HKSAR v. YIP WAI YEE, TRACY AND ANOTHER

DCCC 765/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL ACTION NO. 765 OF 2011

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Reasons for Sentence

Introduction

1.  The instant case is nothing more than a Ponzi scheme which was executed by a married couple: D1-the wife and D2-the husband.

2.  The wife pleaded guilty to a total of 23 offences, 9 of which are fraud and the rest are procuring the making of an entry in a bank record by deception); 6 out of those 23 offences, the wife was jointly charged with the husband who was found guilty of all 6 charges after trial. They are charges 18 through 23- 2 fraud and 4 procuring offence.

3.  There are 9 victims in this case. As far as the 9 charges of fraud are concerned, they relate to 9 individuals who have been deceived into investing money in the scheme in the aggregate sum of nearly 20 million ($19,810,950.00 - the total amount of money as particularized in the 9 fraud charges).

4.  As far as the 14 charges of procuring are concerned, the amount of money as particularized in the charges added up to about 3 million ($2,989,110). There is no overlapping of dates between the offences of fraud and procuring, so the total amount of money put in by the 9 victims in this case is close to 23 million ($22,800,060 to be exact).

5.  The victims relevant to the husband’s case are Mr. Lee Chung Man and Au Kwan Yick who were the colleagues of the husband at the material times. They had put in altogether 2.3 million being $920,000 and $1,380,000 in the case of Mr. Lee and Mr. Au respectively.

The Facts

6.  The scheme of the couple works like this: the victims are offered bogus business opportunities, in joint venture with the wife, which promise fat rewards. The victims need only put up money and the wife supposedly does all the work. They were told their money would be invested in trading goods obtained from companies like Edward Keller or Kwong Leung Hing and promised a high return within short periods of time, but in fact there were no trading goods, no investment of any sort.

7.  Initially, the victims were given ‘profit’ as promised but only to find themselves going down the path further by putting up more money in this scam, and eventually they failed to recoup their investments.

8.  The scheme could have been started as early as 1995, according to one of the victims, Madam Wong Yuk Fun, she stated that she started investing with D2’s wife since 1995, initially the profits were paid on time but the principals were kept by D2’s wife with Madam Wong’s consent for further investment, things had changed since 1998 when D2’s wife began to pay less returns to Madam Wong and sometimes even no returns at all, but Madam Wong continued to give money to the wife and the amount ran up to more than 8.7 million just for the year of 2000. 

9.  The 23 charges in the indictment concern mainly the years of 1999 and 2000 with only two items relating to 1998 and 1996 respectively.

The scheme coming to an end

10.  D1 and D2 left Hong Kong in July 2000 and came back almost 11 years later in May 2011 because the wife was sick.

11.  According to D2, one day in July 2000, his wife tried to commit suicide by taking sleeping pills and was sent to a hospital; there his wife confessed to him it was all a scam. This was, D2 said, the first time he came to know about it. The reasons he went with his wife to the Mainland were that he could not face up to his family and his friends (PW2 and PW3) for they had lost money in this scheme because of him, and he also wanted to prevent his wife from killing herself.

12.  It is not clear how much the victims had actually lost in the scam for most of the victims had not kept a full record of the money they received from the wife as profits, but it is certain that up to now they have not recovered all the money they put in this scam.  

Mitigation

13.  The wife (D1), now aged 44, has a clear record. In fact, there isn’t much mitigation put forward on her behalf, counsel for the wife mainly relies upon two points, namely (1)- D1 is remorseful for what she did by pleading guilty to all the charges; (2)- her deteriorating health condition.

14.  As far as her health is concerned, the medical report of Dr. Ho Chun Pang, called for by the court, suggests that D1 is diagnosed to have end stage renal failure and is also suffering congestive rheumatic heart failure, rheumatic mitral and rheumatic tricuspid insufficiency.

