HKSAR v. SHAWN HANNA

CACC 26/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 26 OF 2012

(ON APPEAL FROM DCCC NO. 918 OF 2011)

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JUDGMENT

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Hon McWalters J (giving the judgment of the court):

Introduction

1.  The appellant was convicted after trial on 23 December 2011 by Deputy District Judge Casewell of one count of conspiracy to defraud contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap 200.  On 10 January 2012 he was sentenced to 39 months imprisonment.  He then applied for leave to appeal both conviction and sentence and on 8 May Hartmann JA granted him leave.  At the hearing of his appeal we reserved our decision. This is the judgment of the court.

The Charge

2.  The appellant was charged with the conspiring with Annie Li, So Tsui-chun and Chiew Chee-boon (“Steven Chiew”) and other persons unknown to defraud persons investing in a private equity company by the name of Solazymepe Bio Engineering Company Limited (“Solazymepe”).  This company was incorporated on 10 December 2010 and its name was deceptively similar to the name of an American company, Solazyme Inc, that was shortly to be listed on the American NASDAQ Exchange.  The charge particularised a number of false representations held out to prospective investors of this company.  These false representations were as follows:

(a) that the company was authorised by Solazyme Inc, the genuine American company, to run a private equity scheme in Hong Kong;

(b) falsely representing that Solazymepe was carrying on a genuine business;

(c) falsely representing that any monies invested were properly recorded and reflected on Solazymepe’s website; and

(d) falsely representing that the private equity scheme would result in the allocation of shares of Solazyme Inc to the investors.

The Prosecution Case

3.  It was the prosecution case that Solazymepe, which operated out of office premise at Concordia Plaza in Tsim Sha Tsui, was set up as a vehicle for fraud and that the use of a name deceptively similar to Solazyme Inc was a deliberate ploy to mislead potential investors into thinking that Solazymepe was associated with Solazyme Inc and authorized by it to raise money in Hong Kong.  Solazyme Inc owns a technology for processing oil out of algae.

4.  At the trial of the appellant much of the evidence was agreed.  The statements of six of the victims were read into evidence and these statements clearly established the fraud that was being perpetrated by those behind Solazymepe.  The prosecution case can be divided into evidence of what transpired before June 2011 and evidence of how the appellant conducted himself after that date.  The significance of this demarcation line is because after early June 2011 the appellant had knowledge that Solazymepe was representing its relationship with Solazyme Inc and in doing so was making use of a forged document of Solazyme Inc.

Events before June 2011

5.  On 27 February 2011 those behind Solazymepe arranged a press conference in a hotel to promote its private equity scheme.  At this press conference it was represented to investors that Solazymepe was authorised by the US “parent” company to come to Hong Kong and seek financing in a capital raising scheme whereby investors purchasing shares in Solazymepe would acquire shares in the American “parent” company.  At this press conference actors were engaged to pose as senior officers of Solazyme Inc, government officials and journalists. Draft speeches were prepared for the artists and the expatriate actors.  A video recording of the press conference was made for later use with potential investors.

6.  The appellant became involved with the Hong Kong company from 25 April 2011 when he arrived in Hong Kong and started work from the office that Solazymepe operated in Tsim Sha Tsui.  He was still present at this office on 13 July 2011 when he was arrested.[1] The appellant was employed as the manager of Solazymepe and became involved on the company’s behalf in some staff training.

7.  Employees of Solazymepe who gave evidence explained how the appellant was introduced to them as the manager of the company and how he had occupied a room at the offices of the company with the manager’s title on it.  They said that after joining the company the appellant talked to them about Solazyme Inc and did some training with them.  When a group of people came in mid-May the appellant was on the stage with the marketing manager answering questions.

8.  Around late May 2011 a member of the staff of Solazymepe enquired from the American company as to whether Solazymepe had any relationship with it.  The American company replied that there was no such relationship.  On hearing this information an employee, PW11, spoke to Annie Li, who had recruited him.  She denied to him that there was no connection between the Hong Kong and American companies. Some of the staff asked the appellant about the email and they said that when they did so he looked shocked and replied that he did not know what was going on.  PW11 also said that Annie Li had represented that the appellant was from the US office but that the appellant denied that he was.

9.  There was also a forged letter of authorization (P33) on the Solazymepe website which was purported to have been written by the Chief Executive Officer (“CEO”) of Solazyme Inc.  The appellant admitted in evidence that he saw this at the end of May and realized that it was a forgery.

10.  This evidence of the email from Solazyme Inc denying any relationship with Solazymepe and the use by Solazymepe of a forged authorization in the name of Solazyme Inc effectively drew a dividing line in the appellant’s association with Solazymepe and the fraudsters behind it.  Before this period the appellant may arguably have been an unwitting participant, like the other employees, deceived into lending his assistance to the fraud.  But after this period the evidence pointed to him having become a knowing participant in the fraud and actively promoting it.  The prosecution position was that whatever the appellant’s involvement may have been before this later period, at some point thereafter he became a co‑conspirator.

