HKSAR v. LEUNG CHIU PING AND ANOTHER

DCCC 372/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 372 OF 2015

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Reasons for Sentence
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This is the sentence of the court.

1.  D1 and D2 (hereinafter referred to as “Law”) are husband and wife. They were jointly charged with one count of fraud, contrary to section 16A(1) of the Theft Ordinance, Chapter 210.

2.  D1 pleaded guilty to the charge and I found him guilty as charged after he admitted the Summary of Facts. The Prosecution asked that the charge against Law be left on file, and I directed that it be left on file, and was not to be proceeded with without leave from the Court.

Background and the Facts

3.  D1 joined the Government Land Transport Agency from 1992 to 2003 as a government transport manager. In 2003 after the merging and reorganisation of his department with another department which was renamed as Government Logistics Department (“GLD”). D1 had worked as a Controller of Land Transport Division of GLD from 2004 till present.

4.  This case concerns a Home Financing Scheme (HFS) fraud on the government perpetrated between 29 April 1994 and 31 May 2003, both dates inclusive, whereby D1 dishonestly claimed housing benefits under the HFS which is subject to the requirements of the Civil Service Regulations (CSR).

5.  Between 29 April 1994 and 31 May 2003, both dates inclusive, D1 had received HFS monthly allowance in a total amount of $2,755,591.61 and a down-payment loan of $1,460,000 to which he was not entitled.

6.  HFS is provided by the Hong Kong Government to eligible civil servants as a condition of service. A monthly allowance is payable to eligible civil servants to subsidize the mortgage repayment of their residential properties. Besides, a down payment loan is also available. The maximum aggregate period of entitlement is 120 months (i.e. 10 years)( “the Entitlement Period”).

7.  A participant of HFS may, in the first two years of the Entitlement Period, use the monthly allowance to rent a property, instead of using it for mortgage repayment, subject to a number of conditions. The conditions include that the participant must live in the property and that the participant or his relatives shall not be the owner of the property or have any financial interest in it. During the two-year period, the participant shall submit rent receipts to the Treasury upon request to prove that he is indeed renting the property. If the participant’s tenancy terminates before the two-year period expires, he will cease to receive the monthly allowance until 1) he rents again and makes an application for the monthly allowance for the remainder of the two-year period or 2) he acquires a property and makes an application for further HFS benefits for the Entitlement Period. The participant is given a maximum break of six months to make either one of the applications. The participant will no longer be eligible for any further HFS benefits should he fail to do so within six months.

8.  In December 1992, D1 applied for and was granted the HFS monthly allowance to rent a property at Flat A, 2^nd Floor, Block 37, Laguna City, Kwun Tong (“the Laguna City Property”) from 30 November 1992 to 7 November 1994. The Laguna City Property was purchased under Law’s name in August 1991. She was the then girlfriend of D1.

9.  In October 1994, D1 was requested by the Treasury to submit a self-certified rent receipt to prove his tenancy at the Laguna City Property. On 19 October 1994, D1 submitted a self-certified rent receipt signed by Law (“the Rent Receipt”) purporting to show that he was still renting the Laguna City Property from 8 October 1994 to 7 November 1994. In fact, the Laguna City Property was sold on 29 April 1994 and D1 did not live in it thereafter. The Rent Receipt was therefore false.

10.  Had the Treasury known that D1 moved out from the Laguna City Property on or before 29 April 1994 and/or that the Rent Receipt was false, D1 would not have been granted HFS monthly allowance in an amount of $151,200 for renting the Laguna City Property from 29 April 1994 to 7 November 1994.

11.  When the tenancy purportedly expired on 7 November 1994, D1 did not make any fresh application for HFS benefits. His HFS monthly allowance was therefore frozen. Ostensibly he had six months up until May 1995 to obtain further HFS benefits either for the purpose of renting again or for financing the purchase of a property.

