HKSAR v. Cheong Kai Boon and Others

DCCC 835/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 835 OF 2013

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Reasons for Verdict

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1.There are 4 defendants in this case but the 2^nd defendant pleaded guilty on the first day of the trial. He pleaded to Charge 2 and 4, leaving Charge 1 on the court file. The other 3 defendants maintained their plea of not guilty.

2.All 4 defendants were charged jointly in charges 1 and 2. Charge 1 is a conspiracy to falsify accounts, contrary to Section 19(1) (a) of the Theft Ordinance and sections 159A and 159C of the Crimes Ordinance, Cap 200. The particulars of the offence are that all 4 defendants and PW7 dishonestly conspired together with a view to gain for themselves or another or with intent to cause loss to another to falsify accounts and records for accounting purposes related to Anglo Starlite Insurance Company Limited. Entries were made in 2 Specific ledger accounts that were false and misleading that purported to show fixed time deposits existed and capital injections were made.

3.Charge 2 is a conspiracy to defraud, contrary to Common Law and punishable under section 159C (6) of the Crimes Ordinance, Cap 200. The particulars of the offence are that all 4 defendants conspired together to defraud the Commissioner of insurance by dishonestly and falsely representing that many accounting records correctly stated the financial position of Anglo Starlite Insurance company ltd and showed regular capital injections. The net effect of the representations was to induce the Commissioner to not take or delay taking any regulatory measures against the company.

4.Charge 3, against the 1st defendant only, charged him with using false instruments, contrary to Section 73 of the Crimes Ordinance, Cap 200. He knowingly presented 6 false Fixed Deposit Confirmation Advice (DCA’s) documents to the staff of the Commissioner of Insurance with the intention of inducing the same staff to accept them as genuine documents issued by ICICI Bank.

5.Charge 4, against the 2^nd defendant only, charged him with using false instruments, contrary to Section 73 of the Crimes Ordinance, Cap 200. He too knowingly presented 6 false Fixed Deposit Confirmation Advice documents to the staff of the Commissioner of Insurance with the intention of inducing the same staff to accept them as genuine documents issued by ICICI Bank. This was on a date after the 1^st defendant presented the same 6 documents.

Background

6.Anglo-Starlite Insurance Company Limited (Anglo) was incorporated in Hong Kong in 1975 as an insurer mainly dealing with motor vehicle insurance. At the material time, the Accused persons occupied the following positions within Anglo. Mr. Balani Atmaram Parshotamdas (“D2” hereafter), the Managing Director of Anglo was actually the founder of the company. Mr. Cheong Kai-boon John (“D1” hereafter) was a Director of Anglo and the General Manager. Ms.Wong Pik-yin Sally (“D3” hereafter) was D2’s secretary. Mr. Chotirmal Sammy Samtani (“D4” hereafter) was a Deputy General Manager of Anglo and the son-in-law of D2. Another relevant person, not standing trial is Mr Modi Narenra Ranchhoddas ( Modi hereafter) also a Deputy General Manager. He was arrested and charged but later no evidence was offered against him.

7.D2 and his family ( his wife, son and daughter) held 51.8% of Anglo’s shares whilst the remaining 48.2% were held by 4 BVI companies, Mass Power Union Limited ( Mass Power) , Everest Victory Union Ltd (Everest Victory),Le Marche Limited(Le Marche), Swisslink Alliance Ltd ( Swisslink). There are 3 other relevant companies, Multiview Investment Limited (Multiview) and Happy Concept Ltd (Happy Concept). For all these above companies, no defendant appeared on record as a director or a shareholder. The last company, Nice View Group Ltd, (Nice View) is another BVI company where D2, his son, Manesh, his daughter, Rohini and his wife, Minoo were the directors and shareholders.

8.As an insurance company, Anglo was subject to the regulation of the Office of the Commissioner of Insurance (OCI). Anglo had to keep a required level of cash assets in accounts in the name of “Insurance Authority Account Anglo-Starlite Insurance Company Limited”. The Commissioner of Insurance and other persons of the OCI were also authorised signatories of these accounts. In addition to this, there were also other discretionary requirements which could be and were imposed by the OCI upon Anglo. In particular, there were periodic assessments and requirements on the solvency and asset levels of Anglo. Anglo was on the watch list of the OCI for many years and monitored closely.

The Issue

9.To summarise the Prosecution case; they allege respective defendants transferred money of Anglo from Anglo’s bank account to other entities, mainly companies related to Anglo and/or the defendants. Perhaps to cover-up for the dissipation of these sums of money, respective defendants “created” various time deposits with ICICI Bank which did not exist. It was necessary to show sufficient funds, assets and capital existed at the ready. At other times, respective defendants “created” capital injections into the DBS account of Anglo which did not exist. These non-existent sums of money were entered into the accounting records of Anglo with the introduction of false supporting documents. Once these non-existent sums of money and time deposits were “created”, it was necessary that their maturity renewal and other disposition be accounted for as time went on. This necessitated further and intricate false accounting records and entries. This forms the basis of the charge of Conspiracy to Falsify Accounts. (Charge 1)

10.Some of the monies which had been transferred out were later transferred back to Anglo’s bank and were entered into Anglo’s financial accounts as capital injections by the said related companies.

11.Six false DCA’s purportedly showing fixed deposits with ICICI Bank were presented on two separate occasions by D1 and D2 to officers of OCI when OCI made inquiries. This forms the basis of the two charges of Using False Instruments. (Charges 3 & 4)

12.One of the purposes of these elaborate steps was so that financial information provided to OCI (including a number of capital injections reported) would present an inflated and false picture of the solvency and asset levels of Anglo so as to meet the requirements and satisfaction of OCI, to stave off pressure from OCI and to avoid more onerous requirements which may be imposed. They would include financial injections being required. (Charge 2)

13.The Evidence the Prosecution adduced and relied upon was by in large not challenged. The Admitted facts, P358 is extensive; drafted well and succinctly. It contains 5 annexes. It covers all documentary evidence which is voluminous. It essentially covers the prosecution case. The 1^st, 3^rd and 4^th defendant do not challenge the evidence the accounts were falsified, the company’s financial position deliberately and falsely inflated and the Commissioner of Insurance the victim of a fraud. D1 does not challenge the fact he did present the staff of OCI with 6 false DCA’s. He denies knowledge; he denies he knew they were false and nonetheless presented them.

14.All defendants deny knowledge of the fraud or falsified records and accounts. They deny any agreement to falsify accounts or to defraud the Commissioner. The crux of the case is a lack of knowledge. The issue is simply whether or not the defendants had knowledge of the offences and agreed to falsify the accounts and defraud the commissioner of the OCI. The position of the defendants is they lacked any criminal intent. D2 as the founder of the company was behind it all and they may have been unwittingly involved by the mere fact of their positions in Anglo and their individual responsibilities but they were not knowingly involved.

15.The Prosecution has no direct evidence of any conspiracies except for the evidence of PW7 a computer programmer of Anglo giving evidence under immunity. He is a named conspirator in Charge 1 only. PW7 only implicates D2 and D3 directly, not D1 or D4. The prosecution relies on circumstantial evidence to draw an irresistible inference against D1 and D4. The prosecution relies on circumstantial evidence, evidence of false bank instruction letters found on her computer and the evidence of PW7 to draw the same inference against D3.

The Prosecution Case and the Presentation of Six Forged Deposit Confirmation Advices (DCA’s)

16.In March 2009, OCI received three complaints against Anglo for failing to settle insurance claims as awarded by the Courts. OCI checked the unaudited balance sheets for the two months of December 2008 and January 2009 and noticed that there were large amounts of time deposits for the two months respectively. On paper there was no reason the claims went unsettled.

17.As a result, OCI asked Anglo to provide proof of the time deposits. OCI did this by sending a Banker’s Confirmation Letter to Anglo and requested Anglo to send this Banker’s Confirmation Letter to ICICI Bank. The intent was that ICICI Bank would list out all of the current time deposits in the document and would return the same directly to OCI for inspection. However, OCI did not receive any reply by the deadline set down. An officer of OCI telephoned ICICI Bank and was told that Anglo had no time deposits with ICICI Bank. Yet later on the same day, OCI received a Bank Confirmation Letter purportedly issued by ICICI Bank which showed that Anglo had time deposits of about HK$66 million and US$13 million.