Events from June 2011 onwards

11.  The evidence of the appellant’s conduct in this period essentially concerned his:

(i) continued involvement with Solazymepe;

(ii) contact with Steven Chiew;

(iii) involvement with Webs Private Equity which was incorporated in Hong Kong on 6 July 2011 and which the prosecution portrayed as a successor of Solazymepe that was created to continue the fraud commenced by that company; and

(iv) dealings with PW9 and his company Nekoworkshop which was engaged to provide assistance to Webs Private Equity for its public launch on 30 July 2011.

Some of the evidence on these matters came from PW9 and some from documents signed by the appellant or found on his computer.

12.  At the time of his arrest the appellant was actively involved with another company called Webs Private Equity, of which he was a ten percent shareholder.  It was the prosecution case that the appellant, together with others, set up this new entity precisely because Solazymepe had become the subject of suspicion.  The prosecution further said that the purposes of setting up Webs Private Equity were simply to continue the same fraud via another corporate entity that was not under suspicion.

13.  An important witness implicating the appellant was PW9, Mr Lee, who worked for Nekoworkshop.  This company was involved in event promotion.  He gave evidence that at the end of June he was contacted by a person by the name of Steven who asked him to assist in the planning of an event to take place in Hong Kong in July.  When he met Steven the appellant was with him and thereafter he had an exchange of emails with the appellant concerning this event.  When Mr Lee requested details of the company for the purpose of booking a venue for the event the appellant provided him with the business registration number and profile of Solazymepe, saying in an email which he sent on 22 June 2011:

“We operate as a private equity investment company. We invest in environmentally friendly energy products. We are working on a website as our current website is for members only. We are expanding into more companies and changing our name to Webs Private Equity. We will continue to invest in another renewable energy company in the USA.”

14.  The appellant also sent PW9 a copy of Solazymepe’s Certificate of Incorporation and a note addressed “To whom it may concern” on Solazymepe letterhead and signed by the appellant as General Manager of Solazymepe.  This note, dated 28 July 2011, contained the following:

“Solazyme would like to hold an event in late July or early August to hold a rewards ceremony for our members. Solazymepe is a Private Equity firm and we have thousands of members throughout Asia and we hold rewards ceremonies 3 times a year.

We want to hold an event in a large venue capable of holding 1000 pax.  We would like to hold a dinner and cocktails.”

Everything in the first paragraph of this note was false and must have been known to the appellant to be false.

15.  The documents obtained from the appellant’s Apple computer also included an email dated 3 July 2011 sent by Steven Chiew to the appellant telling him to contact the “event organizer for the opening”, an apparent reference to the Solazymepe February press conference, and to enquire of the availability and cost of those actors who were engaged to portray the CEO and CFO at that February conference.

16.  Finally, there was exhibit P63 which was a draft design for an entry ticket to the Webs Private Equity 30 July launch.  This was found on the appellant’s computer.  The most prominent feature of this ticket is the word “Solazyme”. Underneath, in much smaller font, are the words “Sponsored by Webs Private Equity Ltd”.  An accompanying explanation for the draft design contained the following:

“We show Solazyme on the ticket and present the logo as the main theme for the event … We will look like Solazyme and through the evening present the concept of change and the idea of Webs Private Equity as a partnership and strong relationship with WPE and Solazyme…. We cannot claim to be Solazyme ‑ or pretend - we must face the fact that we INVEST in Solazyme because it will make money and it is great for the environment. We can make this visually easy to understand and the message will be soft, but clear.”

17.  Investors in Solazymepe eventually lost about $500,000.

The Defence Case

18.  The appellant gave evidence in his own defence.  He told the court that he is a 48 year old Canadian citizen of clear record in Hong Kong and Canada. He is a qualified project manager and in early 2011 he had travelled to Beijing to teach English in the south of China.  He went to Shenzhen to take up employment but before the school year started he met people who asked him if he could work in Hong Kong.  He said that he was paid RMB11,900 and his job description was simply to entertain clients and teach people about Solazyme Inc.

19.  He said that when he saw the email from the American parent company, which effectively confirmed that he was part of a fraud, he said he was surprised and shocked, but also skeptical.  He said that the response from the North American company did not seem right.  He discussed this email with Annie Li who explained to him how Solazymepe was going to invest in the American parent company and his anxieties were temporarily relieved.  However, at the end of May he said that he saw on the Solazymepe website the forged letter of authorization purportedly written on behalf of Solazyme Inc.  He said he thought this letter of authorization was totally fake and that he would then just get his pay at the end of May and leave.  He said he told three members of staff to do likewise.

