trading dropped significantly by 95%-99% during the next 30 days after the review period. It was also observed that the Group traded the warrants actively and at very tight price spread, usually bought or sold at one or two spreads higher or lower and even at the same price. Further, the LPs were found mainly traded with the Group, over 94% of their buying and 86% of their selling were with the Group. Admissibility of evidence 245.Mr Bruce SC objected all the hearsay evidence implication the Defendant both in the Hong Kong event and the Mainland operation. As to the Hong Kong event, it was submitted that the charge did not cover the period of any Hong Kong incidence or event and hence admission of any evidence relating Raymond/Siu But Leung/Sai Rai to the Defendant is highly prejudicial and shall not be admissible. As to the Mainland operation, it was further submitted that there was insufficient independent evidence linking the Defendant to the conspiracy charged and therefore likewise any evidence relating to Raymond/Siu But Leung/Sai Ray to the Defendant shall also not be admissible. 246.As to the Hong Kong event, the prosecution replied that they did not rely on the similarity of names to mark any linkage to the Defendant but just to provide the background circumstances of how those alleged co-conspirators got involved into the DWs pushing exercises which later on developing into the Mainland operation. 247.Clearly the event or incidence that some witnesses mentioned about what had happened in Sheung Wan or other Hong Kong meetings were just providing the background circumstances and explaining how and why they later on involved in the Mainland operation. It should be emphasized that there shall be no adverse inference nor implication as to the identity of person or boss behind CCH if any in those Hong Kong event or meetings which could be related to the Defendant. The Court viewed that of those Hong Kong matters merely served as the general or introductory background for the whole group as to how and why they would later on relating to the Mainland operation and thus there shall not cause any prejudicial effect to the Defendant in this regard. 248.However, as to the Mainland operation, there were clearly ample and sufficient independent evidence which could link the Defendant to the conspiracies as charged. Not only were there the coincidence of travel movement records with the Mainland crew and close connection to CCH and other alleged insiders as shown in the surveillance evidence, but also all those materials, documents, handwritten notes and computer printouts found in Defendant’s room which were all relating to those pushing exercises with the same DWs involved. Further not to mention the telephone messages sent and received and substantial cash found where altogether did provide sufficient or reasonable independent evidence or indeed more than a prima facie case linking the Defendant to the conspiracy. 249.Thus the co-conspirator’s rule could apply and the court could consider all those acts and declarations of those co-conspirators made in furtherance of the conspiracy, for examples the name of the person, Raymond/Siu But Leung/Sai Ray where they only heard from CCH to whom the special phone was linked and his existence as the boss, from whom information of selected DWs, quantity and accounts to be used were provided. Also including the existence and names of those insiders as heard and that they would help buy back the DWs. There were also other hearsay evidence particularly as said by CCH as to the existence and identity of the boss which by reason of the application of the rule should be admissible evidence to be considered. Defendant’s evidence 250.Defendant elected not to give evidence, no adverse inference could be drawn against him. Defendant also has no burden to prove anything, all the burden rest upon the prosecution to prove each charge separately beyond all reasonable doubt. And the court must also bear in mind that the Defendant has a clear record. However, Defendant called upon two witnesses. Ms Noel Chan Yuen Lam and Mr Francis Kwok Sze Chi to give evidence. 251.DW1 Ms Noel Chan worked for the HK Investor Limited between June 2007 and July 2008 as a Sales manager, her duties concerned handling projects for investment seminars or workshops and promotion packages for placing advertisement in websites or other media for HK Investor, the business of which would provide financial education to the public with various clients including different financial institutions like UBS, Macquarie and Zurich Insurance company. HK investor earned by charging clients service or sponsorship fees. 252.The Defence bundle D1 did include various debit notes, invoices and sponsorship agreements including those with UBS securities (D1-6), Standard Bank (D1-11), Calyon (D1-20) and many other securities firms say Hantec Investment,Hani, Partners Capital, Head & Shoulders, LG Gold Online, Hintfull Investment and others (D1,9-17). Ms Chan would also prepare quotations and budget forecasts (D1, 18-19) and in charge of the whole project carrying out. 253.Ms Chan would report to Raymond Ng (Defendant) and his brother Michael Ng in HK Investor. She also mentioned that Christy So was Michael’s secretary while Anna Lai was Defendant’s secretary working in Rm 1904 Sino Plaza. 