15.  In a slightly more detailed medical report, produced by defence, Dr. Hau stated that D1 was maintained on regular hemodialysis two times per week and in the concluding paragraph, he wrote, “Concerning the prognosis, she maintained at end stage renal failure requiring regular dialysis. She had adequate clearance with the hemodialysis and the prognosis in terms of renal aspect is fair. However, she had chronic rheumatic heart disease pending echocardiogram for delineating the prognosis of her cardiac condition.” 

16.  Defence counsel submitted that according to doctor’s opinion in the Mainland, D1 is expected to live a few more years, but counsel produced no medical proof in support of such assertion.

17.  The husband (D2), now aged 49, has one previous record of using false instrument for which he was sentenced to a term of 6 months imprisonment on 24^th August 2011, but the record is subsequent to the commission of the present offences.

18.  D2 was educated up to Form 5 level and had worked in various jobs before he became a funeral officiant that, as counsel submits, was not a job well regarded in our society, but paid him reasonably well so that he could make an adequate living. He earned around $30,000 a month and was capable of paying off a mortgage of a flat he co-owned with his sister. Prior to falling in love with his wife, he enjoyed a stable life, but due to misguided loyalty to his wife, it led him to his trouble today. Counsel stressed that the husband was neither the mastermind nor the originator of the scheme.

19.  Regarding the losses of Mr. Lee and Mr. Au, counsel submitted that it was very difficult to calculate because of lack of evidence but judging from the high rate of profit which the victims had received, the amount of actual losses would be small.

Reasons

20.  Now I come to sentencing. I start with the amounts as particularized in the charges. In the case of the wife who faced 23 charges, the total amount comes close to 23 million; while for the husband, the amount is 2.3 million. These amounts represent the money the victims put into the scam.  

21.  As the evidence shows that the victims had failed to keep a proper record of the transactions they had with the couple, in particular a record of the money they received as ‘profits’. Counsel for the husband suggested that the losses to the victims would be small considering the promised high rate of return. However, I do not think so. 

22.  First of all, the so-called profits given to the victims at the initial stage of the scam, in my view, should not be viewed the same thing as compensation which we expect to have come from the fraudsters’ own pockets. If at the end of the day it is to be given discount, I think the extent should not be in the same amount as if it were compensation.

23.  As in any Ponzi scheme, the way fraudsters make money is to string investors along by paying earlier ones with money from subsequent recruits, always keeping some for themselves. It would make no criminal sense for fraudsters to use their own money when they could get that from others like the one in the present case.

24.  Though the victims were not sure how much exactly they got back from the defendants by way of ‘profits’, in any event I do not think that the amount would be much in comparison with that which they put in. 

25.  The reasons I say this because the victims in the present case had not been paid the promised profits especially in the final few months before the couple’s departure from Hong Kong, but on the other hand, they were asked to, and they did, put in more money during this period of time.

26.  Just by looking at the transaction activities of the very last month (i.e. June/July 2000) in two of the wife’s bank accounts (See the bank statements of the wife- HSBC Premier Savings & Hang Seng Bank-in-One Savings) will give us some ideas of how much money the couple ran off with-though not an exact figure, it is the right ball park.

27.  In the Hang Seng accounts the total amount of deposits for the month from 7 June to 6 July 2000 is $8,346,001 and of withdrawal is $9,319,604; while in the HSBC accounts, the amount of deposits is around 1.8 million and of withdrawal is around 1.9 million.

28.  It is clear from the evidence that in this final month, there were no payouts, but the victims continued to inject money into the scheme. I am sure that the withdrawals were for nobody’s benefit but the defendants. The withdrawals added up more than 10 million.

29.  The husband asserted in his own evidence that the couple relied on several ten thousand dollars to set up a fast food shop in the Mainland after they fled Hong Kong. I do not believe that- at least his wife’s bank accounts tell us a different story. Don’t forget the couple was able to sustain their living in the Mainland for almost 11 years!

30.  Counsel for the husband submitted that there was no direct evidence to suggest that the husband took possession of the money of the two victims, Mr. Lee and Mr. Au. It is true the money was paid into the wife’s accounts but what difference would it make if the couple, as the court has found, was acting in concert in cheating them. Of course, when the court considers the proper sentence for the husband, it will only look at the amounts he had cheated the two victims- that is amount as particularized in the 6 charges of which he was found guilty.

