HKSAR v. CHU PIK ANG

DCCC 105/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 105 OF 2012

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REASONS FOR SENTENCE

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1.  The defendant pleads guilty to one charge of dealing with property knowing or having reasonable grounds to believe the property represented the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Chapter 455.

2.  The plea of guilty is entered at the beginning of what is a re-trial the defendant having already stood trial in August last year on the same charge in the High Court in HCCC 320/2010 before Wright J.  The jury on that occasion were unable to reach a verdict and Wright J transferred the case for retrial in this court.

3.  In summary Tungda Innovative Lighting Holdings Limited (“Tungda Innovative”), Tungda Industrial Limited and Tungda Electrical and Lighting Limited (“the Tungda group of companies”) were founded by the defendant’s family. 

4.  In July 2002 Tungda Innovative was listed on the Growth Enterprise Market of the Hong Kong Stock Exchange.  One of the requirements of a listed company is to publish quarterly reports as to the company’s financial position, including turnover, which represent the value of goods the company has sold during the relevant financial period. 

5.  In publishing the quarterly reports Tungda Innovative included a significant portion of fictitious sales purporting to be sales to overseas customers (see paragraphs 7 and 18 of the admitted facts).  Money was circulated between the personal accounts of either the defendant or one of her brothers and the various accounts of the Tungda group of companies to give the appearance the sales were genuine.

6.  One such account used was the one held by the defendant with the Belgian Bank.  After monies were deposited into this account the monies would then be withdrawn and deposited into the account of Tungda Innovative via the accounts of the other companies in the Tungda group of companies, the monies being used to disguise as payments received from overseas customers.  Shortly afterwards the money would be returned to the defendant’s account, again via the accounts of the other companies in the Tungda group of companies (see paragraphs 6, 8, 19, 24 and 25 of the admitted facts).  

7.  The same monies would be used over and over again to support the fictitious sales. This continued for almost 19 months between August 2002 and March 2004, during which a total sum of $68,458,832 was dealt with in this way (see paragraphs 9 and 21of the admitted facts).  

8.  Money laundering is a serious offence for which deterrent sentences are required (see HKSAR v Xu Xia-li & another [2004] 4 HKC 16 at paragraph 18).  In HKSAR v Javid KamranCACC 400/2004 the court, stressing the need for deterrent sentences, said that it was not possible to lay down guidelines, as there is a very wide range of culpability.

9.  A number of significant factors have been identified as relevant in determining the culpability of a defendant, including the nature of the offence that generated the laundered money and the extent to which the offence assisted the crime or hindered its detection; whether the defendant had knowledge of that underlying offence or has turned a blind eye to the source of the money; whether there was an international element to the commission of the offence; the degree of sophistication of the offence and the level of the defendant's participation, including the length of time the offence lasted and the benefit he derived from the offence; and the amount of money involved (see for example Secretary for Justice v Jerome Yuval Arnold Herzberg [2010] 1 HKLRD 502; HKSAR v Hsu Yu-yi [2010] 5 HKLRD 545; and HKSAR v A male known as Boma Amaso [2012] 2 HKLRD 33.

10.  Whether or not the defendant knew the source of the money the courts have emphasised a defendant is to be sentenced on the facts of the money laundering charge and not on the facts of the underlying offence(see for example HKSAR v Chen Szu-ming CACC 270/2005 and HKSAR v Yam Kong-lai[2008] 5 HKLRD 384).  Further, sentence should mainly reflect the amount of the money laundered and not the benefit obtained by the defendant (see HKSAR v Wu Jianbing [2012] 1 HKLRD 781). 

11.  In passing sentence I have borne in mind all that said by the Court of Appeal in HKSAR v Leung Pui-shan CACC 317/2007 of the need for individual justice. 

Mitigation

12.  In passing sentence I take into account everything said on behalf of the defendant by Mr Ng together with all the letters submitted on behalf of the defendant, which speak very highly of her as a loving and caring mother, daughter, sister and friend.  In particular I take into account how the defendant has single-handedly brought up two daughters after the father left without paying any maintenance. This is fully borne out in the background report, the content of which I have carefully considered.   