254.DW2 Francis Kwok is the executive director of Bright Smart Securities, a company listed in SEHK. He holds many different securities licenses and regularly writes market sharings and other articles as well as giving talks and commentaries in various media. 255.He knew the Defendant around 2006 or 2007 and then entered into a service agreement with HK Investor for consultancy services rendered to his fan club company and website (D1-22, 23). He then also obtained some shares of HK investor from the Defendant and became a director of HK Investor in around 2007. Mr Kwok also took part in seminars organized by HK Investor as speakers but he did not participate in daily management and operation of HK Investor. Assessment of evidence 256.By the very detail account of the actual operation of the Mainland crew including PW1 to PW6 and PW9, the existence of the conspiracy to push DWs was crystal clear and went beyond doubt. Under the recruitment and direction of CCH, each member was responsible for different role, PW1 for computer affairs and preparing Excel file for recording and calculating the profit and loss; Chan Chung Yan for finding premises, arranging various dummy accounts and taking profit out from them; more experienced traders like PW3 & PW4 would be controlling and using more dummy accounts to trade in and out and may also had discretion while others may just follow instructions to operate. 257.Every morning CCH would communicate with someone by the special phone, whom the crew referred to as the boss called Raymond or Siu But Leung, to get the information as to which DWs to trade, what quantity and even the price as well as which accounts to be used, so that a particular account may not accumulate too much profit to arouse suspicion. Every day the crew may focus on some particular DWs to trade, first to buy them in the market or by other means say double order to get it from the market maker the LP, then under various dummy accounts the price of which could just roll up or at the same level by buying and selling to and forth from these controlled accounts as false trades so to create an impression of active trading volume to lure the actual investors for a deal. 258.Before the close of morning session, the crew would report the holding so that risk may be under control and then it went on in the afternoon until sometime before the day close similar report would be made, where CCH would use the special phone to contact the boss if there were still some DWs holding then the insiders would be contacted to buy back the DWs. The whole exercises were almost risk free by just day trade to eliminate the overnight risk of the uncertain market, and in any event the LP would buy back the outstanding DWs following instruction where normally LP was not obliged and under no duty to buy back. 259.Without the evidence of any insider, one may query whether it was the truth they got involved or whether it was just the normal market behaviour in trading. However, any doubt could easily be dispelled when the crew referred to the fact that the screen would show the broker number in trade as well as those from LP. As said by the crew, the LP knew their numbers and they saw the DWs being picked up by LP from the screen. Though there was evidence that the pricing was automated by computer model and calculation of LP, the individual trader could still adjust it manually and therefore the LP could just buy back their DWs easily when they wished to do so. Perhaps one may also note that the timing of pushing the respective selected DWs also matched with the moving of insiders, from Calyon, then Citigroup and Standard Bank and lastly Dresdner. 260.The crew would also input the daily trades into Excel file where the result of the whole team could just be monitored or further directed, particularly as to which account should be traded more or less or whether any particular DWs be pushed further or less. 261.The whole plot was clearly by controlling various dummy accounts to trade the selected DWs back and forth, that would undoubtedly create a false or misleading appearance of active trading in the said DW and induced the general public to trade. The expert could also confirm this in that regard. (Also see the full analysis of all dummy accounts regarding the trading on selected DWs in the review period in Annex I of the Prosecution Closing submission). 