31.  Apart from her guilty plea and her deteriorating health condition, the defence on behalf of the wife put no other mitigating circumstances forward. The fact that she returned to Hong Kong after 11 years of absconding clearly is not being relied upon as mitigation, she came back simply to seek medical treatment for her various health problems. 

32.  As far as her health is concerned, I do not consider it to be a mitigating factor that carries much weight. In Ng Mei Fa CACC 420/2009，the appellant, who was given a 7 years imprisonment term for stealing her employer’s money, relied on her medical condition that she suffered from “end-stage renal failure” as a ground for reduction of her sentence, the Court of Appeal in refusing the application said in paragraph 61 of the judgment, “Whilst the court has considerable sympathy for the applicant and her family, for the fact that she is being treated for a serious medical condition whilst incarcerated for a lengthy period and therefore separated from her family, we are mindful of the relevant statement of the then Chief Justice Li in Yip Kai Foon (2003 3 HKCFAR 35: “……..under the guidelines and principles evolved by the courts, medical grounds will seldom, if ever, be the basis for reducing the sentence for crimes of gravity.” )”

33.  The wife had executed the scam as early as 1995, but as the evidence shows, it gathered momentum especially in the years 1999 and 2000, apparently new victims had been lured in and/or the existing victims were deceived into putting more money in than before.

34.  The scam was undoubtedly planned very carefully in advance and obviously it aimed at someone the defendants knew such as their friends or colleagues. The defendants have no ethics – they masqueraded themselves as someone who was trustworthy, after earning the trust of their friends or colleagues, then milked them millions of dollars with a simple trick, and in this sense, they had breached the trust the victims reposed in them.

35.  The defendants exploited them and the consequences to the victims were appalling- most of them ended up getting little or nothing back from their investment. The loot the couple enjoyed is over 10 million, to say the least. These are serious crimes.  

36.  Mr. Lee and Mr. Au explained in their evidence why they invested with D2’s wife simply because they trusted their colleague, D2, who had acted as their mentor when they started learning to become a funeral officiant. They have been cheated altogether 2.3 million, only a small part of it, I believe, they got back as ‘profits’.

37.  A million dollars are a lot of money to someone who does an average job as a funeral officiant, certainly it takes years for them to earn back their losses, if ever, but worse still, having been cheated by a malevolent friend like D2, it may take a lifetime to recover from the emotional anguish.

38.  To me, the harm done to our society by fraud is no significant difference from, say, by drugs, and fraud has become one of the constants of life. Experience tells us that no matter how tall a story is, there is always someone who will fall for it and in many cases the victims have been reduced to penniless. In order to protect the innocent, the sentence should, in my view, carry sufficient deterrence.

39.  There are no tariffs as such for frauds, but from cases like Ng Kwok Wing CACC 398/2007 (Chinese Judgment), Yeung Chiu CACC 105/2009 (English Translation), one may glean what the attitude of the appellate court is towards such crimes. In both cases, the Court of Appeal is of the opinion that for frauds involving money between 1 to 3 million, the appropriate sentence should be in the range of 3 to 5 years. In Yeung Chiu, the amount of money involved is 1.7 million, the appropriate sentence after trial, as the appellate court says, is one of 4 years imprisonment.

40.  In Ng Siu Ling CACC 160/2011(Chinese Judgment), the money involved is 1.8 million, in upholding a sentence of 4 years after trial, the Court of Appeal said that there were other aggravating features in the case such as premeditation, acting in concert with others, long period of fraudulent conduct over 2 years, victim incurring debts as a result and eventually the victim’s dwellings were re-possessed. 

41.  With regard to the procuring offences, they are actually part of the scam- just that the offences dealt with the aspect of the money going into the wife’s bank accounts to ‘invest’ with her. I’ll therefore rely on the authorities on fraud in sentencing for these offences.