18.Subsequently and without disclosing their conversation with ICICI Bank directly, OCI contacted Anglo and asked for the production of the originals of the Deposit Confirmation Advices (DCA) from ICICI Bank. D1 went to OCI on 30 April 2009 and produced six purported DCAs, Exhibits P13 to P18, in the following terms (Charge 3).

19.On the 5^th May 2009, the Commissioner of Insurance instructed joint managers from Price Waterhouse Cooper to take over and manage the affairs of Anglo pursuant to provisions of the Insurance Companies Ordinance. Officers of OCI and the joint managers went to the premises of Anglo on the same day. Upon request at their arrival, D2 produced to the officers the same six purported DCAs, Exhs P13-18 (Charge 4).

20.It was not disputed the six purported DCAs were never issued by ICICI Bank, and the time deposits did not exist. Furthermore, the account number on the DCAs was not the account number of Anglo. At the material time, Anglo only had a small amount of cash with ICICI Bank. This was subsequently confirmed with ICICI Bank. A report was made to the Police by OCI and they also went to the premises of Anglo on the 5^th May 2009.

110 False Deposit Confirmation Advices( DCA’s)

The Accounting Process Involved

21.A search of the office of Anglo revealed another 104 false DCAs (84 originals and 20 copies) purportedly issued by ICICI Bank. The dates of all 110 DCAs fell within the period from 3 March 2006 to 26 March 2009. All 110 false DCAs purported to show that Anglo had fixed deposits thereon at ICICI Bank when no such deposit existed. A Table of the 110 false DCAs appear as Appendix IV of the Admitted Facts, P358.

22.According to PW6, Ms Harjani Nisha Prem the Accounts Clerk in Anglo she would on occasions be given a copy of a DCA by D3 to input into Anglo’s computer accounting system. Prem would do so and a journal voucher would be generated. Prem would staple the journal voucher with the copy DCA and any other supporting document. Prem would sign her name on the “Prepared By” box of the journal voucher. Prem would give the documents to D1 who would sign at the “Checked By” box of the journal voucher. Prem would either then pass the documents to D3 for her to arrange the signature of D2 or other persons at the “Authorized By” box of the journal voucher or D1 would have it passed to the Administration department directly for D2’s signature. Thereafter, D3 would pass the duly signed journal voucher and documents to Prem and Prem would file this with the Accounts Department. Sometimes, D3 would also give Prem bank instruction letters and other supporting documents. Where this was so, Prem would also staple this together with the relevant journal voucher.

23.107 journal vouchers with attached false DCAs were found in the Accounts Department of Anglo and they had these characteristics:

a. The column “Prepared By” for each was signed by Prem, PW6;

b. The column “Checked By” for each was signed by D1;

c. For the column “Authorized By”, (i) 102 were signed by D2; (ii) 9 were signed by Modi; (iii) 4 were signed by D4; and (iv) 2 were left blank.

24.Stapled with 22 of the 102 journal vouchers were found 22 bank instruction letters. These purported to contain instructions to ICICI Bank for the renewal of fixed deposits at ICICI Bank or to DBS Bank for transfer of money to ICICI Bank. In fact, it was not disputed there were no such fixed deposits at ICICI Bank and no transfers of money as described therein. These bank instruction letters were never received by the purported recipients ICICI Bank or DBS Bank.

25.Six of the 22 false bank instruction letters were retrieved from the office computer of D3. Paragraph 57( a-e) of the Admitted Facts, P358 set out in detail the contents of each of the 6 false letters found on this computer. The location, the content and the falsity were not challenged by D3.

False Accounting Entries

26.Once a false time deposit had been “created”, it had a “life” within the records of Anglo and that life had to be accounted for in the subsequent accounting records of Anglo. Action had to be taken to keep up the charade and it was arranged that either :

i. The false time deposit was “renewed”

ii. The false time deposit was “redeemed”

iii. The false time deposit was partly “renewed” and partly “redeemed”

iv. The false time deposit was combined or merged with other false time deposits

27.Each of the above actions required further false accounting entries and false accounting records, and they included either false DCAs evidencing the “renewal” or other disposition of a false time deposit or false instruction letters to ICICI Bank (never received by ICICI Bank) as to the disposition of the false time deposit upon maturity.

28.In the case where a false time deposit was “redeemed” or partly “redeemed”, it was necessary that real money was injected into Anglo to account for this, and this was in fact done by outside sources.

29.There were 22 DCA’s, false time deposits created between the 3^rd March 2006 and 26^th March 2009, totalling HK$206,430,554.49. However, there were a total of 110 false DCA’s found at Anglos’ office because of the action required to be taken upon the maturity of the false time deposits. The documents multiplied to keep up the charade. They are listed in Annex IV of the Admitted Facts, Exh P358.

30.After analyzing the ledgers, it is found that on seven occasions between the 30^th January 2007 and 26^th March 2009, non-existent funds were injected into Anglo as capital. The “money” from each of the seven false capital injections was used to “create” false time deposits. These were entered into the accounting records of Anglo evidenced by journal vouchers which attached false supporting documents. On 6 of the 7 occasions, the false capital injection was also supported by false remittance advices from third parties purportedly injecting the sum of money into the bank accounts of Anglo.

31.On another 10 occasions, the monies of capital injections amounting to HK $78 million were found to have originated from Anglo and D2 (6 capital injections totalling HK$30 million, were from Anglo’s DBS HK bank account; 3 capital injections totalling HK$ 38 million, were from Anglo’s DBS Singapore’s bank account; and 1capital injection amounting to US$1,297,665, or HK$10 million, was from a personal loan given by HBZ Finance to D2). The initial cash outflows from Anglo were booked as deposits to ledger bank account 205530 and supported by falsified DCAs. The funds were then channelled via companies related to Anglo/Accused such as Multiview, Everest Victory, Le Marche, Swisslink or, in some cases, D2’s son Manesh, then routed back to Anglo as fresh capital injections. In the case of one capital injection, the loan was channelled through one Orsini to Anglo’s DBS bank a/c as capital injection. The funds received were then remitted back to HBZ on the same day to settle the personal loan of D2 (but booked as a deposit to Anglo’s ledger bank account 205530 with the creation of a falsified DCA). Essentially, in all these 10 cases, what happened was nothing more than circular fund flows and were certainly not true capital injections. For all intents and purposes this was all done to show the OCI that Anglo was in good financial shape. The documentation of these money movements whether real or fiction were not challenged by any defendant.

32.It is the Prosecution’s case that all Accused knew that the documentation was false, that the underlying transactions were either non-existent or false, and that they together had agreed to and had the intention to cause those accounting entries so as to falsify the accounts of Anglo.

PW 7 - Computer programmer of Anglo.

33.The DCA’s had to be on ICICI letterhead and there is direct evidence of involvement of various Accused coming from Mr. Lorenzo, PW7, a computer programmer within Anglo. He gives evidence on how the letterhead came about and how the false DCA’s were created.

34.PW7gave evidence under immunity,( Exh P352). He worked in an open plan office as a computer programmer and had for many years. The photo album, P342, photo 3and 4 depicts his desk and cubicle.  His evidence was that one day in 2008, D2 asked him to his office. D2 gave to him a sample copy of a “Deposit Confirmation Advice” with ICICI Bank letterhead. D2 instructed him to make a template document which was the same as that sample provided. Lorenzo did so and printed it out on a blank A4 piece of paper. D2 then crossed out some details on the template and asked for an amended copy. D2 also gave him a blank paper with ICICI Bank letterhead for this purpose. Lorenzo made an amended document and this was given to D2. D2 then asked for a photocopy of the template. Lorenzo photocopied it and gave it to him.

35.A few days later, D2 then amended some details on the photocopy by hand, handed it to Lorenzo and asked that a new amended document be printed. Those details included the interest rate, maturity date and monetary amount. Lorenzo did this on his computer and printed an amended version out. He repeated this at D2’s request on numerous occasions, more than 50 times. He gave evidence that some were backdated.

36.PW7 also said there were many occasions, perhaps more than 20 times when D3 came to him with a copy of a DCA which had been altered by hand. Those alterations involved the amount of money and interest rate crossed out and new figures written in hand. D3 gave this amended DCA to PW7 and told him that D2 instructed him to edit the document and print it out on ICICI Bank letterhead paper. She would, like D2 did, hand him a blank ICICI Bank letterhead paper with the amended document. Lorenzo did as told on his computer. He’d print it out on the letterhead paper and hand it back to D3 in her office.

