HKSAR v. ZHANG QIANG

DCCC 135 & 725/2014
(Consolidated)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NOS 135 & 725 OF 2014 (CONS)

----------------------

----------------------

---------------------

Reasons for Sentence

---------------------

1. The defendant pleads guilty to five charges of fraud. He is a mainland resident. On 9 July 2013, he voluntarily surrendered himself to a Hong Kong police station and confessed that he had deceived three persons, PW1, PW2 and PW5, of a total amount of US$1.75 million. He said he had used up all the money and he felt guilty.

2. Police investigation revealed that a total of five victims, PW1 to 5, had been deceived.  PW1 to 4 are all mainland residents.  PW1 to 3 are business friends of the defendant while PW4 is his ex-schoolmate.  PW5, the defendant’s brother-in-law, is a resident in the United States.

3. According to the victims, the defendant owned a large scale company in Wuxi, China.  He told them he had an investment company in Hong Kong called QZ Capital Limited which had a high yield investment fund jointly operated with the Hongkong and Shanghai Banking Corporation (“HSBC”). The defendant invited the victims to invest in the fund.  He sent a forged HSBC investment application form to them by email.  Lured by the false representation, the victims transferred money to the defendant’s bank accounts. 

4. There were three bank accounts in Hong Kong involved insofar as the charges are concerned:

(a) Account 1 held in the name of QZ with HSBC;

(b) Account 2 held in the name of AEI with HSBC;

(c) Account 3 held in the name of the defendant with China Merchants Bank (“CMB”).

Charge 1

5. Between November 2009 and October 2010, PW3 remitted a total of Renminbi 3.24 million to the defendant’s bank account in China (not the subject matter of the charge) and US$70,000 to Account 1 in October 2011 for investment in the fund.

6. The defendant returned about Renminbi 1.23 million to PW3 between May 2010 and March 2012.  The defendant became out of touch since May 2013.

Charge 2

7. Between 15 November 2011 and 29 February 2012, PW2 remitted a total of US$1 million to Account 1 for investment in the fund. Between January and June 2012 the defendant returned a total of US$222,000 to PW2.

Charge 3

8. PW4 transferred Renminbi 2.4 million and US$25,000 to the defendant’s bank account in China (not the subject matter of the charge).  He also remitted a total of US$100,000 to Account 3 in April 2012. 

9. On 23 April 2013, the defendant returned Renminbi 100,000 to PW4.

Charge 4

10. On 31 December 2012, PW1 remitted US$250,000 to Account 1 for investment in the fund.  In about May 2013, PW1 found out from HSBC that the defendant had no investment fund cooperated with them.  He demanded the defendant to return the money.  The defendant said he would return the money or he would surrender to the police.

Charge 5

11. PW5 is the brother-in-law of the defendant and resides in the United States.  Between 24 May 2011 and 11 February 2012, he remitted a total of US$740,000 to Account 1.  He did not receive any of his investment in the fund.

12. In the interviews with the police, the defendant admitted the offences in Charges 2, 4 and 5 while denying Charges 1 and 3. Regarding Charge 1, he could not remember the remittance of US$70,000 by PW3. Regarding Charge 3, he said the US$125,000 was a loan from PW4.

13. The victims in Charges 1 to 5 parted with a total of US$2.16 million.  The balance of Accounts 1, 2 and 3 was zero or close to zero as in June 2013.

14. While not stated expressly in the Summary of Facts, it transpired that the deception did not actually occur in Hong Kong.  All the victims and the defendant are not Hong Kong residents and have no connection with Hong Kong.  By virtue of the Criminal Jurisdiction Ordinance, Hong Kong courts have jurisdiction of the matter insofar as the money deposited into Accounts 1 to 3 are concerned. 

15. Miss Chan, solicitor for the defendant, agrees that Hong Kong courts have jurisdiction over the offences specified in the five charges. 

16. The defendant is a 39-year-old man, with no criminal conviction record in Hong Kong. 

17. In mitigation, Miss Chan tells the court that the defendant is married with two children.  Because of this case, the defendant has separated with his wife who is now living with the children in the United States.  The defendant will also lose his residence in the United States because of the break of continuous presence. 

18. The defendant was born in China.  He received his university education in the United States and obtained a Master degree in computer science in year 2000.  After graduation, he worked as a computer engineer in the States.

19. In 2009 he set up his own companies running programmes in stock trading in Wuxi, China.  The company suffered a huge loss. The defendant therefore committed the present offences in order to get money to keep the business going and to pay off the company’s debt. 

20. It is said that the defendant is now very remorseful and shameful for what he has done.  He therefore surrendered himself to the Hong Kong police and made full confession.  He provided all information and means of contact of the victims and his bank account details.

21. As to the reason why the defendant had to report to Hong Kong police and not Chinese authorities, Miss Chan explained that the defendant had initially surrendered himself to the local police in Wuxi.  However, the local police refused to take up the matter saying that it was not within their jurisdiction.  The defendant therefore took a trip to Hong Kong specifically for the purpose of surrendering himself.

22. In respect of Charges 1 and 3 which the defendant denied during investigation, Miss Chan explained that the defendant only confused with other money he borrowed from the two victims as loans.  When he clarified from the documents obtained from the police, he admitted his guilt.