262.However, the defence also tried to say that there was insufficient evidence to show any staff or employee of LP having rendered favourable prices to those members or it may just be normal market behaviour, nonetheless, as said by the crew, by the double order in the morning or when DWs were left before close of trade, they would tell CCH and then saw from the computer screen the DWs be picked up by the LP. One may also note that firstly the LP was not obliged nor under any duty to buy back the DW, secondly though the price was computer automated the traders of LP could always adjust the price manually. In fact the expert could also tell that the trade between the Group and LP came up to 80% of the whole market turnover. 263.From another practical point of view, had it not been the help where favourable price having rendered to them, how possibly that the crew or dummy account holders be able to accumulate such enormous profit in each month as seen from their accounts, and where millions of cash could be withdrawn from each account in the said period and be given to CCH. The assistance or help from staff or employee was just implicit and needless to say, they would not do so without any benefit or reward. 264.Further, without the inflated volume of trading, the market of respective DW would be much less liquid to attract the general public to trade, thus the investors were put at economic risks by their fraudulent scheme or they may otherwise participate in other market. As to the LP, they would also not have responded to the request of buying back DW had they known of the artificial inflation of trading and their economic interest was surely also be put at risk, particularly when they had to do so near the end of trading day and thus bear additional burden of overnight risk of uncertain market on the following day. 265.Therefore, the existence of the conspiracy as particularized in each charge was clearly shown and the element of dishonesty was also embedded in their operation, such as the constant moving of trading place to avoid detection; the use of pre-paid SIM card to prevent from any record; the special phone to contact the boss; the destruction of trading records; the use of numerous accounts in different brokerage firms and the reward and payment by cash and in Macau, all these as disclosed by the crew was the truth and the operation was clearly dishonest when viewed both subjectively or objectively. 266.The defence though challenged the existence of conspiracy but the real dispute is whether there was actually a boss behind CCH and whether this person was the Defendant. From the evidence of the mainland crew, CCH was seen in numerous occasions talking to the boss by the special phone during the whole operation, to get information therefrom before directing the crew how to trade and also reporting to the boss at the crucial moment to square the position of the outstanding DWs. To say that it was a fictitious figure by CCH is beyond imagination, not to mention that some crew members had also talked to him. Perhaps it should be noted that PW4 had also talked to a lady through the special phone but it was much less frequent and that was only for reporting profit and loss to the other side but never got any instruction from the lady. 267.Defendant also put forward the evidence of his witnesses to show not only that there were some legitimate business undergoing (including HK Investor, formerly known as Million Great, though only suffered business loss and had no profit, see AF2 income chart item 17), but also it appeared that his company had many business dealings with the above brokerages firms and DWs issuer or LP and thus it was suggested that normal or social gathering with all these personnel would not be surprising. 268.The identity of the person behind CCH was the real issue. Given the complication of the whole pushing scheme, that person must have close connection with CCH and the insiders considering the timely instruction and information communicated as well as having full knowledge of the DW operation and trading. From the chronology of posting and employment as in Annex II above, the historical association and the surveillance evidence of the close connection between CCH and other insiders, Defendant fitted in the connection squarely, but of course that alone would not suffice. 269.To trace that person effectively one may also see where the money eventually go and end. The crew said they were given cash taken to Macau for CCH to pay to that person. From the travel movement records as admitted in para 293 of AF1, CCH went with the crew to Macau about once per month in 2006 until CCH said it was no longer convenient. Surprisingly and coincidentally by referring to Defendant’s travel record as also shown in Annex J with the Crew, Defendant also went to Macau on exactly the same dates from February to December 2006 on 11 occasions. They also came back to Hong Kong on the very same or the following day. 270.Further, then from the surveillance evidence in 2007 and 2008 ( para 267 – 284 of AF1), Defendant was not only seen with close connection with CCH, Chui Kit Man, Tsang Siu Yuen Eric, Khalid Chaneb and Dickson Cheung, but also on different occasions, PW3 Leung Yiu Kei and Chan Chung Yan were seen passing bags to CCH, CCH then also handed bags to Anna Lai Hang Fong whom immediately took it back to Rm 1904 Sino Plaza where Defendant’s office situated and Anna Lai was the secretary and personal assistant of Defendant’s company. 