13.  Mr Ng asks that I consider imposing a community service or a probation order.  I am satisfied the offence is far too serious for the imposition of either a community service or probation order. Alternatively Mr Ng submits a suspended sentence is appropriate.  In support Mr Ng submits three main grounds, the role of the defendant was minimal; the ill health of the defendant and her daughter and the delay in the proceedings.  These grounds are detailed in Mr Ng’s written skeleton submissions in mitigation.

Defendant’s role

14.  The prosecution accept the defendant had no knowledge of the underlying fraud (see paragraph 20 of the admitted facts). The defendant’s role was limited to opening the Belgian Bank account and signing blank withdrawal slips to facilitate the circulation of the monies used to support the fictitious sales. Although the defendant may not have known how much actually passed through her account, by opening the account and signing the blank withdrawal slips the defendant dealt with the monies passing through her account, having reasonable grounds to believe the monies were the proceeds of an indictable offence               (see paragraphs 10, 11, 22 and 26 of the admitted facts and paragraphs 27 and 28 of Mr Ng’s written submission).

15.  Although the defendant’s role was limited this was still an essential role which assisted the commission of the fraud.  As Wright J said, when passing sentence in HCCC 320/2010, in respect of the elder brother, this was a vital part of the scheme.  Whilst the defendant may not have had knowledge of the underlying scheme she, as accepted by Mr Ng, turned a blind eye as to the use of the bank account for which she willingly signed blank withdrawal slips (see paragraph 26 of Mr Ng’s written submission).

16.  In HKSAR v Lung Yun-ngan CACC 482/2010, directors of a stationery company facing financial difficulties conspired together to raise funds by defrauding various banks by submitting bogus applications for letters of credit for which there was no genuine underlying transactions.  The letters of credit were made payable to a different company, which would remit the monies back to the stationery company either directly or via various intermediary companies.  The role of the defendants, a married couple, acting on the request of the elder brother of the wife, agreed to become shareholders and directors of one of the intermediary companies used and in doing so signed blank cheques used to remit money to the stationery company.  The defendants had no knowledge of the fraud.

17.  In dismissing an appeal against a sentence of 12 months imprisonment, imposed after trial, for one offence of dealing with $3,074,931, the Court of Appeal said:

“Money laundering flourishes when persons are prepared to turn a blind eye to the true nature of the funds with which they are dealing. It not only corrupts individuals, it threatens the integrity of our banking and financial services.”

18.  Further as to the culpability of someone who turns a blind eye to the source of the money Stock VP observed in Boma Amaso at paragraph 40(2)(a):

“Where the predicate offence is known to the court, the question of knowledge of the offender as to the nature of the predicate offence is relevant in that the person who knows the nature of the predicate offence is more culpable than the person who does not….. But this is a question to be approached with considerable caution, since many offenders will assert ignorance of the origin of the proceeds in question, particularly where the offender has deliberately turned a blind eye thereby choosing not to know. In such a case it must be recognised that he is nonetheless “assisting in the original crime, whether with knowledge or blind eye knowledge of it”…….. The scheme and purpose of the legislation is to ensure care and honesty in the handling of other people’s money and those who are prepared to handle money on other people’s behalf and turn a blind eye to the source of that money do so at their own risk….. So the person who is aware of the fact that he is dealing with proceeds of an indictable offence but deliberately chooses not to ask questions is barely less culpable than the person who asks or who is told.”

19.  In considering the culpability of the defendant I have also taken into account that the defendant opened the bank account at the request of her elder brother, in whom she trusted (see paragraphs 22-25 of Mr Ng’s written submission) and that there is no evidence of any reward received by the defendant.

20.  Notwithstanding the role of the defendant was limited I am nevertheless satisfied in the circumstances that an immediate custodial sentence is appropriate and that there are no exceptional circumstances to suspend that sentence.   

