HKSAR v. SHYAM CHATOMAL RAICHANDANI

DCCC 389/2009

IN THE DISTRICT COURT OF THE 

HONG KONG SPECIAL ADMINISTRATIVE REGION 

CRIMINAL CASE NO. 389 OF 2009

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Reasons for Sentence 

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1.  Both defendants are jointly charged with 154 charges including 6 counts of conspiracy to defraud, one count of dealing with proceeds of an indictable offence and 147 counts of procuring an entry in a bank record by deception. Each defendant pleads guilty to 66 counts of procuring an entry in a bank record by deception. [1] The remaining 88 counts are left on file.

Background

2.  D1 is the husband of D2. They established Suzika Electronic Company Ltd (Suzika) in 1984. At the material time of the offences [2], D1 was the director and major shareholder of Suzika. D2 was one of the three managers. In 1998, D1 had an agreement with Mr. Leung Ping Chiu (Leung), the then general manager of Intermodal, a freight forwarder, to issue house bills of lading (house bills) to Suzika. Contrary to commercial practice, Leung did not require Suzika staff to produce relevant documents evidencing the delivery of goods to the shipping companies. Leung instructed Intermodal staff to issue 67 house bills accordingly. It transpired that there was no shipment of the goods by any of the shipping companies specified in the house bills. Only Mediterranean Shipping Co. Ltd had conducted 15 shipments on the instruction of Intermodal.

3.   In the twelve shipments through Mediterranean Shipping Co. Ltd. which were financed by BNP, the goods were of no value. In the three shipments through Mediterranean Shipping Co. Ltd. which were financed by HBZ Finance Ltd., the goods were not in accord with the description in the house bills and were of no value.

4.  During the material time, Suzika presented the 67 house bills and other supporting documents to three banks and two financial institutions for Documents against Payment facilities (DP facilities). Suzika successfully obtained about HK$ 27.4 million from them. The three banks were State Bank of India, Banque National de Paris [3] and United Commercial Bank Ltd. The financial institutions were HBZ finance Ltd and Delta Asia Credit Ltd.

5.  The 67 house bills were false in various aspects including the name of vessels, the voyage number, the container reference, the identities of customers and the actual order of goods.

6.  In November 1998, Leung disclosed to the managing director of Intermodal that he issued house bills to Suzika based on fictitious transaction documents submitted by the latter. The case was reported to the Police.

7.  D1 left Hong Kong on 5 December 1998. D2 left Hong Kong on 11 December 1998. Both defendants were arrested on 4 October 2006 in London. They resisted the extradition proceedings. Their appeal against the extradition order, to the Queen’s Bench Division, was dismissed on 20 January 2009. They were extradited to Hong Kong in February 2009.

Mitigation of D1

8.  D1 is 47 and has a clear record. He is married to D2 with a daughter (21) and a son (19). He received education in Hong Kong. He established Suzika with D2 in 1984 trading in electronic products. The business was very successful and the company turnover reached US$55 million in 1997. In 1998, due to over expanding of Suzika and the general economic downturn, Suzika incurred enormous debts to cover its cost of design and production.

9.  In order to cover these debts and savaged Suzika, D1 and D2 resorted to the fraudulent plot as revealed in the charges. D1 was the main instigator of the plot. He prepared and signed most of the forged documents to support the application for DP facilities. When he was out of Hong Kong, D2 would sign most of the documents.

10.  By the end of 1998, D1 and D2 were allegedly harassed by debt collectors. D2 could not stand the pressure and left Hong Kong with the children. D1 joined D2 subsequently in Singapore and the family finally ended up in St. Maarten in the Caribbean in 1999. By that time D1 was fully aware of the financial problems of Suzika and decided not to return to Hong Kong.

11.  In 2000, D1 and his family moved to London and led a normal life until he was arrested in 2006. They resisted the extradition proceedings until their appeal was dismissed in January 2009. They were on bail during these proceedings. D1 claimed that he resisted extradition as his children was young and needed parental care.

12.  From the medical reports submitted, D1 was suffering from severe knee pains, polyarthritis and fibromyalgia while in London. He applied for incapacity benefit. The updated medical report from the Correctional Services Department indicated that his general health is satisfactory.