12.  In March 1995, D1 made an application for a down-payment loan under HFS for the purchase of a property at Palm Springs, Yuen Long (“the Palm Springs Property”), which he purchased in March 1994. In May 1995, D1 further submitted an application for HFS monthly allowance to settle the mortgage repayment of the Palm Springs Property. Both D’s applications were successful and he was granted a down-payment loan of $1,460,000 and monthly allowance in an amount of $2,604,391.61 for the remainder of his Entitlement Period, i.e. from 1 May 1995 to 22 May 2003.

13.  Had the Treasury known that D1 moved out from the Laguna City Property on or before 29 April 1994 and/or the Rent Receipt was false, D1 would have ceased to receive HFS monthly allowance in or about April 1994. It follows that the maximum six-month break to which D1 was entitled to make fresh application for further HFS benefits would have ended on or before 28 October 1994. D1’s applications for the down-payment loan and the monthly allowance under HFS in March and May 1995 respectively for acquiring the Palm Springs Property would not have been successful for the applications would have been out of time.

Personal background and mitigationput forward

14.  I acceded to the request of Mr Grossman, Senior Counsel for D1 to adjourn the matter for a background report and a community service order report before sentence. Before adjourning the matter, I explicitly told D1 that all sentencing options were open to me including one of an immediate period of imprisonment.

15.  D1 is 56 years of age and is a man of clear record. He was married with Law in June 1995. Law is a managing executive of a recruitment company. They have a son now aged 19. Despite busy work schedules, the family of 3 had regular family gatherings with their own families and outings. Law described D1 as a family-oriented and responsible man who worked hard, loved and cared for the family. 

16.  The background report revealed that after D1 had completed his bachelor degree in 1981, he had worked as an assistant operation officer in the Kowloon Motor Bus for nearly a decade. He then shifted to work as an assistant general manager in a car rental company which he worked for nearly 9 months. He then joined the Government as a government transport manager in 1992. D1 is currently the Controller of Land Transport Division of GLD.

17.  Mr Grossman said in mitigation that the offence came to light when D1 confessed to his supervisor in the department in December 2013 during the extended checking for the promotion exercise. It was said that this was an interview for promotion to Directorate Level 3 position. I was told that when D1 moved out of the Laguna City Property in April 1994, he overlooked the requirements on reporting to the Treasury. When the Treasury notified him in October 1994 that his current tenancy agreement would expire on 8 November 1994 and that he needed to submit a rent receipt for the last month for record purpose, he realised that he had committed a mistake. At that moment, D1 did not have the courage to admit his mistake and rectify it by informing the Treasury about his oversight. To cover up his mistake expediently, he submitted a false rent receipt to the Treasury.

18.  D1 had buried his wrongdoings over the past years until it was revealed during an extended checking in December 2013 in connection with a prospective promotion. He realized that he had to face it head-on this time. He reported the wrongdoing to his supervisor in the department immediately. D1 then wrote to the Treasury in early January 2014 stating that he wanted to rectify his mistake and repay the over-claimed allowance. He further requested the Treasury to advise him of the amount of repayment that he should have made and the actions that he might need to take for rectification.

19.  Mr Grossman said that after D1 had moved out of the Laguna City Property, he was in fact entitled to have the maximum six-month break to make fresh application for the mortgage. However he did not do until 7 months later. What he did was to falsify the rent receipt to show that he was still in the flat. It was said that if D1 had done earlier, there would have been no problem at all. When he suddenly found six-month period has been expired, he and his wife acted foolishly by falsifying the document indicating that he was still in the flat during the relevant period.

20.  It was submitted that it was purely the combination of carelessness and foolish desire simply to go back to the 6-month period. Mr Grossman emphasized that if D1 had done what he could have done easily and legitimately, he would have received all the monies lawfully. Mr Grossman submitted that D1 had in fact nothing to gain. I was told that when the incident has come to light, D1 was suspended from duty since May last year. This conviction will almost inevitably lead to D1 losing his job and pension. D1 had also had his property sold in order to repay more than $7 million including interest, for the money he had defrauded from the Government. D1 also could not afford to let his son continue his studies in United State due to lack of money. The incident has already caused severe impact on his family.