Ill-health

21.  Mr Ng has detailed the illness suffered by the defendant and the elder daughter (see paragraphs 38-47 of Mr Ng’s written submission).  Fortunately the present prognosis for the defendant remains good, the surgery in June of last year being considered as successful and recovery having been uneventful.  I have also considered the report of Dr Sylvia Chen as to the defendant’s psychiatric condition.  The daughter whilst suffering from chronic illness, which can at times restrict her movements, is still able to hold down a full time job as indeed does the defendant.

22.  Whilst one has sympathy with anyone suffering from serious illness I am satisfied in the circumstances of this case this does not amount to exceptional circumstances to either suspend the sentence or reduce an otherwise appropriate sentence (see for example HKSAR v TSE Tat-fung & others CACC 167/2008 at paragraphs 359-366). 

Delay

23.  Delay in bringing an offender to justice is a mitigating factor which can be taken into account in sentence.  All the circumstances must be looked at including whether the offender has acknowledged guilt; whether the delay has given the offender the opportunity to rehabilitate himself; whether restitution has been made; whether there was a legitimate expectation the matter will not be further pursued; the size of the investigation and whether the time taken to bring the case to court was longer than necessary (see for example HKSAR v CHEUNG Suet-ting CACC 226/2009). 

24.  The investigation into Tungda Innovative began in 2005, at which time the defendant’s two brothers were arrested.  Clearly the investigation was complex and took a very long time to finish.  Mr Ng accepts there is no fault on the part of the prosecution in this regard (see paragraph 53 of Mr Ng’s written submission). This is perhaps not surprising considering Wright J when passing sentence in HCCC 320/2010 said that the investigation was carried out diligently and with as much speed as sensibly could have been expected.  Wright J gave no discount on account of delay. 

25.  Equally there can be said to be no fault on the part of the defendant.  The defendant however was not arrested until August 2010 and went on trial in the High Court together with her brothers in August of last year.  The defendant stood trial facing two charges of conspiracy to publish false statements and one charge of dealing with property knowing or having reasonable grounds to believe the property represented proceeds of an indictable offence.  Wright J ruled the defendant had no case to answer in respect of one of the conspiracies and the jury acquitted the defendant of the other conspiracy charge.  The jury could not however reach a verdict in respect of the money laundering charge, which was transferred to this court for retrial.

26.  Authority is clear that on a re-trial the defendant is not entitled to a one-third discount for pleading guilty as the plea is not a timely plea (see HKSAR v Chui Chi-wai & another (No 2) [2000] 1 HKLRD 704).  The authorities relate to cases where the defendant was originally convicted and a re-trial ordered.  I am of the view no distinction should be drawn where a re-trial is ordered as a result of the jury not being able to reach a verdict.  Whilst there may be a number of reasons why the defendant chose not to plead guilty to this charge in the High Court as alluded to in section B of Mr Ng’s 2nd skeleton submission, the fact remains the plea is not a timely plea.

27.  Whilst the defendant may have been under stress as a result of her brothers being arrested there cannot be said to be undue delay between her arrest and trial.  Further there was no acknowledgement of guilt until the first day of the re-trial, although I am told the defendant verbally indicated a few weeks before trial her intention to plead guilty, which intention was confirmed nearer to trial.  I find there are no exceptional circumstances arising from the time taken to bring this case to trial.  Further I am satisfied no additional discount should be given on account of delay.  Rather the plea not being a timely plea I am satisfied a discount of one-quarter and not one-third is appropriate.

28.  I have carefully considered all matters put forward by Mr Ng.      I am satisfied individually and collectively they do not amount to exceptional circumstances to suspend the sentence. 

Starting point

29.  Mr Ng submits that the facts of the present case are quite unique, in particular the level of the defendant’s participation (see paragraph 62 of Mr Ng’s written submission).  I accept the way the money in the defendant’s bank account was circulated over and over again is unlike other cases that usually come before the courts and that sentence should reflect this fact and not purely the total amount of over $68 million. 