23. Miss Chan, while drawing my attention to R v Clark, submits that the present case is not a breach of trust case.  She asks me to consider the principle of totality and take a starting point lower than the one taken in HKSAR v Chik Wai Wan Stephen CACC 254/2008, which I brought to the attention of both parties.

24. The victims in this case are not Hong Kong residents, neither is the defendant.  The only connection of the offences with Hong Kong is that the stolen monies were received in Hong Kong bank accounts. Although no citizen in Hong Kong has been deceived, Hong Kong’s reputation as an international financial centre can be damaged by the defendant using local banks to receive proceeds of crime. 

25. Fraud, be it done in Hong Kong or elsewhere, must be deterred.  Whether the victims are Hong Kong residents or not is neither here nor there. 

26. In deciding the proper starting point for each of the offences, the first issue is whether it was a breach of trust situation.

27. Mr Hui, public prosecutor, initially asked the court to treat the case as one very close to breach of trust.  He relied on HKSAR v Ng Tik Ki Chaneki, CACC 68/2011.  When his attention is drawn to HKSAR v Chik Wai Wan, Stephen, he fairly concedes that the present case should not be treated as a typical breach of trust.

28. In my view, while the defendant did take advantage of the trust reposed in him by his friends and relative, he was not in a special relationship with them to place him in a position of trust to justify an enhancement of sentence. 

29. Two English Court of Appeal cases, R v Trevor Clark [1982]2 Cr App R 137, a case referred to by Miss Chan, and R v Barrick [1985]81 Cr App R 78, have been adopted by Hong Kong courts in considering the proper level of sentence in cases of theft and fraud when the offenders had occupied a position of trust.

30. While the present case is not a typical breach of trust case, some of the factors to be taken into account under the Barrick sentencing guidelines have general relevance to offences of dishonesty.  These factors include, in particular, the period over which the fraud or theft has been perpetrated, the effect on the victim, the use to which the money or property dishonestly taken was put and those matters of mitigation special to the offender himself. 

31. I also make reference to the sentencing bands in HKSAR v Cheung Mee Kiu, [2006]4 HKLRD 776 as adjusted in HKSAR v Ng Kwok Wing, [2008]4 HKLRD 1017.

32. The fraud perpetrated by the defendant for the five charges lasted for about four years.  While there is no evidence as to the effect on the victims, the money they have been deceived are no doubt significant sums.  There is also an international element in this case.

33. On the other hand, I would accept that the defendant deceived the money to support his own company which suffered huge loss and I find that the fraud in this case was not a sophisticated one.  I further accept that the defendant is now remorseful.

34. I would ignore the money being deceived and deposited into the defendant’s bank accounts other than Accounts 1, 2 and 3 which, not being the subject matter of the charges, are not within my jurisdiction.

35. Charge 1 involves US$70,000, equivalent to about HK$540,000.  I take 18 months’ imprisonment as the starting point.

36. Charge 2 involves US$1 million which is equivalent to about HK$7.75 million.  I adopt 54 months’ imprisonment as the starting point. 

37. Charge 3 involves US$100,000, equivalent to about HK$775,000.  I take 22 months as the starting point.

38. Charge 4 involves US$250,000, equivalent to about HK$1.9 million.  30 months as the starting point is adopted.

39. Charge 5 involves US$740,000, equivalent to about HK$5.7 million.  I adopt 48 months’ imprisonment as the starting point.

40. A defendant should normally be entitled to one-third reduction only for a timely plea of guilty.  The defendant in this case voluntarily surrendered to Hong Kong police authorities when, as the prosecution agrees, there was no investigation of the offences afoot.  The offences might not have come to light without the defendant’s confession. 

41. In this case, even if the offences were somehow detected by the Hong Kong police, the prosecution could not have been brought home to him if he, not being a Hong Kong resident, did not surrender himself to Hong Kong jurisdiction.

42. For his confession, further discount should be given to him on top of the usual one-third reduction (See HKSAR v Ng Wing Chung CACC 176/2005).  I am therefore prepared to give him a total reduction at about 40 per cent for his plea and confession.

43. Restitution should be taken into account.  It is conceded by Miss Chan that only the US$222,000 in respect of Charge 2 should be properly treated as restitution.  I will allow a further reduction of 3 months. 

44. The sentences of each offence are therefore as follows:

Charge 1 - 10 months’ imprisonment;

Charge 2 - 29 months’ imprisonment;

Charge 3 - 12 months’ imprisonment;

Charge 4 - 18 months’ imprisonment;

Charge 5 - 28 months’ imprisonment.

45. The last question is totality.  Discounting the money the defendant had returned to PW2 in Charge 2, the victims in Charges 1 to 5 parted with a total of about US$1.93 million which is equivalent to about HK$15 million.  The fraud lasted for about four years.  The defendant in Chik Wai Wan, Stephen used a false instrument to deceive his friend into investing US$2 million.  The Court of Appeal said a starting point of 7½ years’ imprisonment would have been more appropriate.

46. In my judgment, after all deductions for the defendant’s plea and confession and restitution, a total term of 46 months’ imprisonment can reflect the defendant’s total culpability in the five charges.

47. To reach this total term of imprisonment, I make the following order.  Sentences on Charges 1 to 3 are to run concurrently with each other.  Sentences on Charges 4 and 5 are to run consecutively.  Sentences on Charges 1 to 3 shall run concurrently with those in Charges 4 and 5.  The total term of imprisonment is 46 months’ imprisonment.