37.One day in 2008, D3 gave PW7 a piece of paper with phone number of a Filipino male called “Dennis”. D3 said D2 had asked him to contact “Dennis”, speak to him in Tagalog and he would print ICICI letterhead paper. This part of his evidence was not challenged (but denied by D3 in evidence). Lorenzo did as told and called Dennis. He had previously met this Dennis in their offices as he did some printing for Anglo and would make deliveries. He met him in the lobby of the office building and gave him a piece of ICICI bank letterhead as a sample to copy. D2 had given him this sample.

38.PW7 recalled that he ordered ICICI Bank letterhead paper twice. One time was for letterhead paper with the bank’s Central address. The other time was for letterhead paper with the bank’s Tsimshatsui address. Every time Dennis delivered the printed paper at the lobby of the offices of Anglo. PW7 would tell D3 the printing was ready and D3 would give Lorenzo some cash to pay “Dennis” downstairs.

39.In late April 2009 and about 1 or 2 weeks prior to the Police coming to the offices of Anglo, D3 came to PW7’s desk and told Lorenzo that D2 had instructed him to delete all the relevant templates of the ICICI advices from his computer. No reason was given. Lorenzo did as told in front of D3. D3 told her it was D2’s instructions that she watch him do it.

40.Despite this, thirteen different templates of the DCAs were found by Police on Lorenzo’s office computer, Exh P157 to P169. He thinks they were saved in different folders and he had omitted to delete them when asked by D3 to do it. He had created them upon the request of either D2 or D3 and printed them out on ICICI letterhead paper.

41.On the day that the Police came to the offices of Anglo, D3 telephoned Lorenzo and asked him to go to the office of D2. D3, D2, and D4 were present. Only D2 spoke to him and he gave PW7 one plastic bag with box files in it and instructed Lorenzo to take them to D4’s trading company which was at the Ground Floor of the same building. D2 also instructed Lorenzo to destroy the ICICI letterhead paper which had been kept by him.

42.Lorenzo went to his work station, took 2 or 3 sheets of ICICI letterhead paper from his desk and the bag of documents and went to D4’s office at the Ground Floor. Lorenzo left the materials in that office. D4 had recently opened his own office in the same building; prior to that he operated his own business with his own staff out of Anglo’s premises. PW7 had on occasion helped D4 with his own business matters in the hospitality trade.

Defrauding the Commissioner of Insurance

43.It is the Prosecution case that the intention behind making the false accounts, was so as to defraud the Commissioner of Insurance, and that all of the Accused had that intention in mind in a criminal agreement to falsify the accounts and in their respective actions to carry out this agreement. To understand how the Commissioner could be a victim of fraud, the Admitted facts at paragraphs 5 to 26, set out in great detail the role of the Commissioner, the capital and solvency requirements from Anglo and the powers of the Commissioner’s office. It also sets out in great detail what financial information and statements the office received from Anglo that purported to represent the true financial position of Anglo.

44.Obviously the Commissioner relies heavily on the audited financial statements and information. Anglo produced not only annual audited reports but also quarterly reports prepared by a different accountancy firm. Those documents and others submitted as part of regulatory requirements are listed in detail in Paragraph 23 of the Admitted facts P358 and Paragraph 61 sets out what details were false in those same reports and documents.

45.I do not propose to repeat these here as they were not challenged. However to give a true picture of the fraud on the Commissioner I will quote from the Prosecution’s Opening as it is succinct and this evidence unchallenged.

“38. The Company is subject (amongst other things) to a solvency margin requirement under the Insurance Companies Ordinance Cap 41. For present purpose, the solvency margin is the greater of: (i) one-fifth of the relevant premium income up to HK$200 million, plus one-tenth of the amount by which the relevant premium income exceeds HK$200 million, and (ii) one-fifth of the relevant claims outstanding up to HK$200 million, plus one-tenth of the amount by which the relevant claims outstanding exceeds HK$200 million.

40. Based on the financial information and returns of the Company, the Commissioner of Insurance at relevant times calculated the solvency of the Company as follows:

	Solvency Requirement	Shareholder Equity as Represented	Fixed Time Deposits with ICICI Bank
FY 2006	HK$43,617,717	(- HK$3,253,733)	HK$72,404,181
FY 2007	HK$44,497,122	HK$38,751,506	HK$108,163,090
FY 2008	HK$46,068,510	HK$37,075,345	HK$164,259,133

41. In the financial year 2006, the financial information showed that the Company had a deficiency in Shareholder Equity of HK$3,253,733. As falsely represented, the Company had failed to meet the solvency requirement of HK$43,617,717 by a shortfall of HK$46,871,450. The true position however was (i) that the Company had a deficiency in net assets (i.e. Shareholder equity) of HK$75,657,914 and (ii) that the Company had failed to meet the solvency requirement of HK$43,617,717 by a shortfall of HK$119,275,631.

42. In the financial year 2007, the financial statements showed that the Company had Shareholder Equity of HK$38,751,506. As falsely represented, the Company had failed to meet the solvency requirement of HK$44,497,122 by a shortfall of HK$5,745,616. The true position however was (i) that the Company had a deficiency in net assets (i.e. Shareholder equity) of HK$69,411,581, and (ii) that the Company had failed to meet the solvency requirement of HK$44,497,122 by a shortfall of HK$113,908,703.

43. In the financial year 2008, the financial statements showed that the Company had Shareholder Equity of HK$37,075,345. As falsely represented, the Company had failed to meet the solvency requirement of HK$46,068,510 by a shortfall of HK$8,993,165. The true position however was (i) that the Company had a deficiency in net assets (i.e. Shareholder equity) of HK$127,183,788, and (ii) that the Company had failed to meet the solvency requirement of HK$46,068,510 by a shortfall of HK$173,252,298.

44. If the financial statements reflected the true position of the Company at the material times or if the Commissioner of Insurance knew that the representations of capital injection in any of the various letters were untrue, the Commissioner of Insurance would have required the Company to take remedial measures such as making capital injections in cash, and would also consider other powers conferred on it by the Insurance Companies Ordinance Cap 41, including: (i) imposing restrictions on new businesses that the Company can write, (ii) appointing a Manager to manage the affairs business and property of the Company; and (iii) presenting a petition to the Court for the winding up of the Company.”

46.PW8, Mr. Ip Po Leung Lewis, was the treasury accountant and he prepared 2 reports, Exhs. P 328 and P350. They were not challenged nor were his expertise and evidence. He gave evidence of the fund flow of Anglo’s financial situation, examining the false time deposits and fake capital injections and the subsequent impact on the financial figures. He agreed that Anglo’s auditors may have been deceived and not picked up on the deceptions. He explained how he would have uncovered them if he had audited Anglo.

The Admitted Facts P358-P361

47.It is simply not practical or necessary to regurgitate much of the Prosecution’s evidence for the purposes of this verdict. Yet it is necessary to know the background of Anglo, the extent of the false accounting despite it not being contentious, why it was necessary to cover up the financial woes of Anglo and the roles of the defendants. The defendants and others in Anglo and the Balani family are named or involved in many bank accounts and companies connected to Anglo or its financial accounts. I repeat, the Admitted Facts P358 is extensive, well drafted and include the bulk of the prosecution’s case.

48.The exhibit includes 5 appendixes. Appendix I listed out all Directors of Anglo since September 2006. Appendix II lists the particulars of the change in shareholdings of Anglo shares Between September 2006 and March 2009. Appendix III lists the 27 Capital Injections recorded in the Capital ledger account of Anglo. As noted above, Appendix IV lists details of the 110 different DCA’s found in Anglo’s offices. Appendix V sets out all the bank transactions and accounting entries in relation to the capital injections and the 110 DCA’s, listing the false DCA’s and showing how capital injections were nothing more than circular fund flow movements; not true capital injections. All designed to pull the wool over the eyes of the OCI and hide the worsening financial state of Anglo.

49.The company was essentially a family owned company and helmed by D2. It was in his interest to falsify the accounts, hide the truth from the Commissioner and keep up the charade once it was decided to start on this path of deception and dishonesty.

50.The Admitted facts P358 set out all the Bank accounts under the name of Anglo (Paragraph 27) as well as all the Bank accounts for the BVI companies, other relevant companies,D2 and D2’s son ( Paragraph 28 to 37). D2, D4 and/or D2’s other family members were authorised signatories of all the bank accounts except for the account of Happy Concepts. Islam Haider and Ms Connie Yuen were the signatories for this bank account. Mr Haider was also a signatory with D1, D2 and D4 of the bank account for Multiview.

