HKSAR v. CHONG HUNG SHEK

HCCC 47/2018

[2018] HKCFI 1470

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 47 OF 2018

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Transcript of the Audio Recording
of the Sentence in the above Case

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COURT:

The defendant, Chong Hung-shek, pleaded guilty to three counts of Fraud contrary to section 16A of the Theft Ordinance, Cap 210, before a magistrate, and he was committed to the Court of First Instance of the High Court for sentence.

The Admitted Facts

The defendant was employed as a conveyancing clerk by S. Cheng & Yeung Solicitors, a law firm, and he was responsible for handling conveyancing cases and dealing with the firm’s conveyancing clients.

When clients purchased properties, deposits for the properties by way of cheque payments would be handed to the defendant to be deposited into the firm’s bank account. Such monies would be released to the sellers of a property when the transactions are completed. When clients sell properties the firm may be entrusted to keep custody of the deposits paid by the buyers, usually by way of cheque payments. The defendant was responsible for depositing such cheques into the firm’s bank account. When the transactions are completed, such sums would be released to the clients. Further, clients may entrust the firm to settle stamp duty payments relating to the properties and cheques would be handed to the defendant to be deposited into the firm’s bank account.

In mid-August 2016 some clients found that their conveyancing deals, which were all handled by the defendant, could not be completed as the firm failed to release the payments to the purchaser or the sellers as scheduled.

On 22 August a client went to see Mr Cheng, the solicitor for the firm and the defendant’s boss, asking for his money back. Mr Cheng and the accounts clerk went through the clients’ files and discovered that the defendant had embezzled the cheque deposits of the clients.

When the defendant was confronted on 24 August 2016 he signed a declaration declaring that he had stolen clients’ money deposited with the firm and the amount was not less than $8 million. The defendant surrendered his passport and Home Visit permit to Mr Cheng. Mr Cheng asked the defendant to locate all the files of the clients from who he had stolen money. Mr Cheng planned to report to the police.

On 29 August 2016 some more clients visited the firm to look for the defendant. They reported the case to the police on the same day. The police attended the firm and seized a list of clients handled by the defendant. The defendant was arrested on the same day. Under caution the defendant replied he understood.

The defendant attended a number of video recorded interviews. During the first recorded interview he told the police how he told clients not to write the firm’s name on the cheques on the pretext that they might get the firm’s name wrong. He then made a photocopy of the cheque and wrote the firm’s name on it and gave the photocopy to the client for record. He put his own name on the cheque and deposited it into his own accounts.

As he had stolen money from some clients, he used those cheques which clients had already put the firm’s name on to settle those outstanding payments, that way he could ensure that the transactions of those clients from whom he had stolen money could proceed when due.

The defendant admitted he started to steal money that way since 2015 until his arrest. He had stolen over $9 million, a figure told to him by the firm’s account staff. He stole clients’ money as he always gambled and he was in debt. The defendant disclosed that his monthly earnings amounted to $40-50,000.

During the second and the third video recorded interviews, the defendant disclosed that he owed credit card debt of around 0.6 million and he also owed other debts of 1.4 or 1.5 million and he needed to repay $40-50,000 per month.

He made use of the loopholes in the firm’s accounting practice to cover his misdeed. The accounts department would not check from whom the money was paid and would issue cheques to payees upon the defendant’s instruction. He would instruct the accounts department to issue cheques from monies of some clients to cover outstanding amounts of certain other clients. The sum would be smaller than the outstanding sum and he would issue a cheque from his own bank account to make up the difference. As for stamp duties, he would make payment from his own bank account when payments were due.

The defendant was shown 41 files and he explained what he had done in respect of the money of the clients in each file. He had either deposited the cheques into his own account or used the cheques to settle outstanding payment of another client for most of the files shown to him.

Police investigation disclosed that between June 2013 and August 2016 the defendant deposited cheques from some 48 clients into bank accounts held in his name. The amount involved was $24,572,772. The defendant falsely represented to those clients that he would fill in the name of the firm so those clients left the payee part of the cheque blank. The defendant then filled in his own name and deposited those cheques into his own bank account. That is Count 1.

Upon police investigation it was found that the defendant had received cash from two clients amounting to $176,890 and had falsely represented to those two clients that the money would be deposited into the firm’s bank account. The defendant did not deposit the money into the firm’s bank account. That is Count 2.

Police investigation also showed that the defendant had used funds amounting to $11,047,559 received from some clients for purposes other than instructed by the clients. The defendant deceived the accounts department staff that due instructions had been obtained from those clients to use their funds in a certain way thereby inducing the firm to transfer the money out of the firm’s own bank account. That is Count 3.

At the time when the defendant pleaded guilty before the magistrate, the actual amount of loss suffered by the various victims had not been ascertained. I was provided by the prosecution the actual loss suffered by the clients. For Count 1, $4,553,885.54, for Count 2, $137,889; and for Count 3, $5,806,419, totalling $10,498,193.54.

