HKSAR v. WONG MING CHUN

HCCC 402/2024

[2025] HKCFI 5350

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO 402 OF 2024

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

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COURT: The defendant pleaded guilty to two counts of dealing with property known or believed to represent proceeds of an indictable offence on 18 November 2024 and was committed to the Court of First Instance for sentence. Before me, he confirmed his pleas and admission of the Summary of Facts.

The particulars of the 1st count accused the defendant of dealing with property known or believed to represent proceeds of an indictable offence between 1 February 2015 and 13 December 2018 with another person, Deng Jie. That property was HK$4,679,152,652.40 and US$34,598,714.98 in three separate bank accounts with Industrial and Commercial Bank of China (Asia) Limited.

The particulars of the 2nd count refer to the same offence where between 2 February 2015 and 18 July 2018, the defendant alone knowing or having reasonable grounds to believe that HK$53,747,333.22 in a bank account with the Hong Kong and Shanghai Banking Corporation Limited in whole or in part directly or indirectly represented any person’s proceeds of an indictable offence and the defendant dealt with that said money.

I have converted the US dollars into Hong Kong dollars and calculate the total amount the defendant dealt with in both bank accounts, that is both counts to be HK$5,002,769,962.46.

Summary of Facts

The victim company number one, Hua Han Bio-Pharmaceutical Holdings Limited was incorporated in 2000 and listed on the Hong Kong Stock Exchange on 10 December 2002. It was renamed Hua Han Health Industry Holdings Limited on 21 December 2015. At all material times, the defendant was company secretary of this listed company and the financial controller of it as well as its subsidiaries. Victim Company 2 is a subsidiary of Victim Company 1.

From February 2015 to June 2016, the victim company raised funds on several occasions, including issuing convertible bonds on 2 February 2015 in an aggregate principal amount of up to HK$620 million. This subscription was completed on 17 February 2015. On 28 April 2015, the victim company proposed an open offer to raise not less than HK$3,194,600,000 by way of an offer of not less than 2,457,346,764 shares of the said company.

It was funds raised in this manner, ostensibly for capital expenditure, which was funnelled away by the defendant and stolen. He dealt with the stolen proceeds.

On 23 September 2016, the victim company’s auditors, Ernst & Young, issued letters to its Board of Directors and the Audit Committee, raising inconsistencies and irregularities discovered during the audit for the year ending 20 June 2016. It was recommended an independent professional firm conduct an independent investigation. On 27 September 2016, the victim company requested a suspension of trading in its shares.

On 21 November 2016, the victim company engaged an independent financial advisor to investigate the audit issues flagged engaging Grant Thornton Advisory Services Limited. Grant Thornton never completed his investigations because the victim company did not provide them with the required necessary information and documentation.

On 12 December 2016, the Hong Kong Stock Exchange imposed conditions on the victim company resuming trading of its shares. Those conditions included completion and disclosure of investigation results relating to matters identified by Ernst & Young, as well as publish all outstanding financial results.

Going forward, on 11 April 2019, a debtor of the victim company filed a petition to wind up the company. On 2 December 2019, the High Court ordered the victim company to be wound up. One year later, the listing of the victim company’s shares was cancelled under the listing rules.

One of the provisional liquidators appointed by the High Court suspected the victim company’s assets had been misappropriated after examining documents and bank accounts. Therefore, the matter was reported to the police.

Fund flow analysis showed that HK$3.814 billion raised through convertible bonds and the open offer went into victim company’s two accounts at China Construction Bank. Both the defendant and Deng Jie were account signatories of these CCB accounts.

Most of the funds were then transferred to the victim company’s account at Industrial and Commercial Bank of China, ICBC, or to a bank account of a company called New Develop Holdings Limited. Between February and September 2015, HK$3.456 billion was transferred from this ICBC account to another ICBC bank account of the second victim company.

HK$2 million was transferred from the first victim company’s ICBC account to victim company number two’s ICBC account, which was then further remitted to a subsidiary of victim company number one in the mainland and could not be traced any further.

Of the HK$3.814 billion received from capital raised referred to in my paragraph above, the fund flow analysis showing the money raised through convertible bonds and open offer, 99.3 per cent of that, which is HK$3.788 billion, was transferred from victim company 1 to victim company 2 and New Develop Holdings Limited.

Fund flow analysis showed HK$1.398 billion was transferred to an account in the name of Universal Merit Limited in the Industrial and Commercial Bank of China. The defendant was the sole director and shareholder of Universal Merit Limited. He was the sole signatory for that Universal Merit Limited bank account.

Records show a total of HK$2.056 billion was transferred from the defendant’s account at Universal Merit Limited to a bank account of Bull’s Eye Limited. This amount accounted for 41.48 per cent of the total withdrawals from the defendant’s account of Universal Merit Limited. Bull’s Eye was a company controlled by the then directors of the victim company number one, Deng and Zhang.

Thereafter, these two company directors transferred most of that money HK$1.998 billion to 14 security firms.

Specific to the three bank accounts of the 1st charge, between the offence period, there were a total of 335 deposits amounting to HK$4,947,638,680.48 and 359 withdrawals amounting to HK$4,956,369,547.54.

The bank account of the 2nd charge at Hong Kong and Shanghai Banking Corporation Limited is a personal bank account the defendant opened on 6 May 2013. He was the sole signatory of this account. Between the offence period, there were 579 deposits totalling HK$53,747,333.22, of which HK$16,153,000 came from the defendant’s account in the name of Universal Merit Limited. The average monthly deposit into this personal Hong Kong and Shanghai Banking Corporation account was about HK$1.3 million, which was twice the defendant’s monthly salary.