51.Mr Haider was Anglo’s messenger boy. Connie Yuen used to be D2’s secretary before she immigrated to Australia and was succeeded by D3. D3 was not an authorised signatory for any material account but was the named contact person in the bank records for the accounts of Multi view, Happy concepts, Anglo, Nice View and at ICICI Bank.

52.D1 was a signatory to the bank accounts with D2 and other family members of Anglo, Everest Victory, Le Marche, Swisslink and Multiview.

The relevant Companies (other than Anglo.)

53.The 4 BVI companies, Mass Power, Everest Victory, Le Marche, Swiss Link, were clearly set up for the purpose of being shareholders of Anglo. There is no activity of note in the bank accounts of these 4 companies and the directors and shareholders were the one and same, only Balani family members as evidenced in P349, the bank records of DBS (Macau).This reiterates Anglo was a family run and controlled company.

54.Nice View had the same 4 directors and shareholders, the Balani Family. There is only 1 statement of account in the banker’s affirmation, P335.That statement shows many autopay transactions paid to Transamerica and Manulife for August 2008. The fact it is autopay suggests regular payments made from that account for this purpose. Both those companies deal with Insurance, retirement and investments.

55.For Happy Concepts, P334 too only includes only 1 statement of the account in the banker’s affirmation and it shows a loan of $9M credit to the account followed by a $5.5M cash payment to Anglo on the 10/4/2008. This is in the books of Anglo as a capital injection. This company was used as conduit for routing funds. It would seem there were loans required to put capital into Anglo; I am sure as arranged by D2.

56.For Multiview, D1, D2, D4 and Islam Haider were authorized signatories of the bank account of this company. There were more auto pay payments to Transamerica in 2006, in fact several were for identical amounts as those paid by Nice View in 2008. There were also auto pay payments to Manulife. There were many many same day cheque deposits of varying amounts. There were then many cheque withdrawals. The prosecution submits this company was also used as a conduit for routing funds.

57.HBZ Finance, P346, showed Anglo and D2 had accounts here. Anglo had an account with 5 authorised signatories. They were D1, D2, D2’s wife, Modi and Ms. Lu. Lu is another of D2’s secretaries before D3. There is correspondence to show that D2 took out substantial loans and for one loan, Anglo repaid that loan. D2 borrowed and can be seen to send a huge sum of money to his son, Manesh Balani in Dubai.

58.It is clear other staff members of Anglo were either set up as directors of companies or authorized signatories other than family. It was not just limited to D1; Modi, Ms Lu, Ms Yuen, both secretaries and Islam Haider the office messenger were named and appointed to various positions. The prosecution has set out in Table A of their closing submissions, MFI – 4, what connections D1 (and D3 and D4) had with relevant and material bank accounts.

Evidence against D1

59.The prosecution agree they rely heavily on adverse inferences to be drawn from circumstantial evidence to draw the necessary inference against D1 required to prove guilt; the same applies to D4.

60.The prosecution relies on certain pieces of evidence. These include D1’s position in Anglo as the General Manager and a Director. In such roles, he should have known of the deception and fraudulent conduct. He was also a signatory to company accounts with Modi, Manesh Balani, Minoo Balani, D2 and D4. He was also a signatory to other bank accounts, such as Everest Victory, Le Marche, Swisslink, Multiview. He signed cheques with either D2 or D4 that were part of circular fund flows in Anglo, disguised as capital injections.

61.D1 also signed account journal vouchers prepared by Prem as the “checker”. They required 3 signatures from the person who prepared it, the person who checked it and lastly the person who authorised it. D1 never authorised any; he only ever checked them. They’d be passed to him in multiple numbers for his signature. The 117 relevant journal vouchers here had false supporting documents attached to them. Once all checked and authorised the information was entered into the computer accounting programme and the vouchers filed away. The prosecution submits his signatures infer knowledge of the false information attached.

62.Some of the false bank instruction letters, such as P98 or P122 contained his signature alongside either D2 or D4’s. Some of the false requests to the ICICI bank for DCA’s, such as P10 contained his signatures alongside D2’s signatures. The prosecution submits his signatures infer knowledge of the false information attached and the conspiracy. What documents D1 (and D4) signed are set out in Annex V of the Admitted Facts, P358 as well as Table B and C of the Prosecutions closing submissions, MFI-4.

63.D1 with D2 and Modi signed annual audited accounts which were falsified. He therefore in view of his position and role in Anglo must have known that.

64.D1 was a designated controller along with others and was often the point of contact for the staff of OCI. He knew that Anglo was on their watch list and they had concerns about Anglo’s liquidity and solvency. He took direct requests for Anglo to make capital injections from OCI. He made excuses to the OCI for the reasons Anglo were slow in paying out awards and claims. He knew of Anglo’s financial difficulties. He was closely involved in many aspects of the running of Anglo and therefore must have known the significant time deposits and capital injections that suggested a healthy bank balance were false. D2 could not have carried out this long term and systematic deception and fraud alone. He needed D1’s help as he needed D3 and D4’s.

Evidence against D3

65.D3 worked at Anglo for many years and after Connie Yuen, D2’s then secretary immigrated to Australia in early 2006, she became his secretary. She started her career there in the Accounts Department. She was not top tier management like D1, D4 or Modi. She was not a signatory to any bank accounts but is named as the contact person in several bank account application documents for several relevant companies.

66.As his secretary, D3 typed documents for D2. Six of the 22 false bank instruction letters were retrieved from the office computer of D3. The location, the content and the falsity were not challenged by D3.

67.PW7’s evidence directly incriminates D3. He says she, along with D2 gave him blank ICICI letterhead paper and hand amended deposit confirmation advices to type out and print on the letterhead paper. She at a later stage gave him instructions from D2 to contact a Pilipino printer and arrange him to print ICICI Bank letterhead. When printing was ready to be delivered, D3gave PW7 cash to pay for it. She also ordered him to delete all incriminating ICICI documents from his computer not long before the police came to the office. She stood over him and watched whilst he did it. Lastly, on the 5th May when the OCI sent in caretaker managers she was present in D2’s room before D2 met OCI staff who had arrived unannounced when D2 told PW7 to get rid of a bag of documents and all ICICI papers at PW7’s desk. The prosecution said she helped D2 to carry out this fraud and deceptive scheme. She had full knowledge and actively participated in it.

Evidence against D4

68.The prosecution submits D4 as D2’s son in law was a member of the family inner circle. There is no direct evidence of knowledge against D4 but he signed some Anglo related documents (set out in Table B and C of MFI-4) such as cheques, account journal vouchers and letters. PW6, Prem said when on the rare occasions D2 was not available to authorise accounting vouchers she could ask D4 to sign. He had his own room or office in Anglo at the material time.

69.D4 attended 2 meetings with the OCI in Oct 2008 and March 2009. There is no evidence of the extent of his participation in these meetings other than present as a representative of Anglo.

70.On the 5th May when the OCI sent in caretaker managers he was also present in D2’s room when D2 told PW7 to get rid of a bag of documents and all ICICI papers at PW7’s desk. PW7 was to take it and put it in D4’s office in the same building for safe keeping. The prosecution said he helped D2 to carry out this elaborate fraud and deceptive scheme. He, like D1 and D3 had full knowledge and actively participated in it.

The Defence Case –

D1

71.D1 and D3 elected to give evidence. D1 joined Anglo in 1975 as a Claims Manager and in 1980 he was promoted to General Manager and made a company director. He specialized in and dealt with all personal injury claims and Modi dealt with all damage to property claims. He was earning $60,000.00 a month and had no commission, bonus or housing allowance. He said D2 dealt with all Anglo’s financial, banking, investment and foreign currency or exchange matters. D2 made all the financial decisions and he did not share that information as a matter of course. He kept all banking documents including DCA’s.

72.D1 explained why he was one of the signatories to some bank accounts at D2’s request; especially for the ones where the shareholders lived overseas. Despite this he had no knowledge of account details or control over them. He denied knowing and certainly did not see the circular fund flows described by the prosecution as he had no control over the account details. He may have signed cheques but did not see where the money went, how it was moved, what connections there were or grew suspicious.