The Impact Statements

I have been provided impact statements from some 43 victim and the solicitor, Mr Cheng Chun-chung, who was the partner of the firm and the boss of the defendant at the material time.

Of the 43 victims, some were buyers and some were sellers. For some the money stolen by the defendant represented money for deposit payments or for stamp duty payments. For others the money stolen represented payment by buyers to them. The impact of the defendant’s fraudulent deeds on them understandably was that they all suffered financially and were stressed out. Many of them had to borrow money from banks or family members to meet the payment due. For many of them they had to use money originally set aside for other purposes to deal with the sudden situation presented to them when the money had been misappropriated by the defendant. Some had planned originally to use the money for their retirement. Some had planned to use the money to help their own children to either purchase properties or to study overseas.

These victims had to cope with a stressful situation when they no longer had the money as planned. They could not retire or they could not help their children. Some victims found that their interpersonal relationship with other family members, friends or colleagues deteriorated due to the financial stress or pressure they faced. Some of them had to urgently engage other firms of solicitors to deal with the matter. Some had even lost faith in the justice system in Hong Kong when their money was stolen by somebody working in a solicitors’ firm. One particular first-time property buyer found that the fraud not only affected her interpersonal relationship with others, she had to seek professional counselling to deal with the anger and mental distress that she felt. None of them had got any part of the money back.

As for Mr Cheng, he said that after the defendant’s fraud was discovered, the firm was taken over by the Law Society. He and his partner became bankrupt and lost their qualification as solicitors as a result. He now works as a solicitor’s clerk earning much less than before.

The defendant’s act caused unnecessary loss and suffering to all concerned.

The Background and Mitigation

The defendant is 55 years of age. He was educated up to Form 5 and worked as a clerk in a solicitors’ firm, as disclosed in the admitted facts. He is married with one daughter.

He has one previous conviction of conspiracy to defraud in 2007 for which he was sentenced to 4 months’ imprisonment. When I asked for details of that offence I was informed by Ms Monica Chow, counsel for the defendant, that the defendant defrauded the government by representing himself to be a person entitled to compensation for a land resumption matter when he was not so entitled.

As the defendant was put in a position of trust to deal with money by the firm, I asked for information if the defendant had disclosed to the firm that he had such a previous criminal conviction of dishonesty. I was informed that the defendant did not make such a disclosure to the firm.

Mr Chow informed this court that the defendant was an experienced clerk who had worked since the 1990s and was earning $60-70,000 per month then. At that time the defendant had to make mortgage payment of $30,000 per month. However, in 1997 his income was drastically reduced to about $20,000 per month. He started to borrow money from credit card companies and banks to make ends meet. By the time he joined the firm in 2009 he was in debt to the tune of a million dollars. Apart from the monthly mortgage of $30,000 he also had to repay credit card companies and banks each month in the sum of $40,000. He could not make ends meet and he resorted to gambling, hoping for a windfall.

Ms Chow submitted that the debts started to snowball and the defendant was overcome by the outstanding amount and he lost his sense of what was right and what was wrong. He started to commit the offences. Ms Chow told me that the defendant instructed her to submit that he knew he was getting himself involved deeper and deeper, but he lacked the courage to own up to what he had done. He was under a lot of stress and suffered from insomnia. The defendant was, in fact, relieved when the matter came to light finally in 2016.

Ms Chow submitted that while the amount dealt with by the defendant fraudulently in all three counts came to over $35 million, she suggested this court to sentence the defendant on the basis of actual amount unrecovered, that is 10-odd million while without losing sight of the actual amount involved, that is over 35 million. Ms Chow also suggested this court to look at each count separately to arrive at the sentence, then to order all three sentences to run concurrently.

The defendant had written to this court expressing his remorse. He said he committed the offence due to momentary greed. While accepting that he had to bear the consequences of his acts, he nevertheless asked for leniency so that he could start afresh sooner.

The defendant’s daughter wrote on behalf of the defendant, saying that the defendant was a good and hardworking father. She asked this court to be lenient to the defendant so that the defendant could reunite with the family and have a chance to repay society by doing meaningful deeds earlier.

The defendant’s elder sister also wrote to this court. The defendant was described by her as a responsible and filial son. She believed that her brother committed the offence due to a momentary greed which blinded him. She and her other siblings asked for leniency on behalf of the defendant.

Ms Chow very fairly and properly accepted that what the defendant had done could not be described as a momentary greed. She stressed that she had not advanced the mitigation on such a basis. She submitted that the defendant and his family might have just used this commonly used Chinese phrase to express themselves.

Ms Chow informed this court that the impact statements from the various victims had been explained to the defendant and the defendant did not seek to challenge any of them.

Ms Chow submitted that the only real mitigation was the defendant’s plea at the earliest opportunity and she asked this court to be as lenient as possible.

Consideration and Reasons for Sentence

First of all, I will mention two relevant authorities.

