HKSAR v. TARAZONA EDGAR HENRY & ANOTHER

CACC346/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 346 OF 2003

(ON APPEAL FROM DCCC NO. 521 OF 2002)

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REASONS FOR JUDGMENT

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Hon Ma CJHC (giving the judgment of the Court) :

Introduction

1. On 4 August 2003, the Applicants were convicted after trial in the District Court before His Honour Judge Line of possessing false instruments, being 750 US$500,000,000 United States Treasury Bonds ("the Treasury Bonds"), contrary to section 75(1) of the Crimes Ordinance, Cap.200. They had been charged alternatively under section 75(2) as well. The difference in the two charges was that under section 75(1), apart from the possession of false instruments and the knowledge of falsity, there also had to be proved an intention to use the false instruments to induce another person to accept them as genuine and in doing so, causing that person to act to his prejudice. A section 75(1) offence carries a maximum sentence of 14 years; under section 75(2) the maximum sentence is 3 years.

2. The Applicants were sentenced on the same day each to 3 years' imprisonment. Both sought leave to appeal against conviction and sentence. On 1 April 2004, however, the 1st Applicant abandoned his application for leave to appeal against sentence.

3. Accordingly, at the hearing on 8 April 2004, there were before us for determination the Applicants' applications for leave to appeal against conviction and the 2nd Applicant's application for leave to appeal against sentence. At the conclusion of submissions from Mr James McGowan, who represented both Applicants, we dismissed the applications with reasons to be handed down on a later date.

The case against the Applicants

4. On 3 April 2002, the police raided a room shared by the Applicants at the Inter-Continental Hotel. There, they found the following :-

(1) Three sealed metal boxes which contained the Treasury Bonds with a total face value of US$375 billion. The Treasury Bonds were all counterfeit. We have seen them. They each showed a value of US$500 million, printed together with a picture said to be of President McKinley.

(2) In the room were also found a computer linked to a website displaying images of US banknotes and a digital camera also containing these images. The images were downloaded, printed into hard copy form and made exhibits. We have seen these exhibits in the bundles before us. They comprise, among others, images of purported US$1 million bills containing on their face obvious errors such as "ONE MILLIONS DOLLAR" or "ONE MILLION DOLLAR". These notes displayed pictures of President George Washington.

(3) There was a black bag found in the room as well. This bag contained several documents, one of which was an unsigned letter dated 17 August 2001 from the 1st Applicant to a Mr Momohara. The contents of this letter are not easy to understand out of context but essentially seemed to relate to a transaction, in which the 1st Applicant, Momohara and a Mr Xin were involved, dealing with the delivery by the 1st Applicant of 300 US$1 million notes to someone in exchange for a fee or commission of US$1 million. Reference is also made in the letter to some "phony" bills.

(4) The 1st Applicant, together with two other men (a Mr Lopez and a Mr Valenzuela), were present in the room.

5. At about the same time, the 2nd Applicant was arrested at the lobby of the hotel as were Momohara and a Mr Cheung Chung Kit. On Mr Cheung's person was found 88 counterfeit US$1 million notes. The numbers on 44 of these notes matched the images on the website to which the computer in the room was linked (as well as those in the digital camera). The digital camera, I should add, belonged to the 2nd Applicant.

6. Given these basic facts which, as the learned judge recorded, were not really challenged by the Applicants at trial, it is clear that the following inferences could permissibly be drawn :-

(1) The Applicants occupied the room at the Inter-Continental Hotel.

(2) They were in possession of the 3 boxes containing the counterfeit Treasury Bonds.

(3) They were in association with a person (Cheung) who was carrying counterfeit US dollar bills and were in possession of equipment that displayed images of counterfeit bills.

(4) In the premises, they were in possession of false instruments and, given their nature and the type of deals in which the 1st Applicant was involved as shown by the letter dated 17 August 2001, it was clear that the Treasury Bonds were to be used to induce innocent persons to accept them as genuine and to act to their prejudice.