73.He, D1, had no knowledge of the financial aspects of Anglo and all information he gave the OCI came from D2. Whenever OCI had a question or query by phone or letter he had to take it to D2 for an answer or instructions. D2 would advise him how to answer. Normally Modi would be there too as a fellow director and he dealt with OCI if D1 was away or not at hand. Whenever OCI requested a meeting, D2 would decide who should attend and normally it would be himself, Modi and/or D4. In hindsight, he felt D2 made him his mouthpiece and made use of him by giving him the title of General Manager and made him a director. There was no benefit received as a director. He received no monetary benefit from participating in the conspiracies.

74.D1 gave examples of OCI meetings called, who attended and what D2 told him or them to say to the staff of OCI. Exhibit P1A are minutes of meetings recorded by OCI. D1 said all the information attributed from him were just a regurgitation of D2’s instructions or explanations. He had no idea why D4 would be asked by D2 to go to these meetings as he had no insurance experience and only helped with some marketing. He tendered his resignation after the meeting of the 30^th March 2009, Exhibit D4. He was increasingly stressed with work pressures and in poor health but gave one months notice so he would still be able to sign the audited reports ready for the 30^th April 2009. D2 told D1 his son, Manesh would replace him as director and members of his family would take over his role but he did not proactively deal with this.

75.D1 gave evidence of the roles of other staff members and who he did or did not supervise.  He agreed he signed documents and had signed the same type of documents for decades without any consequences. He would sign account journal vouchers as a checker but did not look into the contents of each voucher let alone verify if they were accurate. If it referred to a time deposit he assumed it was a genuine deposit; the same applies for capital injections. He had no reason to doubt them or suspect they were anything but authentic. He signed blind as he had for years without dire consequences. He was told they came from shareholders. He knew they still had to be authorized by D2 and then would be imputed into a computer programme as a record.

76.The same also applies to the audited accounts. He did not help prepare them and he’d sign them assuming they were correct and accurate as prepared by accountants. He signed them after they were authorized and approved by D2 and then Modi. He had signed these for years with no issue ever arising or questions asked. He said D2 was in his view a successful businessman with good financial accounting skills so he never suspected any wrong doing. He also knew that D2 was not only involved in the Insurance business but also the restaurant trade, the bollywood movie industry and trading business. Manesh, his son traded from Dubai.

77.His evidence is he would often be given letters to sign. He’d sign all sorts of letters including letters purporting to give instructions to banks. They were not prepared by him or on his instructions. They were prepared by D3 or D2’s previous secretary Connie Yuen and were already signed by D2; his was always the 2^nd signature. Again he had no reason to suspect them or the contents so he would just sign without question and often without reading them. He had done this for many years. He had no reason not to trust D2 or other colleagues who gave him documents or cheques to sign.

78.An example of this would be the letter addressed to DBS Bank Ltd at page 699 of volume 2 (part of Exhibit 98, a journal voucher and its false supporting documents). He signed this letter after D2 signed it. He did not know of its contents nor read them. He said this was because all banking matters were looked after by D2, he just had to sign as a signatory. A copy of this letter, not on Anglo letterhead, was found in D3’s computer, Exh P180, pg 904 of the same volume. DBS never received this and the details referred to a fake time deposit.

79.At the end of 2007 D1 had told D2 he wanted to resign; he had reached 62, was in poor health and under too much stress at work. He had to deal with too many OCI enquiries. D2 asked him to stay on until a replacement could be found and D1 agreed out of loyalty. He had heart surgery in March 2008 and in April 2008 a Pierre Fong was employed to take over from D1. D1 agreed to a handover of 1 year. D2 persuaded D1 to stay until April 2009 to sign off on the annual audited report. However, D2 fired Pierre Fong who then took Anglo to the Labour tribunal court. D1 recalls he had to attend the tribunal on behalf of Anglo and settled the matter. After he left, D1 asked D2 to find a replacement as quickly as possible.

80.Where charge 3 was concerned, he got a phone call from OCI on the 30^th April 2009 and asked to attend an urgent meeting. They asked him to bring the ICICI Bank DCA’s. D1 asked D2 for them and he was given them by D3 in a brown envelope just before he left for the meeting. She said they were the DCA’s. D1 did not bother to open the envelope; he gave them to an OCI staff, PW3 at the meeting. Later he returned them to D3 and told D2 about the meeting he had had.  He did not know the DCA’s he showed the OCI were false. He had no reason to doubt their authenticity. If he knew this he would have gone to the police. He signed the audited reports on the 30^th April and resigned as a director with immediate effect, Exh D5. He was fed up D2 had done nothing in the month of April to replace him despite his notice to resign.

81.On the 5^th May 2009 he was there packing up his personal things when the OCI and police came. He was asked where the DCA’s were and he told them all D2 had possession of them. He then gave a witness statement.  His home was then searched and computer confiscated. Nothing incriminating was found in his office, at home or on his hard drive.

82.His defence is that he did not know the journal vouchers were supported by false documentation designed to falsify the accounts. He had no reason to suspect this. He trusted D2 and said he had run the company for many years without any problems. He trusted the external auditors knew what they were doing and they did not ever flag any suspicious accounting. He did not agree or conspire with any co-defendant or D2 to falsify the accounts. He did not know of the false accounting so it follows he did not intend to defraud the Commissioner of the OCI.

D3

83.D3’s evidence began with the events of the 5^th May 2009. She gave evidence of her surprise when a large group of people arrived from the OCI and asked for D2. She asked them to wait in the conference room and told D2. D2 asked her to call Larry Lorenzo, PW7, to his office. She followed PW7 into D2’s office to see if she could help as she thought D2 was acting strangely. D4 was there in D2’s office as he usually was every morning when he arrived at work. D4 said nothing. She saw D2 give PW7 a bag and told him to throw it away. He also said if there were any ICICI letterhead stationary at his desk to dispose of that as well. PW7 left with the bag. D3 was stunned to hear this and left too. She knew nothing about ICICI letterhead in their offices. She said all letters from ICICI Bank were only to be opened by D2 himself.

84.Not long after a man from KPMG, the appointed managers to take over Anglo was holding a stack of DCA’s and asked D3 if she knew they were false. He asked for the originals and D3 told him that D2 had them. D2 gave her a file to pass to them. She knew nothing of any fake DCA’s in Anglo. She had seen them before but did not know they were not authentic.

85.She referred to PW7’s evidence. She totally denied on many occasions she ever gave him any amended DCA’s to print on ICICI letterhead. She had never seen a DCA amended by hand nor knew someone was creating fake ones in Anglo. She also denied she went to his desk and asked him to delete all ICICI documents from his computer. She denied she watched him do it. She denied she gave him a printer’s mobile number and told him D2 said to have him print ICICI letterhead stationery. She never gave PW7 cash to pay the printer for ICICI letterhead. She said PW7 knew Dennis the printer already. She said she knew this because PW7 worked part time in D2’s restaurant and Dennis printed for the restaurant. She had heard them chatting in Tagalog when Dennis delivered to Anglo.

86.She and PW7 bore each other no grudges nor was there any history of grievances between them. She suspects PW7 wrongly implicated her and accused her of involvement because he wanted her to be his scapegoat. After he had been arrested he pushed the blame on her. She said she thought he thought to implicate only one person, D2 was not enough; meaning if he only pointed the finger at one person the police would not let him go. She thought he thought because she was D2’s secretary and had the most contact with D2 she was the best choice to frame. He fabricated all his evidence where it implicates her.

87.She said she had to chase up PW7 to repay the loans he had with Anglo. He borrowed money from the company and paid it back by monthly installments. His evidence that he repaid it with deductions made directly from his salary before he was paid was a lie.

88.She did not dispute she had typed up bank instruction letters found on the computer at a desk she shared with Connie Yuen. She said her room was shared with Yuen, her predecessor. When she had to type letters for D2 she used this computer as it had the letter format set on it. When shown Exh178, a fake bank instruction letter, she said she typed many similar documents so this exhibit was either typed by her or Yuen. The same applied for Exh. 179 to 183, the other 5 fake similar letters. She said in chief that either she or Connie Yuen typed them. In cross examination it was put to her that she knew the 6 instruction letters found on the computer were false and never meant to be sent to the banks. She then said she did type them but didn’t know they were false. She was told to type them for the accounting department’s records.

