HKSAR v. YU KING SING

DCCC185/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 185 OF 2011

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Reasons for Sentence

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1.  Yu King-sing, you have been convicted on your own pleas on five charges of using a false instrument, contrary to section 73 of the Crimes Ordinance.

2.  The offences occurred over a period of more than three years. 

(i) Two of those offences occurred on 16 February 2006. They are the subject of Charges 1 and 2;

(ii) the third offence occurred over a year later on
7 March 2007;

(iii) the fourth offence over a year later on 26 April 2008; and

(iv) the fifth and final offence over a year later still on 15 May 2009.

3.  By profession, you are a certified public accountant.

4.  At the time of these offences, you were the Chief Financial Officer of Birdland (Hong Kong) Limited, a private company which operated the KFC franchise in Hong Kong.  The company’s statutory auditor was PricewaterhouseCoopers.

5.  In the early part of each year, as part of its auditing procedures, Pricewaterhouse would seek written confirmation from certain of the companies which had provided services to Birdland of the amounts owed by Birdland to them.  The companies would be required to do this by signing a document titled “Confirmation of balance”, confirming the money due to them from Birdland.

6.  The procedure adopted by Pricewaterhouse to obtain these confirmations of balance was for them to send blank confirmation of balance forms to you at Birdland, requesting that Birdland fill in the names and addresses of the particular companies selected by them, as well as the amount that Birdland owed these companies.

7.  After having filled in these details, Birdland would then be required to return the forms to Pricewaterhouse, who would send them to the companies concerned.

8.  The companies would then be required to certify the accuracy of the contents by signing the forms and affixing their company chops and returning the documents to Pricewaterhouse.

9.  You were the person in Birdland responsible for providing to Pricewaterhouse the names and addresses of the companies selected by Pricewaterhouse, as well as the amount owed by Birdland to the companies.

10.  On the five occasions represented by the charges, you were responsible for the sending of false confirmation of balance forms to Pricewaterhouse, which had never been signed by the companies which purported to confirm the contents. 

11.  This was effected by filling in the correct name of the company selected by Pricewaterhouse on the blank confirmation of balance form, but an incorrect address.

12.  In each case, the address filled in on the form was the address of a secretarial company, to which you had subscribed, in the names of the companies required to sign the confirmation of balance forms.  The amount stated on the forms to be owed by Birdland to the company concerned was seriously understated.

13.  When Pricewaterhouse received the forms from Birdland, they would then send the forms to the address of the secretarial company, believing this to be the address of the company concerned.

14.  You would then collect the forms from the secretarial company, which would then be sent back to Pricewaterhouse bearing false signatures and forged chops, purporting to be of the company to which Pricewaterhouse believed it had sent the form.

15.  Insofar as Charge 1 is concerned, the confirmation of balance stated that $3,854,158.60 was owed by Birdland to Maxus Communications Limited, when $9,135,975.95 was in fact owing, an understatement of $5,281,817.35.

16.  Insofar as Charge 2 is concerned, the confirmation of balance stated that $2,212,325 was owed by Birdland to Batesasia Hong Kong Limited, when $2,652,325 was in fact owing, an understatement of $440,000.

17.  Insofar as Charge 3 is concerned, the following year, the confirmation of balance stated that $741,413.81 was owed by Birdland to M&C Saatchi Hong Kong Limited, when $2,151,594 was in fact owing, an understatement of $1,410,180.19.

18.  Insofar as Charge 4 is concerned, the next year, the confirmation of balance stated that $1,738,017.71 was owed by Birdland to Mindshare Hong Kong Limited, when $5,454,732.95 was in fact owing, an understatement of $3,716,715.24.

19.  Insofar as Charge 5 is concerned, in the final year, 2009, the confirmation of balance stated that $781,752 was owed by Birdland to David Communications Limited, when in fact, $3,199,872 was owing, an understatement of $2,418,120.

20.  I should add that the underestimated liability of a particular financial year was carried forward to the next financial year and booked in that financial year.

21.  I have been told by Mr Bruce that the sums owed by Birdland to each of the companies concerned were in respect of charges for marketing and promotion work by those companies.  Those were charges which Birdland’s ultimate parent company had a policy of monitoring closely.