The first one is HKSAR v Cheung Mee Kiu [2006] 4 HKLRD 776. In that case the defendant was a 61 year old jewellery company owner with no previous conviction. She stole jewellery worth close to $10 million entrusted to her for sale, pawned many of them and put the money into her company’s account. Her company account was heavily in debt. She was sentenced to a total of 4 years, 4 months’ imprisonment.

The Court of Appeal, after referring to the well-known English decision of R v Clark [1998] 2 Cr App Rep 137, set down guidelines for future cases as follows: Over 15 million, 10 years or more; 3 million to 15 million, 5 to 9 years; 1 million to 3 million, three to four years; 250,000 to 1 million, 2 to three years; less than 250,000, less than 2 years.

The Court of Appeal differently constituted in another case, HKSAR v Ng Kwok Wing, unreported, CACC398/2007, adjusted the second and the third bands as follows: 3 million to 15 million, 5 to 10 years; 1 million to 3 million, 3 to 5 years, to ensure there was no perceived gap between the sentence for 1 to 3 million, 3 to 15 million and over 15 million.

Now I will deal with the facts of this case.

This is clearly a serious breach of trust case. The defendant was entrusted by the firm to deal with clients’ money and he pocketed the clients’ money for his own purposes. Although there are three different charges involving three different ways of how the defendant deceived the clients in the firm, they were all acts of fraud which he was able to perpetrate as a result of his position held in the company and also because of the loopholes in existence in the accounting practices of the firm.

I will consider the total amount defrauded by the defendant in my consideration of the appropriate global starting point. I must mention here that I am of the view that in deciding the correct starting point I must do so with reference to the amount the defendant had defrauded from the various victims in order to decide the magnitude of the defendant’s fraudulent acts, that is over 35 million. I will, of course, take into account the fact that the actual loss suffered by various victims came to about 10.5 million and will make the necessary adjustment from the appropriate starting point.

It is wrong, in my view, to take the net loss as the basis for my consideration of the proper starting point while without losing sight of the over 35 million involved, as suggested by Ms Chow, after all, the defendant’s fraudulent acts did defraud those victims of the amounts specified in each count. It was because of the defendant went about covering up one fraudulent act from another that eventually when the defendant’s fraudulent acts were discovered, the actual loss was crystallised at a later stage.

The actual amount of loss would have been different depending on when the defendant’s fraudulent acts were discovered. The actual amount of net loss does not, in my view, distract from the overall scheme of things of how the defendant embarked on his fraudulent behaviour to defraud so many victims.

Further, I do not agree with Ms Chow’s suggestion to impose a sentence for each count according to the amount involved and then to order all three sentences to run concurrently. Doing it that way, as suggested by Ms Chow, the defendant would in effect be sentenced for defrauding victims of over 24 million, that is Count 1 only, and not the larger and the actual amount of over 35 million involved in all three counts.

The defendant started his fraudulent acts as early as June 2013, although most of them were done in 2015 and 2016. The defendant and his elder sister said it was due to momentary greed that the defendant had committed the offence, that is in their letters to this court. I have already told Ms Chow that I do not accept such an assertion. We are not talking about an isolated incident in which the defendant has stolen money once. The fraudulent acts were done systematically for a long time. As I said, Ms Chow rightly conceded that she could not mitigate and did not mitigate on the defendant’s behalf on the basis that it was a momentary greed.

The total amount defrauded was over $35 million, 35,797,221. On the authority of Cheung Mee Kiu, the appropriate starting point is one over 10 years.

Having considered the ways in which the defendant went about committing these offences, the time spent within which the defendant perpetrated his frauds, the amount involved and distress and suffering caused to the various victims, I am of the view that a proper global starting point is one of 15 years.

The defendant is not a man of clear record and had a previous conviction of dishonesty which he failed to disclose to his boss when he was employed in 2009.

Having considered this matter, and bearing in mind that a 15 year starting point is already a long one, I will not enhance this starting point. On the other hand, I do bear in mind that the actual loss suffered by various victims was about 10.5 million, an amount much less than the amount of over 35 million, although it is still a large amount. I have to adjust the starting point to reflect this factor.

Having given the matter some thought, I am of the view that a deduction of 3 years from the global starting point of 15 years is appropriate. So the pre-deduction for plea, global sentence is therefore one of 12 years.

The defendant and his family had asked for leniency. While I appreciate the inevitable difficulties faced by the defendant and his family upon the defendant’s incarceration, his family circumstances are not such that I would or should deal with him leniently, bearing in mind, in particular, the magnitude of his misdeeds and the impact his fraudulent acts had on so many victims.

The only mitigating factor I can see is the defendant’s plea of guilty at the earliest available opportunity. I will give the defendant a full one-third discount for his plea.

With a one-third discount sentence would be one of 8 years. There are no other grounds to further reduce the sentence to be imposed.

So the actual sentence: Count 1, 8 years; Count 2, 8 years; Count 3, 8 years. All three sentences to run concurrently, making a total of 8 years’ imprisonment.