HKSAR v. WONG PUI TING HEIDI

DCCC 83 & 463/2019
(Consolidated)

[2021] HKDC 142

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NOS 83 & 463 OF 2019

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JUDGMENT

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Introduction

1.  There were 2 defendants (D1 and D2) and both were convicted on their own pleas.  There was a 3^rd defendant (D3) who pleaded guilty earlier and was sentenced by another court on 29 October 2019.  This matter concerns only D1 and it is an application by the prosecution against her for a confiscation order, pursuant to Section 8 of the Organised and Serious Crimes Ordinance, Cap 455 (“OSCO”).  This application was made on 5 October 2020 immediately after her conviction but before sentence of 5 charges.

2.  D1 pleaded guilty to one charge of conspiracy to live on earnings of prostitution of others (Charge 1) and 3 charges of dealing with property known or believed to represent proceeds of an indictable offence (money laundering) (Charges 2, 3 and 6).  There was a charge 5, also money laundering which was left on the court file, not to be dealt with unless there is leave of this Court or the Court of Appeal.

3.  The hearing of this application was adjourned pending the prosecution tendering a statement pursuant to Section 10 of OSCO, a Section 10 Statement.  On 12 October 2020, D1 was sentenced to a total imprisonment term of 3 years.

4.  The hearing of the application for confiscation was adjourned to 30 December 2020.  By that date, the prosecution had filed a Section 10 statement. There was no Section 10 statement in reply from D1.  Prior to the hearing, the defence filed written submissions to which the prosecution replied in writing.  After the hearing, I reserved my judgement to be handed down on a date to be notified. I now give my judgement as follows.

The Charges

5.  The facts of the case are summarised in my reasons for sentence which do not need to be repeated here.  In brief, D1 operated 6 Internet websites offering sexual services of prostitutes between May 2009 and May 2018.  An operation was mounted by the police and undercover officers contacted various mobile phones advertised on those Internet websites offering sexual services.  Sexual services were arranged and offered in various hotels with payment for their services either made in cash or by credit card.  Sexual services were only offered after payment was made.  Those sex workers offering sexual services to those officers were either Russian or Venezuelan passport holders who were visitors in Hong Kong.

6.  The operation turned overt with both D1 and D2 with D3 arrested when the home of D1 was raided and searched on 15 May 2018.  D2 was one of her domestic helpers who assisted her in manning the phones and arranging sexual services for clients who called those telephone numbers.  D3 was also one of D1’s domestic helpers who faced similar charges and pleaded guilty earlier before another Court.

7.  D1 operated these 6 Internet websites, she was the mastermind of the sex business and her domestic helpers assisted her. D2 with D3 manned the phones at home, arranged prostitutes to service clients, obtained bank authorisations when credit cards were used, kept records of all the transactions in ledgers and oversaw cash and credit card payments into D1’s bank accounts.

8.  The 6 websites provided mobile phone numbers and email addresses as a means of contact.  The mobile phone numbers were registered in the name of Firstmount Investments Limited (“Firstmount”).  The defendant has been its sole director and shareholder since 2005.  The registered addresses of those mobile numbers was the defendant’s home address at Flat B, 43^rd floor, Tavistock 2, No.10A, Tregunter Path, Hong Kong.

9.  The legal owner of the defendant’s address is Vardenvale Limited.  The defendant and her elder sister are directors and shareholders with the defendant holding 99% of the shares whilst her elder sister holds the remaining 1%.  On 22 July 2020 a restraint order was granted against the defendant by the High Court restraining her realisable property in the amount of about $62 million.  The order applied to various bank accounts and this property at Tavistock 2.  Based on that order, the total value of the D1’s realisable property is $62,321,920.31.

10.  The police seized 17 handwritten ledgers that spanned the transactions between 2009 to 2018.  There were essentially 2 sets; a set of complete ledgers and a set of reduced ledgers.  The reduced ledgers had fewer entries with income recorded adding up to about HK$5.61 million.  The income in the reduced ledgers matches the income reported in Firstmount’s IRD tax returns for the respective years of assessment.