30.  This was the approach taken by Wright J when passing sentence in HCCC 320/2010 on the brother Chu Chick-kei, who was also charged with one count of dealing with property knowing or having reasonable grounds to believe the property represented the proceeds of an indictable offence.  In passing sentence Wright J said:

“Insofar as the money-laundering charge only against the 2nd accused is concerned, the evidence is that $44,437,900 passed through his bank account between 6 February and 20 August 2002. It has to be said that this is not a run-of-the-mill money-laundering exercise where different substantial sums of cash are received from a third party into a bank account and then passed onto another third party.

Although the deposits into the 2nd accused’s account amounted to over $44 million, the conclusion of the expert witness called to testify in regard to these counts was that the transactions took place in order to conceal the falsification of the turnover figures by purporting to be payments for genuine sales and that the money used to create that false impression was then paid back into the 2nd accused’s account in order to be available for the next set of false payments.

Thus, although the deposits amounted to over 44 million, the actual amount of cash that was used to create those deposits was substantially less. Even so, the conduct satisfied the essential elements of the offence. In my judgment, a sentence lower than that that would normally be imposed for money-laundering of the more common kind involving this sum of money would be justified in these circumstances. I take a starting point of 4 years’ imprisonment.”

31.  Whilst the dealing covers a period of nearly 19 months and the total amount is more than that which passed through her elder brother’s account, a clear distinction is to be drawn in the roles of the defendant and her elder brother.  The culpability of the defendant is much lower than that of her brother, who played an active part in the fraud, including the fraud perpetrated to secure the listing of Tungda Innovative.  As Wright J said earlier in his reasons for sentence:

“The conduct of the accused throughout their involvement demonstrates a cynical, calculated and persistent course of conduct designed to deceive the regulators in the exercise of their duty…”

32.  Mr Ng refers me to the sentence imposed by HH Judge A. Wong in HKSAR v Tsang Wai-lun & others DCCC 24/2008.  This case also concerned a circular fund flow of money between various accounts so as to deceive the Stock Exchange of Hong Kong and the shareholders of a listed company, that acquisition and disposal of interests in a project were genuine. 

33.  Five defendants were convicted after trial of dealing with property knowing or having reasonable grounds to believe the property represented the proceeds of an indictable offence.  Accepting the facts of the case represented a very unique case of money laundering HH Judge Wong took starting points of between 9-18 months imprisonment         (see paragraphs 63-74 of the Reasons for Sentence).  Discount was given on account of positive good character, delay, and ill-health thereby reducing the sentences to between 6-12 months imprisonment              (see paragraphs 77-89 of the Reasons for Sentence). 

34.  Mr Ng in particular refers to the sentence of D6, a chartered accountant, who was sentenced on the basis he did not have knowledge of the fraud perpetrated on the Stock Exchange and the shareholders.  D6’s role was to make arrangement for various companies to be involved in the circular fund arrangement (see paragraphs 44-45, 63 and 71-76 of the Reasons for Sentence and paragraph 65 of Mr Ng’s written submission). 

35.  I must say on the information placed before me the sentences for the money laundering charge appear to be lenient, in particular for the professionals as well as those defendants directly involved in the fraud, especially when considering the sentence of 4 years imposed by Wright J in HCCC 320/2010.

36.  In my view the role of the defendant is somewhat similar to that played by the defendants in HKSAR v Lung Yun-ngan, in that banking documents were signed in blank. The Court of Appeal in that case said an immediate custodial sentence was inevitable and that the sentence of 12 months after trial contained an element of mercy.

37.  Taking into account the role of the defendant was limited I am satisfied the proper starting point after trial is one of 1 year and 6 months  imprisonment, which I reduce by 2 months by reason of the defendant’s clear record.  Giving the defendant credit for her plea of guilty reduces the sentence to 12 months imprisonment.   

38.  The defendant is convicted and sentenced to 12 months imprisonment.