20.  Despite the email from the US parent company and the use by Solazymepe of what the appellant accepted was a complete forgery of a document of the US company, the appellant still thought that he was not part of a scam but that he was merely caught up with people who were doing something that they had no idea how to do.

21.  He further said that when he talked with Steven Chiew he thought that this person was a potential investor and was persuaded by him to become involved with Webs Private Equity.

22.  When asked about the press launch for Webs Private Equity that was to take place on 13 July 2011, he said that at the time he arranged it he had no idea that Steven Chiew was associated with Solazymepe or the Solazymepe had been in any way involved in arranging the press launch for Webs Private Equity.  When asked why he provided to PW9 details of Solazymepe for the purpose of this event, he explained that Webs Private Equity had not yet been incorporated and so he was not able to provide documentation in relation to it for the purpose of booking the venue.  Some documentation was required and so he simply provided the documentation for Solazymepe so that the booking could be made.

23.  In respect of the email from Steven Chiew encouraging him to use the same actors as had been previously used for the Solazymepe press conference, he said that in fact he never replied to that email as he could not agree to the use of actors to represent the CEO and the Chief Financial Officer (“CFO”) at any event.

Reasons for Verdict

24.  That Solazymepe was set up for a fraudulent purpose and that as a consequence investors were deceived into investing money with it and as a result lost their money was not really in dispute.  What was at issue in the trial was whether the appellant was part of the fraud.  The fraud obviously pre-dated the appellant’s association with the company as the company was incorporated on 10 December 2010 and the appellant did not become involved with it until 25 April 2011.

25.  The most damning evidence against the appellant was his continued involvement with the company after becoming aware that it was employing fraudulent misrepresentations as to its association with the US company and forging documents of the US company.  His continued involvement with it was given a sinister character by the fact that he thereafter became involved as part-owner and promoter of Webs Private Equity which appeared to be just a mutation of Solazymepe.  That Webs Private Equity was to be a fraudulent vehicle was proven by the fact that similar tactics were to be employed at its launch as were employed at the February press conference of Solazymepe.  That is, the use of actors to represent officers of the company, the making of representations which would mislead people as to the connection between Webs Private Equity and Solazyme Inc, and the design of the admission ticket for the press conference which was found in the appellant’s computer and whose accompanying explanation made it clear that the ticket had been deliberately designed to convey the misleading impression that there was a connection with Solazyme Inc.

26.  The appellant’s conduct, therefore, was in stark contrast to those staff of Solazymepe who as soon as they became aware that they were employed in a fraudulent enterprise left the company.  The appellant continued to stay with the company and the persons who were involved in its promotion.  He lent his support to the launch of a new enterprise which was clearly intended to replace Solazymepe employing the same fraudulent tactics at its launch.

27.  After examining the evidence the judge pronounced himself satisfied beyond reasonable doubt that the prosecution had established that Solazymepe had been created as an “engine of fraud”.  He then directed himself that the question that he had to decide was whether the appellant was ever part of the agreement to defraud the investors.

28.  The judge disbelieved the evidence of the appellant and this is hardly surprising given the inherently incredible nature of much of it and the conduct of the appellant after he became aware of the fraudulent nature of Solazymepe.  His conduct belied his claim that he was shocked by what he discovered and that he wanted to have no more to do with Solazymepe.  After analyzing the evidence of PW9, the judge concluded that it showed that the appellant was “fully involved in the work of Solazymepe and the change of the name of the company to Webs Private Equity”.  Furthermore the email between the appellant and Steven Chiew contradicted the appellant’s evidence that he had no knowledge of Steven Chiew’s previous involvement with Solazymepe.  The judge concluded that the evidence clearly showed that Solazymepe simply transformed itself into Webs Private Equity and that the appellant must have been aware of this.  In respect of the appellant’s evidence the judge said he found it to be “evasive, disingenuous and untruthful”.

29.  Having rejected the appellant’s evidence, the judge had no difficulty in inferring from the prosecution evidence that the appellant “must and did know of the fraudulent nature of Solazymepe’s operation, yet was happy to agree to continue to assist in its ongoing operations, particularly the planning and execution of the 30^th July event, where the further layer of deception will be added in the creation of Webs Private Equity”.  He said that this was the only reasonable inference that could be drawn from the established facts.

Reasons for Sentence

30.  The judge described the fraud of which the appellant had been convicted as follows:

“The fraud was elaborate, involving the creation of a fake press conference involving actors and media presentation. The fraud itself operated in a virtual manner out of a website where details of purported investments were kept. Investors were offered various incentives to participate. It would appear that none of the investment actually existed in the real world and the investors could not, when they wanted to, get any part of their money out”.