89.In cross examination she was asked why she did not post the letters printed and signed as the bank staff never received these instructions by post. She explained that sometimes D2 said he had given the banks oral instructions already and the letter only needed to be filed with accounts for a record. They were not required to be posted by the bank but yet were still signed by D2 and then either D1 or D4. She did not question him as he was the Boss nor did he have the right to ask about his instructions.

90.D3 mentions Connie Yuen often in evidence. She left Anglo in 2006 to immigrate to Australia. D3 said she would then for the following 2 years return to HK for 2 to 3 months and work at Anglo before returning to Australia for 1 to 2 months as she had children there. She repeated this pattern. Every time Yuen came back D3 would vacate her desk for her as she regarded her as her senior. In cross examination when asked about Yuen’s returning to Hong Kong she then backtracked and said Yuen came back for 2 to 3 months every year. Later, she said she could not recall exactly how many days Yuen returned to HK.

91.In Chief, D3 said she went on maternity leave in December 2008 for 10 weeks and said Yuen came back to cover her job in her absence. In cross examination she agreed Yuen did not come back in 2009. She said she could not recall if Yuen came back in 2008.When put to her that Yuen did not come back in 2008 she said perhaps she did not. It was put to her that Yuen did not come back to HK after she emigrated. It was a further admitted fact that Connie Yuen did not use her Hong Kong Identity card to enter Hong Kong between 1^st Jan 2006 and 31^st Oct 2010, Exh P360. D3 said that may be the immigration record but she recalled she came back for several years. Other employee witnesses had different recollections and I will refer to this.

92.When D3 started at Anglo in 1994 she worked with PW6 in the Accounts department. She earned $6000 per month. In about 2000 she moved to the Admin Department and earned about $11000 per month. In 2006 Anglo moved offices to Causeway Bay and by then her income was about $18000 per month. A year later in 2007 she received a large pay rise and housing benefits; she was paid $28000 per month and $5000 housing benefit. This was because she wanted to resign to rest but D2 offered her an increase to stay.

93.Her health was not great and despite wanting to start a family with her husband she miscarried twice in 2006 and 2007. She was already 37 years old, wanted to rest at home and try for a family. She and her husband were financially stable, the mortgage nearly paid off and she did not need to work anymore for financial reasons. However, D2 could not find a replacement secretary so offered her the extra income to stay. She took the increase and stayed instead of leaving.

94.Her evidence was that she had no knowledge of the false accounting and certainly did not conspire with D2 or any other person to falsify accounts. She did not know of any plan to defraud the Commissioner of the OC1and was not part of any. She did not know the company was in financial difficulty at any material time.

D4

95.D4 elected not to give evidence. His case was put to prosecution witnesses and co defendants alike. He was not a director of Anglo. No one could say he was involved in the insurance business at all. The defence established that D4 had an office in Anglo’s premises but ran his own businesses therein. He paid rent to Anglo. He had his own room and had several of his own staff sat near his room. They worked in his hospitality business with him and not in any Anglos business.

96.PW7 recalls him running his own business from 2006 in Anglo’s offices and helping him with some of his business matters including designing a logo on a computer, exh D2, preparing packing lists and unpacking party products such as cutlery and crockery. PW7 also saw D4’s staff dealing with cutlery and crockery too.

97.PW6 said she never had anything to do with him and she dealt with all the accounts. She did not know his title or role at Anglo. Her only contact with him was if D2 was not in the office and something needed a signature she would go to him and he’d sign it. This was rare.

98.D3 agreed that all of the Balani family were on the Anglo payroll which she dealt with even though D2’s wife, son and daughter did not do any work there. She agreed D4 ran 2 companies out of Anglo’s offices.

99.It was a further admitted fact, P359 that D4 travelled out of Hong Kong over 100 days per year from 2006 to 2009. It was put that he was travelling for the purposes of his own business and not Anglo’s business.

100.He was not in fact involved in Anglo’s business but as the son in law of D2 he was given authority to sign cheques and documents relating to Anglo Business. He did sign on documents that proved to be false but without that knowledge. That is the only physical evidence that ties him to the charges and the other co accused. It was an agreed fact in P359 that he (and D1) signed other cheques, journal vouchers and letters that were not the subject to any criminal charge.

101.It was a further agreed fact P361 that D4 was arrested over 15 months after the 5^th May 2009 raid. D1, D2 and Modi were arrested within 2 days and D3 within 2 months.

Connie Yuen

102.Connie Yuen’s presence was put to many witnesses by the defence for D3. It became an issue. She was never arrested nor interviewed. Obviously questions about her presence in the offices of Anglo dating back nearly 10 years would make recollection difficult for most people. That proved to be the case. PW6, Prem who had worked at Anglo since 1982 said at first that Connie Yuen emigrated abroad and did not come back to the office to work. When questioned about it she said maybe she came back. She said at first Yuen did not cover D3 whilst she was on maternity leave in December 2008 and then said she did.

103.PW7, also a long term employee said he could not recall seeing Yuen working at the causeway bay office after they moved there in 2006. PW10 who joined the administration department in July 2008 as a clerical worker did not know a Connie Yuen and she did not work there in December 2008. PW11 the in house accountant at Anglo since 2005 was not asked any questions about Yuen.

104.D1 agreed Yuen covered D3’s job whilst she was on maternity leave. He also agreed she’d worked at Anglo again since she emigrated. I have said above what D3 said about Yuen’s role and presence in the office even after she left Hong Kong.

105.In light of the questions about Yuen’s presence and a suggestion that she may have typed the incriminating documents the prosecution say they found in D3’s computer, the Prosecution asked the immigration department for Yuen’s travel movements in and out of Hong Kong during the relevant period. She did not enter Hong Kong using her HK ID Card in the relevant period. There does not mean she did not enter using some other travel document.

The Law

106.All 3 defendants have clear records and I warned myself accordingly. I will take that into consideration in relation to their propensity to commit the offences charged. I have directed myself in accordance with requisite directions set out in the authority, Tang Siu Man v HKSAR 1998 1 HKC 371. These defendants do not stand or fall together. The evidence against each defendant must be considered separately and individually. The prosecution has the duty to prove the elements of every charge against every defendant beyond reasonable doubt. The defendants have nothing to prove.

107.For Charge 1, Conspiracy is defined in section 159A of the Crimes Ordinance, Cap200. A conspiracy is an agreement between 2 or more persons to perform an unlawful act or a lawful act unlawfully. The actus reus of conspiracy is the agreement itself. The mens reas of the offence is an intention to be a party to that agreement. In this case the prosecution’s case is that the agreements were actually carried out. The unlawful act alleged by the prosecution is the commission of the offence of false accounting, contrary to S19 (1)(a) of the Theft Ordinance, Cap210.

108.The prosecution must prove there was dishonesty and the test is the 2 stage test set out in R v Ghosh (1982) QB 1053 approved in a number of appeal decisions including HKSAR v Goh Swee Yan (2000) 3 HK LRD 342.

109.The court has to decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was dishonest by those standards then the court must consider whether the defendant himself had realised that what he was doing was by those standards dishonest. In Ghosh the court observed that in most cases it would be obvious the defendant himself knew that he was acting dishonestly.

110.The fact of the existence of the charged conspiracy was not disputed. However, Mr. Turnbull for D1 did submit that charge 1 specifies 2 specific ledger accounts so an agreement to falsify accounting records generally would not suffice to make out this charge ( Paragraphs 14 to 19, MFI-5).  The prosecution’s case is that there was an agreement to falsify accounts and much was done to actually achieve this leading to those specific ledgers being a record of the actions taken. The false records in the ledgers are not challenged. It is an artificial submission in this instance and fails.

111.I repeat, the fact of the existence of the charged conspiracy was not disputed. It is disputed the defendants were a party to the agreement; none knew of the existence of the agreement or conspiracy.

112.The conspiracy alleged in Charge 2 is contrary to Common Law and S159C(6) of the Crimes Ordinance and I quote from the leading authority,  Mo Yuk Ping v HKSAR (2007) 10 HKCFAR 386. In that case Mason NPJ said at paragraph 40: -

“What emerges from the discussion of the cases? First that there is no formulation which amounts to a comprehensive definition of the of the common law offence. Secondly that the offence is constituted by becoming a party to an agreement with another or others to use dishonest means (a) with a purpose of causing economic loss to, or putting at risk the economic interests of, another; or (b) with the realisation that use of those means may cause such loss or put such interests at risk. The offence extends also to cases in which the dishonest means cause a person to act contrary to its public duty, this being a class of case which requires no further consideration by the court in the circumstances of this case”.