21.  Mr Grossman told the court that after D1 wrote the letter to the Treasury in January 2014 enquiring about the amount that he had owed to the Government, he had not received any reply from the Treasury until January 2015. It was submitted that if D1 had been told in January 2014 when he first asked, of course he would have not had paid enormous interests he ought to pay now. But he was very much prepared to pay for this amount. It was submitted that the act of D1 writing to the Treasury indicating his willingness to make repayment is a clear indication of genuine remorse. D1 felt very sorry for what he had done and he was co-operative from the start, making full confessions. D1 chose to make restitution not because of the trial that he now faced attempting to buy his freedom. The Prosecution confirmed today that D1 had already made full repayment to the Treasury during the court adjournment period.

22.  In mitigation, Mr Grossman particularly reminded the Court that a new housing benefit package, the non-accountable cash allowance scheme, has been introduced since 2000. Hence, it was submitted that if the incident happened in 2000, it should not have been any problem at all.

23.  A number of letters have been placed before the court from D1 himself, friends, work colleagues, and relatives of D1. I have considered the contents of all these. Suffice to say, they all have very positive comments on D1 and ask the court to treat him leniently. In the eyes of his siblings, D1 was a loving and caring brother.

24.  D1 wrote a letter in his own mitigation indicating that he felt deep remorse for his wrongdoings. He admitted it was a foolish and unacceptable act. He has failed the expectation of many people, including his family, friends and colleagues. He said there was no excuse and he should be held fully responsible for the wrongdoings.

25.  Letters of support from, the Director of GLD, the Chief Executive officer of GLD, Controller of Government Supplies Division of GLD, Controller of Printing Services Division of GLD, Permanent Secretary for Financial Services and the Treasury (Treasury), the former Government Land Transport Administrator, were also produced. The letters spoke highly of D1 and his achievements. It was revealed that at various times during D1’s transport career, he was responsible for procuring large numbers of vehicles for the government vehicle fleet, a role that required him to liaise closely with the private sector on multi-million dollar tenders, bringing with it the risk of exposure to corrupt practices. His integrity was never in doubt and he unfailingly conducted himself with discretion and absolute honesty. D1 has also handled many high profile international projects with distinction, for example, the logistical arrangements for the Handover Ceremony in 1997 and the World Bank/International Monetary Fund Annual Meeting 1997 for which he received well deserved commendations. He received a 20 years’ meritorious Service Certificate issued by the Secretary for the Civil Service on 10 February 2014. While D1 served as the chairman of promotion boards for his subordinates, he cared about the training needs of his subordinates and endeavoured to develop a capable team for providing effective transport services to the Government. He has won the trust, support and respect of his supervisors, peers, subordinates and staff unions. D1 was described as an upstanding public officer who has been serving the community wholeheartedly in his more than 20 years’ civil service career.

26.  It was stated in the community service order suitability report that D1 is a suitable person for community service order. D1 also indicated that he was willing to make reparation for his wrongdoings by performing unpaid service. Mr Grossman urged the Court to impose a community service order on D1, citing the case of Secretary for Justice v Lin Min-ying & Anor [2002] 2 HKLRD 823 in support.

Sentencing considerations

27.  There is no tariff for this type of offence. Every case must be looked at on its own facts.

28.  In mitigation, Mr Grossman referred me to Lin Min-ying. This concerned two university lecturers who were again husband and wife who had been convicted of a Private Tenancy Allowance (PTA) fraud after trial. They were each sentenced to 240 hours of community service on charges of furnishing false information. Mr Grossman drew my attention to two paragraphs which were originally from paragraph 13 in which the Court of Appeal cited Judge Sweeney’s remarks in that case: -

"If there are such people out there, they can expect ‘the greatest clemency' (to borrow a phrase I have read a lot of recently) if they immediately put their hands up and admit their guilt and offer to repay all monies improperly obtained as soon as possible. In that way they will not only be showing remorse, but also saving the prosecution authorities a great deal of time and effort as these can be complicated and troublesome cases to prosecute. That is what I would term ‘the honourable approach'.