271.PW3 also confirmed withdrawing cash to CCH and that different dummy account holders including PW7 Cheung lai fan, Tjoe Khiun Fa, Ko Kwong Fat and Huen Hoi fai were also seen passing cash or something to Chan Chung yan whom on the same day passing something to CCH, whom then handed bags to Anna Lai returning to Rm 1904 Sino Plaza on the same day. 272.No doubt the whole scheme had generated much profit where the crew and dummy holders were then instructed to withdraw substantial cash from the account to be given to CCH. From the surveillance evidence and background circumstances, it was just highly likely cash was passing from the Crew or dummy holders to Chan Chung Yan, then went to CCH passing to Anna Lai to be taken to Defendant’s office at Rm 1904 Sino Plaza. 273.Now it comes the cash and documents found in Rm 1904 Sino Plaza. Two safes were found in Defendant’s room where one contained piles of banknotes totalling HK$2,278,500 and the other was ordered by Chui Kit Man where some brown envelopes also containing piles of banknotes of HK$2,792,000 was also found. It tallied with the above observation to see where the money ends, it was also noteworthy that total cash found in Defendant’s wife safe deposit was even up to HK$34.648 million. 274.Moreover, there were also substantial cash deposits into various bank accounts under Defendant and his wife’s control (as shown in Annex 2 & 5 of the Prosecution’s Closing submission) that in 2006 about 1.4 to 3.7 Million cash deposited each month, then it went up in October 2007 the amount increased to 7.7 Million which was consistent with the facts that more DWs were pushed and involved later on. All in all, the aggregate sum of cash deposited was over 110 Million (about 40 Million in Defendant and with wife’s joint account and 70 Million in wife and associated companies’ accounts, see Annex 5). Such sum went far in excess of the declared income of the Defendant and his wife and all their associated companies but they were just in line with the vast sum of cash generated from each dummy account for millions as seen in AF1 Table A. 275.Apart from the cash found, there were other documents including handwritten notes, computer printouts, notebook, monthly trading statements and USB flash drive found in Defendant’s room (P357 – P360, P371, P283 & P284). It is important to note that for the handwritten notes and the highlighted computer printouts found, the details of which did match with the trading statements of dummy accounts. 276.Exhibit P357 comprises both hand written notes and hard copies of computer printout with highlights. The hand written notes showed a list of warrant numbers issued by Citigroup. The left column dated 19th May 2008 and on the right headed “today”. The highlighted computer printout is dated 20th May 2008 which matched the handwritten column on the right under the heading “today”. However the highlights were not part of the SEHK records and that would mean they were highlighted by the maker. 277.The warrants listed on both days also matched with the monthly statements of the dummy accounts traded on those days. (see Annex 3 of the Prosecution Closing showing a complete comparison of the respective DWs in the written notes and the monthly statements of the dummy accounts, the number circled in red and highlighting were for guidance and not in the originals). These would further indicate the undergoing pushing scheme made through various dummy accounts. 278.P358 was similar to the hand written note P357 but not dated. Those DWs were warrants also traded through the dummy accounts. 279.P359 was a notebook found on a table inside the Defendant’s room, there were two separate pages of the notebook. On the right hand side of the page (p.9845) showed a list of 3 digits numbers which corresponded with the 3 digit numbers of those securities firms used by the conspirators to trade the warrants (except 058 not included but mentioned by PW2). Underneath the numbers there were words “confirmed by calls 10.30am and the date 19th May appeared the left. 280.P360 was the paper found on the windowsill of the defendant’s room. This also contained a list three digit broker numbers and 4 digit warrant numbers. The broker numbers were those brokers used by the Mainland crew and the warrant numbers were warrants traded by them. Further, by all the above detail description and corresponding brokerages numbers, P359 and P360 could hardly be just the related information to Hong Kong Investor as defence may suggest. 