11.  The complete ledgers added up D1’s income and benefit to be $33,189,534.45.  D2 explained in a non-prejudicial statement to the police that the figures in the 5^th column of each page of each complete ledger represented D1’s net income, as opposed to her revenue.  This is explained by D2 in her non-prejudicial statement annexed as LSK-5 in the Section 10 Statement of Detective Senior Inspector Lam Sze-ki.  D1 admits the ledgers were records of her benefit and income from the conspiracy to live on the earnings of prostitution of others.

12.  D1 also admitted that money went into 3 bank accounts of Firstmount and herself, the 3 bank accounts of Charge 2, 3 and 6.  In the Summary of Facts D1 admitted that all of the monies she earned from Charge 1 flowed into the bank accounts of Charges 2, 3 and 6.  She was the beneficial owner of the monies in these bank accounts.  The aggregate amount specified in the particulars of Charges 2, 3 and 6 represents the defendant’s benefit from the offences of dealing with property known or believed to represent proceeds of an indictable offence, amounting to $32,345,153.69.

Application and pre-conditions for confiscation

13.  In proceedings for the making of a confiscation order under OSCO, the court must determine if the following preconditions are met: -

(a)  Has D1 benefited from the specified offence (S8(4)(a) of OSCO);

(b)  if so, what is the value of the benefit she has received? S8(4) of OSCO; and

(c)  what sum of money is recoverable from D1? (S8(6) OSCO)

14.  The prosecution has referred me to R v May 20081 AC 1028 at paragraph 8 where Lord Bingham of Cornhill posed those 3 questions that a court is required to address before considering a confiscation order.  The prosecution relies on the fact this authority was cited with approval by the Court of Final Appeal in HKSAR v Li Kwok Cheung George2014 17 HKCFAR 319 and HKSAR v Lin Kei Tat2016 1 HKLRD 482.

15.  The prosecution also reminds that the applicable standard of proof for applications of this nature is on the balance of probabilities; S8 (8B) of OSCO.

The live issue

16.  In the written submissions for D1 and confirmed in the hearing, the defendant does not deny she has benefited from the specified offences of conspiracy to live on earnings of prostitution of others and/or money-laundering.  It is not disputed that her realisable property is more than the value of her proceeds of the specified offences.  Therefore, the only live issue in this application is the value of the benefit she has received from the specified offences.

17.  The prosecution calculates the value of D1’s benefit from Charge 1, the conspiracy to live on earnings of the prostitution of others, a specified offence.  They calculate the total net income during the period specified in the particulars of the charge to be $33,189,534.45.  This is the sum they submit should be recoverable from the defendant.  This is painstakingly added up from every page of every ledger spanning 10 years therefore, it is the most accurate reflection of the value of the benefit D1 received.

18.  Alternatively, the sum they submit could be recoverable from the defendant as the value of her benefit from money laundering is the aggregate amount specified in the particulars of Charges 2, 3 and 6, that is $32,345,153.69.  In the hearing the prosecution clarified that it was the larger sum they want recovered but if I was not with them, then the latter sum should be recovered.

Contention of the parties

Defence submissions

19.  D1 has not adduced any new evidence for the purpose of these proceedings. Ms Draycott SC for D1 does not challenge the figures provided by the prosecution as set out in the Section 10 Statement.  In other words, D1 does not dispute the value of her benefit as quantified by the prosecution.  D1 submits that in all fairness, the alternative and lesser sum calculated by the prosecution should be the sum recoverable from her.  However, D1 contends that 3 sums as submitted should be excluded from a confiscation order that may be made against her.

20.  Those 3 sums are, namely (i) $5,228,749.00, monies that flowed through her accounts as proceeds of lawful escort and massage services as opposed to payments of immoral earnings; services without the provision of sexual services; (ii) $1,404,472.00, funds that were paid to D2; and (iii) $4,401,072.00 which represents half of all credit card payments deposited into D1’s Fubon bank account for the benefit of the prostitutes and their handlers.  D1 submits these 3 sums should be excluded from a confiscation order to be made.