The judge concluded that the fraud was a serious one “involving considerable expense on behalf of the fraudsters”.

31.  Although the victims lost only an amount in the region of half a million dollars, the judge noted that this was just the amount from victims who had made a report to the authorities.

32.  When considering the role of the appellant in the fraud, the judge accepted the submissions of defence counsel that the appellant was not actively involved in dealing with investors and inducing them to part with their money.  Nor was there any evidence that the appellant received any substantial sums of money from the fraud.  The activities of the company were designed to give Solazymepe a veneer of respectability and it was in this respect that the appellant was involved.  Noting the appellant’s role as manager of Solazymepe and then as a facilitator of the creation of Webs Private Equity he described the appellant as having what he would call “a “behind the scenes” public relations role”.

33.  The judge concluded that a sentence of imprisonment was required and said that he took into account all the factors to which he had referred in arriving at the sentence of 39 months imprisonment that he imposed.

Grounds of Appeal

Conviction

34.  In this appeal the appellant was unrepresented and he has filed with the court a lengthy written letter setting out his evidence and the explanation for his involvement in this fraud and his complaints in respect of the trial which resulted in his conviction.  It is difficult to identify grounds of appeal from the lengthy and somewhat rambling nature of the appellant’s letter to the court.  It is apparent that the appellant’s main complaints are that the judge disbelieved him, that the judge wrongly inferred his involvement in the offence, that the judge failed to take into account that Webs Private Equity was quite separate from Solazymepe and that the judge convicted him on the basis of supposition and adverse inferences wrongly drawn.

35.  He has also made allegations against the prosecutor, the judge and his own counsel.  These range from the prosecutor misleading the judge and of being guilty of non‑disclosure and trickery, to the failure of his counsel to be properly prepared in presenting his defence, and finally to bias by the judge.  In respect of the prosecutor he refers to an amendment that was made to the charge at the beginning of the trial adding the names of two new conspirators, So Tsui-chun and Chiew Chee-boon (ie Steven Chiew).  He says the judge wrongly allowed the prosecution to make this amendment as a result of which he, the appellant, was deprived of the opportunity of cross-examining PW3 and PW4.

Sentence

36.  The appellant’s complaints are that he had a minor involvement in this conspiracy to defraud, he did not get any credit for his co-operation with the authorities, he was on a salary of RMB11,900 and that was his only financial gain and that his sentence was disproportionately severe compared to another conspiracy to defraud case which he indentified.

Discussion

37.  That the appellant is dissatisfied with the outcome of his trial is clear but a conviction was not surprising once the judge rejected the appellant’s evidence.  There is no merit in his complaints that the judge should not have disbelieved him or that his conviction is based on supposition or wrongly drawn inferences.  The prosecution case was very strong and once the appellant’s evidence was rejected there was an absence of any evidence to explain or contradict it.  In these circumstances a conviction was inevitable.

38.  As to his other complaints, suffice it to say that the appellant was ably represented throughout the trial by very experienced counsel.  The amendment to the charge to include two new co-conspirators was far from prejudicial to the appellant and actually benefited him.  It did so by adding greater precision to the particulars of the offence and by clarifying who it was the prosecution was alleging were part of the conspiracy.  There was nothing improper in allowing this amendment and had his counsel wished to call or re-call any prosecution witness as a result of that amendment we are in no doubt that he would have been allowed to do so.  There is nothing in this complaint.

39.  We have carefully considered each of the various complaints made by the appellant in his lengthy written submission to us and we find no merit in any of them.

40.  We therefore dismiss the appeal against conviction.

41.  In respect of the appeal against sentence the appellant’s complaints do not avail him.  The trial judge correctly assessed his limited role in the conspiracy and took into account his small financial gain saying in his Reasons for Sentence:

“We know that he received some RMB11,000 at one point and also had the use of a flat in Hong Kong. The defendant himself was here from Canada and appears to have no other means of supporting himself, and may well have been glad of the fact that he had the ability to live somewhere and was prepared to carry on primarily because of that.”

42.  The complaint that his sentence is excessive when compared with other cases is without any substance.  This court has repeatedly said that sentencing is a fact sensitive task and rarely can assistance be gleaned from comparing one case with another.  This is especially so with cases of conspiracy to defraud.  The proper approach for the Court is to assess the culpability of the offender before it and this we have done in respect of the appellant.  We can find no error by the judge in his Reasons for Sentence or in the sentence which he imposed.  We therefore dismiss the appeal against sentence.

[1] It was an admitted fact that the applicant remained in Hong Kong from 25 April 2011 until 24 June 2011 when he travelled back to Mainland.  He returned to Hong Kong on 26 June and then remained in Hong Kong until his arrest.