7. These basic facts and the inferences that could legitimately be drawn from them were not really in dispute either at the trial or in the present appeal. Rather, the focus of the Applicants' attention then and in this appeal was on their version of events and the explanations given of their involvement. The learned judge, in arriving at his findings of guilt, rejected their version and explanations.

The Applicants' version of events and explanations

8. The Applicants' version of events and their explanations were summed up in some detail by the judge in his written Reasons for Verdict. No criticism has been advanced on behalf of the Applicants of the summary as being in any way incomplete or misleading and we have therefore proceeded on this basis. Of the Applicants, only the 1st Applicant elected to give evidence. Both Applicants had, however, provided video-taped interviews, the transcripts of which were before us.

9. We cannot improve on the way that the learned judge has set out the summary of the defence case. This is contained in paragraphs 8 to 26 of the Reasons for Verdict. To sum up the version of events put forward by the Applicants to counter the prosecution's case :-

(1) They were themselves the victims of an elaborate fraud whereby they believed all along that they were dealing in genuine US treasury bonds as part of some official US Government Treasury Recovery Programme to recover old, but extremely valuable on their face, bonds.

(2) The people they dealt with appeared to be genuine. Lopez had said he worked for the Pentagon and Valenzuela in turn said he worked for the US Treasury. Apparently, some identification papers were shown to the 1st Applicant, although there was nothing to this effect before us and the Applicants were unable to produce any official document to show that they were indeed working for the US Government in some capacity. The 1st Applicant said he also met a representative of the CIA.

(3) The Applicants' role was really to assist this recovery programme and they were to be paid some sort of commission or fee.

(4) Immediately prior to the 3 April 2002, the Applicants had been in the Mainland having there located a source of US treasury bonds. These bonds had been transported from the Mainland into Hong Kong by the Applicants under the watchful eye of US officials.

(5) In Hong Kong, the Applicants picked up Lopez and Valenzuela from the airport and took them to the Inter-Continental Hotel. It was said that Lopez and Valenzuela were in the process of conducting a verification exercise on the Treasury Bonds when the police raided the premises.

(6) As to the 17 August 2001 letter, the 1st Applicant tried to put an innocent gloss on the contents. He also said that the reference to "phony" bills was a typographical error. The correct word was "copy", not "phony".

The judge's Reasons for Verdict

10. The judge rejected the Applicants' version of events and their explanations. In a comprehensive analysis, he set out his reasons for this rejection. Paragraph 28 of the Reasons for Verdict contains 15 points made by the judge in this regard. Essentially, he was saying this :-

(1) The Applicants' defence boiled down to their having been deceived in an elaborate scheme perpetrated by persons pretending to be US federal agents. As the judge observed, on their version, either they were set up or they were themselves the victims of a fraud involving the Treasury Bonds.

(2) On the possibility that they had been set up, there was simply no evidence to suggest any possible motive for this. Quite why US federal agents or men posing as such would want to involve the Applicants in an elaborate set up was quite fantastic and the judge simply could not accept it.

(3) The judge also could not accept the Applicants' contention that the 1st Applicant, a 50 year old former businessman of independent means, disposed towards charitable activities, was specifically engaged by the US authorities to play a very significant part in the retrieval of treasury bonds worth millions, indeed billions, of dollars. The 2nd Applicant was allegedly likewise engaged by the authorities under this programme.

(4) Nor could the judge accept the elaborate and extremely secretive way in which the Treasury Bonds were to be transported from the Mainland, first to Hong Kong and then, after verification, to the US. Rather than any formal (and safe) passage for these bonds into Hong Kong, they were contained in 3 boxes transported not by US officials but by the Applicants themselves, although this was said to be under the observation of Pentagon men. Once in Hong Kong, verification of the bonds was to take place not in some secure area such as the US Consulate but in a hotel room in Tsim Sha Tsui. We would add here that verification was not intended to be of the bonds themselves (since it was said, again quite incredibly as held by the judge, that if the seals on the boxes were broken, the contents would lose all value), but only of the boxes. Apparently, digital pictures were to be taken of the boxes and these images would then be e-mailed to authorities in the US. If the US authorities were satisfied of the authenticity of the boxes, they would then be transported by a commercial security company to the US (rather than through the US Consulate).