At paragraph 55 of the judgment the elements of the offence are set out: -

“It follows from the preceding discussion;

(1) that dishonesty is an essential element of the offence in that the means agreed-upon must be dishonest;

(2) that the test for dishonesty is to the stage test enunciated in Ghosh;

(3) that the offence includes cases of economic loss and the “contrary to public duty cases”

(4) that the essence of the offence in the former category is to use dishonest means to cause economic loss to another or to put at risk in others economic interests and while there is strong authority to support the proposition that the offence extends to cases of non-economic loss, the correctness of this proposition remains finally to be resolved; and

(5) the offences does not extend beyond the ‘contrary to public duty ‘cases to ‘contrary to private duty’ situations.”

113.Where Charge 2 is concerned, the fact of the existence of the charged conspiracy was not disputed. The Admitted facts which prove almost all of the elements of the offence are not challenged and it is not disputed the OCI officers were deceived by dishonest and false representations. It is however, once again disputed the defendants were a party to that agreement; none knew of the existence of that agreement or conspiracy.

114.Where Charge 3 is concerned it is not challenged the 6 DCA’s D1 presented to the officers of the OCI were false and the elements are proved except that D1 knew or believed them to be false.

115.The prosecution case to prove such knowledge or belief relies heavily on alleged adverse inferences to be drawn from circumstantial evidence. In fact the same applies for all defendants and all the charges they face, to a greater extent D1 and D4.

Inferences

116.By their very nature, conspiracies are hard to prove. Either there is an admission, direct evidence of participation or usually the court is invited to infer that a conspiracy exists from individual acts or actions of the co- conspirators done in pursuance of the conspiracy or agreement. It is of course well established that an inference of guilt can only be drawn against a defendant if it is the only reasonable inference to be drawn. The primary facts from which the prosecution invites an inference of guilt must themselves be proved beyond reasonable doubt.

117.Lord Diplock, in the often cited authorityR v Kwan Ping – Bong and 1979  HKLR 1 said at page 5 “The requirement of proof beyond all reasonable doubt does not prevented from inferring from the facts that have been subject of direct evidence before them the existence of some further fact, such as the knowledge or intent of the accused, which constitutes an a central element of the offence; but the inference must be a compelling -- one (and the only one) that no reasonable men could fail to draw from the direct facts proved”.

118.In Tang Kwok-wah, Dixon V HKSAR, FACC 4/01 (2002) 2 HKC 22 the Court of Final Appeal held that the Dicta of Lord Diplock to be “incontrovertible”.  Mr. Turnbull for D1 submits and relies on the following at paragraph 73 of his final submissions, MFI-5, - “The Hong Kong Court of Appeal in HKSAR v Man Wai - Ming (unreported see CACC 254/1998 at para 9and 11) approved of the directions given by the trial judge as “impeccable”on the practical application of the drawing of inferences from circumstantial evidence. The trial judge had directed the jury thus

You may only draw an inference if it is the only reasonable inference you can draw. In other words, you are not dealing with the situation whether – can I draw that particular inference. We are dealing with whetherthe facts are such that they cannot fairly admit of any other inference. And in particular, you may only draw inferences of guilt or other inferences against the defendant if you are satisfied that the inference of guilt other inference against him is the only reasonable inference you can draw.

If you have a set of primary facts, and you say,’ now, what inferences can I draw from those facts?’, and there's only one reasonable inference to draw from, all the other inferences are just fanciful nonsense. If there is only one reasonable inference you can draw, then draw the inference. But if from those sets – that set of primary facts you can draw inference (a), which is against the defendant; but you can also draw inference(b), which is not against him, then you must not draw inference (a),. Do you follow? Because it's not the only inference you can draw” (emphasis added).”

119.Mr. Surman submitted for D3 at paragraph of MFI-6, his final submissions and I quote” The Prosecution case against D3 is almost entirely circumstantial. Lord Normand in Taper v R[1952] AC 480,warned that care and special attention must be adhered to when dealing with circumstantial evidence:

“Circumstantial evidence may sometimes be conclusive, but it must always be narrowly examined, if only because evidence of this kind may be fabricated to cast suspicion on another. Joseph commanded the steward of his house, “put my cup, the silver cup, in the sack’s mouth of the youngest,” and when the cup was found there Benjamin’s brethren too hastily assumed that he must have stolen it. It is also necessary before drawing the inference of the accused’s guilt from circumstantial evidence to be sure that there are no other co-existing circumstances which would weaken or destroy the inference.”

120.Mr. Surman submitted that the last paragraph of the quote is applicable here as D3’s actions can be innocently explained away; she was only doing her job and carrying out her duties as a secretary. This is a co-existing circumstance which weakens the any inference drawn.

My Findings

121.The fact that I do not mention a particular piece of evidence or submission does not mean that I have not considered it or factored it in my decision making. All Defence counsel submit the evidence presented and proved by the prosecution is not capable of adding up to, when considered together, a compelling inference. Mr. Turnbull goes further and suggests a reasonable inference that can be drawn from the evidence presented is the D1 had no knowledge of the financial workings and real situation of Anglo. He submits the way D2 controlled and operated the bank accounts showed D1 would not have had any intimate knowledge of the real financial position as well as the charade created by D2.

122.Having considered the oral and documentary evidence, I do not hesitate in finding D2 could easily manipulate the accounts and hide the fact. Anglo was a family owned and controlled company. The Balani family headed by D2 controlled it. D2 did not answer to anyone. There were no safeguards to prevent abuses; no checks and balances. He set up companies and placed and named his own employees and family members in positions such as company directors, shareholders, authorized signatories and company contact persons. The officer messenger boy being appointed a company director and authorized signatory of Multiview and Happy Concepts being my case in point. I am sure these named position holders were appointed in name only. In addition, D2 did not need everyone“in on it” to commit these offences. Having said that, I am sure he did not act alone.

123.D1 could or should have known about the true financial situation if he had probed all the vouchers, cheques, audited accounts or letters he signed but he took them at face value. That may reflect poorly on his professionalism but I am not convinced it indicates he turned a blind eye pursuant to an agreement or participated in the conspiracies. After all, the 2 sets of professional auditors did not pick up on or suspect any false accounting.

124.He as the General Manager had access and sight of the accounts and supporting accounts documents. However, being General Manager in a company run like Anglo did not mean access to all information. Being a signatory to various accounts did not mean access to information in those accounts; moreover those accounts required 2 signatories. I agree with the submission that despite his position it is plausible he did not have knowledge of the company’s complex financial affairs.

125.D1’s role in the company would have made him a natural suspect when these offences were uncovered. Especially when he had delivered 6 false DCAs to the OCI at their request. He was a spokesman for Anglo as one of the named controllers. He attended meetings for Anglo and OCI dealt directly with him. However, PW1 from the OCI said D1 had to contact D2 for answers or consent when major issues were raised with him by OCI.

126.His “fingerprints”, figuratively speaking, are on many incriminating documents, accounting records and letters. They are also all over non incriminating documents spanning 30 years. Signing a document as an authorized signatory or a checker or company representative does impart a duty or an onus of duty but in reality if the document is prepared and signed already or to be authorized by someone else and on the face of it is routine, one would sign it without question. This would apply to D1, the“checker”of journal vouchers. The prosecution are saying that this infers D1 had knowledge. DI gave evidence of why he signed journal vouchers blind and did not look into the contents of letters or cheques he co-signed. He is essentially saying despite his role he was in no different position to PW6, the accounts clerk or PW11 Anglos own accountant. They did not suspect anything and nor did he. That inference cannot be drawn. I do not see the evidence taken together as forming a body of fact sufficient to prove beyond reasonable doubt D1 conspired with D2 and or anyone else to falsify accounts. Despite suspicions, the evidence does not add up to infer he had knowledge because of his position and role in Anglo.

127.There is no direct evidence he was involved in any scheme to create false DCAs. There is no evidence that connects him to the making of the documents as described by PW7. PW7 does not incriminate him. There is no evidence that links him to the destruction of incriminating documentation on or before the 5^th May 2009. The evidence he had sight of copies of these documents when he signed journal vouchers is insufficient to infer knowledge or participation in a conspiracy.