13.  D1 pointed out that he and his family derived no personal benefit from the fraud. He led a humble life in London. He is remorseful and pleads for leniency.

Mitigation of D2

14.  D2 is 45. She was born in Hong Kong and has a clear record. She was the director of Suzika until 1994 when she sold her shares to D1’s brother. She remained as a manageress of Suzika until 1998 handling her own clients. The business in Suzika deteriorated in early 1998 due to the wrong judgment of D1. Its debt was insurmountable. D1 ignored her advice. This situation also affected their marital relationship. D2 was depressed and lost her interest in Suzika. She just followed D1’s instruction and signed the forged documents with the hope that things would get better in the end. At the same time, she was harassed by debt collectors and was under great stress. She decided to leave Hong Kong in December 1998. She lived in St. Maarteen until 2000 and finally settled down in London. She worked in London and made no attempt to conceal her identity.

15.  D2 pointed out that she derived no personal benefit from the fraudulent plot.

Sentencing considerations

16.  The fraud perpetrated in this case is a serious offence. It continued for about 6 months in 1998. The victims were repeatedly deceived by forged house bills and shipping documents. It was an elaborate plot. It severely damaged the integrity of the credit system which heavily relied on mutual trust and apparently reliable documents.

17.  In sentencing, I bear in mind that this plot involved a systematic manufacturing of forged documents and the potential risk to banks and financial institutions [4]. I also bear in mind the actual loss to the victims which was about HK$27.4 million.

18.  Counsel refer me to several comparable authorities. I need only refer to HKSAR v Chu Wai San & Others [2008] 1 HKC 526. In considering the starting point, Stone J reviewed several authorities and concluded that a starting point of 5 years for a fraudulent scheme involving HK$22.5 million would be appropriate. However, in all those cases reviewed, the victim banks suffered no real loss and the defendants derived no benefit from the scheme [5].

19.  In our present case, there was actual loss of at least HK$27.4 million. D1 allegedly used the money to cover his business debts to savage his business. He derived actual benefit from the plot. While I accept that D1 might be a successful and innovative entrepreneur at the material time, his financial problem is not a valid mitigating factor.

20.  In addition, the plot was perpetrated with the assistance of the general manager of the freight forwarder, Intermodal. There was also a large volume of forged shipping documents involved. All transactions specified in the house bills were fictitious. In my view, this plot was sophisticated and warrants severe penalty.

21.  I have considered the personal circumstances of D1, his health is satisfactory apart from the polyarthritis. In fact, Dr. Wong of the Correctional Services Department described it as minor ailments [6].

22.  In early December 1998, D1 might not intentionally flee Hong Kong, however, his subsequent conduct left me in no doubt that he deliberately stayed away from Hong Kong. D1 resisted the extradition proceedings until his appeal was dismissed, I do not think he deserved any sympathy from this court in this respect.

23.  I take a global view of the criminality in this case. D1 was the main instigator of the plot. Suzika actually received the sum of $27.4 million. Having considered all circumstances, I take 8 years as the starting point for each charge he pleads guilty. I deduct 32 months for the plea, I sentence D1 to 64 months imprisonment for each charge to run concurrently.

24.  As for D2, I accept that she was not the main instigator. There was no evidence that she derived any personal benefit from the fraudulent plot. She assisted in the perpetration of the plot by signing the forged documents. I accept that She might be under the influence of D1. Having said so, D2 had been in the trade since 1984, I do not accept that her role was entirely passive. Similarly, I do not accept that she fled Hong Kong unknowing of the criminal investigation. I also do not think she deserved any sympathy from this court because of the extradition proceedings.

25.  I take a global view of the criminality in this case. Having considered all circumstances, I take 54 months as the starting point for each charge she pleads guilty. I deduct 18 months for the plea, I sentence D2 to 36 months imprisonment for each charge to run concurrently.

[1] Contrary to s.18D, Theft Ordinance.

[2] June 1998 to November 1998.

[3] Now known as BNP.

[4] Per Stuart-Moore VP, as he then was, in HKSAR v William Yau [2002] 3 HKLRD 397 at 400.

[5] Para. 193 of the judgment.

[6]D1's bundle at tab 31.