HKSAR v. CHENG KUNXIAN

DCCC 849/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 849 OF 2014

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REASONS FOR SENTENCE

The defendant pleaded guilty to a charge of "Using false instruments". He tried to obtain from an individual a loan in a sum slightly over US$15 million by using forged bank documents.

Summary of Facts

2. Mr. CHOI (PW1) is a Macau resident.  In July 2014, he became acquainted with the defendant in the mainland.  The defendant made a false representation to PW1 that he had a bank deposit in the sum of US$500 million, but was frozen by HSBC.  In order to re-activate the account, the defendant had to settle a tax payment in the sum of US$15,125,000.

3. After discussion, PW1 agreed to lend US$15,125,000 to the defendant.  In return, the defendant agreed to repay PW1 in double (i.e. US$30,250,000) within 10 days.  Furthermore, the defendant agreed to pay RMB500,000 to PW1 as "Guarantee Fee".

4. On 12 August 2014, PW1 and the defendant came to Hong Kong to attend a law firm (namely Chan, Wong & Yip Solicitors) to discuss the loan agreement.

5. About 11:00 am the following day (13 August), at the 2^nd meeting held at the law firm, the defendant produced to PW1 the documents listed in the Charge, which were purportedly issued by HSBC.  Those documents purported to show that the defendant and Yongkai Guangya Investment (HK) Ltd. ("Yongkai") were the holders of an HSBC bank account (No.112-399026-838A), which had a balance of US$550 million cash.  Police investigation later revealed that the defendant was the sole director of Yongkai.

6. Believing the documents were genuine, PW1 signed the loan agreement with the defendant.  PW1 agreed to prepare a cashier order in the sum of US$15,125,000) by 3:30 pm, 13 August 2014.  In return, the defendant agreed to pay RMB 500,000 to PW1.

7. After signing the loan agreement, PW1 obtained copies of the purported bank documents.  He checked with HSBC and discovered that the documents were suspicious because HSBC has no bank account which contains the letter "A" at the end of the account number.

8. As a result, PW1 stopped preparing the cashier order.  In the afternoon on 13 August, he met with the defendant asking for an explanation.  The defendant refused to go to HSBC for verification.  He warned PW1 to prepare the cashier order; or otherwise, PW1 had to pay him HK$100,000 as compensation.

9. PW1 reported the matter to the Police.  The defendant was arrested, and the purported bank documents were seized from him.  They were sent to HSBC for examination.  It was confirmed that they are forged documents; HSBC has never issued such documents and the bank account number does not exist.

10. Under caution, the defendant admitted that he was prepared to invest US$550 million to set up a hospital in the mainland.  PW1 agreed to provide a cashier order for him to settle his tax in Hong Kong.  The relevant bank documents seized by the Police belong to him and they are genuine documents.  The defendant denied having shown the bank documents to PW1 at the law firm.

11. Mr. TSE, a Legal Executive of Chan, Wong & Yip Solicitors, confirmed that the relevant bank documents were produced to PW1 by the defendant.

Mitigation & Sentence

12. The defendant is 73 and has a clear record. Defence counsel Ms. SIU informed me that the defendant is a mainlander from the Sichuan Province. He studied mechanics when he was young and worked in a biological factory until 1988. He then started his own trading business. He got married in 1963 and has 4 granddaughters (one was present in court on 16 December 2014). The defendant's medical records were placed before me. He is diabetic and has problems with his lungs and heart. Ms. SIU has also informed me that the defendant's wife has a tumour in her spine and she will soon receive surgery.

13. Regarding the present offence, Ms. SIU submitted that the defendant met 2 men (who claimed themselves as members of the Communist Party) in Chengdu. They provided the forged HSBC documents to him and told him that the money would be used for building a hospital in the mainland. As a result, the defendant did what he did. Finally, Ms. SIU submitted that after serving his sentence in Hong Kong, the defendant is unlikely to see his wife again.

14. Doubling the sum of US$15 million in just 10 days seems too good to be true. Yet, with no assets as security or collateral, handing over US$15 million to someone even just for 1 day seems way too risky. The story of this case seems so unrealistic in terms of human behaviour and the magnitude of the sums of money involved.

15. Although defence counsel informed me that the defendant did not come up with the deception plan or the forged documents (he was only carrying out the plan), the Summary of Facts revealed that he executed the plan all by himself. Even as a mere executor, his role is no doubt significant.

16. Ms. CHEUNG for the prosecution and Ms. SIU have both submitted cases on sentencing to assist me. Those cases are helpful to some extent only. There is no tariff for the present offence. The spectrum of this type of offences is simply too wide. Each case carries its unique features and it is difficult to find a universal sentencing formula which is applicable across the board.

17. As a start, the amount of money involved is always a significant consideration. The modus operandi of the scam and its degree of sophistication are also relevant factors to be considered. In the present case, the plan seems sophisticated at first sight. But the authenticity of the purported bank documents could be verified with the slightest degree of due diligence. Once the bank documents were proved to be false, the scam would fail. It was most fortunate that PW1 was alert enough by taking measures to prevent his loss.

18. Having considered all relevant matters, I consider a starting point of 4 years' imprisonment to be appropriate. A one-third discount is given for the guilty plea, reducing the sentence to 32 months. As an act of mercy, I will grant a further discount of 4 months for the defendant's old age and health conditions. The sentence I pass is 28 months' imprisonment.