22.  The persons who should have been monitoring these expenses within Birdland were the marketing director and the chief executive officer of Birdland, on the basis of a budget of approximately 5 per cent of turnover.

23.  Mr Bruce has suggested to me that the marketing manager and the chief executive officer of Birdland would have been in trouble with the ultimate parent company if it had become known that the marketing department was over budget.

24.  I am told by Mr Bruce that in each case, the offences arise in respect of invoices which arrived after 31 December, in respect of services provided prior to 31 December, and that it had been agreed with the then chief executive officer of Birdland to book these accounts in respect of the year in which the invoice was received, rather than the year in respect of which the services were provided.

25.  This was to avoid it being revealed that the marketing department was over budget in the year in which the expenses had been incurred.

26.  It is not, however, suggested that the chief executive officer was in any way party to the means you adopted to conceal what had happened from the auditors Pricewaterhouse.

27.  It has not been disputed by the prosecution that the invoices in question were booked and appeared in the accounts of Birdland for the subsequent financial year, nor has it been disputed that no financial loss was suffered by Birdland itself as a result of these offences.

28.  Furthermore, it has not been disputed that the suppliers of these services were paid for their services in the normal course of events without delay, nor has it been suggested that you received any personal benefit from these offences.

29.  Mr Bruce has described this as a case of misguided loyalty on your part to your colleagues.

30.  Having said all that, the fact remains that these are serious offences.  It is not a case of an isolated offence committed on the spur of the moment by a man who was not fully aware of the implications of what he was doing.

31.  You were the chief financial officer of Birdland.  You yourself are a certified public accountant who had worked for Pricewaterhouse as an auditor for nine years between 1990 and 1999, and would have realised how important it was that auditors should not be deceived as to the true state of affairs of a company.

32.  Not only were Pricewaterhouse deceived by these offences, but these offences would potentially have deceived the shareholders of Birdland’s ultimate parent company and those to whom they showed the audited accounts.

33.  These offences were committed over a period of over three years.  They involved you subscribing to the services of a secretarial agency in respect of the different companies.  They also involved the creation of false chops and the affixing of forged signatures in order to lend credibility to the confirmation of balance forms.

34.  As a result of these offences, anyone looking at the audited accounts of Birdland would not form a true impression of the company’s financial affairs.

35.  In considering the appropriate sentence in this case, I have borne in mind and taken into account your previous good character and what I have heard about your services to the community, and also what I have heard or read about your character in the letters that have been given to me from the Dean of St John’s Cathedral, the Rev Andrew Chan, and your friend, Mr Edmund Yeung.

36.  I also take into account that during the four years in question, your father was ill.

37.  I bear in mind that you may well suffer additional professional consequences as a result of these offences.

38.  I am satisfied that sentences of imprisonment are inevitable and that, in view of the deliberate breach of your professional duties, despite the other mitigating circumstances, there are not exceptional circumstances which would warrant a suspension of those terms of imprisonment.

39.  On each of the charges I adopt a starting point of

40.  I would have regarded an overall starting point of

41.  In the light of your pleas of guilty and the additional evidence I have received as to your character, I discount each sentence by one-third, resulting in a sentence of 12 months’ imprisonment on each count, with an overall sentence of 16 months’ imprisonment, and I impose sentences as follows:

(i) on Charge 1, I sentence you to 12 months’ imprisonment;

(ii) on Charge 2, I sentence you to 12 months’ imprisonment, 1 month to run consecutively to the term of imprisonment imposed in respect of Charge 1;

(iii) on Charge 3, I sentence you to 12 months’ imprisonment, 1 month of that term is to run consecutively to the sentences imposed on Charges 1 and 2;

(iv) on Charge 4, I sentence you to 12 months’ imprisonment, 1 month of which is to run consecutively to the sentences I have imposed in respect of Charges 1, 2 and 3; and

(iv) on Charge 5, I sentence you to 12 months’ imprisonment, 1 month of which is to run consecutively to the sentences in respect of Charges 1, 2, 3 and 4; making a total of 16 months’ imprisonment.