128.My findings above apply to the 2^nd and 3^rd charge as well. The central issue being knowledge means the inferences relied upon by the prosecution apply across the board for all 3 charges. For Charge 3, he took 6 DCAs requested by OCI to their offices. By then he had resigned, if he had knowledge of the false DCAs I do not see why he would have handed them over himself. If he had resigned to jump ship, he would not have further incriminated himself directly by physically handing over what he knew to be false DCAs.

129.I find, after careful consideration of all the evidence and submissions, the prosecution is unable to make all the circumstantial evidence add up to a compelling inference against D1; the only one that no reasonable man could fail to draw from the direct facts proved. Even collectively considered, they cannot prove he had knowledge of the offences and agreed to perform unlawful acts with another or lawful acts unlawfully. Accordingly, D1 is acquitted of Charges 1, 2 and 3.

130.D3, unlike D1 and D4, has evidence against her that directly implicates her in the false DCAs. PW7 gave evidence that D3 knew the DCAs were false. She knew that D2 had ICICI bank letterhead printed to keep up the charade of fake DCAs. She arranged the payment for that printing. She herself gave instructions to PW7 to create false ICICI bank documents on about 20 occasions. She instructed PW7 to destroy evidence of these documents on his computer. She said D2 ordered this and she had to watch PW7 do it. She was there when D2 asked PW7 to take a bag of files away and destroy anything left of ICICI bank stationary. According to PW7 she did not say anything about the bag.

131.Other than this direct evidence there is the evidence she is D2’s executive secretary and was during the material time, she was the contact person for the banks for many accounts. On the computer found at her desk there were 6 false instruction letters to banks created for and necessary to shore up the false accounting charade. She admits she typed letters of this nature at D2’s request. She did not post them to banks because D2 told her they were just for Anglo’s accounting records and for filing. Despite this she was not suspicious they were anything but authentic instructions. I have considered all this circumstantial evidence and if there was no evidence from PW7 I would find there despite being suspicions not enough evidence to draw the irresistible inference that she had knowledge, agreed to participate in a conspiracy and was guilty as charged.

132.Is adding PW7’s evidence enough to draw that inference and prove the charges beyond reasonable doubt? Mr. Surman for D3 submits his evidence is not reliable and credible. D3 said in evidence that she suspected she was a scapegoat for PW7 and he falsely accused her, fabricating all the evidence implicating her.

133.Mr. Surman casts doubt on PW7’s evidence suggesting it is misleading. He was more deeply involved in the conspiracy than he would admit, expressing blind loyalty. He had borrowed money from the company and was indebted to Anglo. He had young children and was desperate to stay out of prison so made up evidence to appease the police and secure immunity. As he gave evidence as a co-conspirator under immunity it should be treated with great caution. His evidence against D3 is based on assumptions not reality. His recollection of dates was vague and at times confused which affects the reliability of all his recollections of events.

134.PW7 said he didn’t make DCA’s from 2006 but later on and therefore some were backdated. Even when he was shown his own statement in cross examination where he says D2 first asked him to do this in 2006 he was adamant he would not change his evidence. He only went as far as saying he could not recall the exact year but it was not 2006. The evidence was that journal vouchers were generated contemporaneously and it would be hard to backdate documents for the accounts. His evidence on this point was at odds with the system and his statement. I am mindful he was giving evidence under immunity and witnesses in this position would be well aware of the consequences if they did not come up to proof. Perhaps he was too afraid to admit he made a mistake about the year in case there were consequences. In any event, this discrepancy between his statement and oral evidence is not fatal or so serious that I doubted his credibility.

135.I observed PW7 carefully as he gave evidence, even more so than usual as he was under immunity and the only direct evidence against D3. His evidence had to withstand close scrutiny. His first job ever was at Anglo, he had not worked anywhere else. He said on numerous times he just did what he was told by D2. He didn’t think about the task or suspect it was illegal because D2 had asked him to do it. He is loyalty personified. The impression he gave me was one of a man who was not cunning or sly. He tried his best to recall events. He didn’t try and exaggerate his evidence or overstate it. His responses to questions were not tailor made to impress or exonerate himself whilst blaming others. I found him credible and truthful. There were no discrepancies or anomalies so serious that I could not rely on his evidence.

136.I repeat the question, is his evidence when considered with other evidence implicating D3 enough? As far as D3’s own evidence is concerned I was of the view that it was tailor made to exonerate herself or distance herself from the offences. There was a clear attempt to muddy the water with the suggestions that Connie Yuen was working at Anglo for a good part of each year since she left Hong Kong in 2006. As Yuen was more senior than D3 and there before D3 she may have been in cahoots with D2 not D3. It is her own evidence D3 did benefit financially in 2007 when her income nearly doubled, part of it made up as housing benefit. Even D1 did not get a housing benefit. Her explanation as to why she stayed on after she resigned did not satisfy me.

137.Neither did her thoughts on why PW7 would frame her. Her half hearted attempts to suggest she had to often chase him up for repayments of his loan from Anglo and he was unhappy with her was not substantiated. Her opinion that he thought if he only pointed the finger at one person, D2, that would not satisfy the police was baseless. That and his decision to make her a scapegoat to appease the police thereby ensuring he got immunity gives him more credit than I think he deserves. It made D3 come across as desperate which I am sure she is bearing in mind the seriousness of the charges. I took into consideration she has a clear record and I am sure has not been in the witness box as an accused before but I did not accept her evidence.

138.I did find PW7 was telling the truth and more importantly it was in enough detail for me to be sure that D3 was involved with the false DCAs and had knowledge. I do not believe he concocted stories that involved D3 to frame her. I am sure she had knowledge that false DCAs were being manufactured and the only purpose was to falsify accounts. I am sure she did on numerous occasions give PW7 amended DCAs to create new ones to carry on the charade. They had to be done on ICICI bank letterhead and she was fully aware that they were arranged by PW7 with the printer, Dennis, on her instructions. She was involved enough to want to ensure PW7 deleted all incriminating documents from his computer. She watched him do it. This is a fact that I do not believe PW7 made up.

139.Accordingly and despite D3’s clear record, I am sure the prosecution can prove beyond reasonable doubt that D3 conspired with D2 and PW7 to falsify accounts. Other than the fake DCAs, false bank instruction letters had to be created to keep up the conspiracy. The only purpose for creating these and fake DCAs would be to falsify Anglos financial accounts which include the 2 specific ledgers of Charge1.

140.I am sure beyond reasonable doubt D3 conspired with others to defraud the Commissioner of Insurance by dishonestly and falsely representing certain documents reflected the true financial position of Anglo to induce the Commissioner not to take any or delay taking any regulatory measures against Anglo. In order to doctor those financial documents fake DCA’s and false Capital injections had to be created. I am sure D3 knew and assisted the conspiracy with the intention to hide the truth from the OCI. The D3 is convicted of Charges 1 and 2.

141.D4 too faced the 2 conspiracy charges only. He was not arrested until 15 months after the investigation begun. He was an afterthought. He is related to D2 and part of the Balani family. He was present in the office during the material time and on the 5^th May 2009.  However, there is evidence he ran his own business in Anglo’s office. He paid rent to be there and had several members of his own staff unrelated to the insurance business working there. He travelled out of Hong Kong extensively; not on Anglo’s business.

142.On paper he was involved with Anglo but to this extent only; he signed 4 journal vouchers, 6 legitimate bank instruction letters with D2, 3 false bank instruction letters with D2, 10 cheques and 2 telegraphic remittances as 1 of 2 required signatures. Most witnesses were unsure of his role there other than as the son in law of D2. PW6 on rare occasions had to get him to authorize a journal voucher only when D2 was not available, hence there only being 4 he signed out of many prepared on a daily basis.

143.He did attend a couple of meetings at OCI but not on his own. There is evidence D2 told him to accompany others to the meetings. Minutes of 2 very important meetings show he did not actively participate during the meetings.

144.D4 was in D2’s office when PW7 said he was called in and instructed by D2 to take a bag to D4’s office downstairs and destroy any ICICI bank letterheads he had in his desk. There is no evidence he spoke or did anything in this room that would connect him to the offences. He was merely present.

145.D4 did not create, alter or deliver any incriminating or relevant document. He did not say anything to anyone to indicate he had knowledge of any conspiracy. I have considered all the facts presented above that point to D4’s involvement and conclude that it is not enough to prove beyond a reasonable doubt his involvement in any conspiracy or that he had knowledge of the false accounting and agreement to defraud the Commissioner. Accordingly, D4 is acquitted of Charges 1 and 2.