281.P371 was a USB drive which only contained 4 Excel files with the names of “Daily Trading Summary of Derivative Warrants, the printouts as P371A to P371D. Although these were the publically available daily summaries but the highlighting was not. The summaries covered four days including 21st, 22nd , 23rd and 26th May 2008 (p9877-9888). (see Annex 4(1)-4(4) of the Prosecution Closing listed out the highlighted DWs matching the dummy accounts used). Prosecution emphasised that this cannot be a coincidence of a legitimate business operation keeping track of the same brokers and warrants used in the criminal enterprise. 282.P283 and P284 were the account statements and other documents related to an account in the name of Tjoe Khiun Fa. There was also surveillance evidence showing that Chan Chung Yan received an envelope from Tjoe whom had just drawn the money from the bank. Chan was later to meet up with CCH and pass this envelope together with two others received from Cheung Lai Fun to CCH whom later passed them to Anna Lai. Anna Lai was then seen entering Room 1904 with the bag containing the envelopes (3rd May 2008). 283.Tjoe had opened the account with Hintfull Securities on the 30th March 2007 and all transactions were online. HK$300,000.00 was withdrawn from her BOC account on the 3rd May 2008 (B2140). The full balance on Hintfull account was withdrawn on the 13th June 2008. The account was shown to have traded in the warrants mainly issued by Calyon. 284.Lastly, there were also copies of HKID card of Sun Chor Fun Polly and Chan Siu han found, who were also the dummy account holders listed above and there were also a loan agreement between Sun Chor Fun and Ng Chun Hung Michael (Defendant’s brother) found. 285.All the above documents including handwritten notes, computer printouts, notebook, monthly trading statements and USB flash drive altogether must lead one to an inescapable link to the Mainland operation. The Device Reports 286.A Samsung phone P372A and a LG phone P373A were seized from the defendant. 287.There were messages received such as,
288.And there was message sent :
289.And the Defendant also sent message to Dickson Cheung,
290.PW11 LAM Lok-kay confirmed that the English name of the defendant is Raymond and his nickname was “Sai Ray”. 291.Further, each DW is assigned with a stock name. The stock short name for example DW 4801 CGLIFE@EC0808B will reveal some information of the warrants, including the issuer, the underlying assets and expiry year and month. The message above contained 6 sets of numbers as follows,
292.Although the warrant numbers may be reused upon the expiry, the same code would not be assigned to more than one security at one time. The underlying stock code and warrant codes covered the period from 27 October 2006 to 15 December 2008 and the code combinations show the messages were referring to the warrants issued by Citigroup (CG). 293.By reference to the monthly statements for DWs traded by the Mainland crew (PW1 - PW6) and dummy account holders including PW7 Cheung Lai-fan and PW10 Tse Tai-tai and YANG Aizhen whose account executive was PW8 during the charged period, the above DWs had been traded by them,
Khalid Chaneb’s Excel Files 294.When Khalid Chaneb was arrested on 28th May 2008, a computer found at his home 5 Excel files were printed (P287-P291). Chaneb was the vice president in equity and derivatives at Dresdner, the Mainland crew had heard the name of Kwei Chai or French Boy as insider of Dresdner. Chaneb by nationality is French (P332 V22 p9813).
295.P287 appeared to be a report on “PnL” or “profit and loss” for various dates with the terms “Turnover Bank”, “Turnover Fish”, “Turnover friend” and “Raymond” as the headings of some of the columns. P288 to P291 appeared as trading records of DR warrants on 1, 2, 4, 7 and 8 April 2008 (see filenames and warrant code numbers in the files). The first page of each of the files is a summary of the trading records, followed by details of the transactions (time, broker number, quantity and price). The terms “Turnover fish”, “Turnover friend” also appeared in P289 to P291. P287 should be related to P288 to P291 as some dates and figures corresponded with each other such as in the columns “Turnover Total”, “Turnover bank”, “Turnover fish” and “Turnover Friend”. 296.The prosecution also submitted that the figures in column “Cost (5 bps)” in P287 at p.9267 are arrived at by multiplying 0.05% with the figures in “Turnover Friend”. For example, on 2-Apr, 175,169,730 (Turnover Friend) x 0.05% (5 bps) = 87,585 (cost) and that P288 to P291 were last used towards the end of a trading day (between 3:10 pm to 3:58 pm). (See P288 to P291 at p.9268, p.9274, p.9286 and p.9295 respectively and Annex 6 of the Prosecution Closing submission identifying the table of transaction lists and the monthly statements and list of broker). 297.It was further submitted that the columns “Q_B”, “Price_B”, “Q_S” and “Price_S” in P288 to 291 also appeared to denote the quantities and price of warrants that Dresdner bought from and sold to brokers controlled by the Mainland crew. 298.The prosecution also tried to compare the figures in Chaneb’s file with the table prepared by Stella Fung (Expert witness) in SF-27 which showed the total quantity of warrants Dresdner sold to and bought from the Group (Mainland crew). 299.Taking DW9300 as an example, one can match the quantities in P288 to P291. DW 9300