During the same offence period, there were 1,171 withdrawals totalling HK$53,746,768, just under HK$27,500,000, or about 51 per cent of those withdrawals, were dissipated to Hong Kong Jockey Club. There was one sum of HK$4,660,500 transferred to a bank account belonging to the defendant’s ex-wife. Other transfers were to a security firm, used for credit card repayments, a loan repayment, utility bills, school fees, and so forth. Over HK$53.7 million of money raised for and by victim company 1 went through the defendant’s own personal account.

After clarification from both counsel, I have a clearer picture of the facts, and I thank them both for detailed submissions and mitigation.

Mitigation

Ms Kong had said all she can say on behalf of the defendant. His best mitigation is his plea of guilty. The defendant is now 44 years old, divorced, and his 14-year-old daughter lives with his ex-wife. He qualified as a chartered accountant, and had been working for the victim company since 2008. His salary was HK$60,000 a month. He was arrested for this case on 12 May 2021. Before his arrest, he had a clear record.

His explanation is that he dealt with all the money through those four accounts of both charges at the instructions of Deng Jie, his co-accused in Count 1, who was the director of the victim company. Deng Jie was the defendant’s direct employer, and remains at large as a wanted person. The defendant’s explanation is that he was doing as he was told, doing as he was instructed. He was not the mastermind, nor were these his ideas. It is accepted and acknowledged that he has committed a very serious breach of trust, and his crimes have affected the reputation of Hong Kong as a financial centre, as well as the Hong Kong Stock Exchange.

The defendant submits that of the over HK$5 billion he dealt with, he only received a benefit of approximately HK$16 million, even when over HK$53.7 million went into his personal bank account.

Sentencing

The maximum sentence allowed under law for this offence is 14 years’ imprisonment. A deterrent sentence is paramount to deter and discourage others from money laundering. Since the facts and act of money laundering relate to and refer to both charges here, I will take a global approach in sentencing and consider a starting point that encompasses both charges.

In considering sentence, I have been referred to the Court of Appeal authority, HKSAR v Boma [2012] 2 HKLRD 33. The Court of Appeal, in that case, recognised that guidelines were inappropriate due to the variety of circumstances which prevail in money laundering cases. However, in that case, the Court of Appeal did identify some of the significant features to which the court should look at and take into account, although the court did say it was not possible to produce an exhaustive list.

I have also had before me the cases of HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, and HKSAR v Wan Kwok Keung [2012] 1 HKLRD 201.

In turning to significant features, all factors for the purposes of sentencing, obviously the amount of money involved is a major consideration. But it is not the be-all and end-all of a case. Nevertheless, the amount of money involved is important, whereas the amount of benefit received by the defendant is not necessarily of such a similar major consideration.

Another significant factor to consider is the nature of the predicate offence, which here is brazen theft, conducted by the defendant and others, I am sure, but for the defendant he was placed in a position of trust.

Another significant feature would be the state of an offender’s knowledge. In this case, the defendant had full knowledge of the origins of the funds and the predicate offence. Moreover, it would appear he continued to launder the victim company’s money, or deal with it, even after Ernst & Young had raised auditing discrepancies.

Another significant factor would be the number of transactions and the length of time, or period of time, over which the offences were committed. The culpability of the offences lies in the role of the defendant, as well as the assistance, support and obvious encouragement he would have provided to his co-accused.

In relation to the three bank accounts of Charge 1, over a period of nearly four years, I repeat, there were 335 deposits and 359 withdrawals of stolen money.

In relation to one account of Charge 2, there were, in that over a three-year period, 579 deposits, with an average deposit, I repeat, of HK$1.3 million every month, and 1,171 withdrawals of stolen money.

Lastly, it is relevant to consider the defendant’s knowledge of the origins of the funds, and he knew he was stealing the victim company’s money.

Turning to the case of the Secretary for Justice and Wan Kwok Keung [2012] 1 HKLRD 201, the Court of Appeal there said that money laundering was a serious offence and must be deterred. The sentence should mainly reflect the amount of money, and not necessarily the benefit obtained by the defendant or others.

I consider this to be a very serious case of money laundering. Here, the amount of money involved in both Count 1 and 2 is over HK$5 billion, which on anybody’s terms can be described as very substantial, very significant.

I have also taken into account the effect on Hong Kong’s reputation as an international financial centre. This type of fraud, theft and breach of trust conducted on investors must be deterred, and in turn the penalty harsh.

Therefore, I find a global approach, a starting point of 11 years and 6 months’ imprisonment appropriate in light of the facts, amounts of money involved, and to reflect a deterrent sentence.

The defendant pleaded guilty at the earliest opportunity and will benefit from the full one-third discount.

Accordingly, the defendant is sentenced to:

Charge 1, 7 years and 8 months’ imprisonment;

Charge 2, 7 years and 8 months’ imprisonment.

I order both charges to be served concurrently.

A total of 7 years and 8 months’ imprisonment.

Can I ask if you understand Mr Wong?

ACCUSED: Understood.

COURT:

Disqualification order

The prosecution seeks a disqualification order under section 168E of the Company Ordinance, Chapter 32. The maximum period to be imposed is 15 years if ordered by a Court of First Instance’s judge. There is no question that the defendant has engaged in egregious conduct. He has admitted his guilt to serious criminal offences involving dishonesty. His criminal conduct was protracted and widespread and as far as I am concerned, reflects seriously on his integrity and ability to perform the important task as a company director, whether it would be private or public.

Therefore, I see no reason why this disqualification order should not be lengthy for the protection of the public and general deterrence. The defendant is disqualified from being a director of a company pursuant to the provisions of section 168E of the Companies Ordinance for a period of 12 years.

Mr Wong, do you understand that disqualification order?

ACCUSED: Understood.