21.  The 1^st sum of $5.2 million was calculated by the defence.  It was submitted that payments which were $2500 or less and set out in the complete ledgers, were not payments of immoral earnings.  Those payments over the course of 10 years from 2009 to 2018 added up to just over $5.2 million.  Tabs 1 to 10 of the defendant’s written submissions evidenced that calculation.

22.  The 2^nd sum of $1.4 million described as payments to D2 also came from the completed ledgers where on some, not all pages, there was a figure after the name Joan or the letter “J”.  The defence submits that those figures represented daily payments to D2, Joan as commission between 2009 to 2018.  Tabs 11 to 20 of the defendants written submissions evidenced that calculation.  The defence suggests that D2 must have received more than she claimed; more than an average of $1000 per month as commission.

23.  The 3^rd sum of $4.4 million represented half of the credit card payments made into a Fubon bank account number 0128-000-1830-7879, the bank account of Charge 2.  During the period of 5 May 2011 to 23 May 2018 a total of $8,802,145 was deposited into this account, all of which flowed from the vice business operated by D1.  The evidence, which is not disputed by the prosecution, is that D1 would receive half of the credit card payment whilst the other half was paid out to the prostitutes and their handlers.

Prosecution submissions

24.  On the other hand, Miss Fok, counsel for the prosecution contends the dividing line of $2500 by the defence to differentiate between lawful and unlawful activities is arbitrary and there is no evidence to support it.  There is no dispute that there was also no mention in the Summary of Facts agreed by D1 nor any suggestion in the course of mitigation nor during this hearing by way of a Section 10 statement in reply that D1 also arranged the provision of lawful escort and massage services as well as unlawful sexual services for payment.

25.  Miss Fok submits it is not now open to D1 to contradict the Summary of Facts where she admitted she controlled the bank accounts through which all of the monies earned by her from the conspiracy charge flowed.  It is not open to her to now suggest that part of the funds was in fact proceeds of lawful escort and massage services.

26.  The prosecution submits that D1 has failed to prove on the balance of probabilities that there were $5.2 million which were not part of a benefit from the specified offences.  I agree with this submission.

27.  As for the 2^nd sum of $1.4 million which D1 says should be treated as the proceeds of D2’s crime not hers, the prosecution suggests it is a bare assertion that is not supported by the complete ledgers.  Figures next to the word Joan or a “J” do not indicate that they must have been payments made to D2.  There are other plausible explanations for that figure, for example, she may have collected cash for that day’s transactions and that figure represents that cash which she deposited into D1’s bank accounts.  They could represent the orders dealt with by her directly over the phone on any specific day.

28.  D2 admitted to the police in her non-prejudicial statement that she received a bonus each month for running the vice syndicate of 0.005% of the monthly income.  She estimated she would earn on average an extra $1,000 per month on top of her domestic helper’s salary of $4,310.  That is approximately an extra 25% of her salary.

29.  I have referred myself to the complete ledger of 2012, MFI-1, to consider this contention by the defence.  As I have said, it is not every page that there is a reference to Joan or “J” and a figure.  When there is, I cannot believe they represent commission payments to D2.  For example, on March 8, 2012 the total of the 5^th column (D1’s net income) is calculated as a total of 9,450 with the figures 8,850 attributed to Joan.  On May 27, 2012 the total of the 5^th column is calculated as a total of 4,546 with the figure 3,246 attributed to Joan.  On September 22, 2012 a total of the 5^th column is calculated as a total of 21,405 with a figure 5,955 attributed to Joan.

30.  If the defence contention is correct then D1 was paying D2 as commission on divers days somewhere between 25% and over 90% of her daily income.  The defence have failed to prove on a balance of probabilities that those figures attributed to Joan or “J” on certain pages of the ledgers represented payments to D2.