42.  The approach that I’ll adopt in sentencing is as follows: first set the starting point by considering the circumstances of the case including the amount of money as particularized in the charge (this is the amount the victim was cheated), then reduce the term for mitigating factors, if any, such as guilty plea, and then further reduction is given for the fact that the victims received some profits (though this is the money from among the victims themselves).

43.  As far as the wife is concerned, apart from her guilty plea and clear record, there is no other mitigation that is of substance. The same applies to the husband except that he was convicted after trial, and from his mitigation, I detect no remorse on his part about the crimes he had committed. Of course, he has every right to maintain his innocence even though he was convicted after trial, his lack of remorse would not constitute a factor for increasing his sentence, and it is just that he does not have it as mitigation for the reduction of sentence.

44.  His counsel was trying to suggest in mitigation that had it not been for his wife engineering such scam, he would not have been where he was today. I can only say that the evidence shows the scam went on for some years, he came into the scam at a late stage- about a year before the scheme collapsed in July 2000, but, I would say, he must have known about it when they got married in 1997 because he claimed he himself had invested 1 million in it. In terms of criminality, I do not think there is any real difference between the couple in relation to the two victims, Mr. Lee and Mr. Au.

45.  The husband has a previous record of using false instrument (sentenced to 6 months on 24 August 2011) that is after the commission of the present offences, I’ll therefore treat him as a person of clear record for the purpose of the present case.

46.  Taking into account all the mitigation put forward for the wife including her clear record and giving the usual 1/3 discount for the plea, a further reduction for some profits the victims had received. Take charge 1 for example, I take 6 years as the starting point, reduce it to 4 year for the plea and give a further reduction of 20% for ‘profits’ received, the individual sentence for each offence is worked out as follows:

	Term after plea	Term after
		Further Discount
	( 1/3 discount )	( 20% discount )
Charge 1- ($5,420,000)	4 years	38 months
Charge 2- ($294,000)	8 months	6 months
Charge 3- ($1,750,000)	2 years	19 months
Charge 4- ($10,235,000)	56 months	44 months
Charge 5- ($20,000)	6 months	4 months
Charge 6- ($65,100)	6 months	4 months
Charge 7- ($50,000)	6 months	4 months
Charge 8- ($35,000)	6 months	4 months
Charge 9- ($20,000)	6 months	4 months
Charge 10- ($14,210)	6 months	4 months
Charge 11- ($387,150)	8 months	6 months
Charge 12- ($25,000)	6 months	4 months
Charge 13- ($70,000)	6 months	4 months
Charge 14- ($35,800)	6 months	4 months
Charge 15- ($492,000)	1 year	9 months
Charge 16- ($230,000)	8 months	6 months
Charge 17- ($1,356,800)	2 years	18 months
Charge 18- ($180,000)	8 months	6 months
Charge 19- ($130,000)	8 months	6 months
Charge 20- ($150,000)	8 months	6 months
Charge 21- ($460,000)	1 year	9 months
Charge 22- ($200,000)	8 months	6 months
Charge 23- ($1,180,000)	2 years	19 months

47.  In the case of the husband, having considered all the mitigation put forward including his clear record, the individual sentence for charges 18 – 23 offences is set out as follows:

	Starting Point	Term after
		Further Discount
		(20% Discount)
Charge 18- ($180,000)	12 months	9 months
Charge 19- ($130,000)	12 months	9 months
Charge 20- ($150,000)	12 months	9 months
Charge 21- ($460,000)	1½ year	14 months
Charge 22- ($200,000)	12 months	9 months
Charge 23- ($1,180,000)	3 years	28 months

48.  Taking the totality principle into account, for D1 I order that the term (38 months) of charge 1 is to run consecutively to 22 months of the term (44 months) of charge 4, all the rest are to run concurrently; the total term is one of 5 years imprisonment; for D2, I order that the term (28 months) of charge 23 is to run consecutively to 4 months of each of the other charges, the remaining are to run concurrently; the total term is one of 4 years imprisonment.