By stark contrast, what we have had in this case is ‘the dishonourable approach'. This is where a defendant hopes to brazen it out by not only forcing the prosecution to prove its case, but also allowing evidence to be called to try to support the original deceit. Then, and only then, if that fails, come forward with page after page of good character reference and offer to pay back all monies improperly obtained in order to avoid full punishment for their crime.”

29.  In any event, even if a number of factors exist which in combination make an offender a suitable candidate for a community service order, a judge should not, as indicated in Lin Min-ying in paragraph 21, “slavishly make such an order”.  The gravity of the offence itself must be carefully considered before an order of this kind is contemplated. 

30.  Mr Grossman has made mitigation on behalf of the D1 fully, and I have taken into account all that he has had to say.

31.  In HKSAR v. Luk Chung Yee Jimmy HCMA1170/2002, Deputy High Court Judge McMahon (as he then was) stated in paragraph 15:-

“A civil servant defrauding the Government of Hong Kong Special Administrative Region by abusing the financial benefits provided to him by his conditions of employment as a civil servant represents a significant breach of trust.”

32.  It is my view that the offence committed by D1 is sufficiently serious to merit a custodial sentence. He betrayed the general trust place in him by the government. It was abundantly clear that an aggravating factor in this case is the production by D1 of a false rent receipt with which D1 attempted to cover up his mistake of not informing the Treasury of the change of his residence. It resulted in the obtaining of an allowance to which D1 would not otherwise have been entitled, amounting to about $4.2 million. I must say I cannot lose sight of the serious nature of the case, in particular the amount that was involved in this case is very large. Ultimately, I have decided that a Community Service Order is not an appropriate sentence due to the gravity of this case.

33.  I have also considered whether the cumulative effect of all the relevant matters would justify imposing a non-custodial sentence. Having digested the mitigating letters put before me, I find it unquestionable that having spent 22 years as a civil servant, D1 has worked very hard and excelled in his own field. He has now fallen from grace. His foolishness has destroyed a very promising career in the government sector. For a person in the position as D1, a conviction is in a way by itself a harsh punishment. I accept that what D1 had done was only his foolish error of judgment which I believe was an isolated occurrence when set against his long career, which in all other respects has been one of high achievement and dedicated public service. Ultimately, it was D1 who voluntarily disclosed his wrongdoings to his superior and also to the Treasury indicating his willingness to make restitution in or about January 2014, about a year and a half years before he was brought to the Court for hearing. In addition to the $4.2 million he had to return to the Government, D1 has also made a further payment to the Government of about $2.8 million which represented the interest he owed on the sums fraudulently obtained by him. Finally he has paid just over 7 million in total which was much more than the amount of the advantage received. The discovery of the offence has had a great impact on his family. I accept that D1 has expressed genuine deep remorse. I also bear in mind that D1 has made considerable contributions in serving the community throughout his career in the civil service.

34.  Having considered the collective impact of all the relevant circumstances, I consider there are sufficient exceptional circumstances which justify suspending the sentence imposed on D1.

35.  Considering all the circumstances of the case, I adopt a starting point of 12 months’ imprisonment and I reduce that by one-third to reflect D1’s guilty plea.  That would reduce the sentence to a term of 8 months’ imprisonment. I find after very careful consideration that I am satisfied that in his case, grounds exist for suspending the sentence of imprisonment, and I shall order the sentence of imprisonment will be suspended for 2 years.

36.  Defendant please stand up, let me explain to you a suspended sentence. You will not be required to serve this sentence immediately. However, if you commit an offence punishable by imprisonment in the course of the next two years, you will be liable to serve that term of imprisonment in whole or in part in addition to any other sentence that might be imposed. Do you understand that sentence?

DEFENDANT: Yes, understand.