*The percentage shown in the table represents the figure as a percentage of the Group’s total buy/ sell. Stella Fung’s analysis is from the viewpoint of the Group whereas Chaneb’s data appeared to be from LP side. Whenever the Group is on the buy side, Dresdner is on the sell side. 300.The prosecution therefore concluded that in preparation of files 287 to P291 Chaneb had singled out the transactions between the brokers controlled by the Mainland crew and Dresdner towards the end of the trading day (p.9268, 9274, 9286, 9295) and did various calculations including but not limited the average buying and selling price of these warrants with Dresdner. 301.As submitted, these Excel files were clearly documents generated for the purpose of tracking the trading status of the Dresdner warrants in the Mainland operation. The respective headings Turnover Me, Turnover Fish, Turnover Friend were also unlikely to be used by individual investors and these were clearly prepared as a summary calculation for the Group. Telephone call records 302.Prosecution had categorized the telephone records as follows,
303.The number 9192-2299 was registered in the name of defendant’s wife (AF1/321) but defendant had used this number in his application for identity card in 2003 (P256) and the number 9809-9388 was registered in the name of Chan Chung-yan (AF1/321). 304.The Mainland crew mentioned that they used Nokia 1110 installed with pre-paid SIM cards to contact the brokerage firms for the warrant pushing activities while the contact between the Mainland crew or through CCH and Raymond/ Siu But Leung was through a special mobile phone installed with pre-paid SIM cards. It is thus noteworthy that nine mobile phones (five of which were Nokia 1110) were found a waist bag seized from the Defendant when he was arrested on 28th May 2008 (AF1/296). 305.Throughout the conspiracy period the Defendant had maintained close contact with the insiders (P314). In particular there were 669 calls between the Defendant and Chui Kit-man of Calyon (mobile and landline combined) and 245 calls between the Defendant and Khalid Chaneb of Dredsner. These calls were recorded at various times throughout the day (both within and outside office hours). There were also 116 calls recorded between the defendant and Dickson Cheung around the same period (AF1/18 - 37) and many phone calls between Chan Chung Yan and some dummy account holders. 306.Defendant also had telephone contacts with two of the dummy account holders including Lam Ying-keung Percy whose telephone number was 9388 8836 and he was holder of dummy accounts no. 13 and 14 (AF1/323; P314, Vol.21/9349-50, 9318-19, 9351). The other contact was with Yan Man-yiu Alfred of 9382 1770 and he was the holder of dummy account no.34. (AF1/323; P317, Vol.21/9646-47). 307.All in all, any of the above matters, when viewed alone and separately one may try to interpret it in favour of the Defendant and could come up with other views such as that these were only usual or social communication with other bankers; or just normal trading as an individual investor. However, when considered together, the coincidence of the travel movement records; the connection with all these related person as show in their posting and the surveillance evidence; the very substantial cash found and deposited in bank accounts; the documents found, the phone message and calls and all others as stated above were such that the circumstances were so compelling, that the only irresistible inference must be that the Defendant was surely the mastermind behind CCH orchestrating the whole pushing scheme as conducted by the Mainland crew. 308.To add further, the above circumstantial evidence was indeed so strong and telling that even without the hearsay evidence as admitted under co-conspirator’s rule, that would already be more than sufficient to come to the only conclusion that the Defendant did conspire with CCH and others to defraud as particularized in each charge. 309.The prosecution has proved beyond all reasonable doubt that the Defendant had committed the said four charges and therefore Defendant is convicted on all these charges accordingly.
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Cases cited in this judgment
Further hearings and rulings under DCCC 405/2009