31.  As for the 3^rd sum of $4.4 million being credit card payment not due to D1, this only applies to the alternative sum of $32,345,153.69 calculated as recoverable from D1 by the prosecution.  The prosecution agrees that that sum of $4.4 million was not deducted from the calculations of the aggregate amount specified in the 3 money laundering charges.  The prosecution agrees that if I were to take the alternative and lesser sum as recoverable from the defendant then I should deduct that $4.4 million.

32.  However, if I were to find the net income during the period specified in the particulars of Charge 1 of $33,189,534.45, the conspiracy to live on earnings of the prostitution of others, recoverable by the prosecution then, that contentious sum of $4.4 million was not included in the net income.  The net income set out in the ledgers did not include that proportion of credit card payments due to the prostitutes and their handlers.

Reasons for judgment

33.  The power of the court to make a confiscation order is contained in Section 8 of OSCO. Here, D1 has been convicted of one or more specified offences therefore an application may be made on behalf of the Secretary for Justice for a confiscation order. The section 10 statement supports the application and its contents not challenged.

34.  The only live issue as identified is the value of the benefit D1 received. Based on the Summary of Facts, the complete ledgers marked as MFI-1, the Section 10 statement and the written and oral submissions of the parties, bearing in mind the standard of proof applicable in the present proceedings, I find that the proceeds of Charge 1 should be recoverable. That is the net income D1 received as recorded in the complete ledgers, adding up to $33,189,534.45. I find that to be the total amount of D1’s proceeds from Charge 1, a specified offence.

35.  The complete ledgers are the best records of the value of the benefit D1 received. To take the aggregate amount specified in the particulars of Charges 2, 3 and 6, the money laundering charges, may not be as accurate, it may not reflect all the proceeds of the conspiracy to live on earnings of the prostitution of others. After all, the police did not initiate a more forensic investigation of these accounts as well as other accounts the 1st defendant held. Therefore, I base this order on the conviction of D1 of Charge 1.

36.  In the absence of any credible evidence and again, bearing in mind the standard of proof applicable in the present proceedings, I find no reason to deduct any of the 3 sums of monies as suggested by the defence.

37.  I accept the prosecution’s submissions that there is no proof that over $5 million were proceeds of lawful escort and massage services which should be deducted from the ultimate sum recoverable. Similarly, there is no evidence in the criminal proceedings, Summary of Facts or information in the confiscation proceedings to suggest that over $1.4 million of the sum recoverable was in fact paid to D2.

38.  Lastly, the credit card payments of over $4.4 million were not taken into account by the prosecution in calculating the value of D1’s benefit received from the specified offence, Charge 1. Therefore, there is no need to consider deducting this sum from the amount recoverable.

39.  There is no dispute that the realisable property of D1 is more than the amount which the prosecution seeks to confiscate.

40.  In the circumstances, this court is satisfied that the amount to be recovered in D1’s case under the confiscation order shall be the total amount of the net benefit as evidenced in and calculated from the 5th column of the complete ledgers. Therefore, the amount to be recovered from D1 is $33,189,534.45.

Order

41.  Based on the above, I make a confiscation order against D1 in the amount of $33,189,534.45. Pursuant to Section 13 of OSCO and at the request of Miss Fok, which is not opposed by Ms Draycott SC, D1 shall pay the aforesaid amount within 6 months from the date of judgment.

42.  In addition, pursuant to the same section of OSCO, I shall fix a term of imprisonment in default of payment which is in addition to the imprisonment term in respect of the offences convicted. For an amount exceeding $10 million, the maximum sentence is 10 years’ imprisonment. The prosecution has suggested on an arithmetic approach and calculation, the maximum of 10 years in default should be imposed in this case. Ms Draycott SC does not suggest otherwise. I therefore adopt that submission and order D1 to serve an additional imprisonment term of 10 years in default of payment.

43.  In view of the outcome of this present application, I do not foresee that there would be any application for costs. However, in case there is, then it can be dealt with on paper.