(5) There were other points that the judge made but it is unnecessary for us to repeat them. For example, the judge could not believe the 1st Applicant's assertion that the word "phony" in the 17 August 2001 letter was a typographical error for the word "copy".

11. In short, the judge found the Applicants story much too 'tall' with explanations just being too contrived. No document was produced to back up the somewhat fantastic tale that had been told by them.

12. The judge, having rejected the Applicant's version of events and their explanations, found all elements of the first charge proved. As we have earlier stated, the case of the prosecution enabled sufficient inferences to be drawn for a finding of guilt. But was the judge right to reject the Applicants' version and explanations?

The Applicants' arguments on appeal

13. In the course of Mr McGowan's submissions, we reminded him (and he accepted) that the Court of Appeal's role was not to retry the case as if we were sitting at trial, but to examine critically the judge's verdict and his reasons for it to see whether the learned judge had erred. Was he entitled to make the findings and reach the verdict he did? If he was and there was good reason to support the verdict, this court would not disturb it.

14. In our view, the Applicants have reached nowhere near the requisite threshold to satisfy us that the judge's verdict was somehow unsafe or unsatisfactory. On the contrary, we are of the view that the judge's analysis cannot be faulted and he was perfectly entitled to reject the Applicants' version, make the findings he did and reach the guilty verdict.

15. None of the various submissions made by Mr McGowan, whether individually or seen as a whole, undermined the verdict or the judge's reasons for it :-

(1) First, the Applicants argued that a fair trial was not possible in the absence of evidence, at least cautioned statements, from Lopez, Valenzuela and Momohara. At the trial, the Applicants had unsuccessfully applied for a permanent stay on the basis that crucial witnesses, being Lopez and Valenzuela (but not Momohara), were missing. Reliance was placed by Mr McGowan on the decision of R v Lau Yuk Wan, unreported, CACC 389/1996, 2 May 1997, Court of Appeal. The facts of that case were, however, quite different to those in the present. In Lau Yuk Wan, a material witness was permitted to leave Hong Kong without a statement having been taken from him. In the present case, although cautioned statements were not taken from Lopez or Valenzuela, there were video recorded interviews of what they had told the police. Transcripts of these interviews were made available to the Applicants, but Mr McGowan seemed to accept that nothing significant or particularly helpful to the Applicants was contained in these interviews. Moreover, Lopez and Valenzuela left Hong Kong rather abruptly even though they had informed the police they were willing to be prosecution witnesses. The police did, however, have records of their passports and this information was available to the Applicants if they had asked for it. Thus, if the Applicants had really wanted to contact these two men, they could have. As for Momohara, his absence was never a source of complaint in the trial below in the first place.

(2) At the end of the day, the court, when dealing with submissions such as those made by the Applicants under the first ground of appeal, really has to ask itself one question :- Was the possibility of a fair trial denied to the Applicants? Here, we have derived much assistance from the decision of the Court of Final Appeal in HKSAR v Lee Ming Tee & Another (2001) 4 HKCFAR 133 and to the analysis of Ribeiro PJ at 148-151 (even though that decision was in the context of a stay application). We conclude in the present case that the Applicants were not denied a fair trial through the absence of Lopez, Valenzuela and Momohara as witnesses. The judge duly took into account their absence in assessing the defence case. His approach cannot be faulted.

(3) Next, Mr McGowan made various complaints as to the reasons given by the judge as to why he disbelieved the Applicants' version of events and their explanations. With respect, these complaints were either misunderstandings of what the judge actually said or were based on factual inaccuracies. We give two examples here :-

(a) It was contended that the judge was factually incorrect when he disbelieved the 1st Applicant's assertion that Cheung Chung Kit (see paragraph 5 above) had nothing to do with him that day. Mr McGowan pointed to evidence to demonstrate that in fact the 1st Applicant had all along accepted he knew Cheung. This missed the point. All the judge was highlighting was the fact that in his testimony, the 1st Applicant did indeed say he was not expecting to see Cheung on 3 April 2002, the day of arrest. The 1st Applicant's explanation was just too convenient a way of distancing himself from Cheung who, it will be remembered, was carrying counterfeit notes.

(b) The learned judge also remarked that if indeed the Applicants were the victims of a fraud, then it was quite noteworthy that there was no evidence of their having paid any money in exchange for the US$375 billion worth of bonds in their possession. After all, it was the essence of frauds involving this type of bonds (apparently sometimes called Morgan or Morgantherga frauds) that an innocent person would be tricked into parting with money in exchange for bonds or bills worth a vast fortune (on their face). Mr McGowan pointed to evidence that showed the Applicants having incurred expenditure and said that the judge was therefore inaccurate in what he said in this context. This submission misunderstood the point the judge was trying to make. There may have been evidence of expenditure incurred by the Applicants in the whole venture, but none showing any payment for the Treasury Bonds themselves.

(4) Complaints were made of the judge taking into account the 17 August 2001 letter. It was said that this letter was irrelevant since it dealt with a different transaction to the one that formed the background to the present charges. Whether or not the transaction referred to in the letter was in fact different was beside the point. It was clearly relevant for the reasons we have already gone into. Apart from anything else, it showed the relationship between the 1st Applicant and Momohara, who was arrested at the hotel lobby together with the 2nd Applicant. It was somewhat baffling that on the one hand, Mr McGowan was saying that Momohara was a critical witness, yet on the other, he was also submitting that a letter in which the relationship of the 1st Applicant and Momohara was in part explained, was somehow irrelevant. We find no merit at all in this point.

(5) The Applicants submitted as another ground of appeal that the judge had not taken sufficiently into consideration Momohara's role. With respect, the learned judge had.

(6) Criticism was leveled at the judge for taking the case of both Applicants together and we were shown instances where the evidence was relevant only to one Applicant but not to the other. Again, this submission misunderstood what the judge was actually saying. In paragraph 30 of the Reasons for Verdict, the learned judge said this :

"Let me add that I did give the case of each defendant separate consideration but the issues were presented in such a way that they stood or fell together. There was a large body of evidence that indicated that they were acting together in joint enterprise and no one argued to the contrary."

At trial, the Applicants were indeed running a number of common issues that fell to be considered together. We see no merit in this argument either.

16. We should just add as a matter of completeness that at the beginning of the appeal, we dealt with an application by the Applicants for leave to adduce further evidence. We dismissed it. Although the application was put on the basis of the interests of justice, it became clear that the requirements of section 83V of the Criminal Procedure Ordinance, Cap.221 were simply not met. The evidence that was sought to be adduced was either inadmissible or was evidence (of doubtful value as well) that was freely available to the Applicants at the trial below. We reiterate that in most instances, a different tactical view of the case held by counsel on appeal, will extremely rarely pass the section 83V hurdle.

The 2nd Applicant's application for leave to appeal against sentence

17. We were shown a letter dated 4 February 2004 addressed to the Court of Appeal from the Consulate-General of Japan. In this letter, information was given that, sadly, the 2nd Applicant's wife is ill with cancer and that his father has just had a heart bypass operation. The letter calls for an early date of hearing of the appeal. Mr McGowan submitted that the 2nd Applicant has already served 20 months of his sentence and should be released immediately on compassionate grounds. Reference was made to the decision of Patrick Chan J (as he then was) in R v Ho Yeung Yau, unreported, HCMA 690/1993, 16 November 1993.

18. We are of course sympathetic to the 2nd Applicant's family. However, nothing in that letter shows the necessity of an early release. Taking into account also the fact that the present sentence is one of 3 years, we are of the view that no grounds have been made out to enable us to exercise our discretion in favour of the 2nd Applicant.