HKSAR v. LI TSZ LOK AND OTHERS

 DCCC1063/2008,

DCCC245 & 453/2009 (CONS)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1063 OF 2008 AND 245 & 453 OF 2009

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Reasons for Sentence

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1.  All the defendants facing Charge 1 have been convicted of conspiracy to sell infringing optical discs without the licence of the copyright owner of the copyright work. D12 and D14 have been convicted of one money-laundering charge each. D14 has also been convicted of Charges 3, 4 and 10. This trial lasted 95 days.

2.  I will summarise very briefly the facts of this case again. My verdict set out the facts of the prosecution’s case and the defence case in full detail. There is no need to repeat myself. This case concerned the defendants working in or for a retail outlet, Shop 143 in 298 Computer Zone in Hennessy Road, Wanchai, selling out of this shop, infringing copies of optical discs. The material dates of this case are 3 July 2007 to 23 June 2008. Customs and Excise in that period of time mounted an operation named Operation Codebreaker against this shop and those involved. I have given details of the sales system used in Shop 143 that was designed to lower the risks of salesmen being arrested or infringing discs being confiscated.

3.  During this period of time, a covert surveillance was maintained on this shop and all personalities involved. This shop was at all times bar one day bare except for three walls within the shop being covered with disc inlay cards advertising the discs for sale. No stock was kept in the shop. Customers would peruse the inlay cards stapled to the walls and tell a salesman which disc or discs they wished to purchase. The salesman would note down a number taken from the card, and the customer would be directed to pay a cashier just outside the shop. The customer would be given a piece of paper with an order number and told when to come back to collect the discs.

4.  As I have said in my verdict, the modus operandi of this retail shop has been seen before by the courts and the Customs and Excise in many districts of Hong Kong and Kowloon. The discs would be collected from a storage centre nearby, in this case a flat in Cross Street, by one of a team of couriers and delivered to 298 Computer Zone. They would often be deposited somewhere in the building and picked up by another person. The discs would find their way to Shop 143 and were distributed to customers always outside, not inside Shop 143. Staff would as little as possible linger inside 143.

5.  In addition to Shop 143, there was the rear alley of 298 Computer Zone which was set up and designated as a makeshift office conference room for this business. A male, who was codenamed Grand Master, would be in this rear alley almost on a daily basis and his role was clearly running the operation on a day-to-day basis. He would receive daily takings, check sales records and distribute wages to staff who would congregate there at the end of each shift. Staff such as salesmen and couriers would earn between $300 and $330 a day. Grand Master has evaded arrest to date.

6.  There was the Shop 142 next-door to 143 which was later used as a control centre from February 2008. It was mainly used by D12 and D15. Before the operation turned overt, it is clear that this shop was no longer in use as a control centre sometime in the month of June.

7.  During this operation, the Customs and Excise Department would continue normal enforcement actions and harass Shop 143 on a daily basis. During that year, there were 19 arrests related to Shop 143. Customs and Excise would rip off all inlay cards of all three walls with every raid. Inlay cards were kept sufficiently close by, for example, in the rear alley. That would enable the syndicate to replace all inlay cards within a very short period of time and resume business.

8.  I found that the prosecution could prove that there was a conspiracy between all these defendants as well as others to operate this business outside of the law. It was an operation made up of many persons holding different roles and positions.

9.  When the operation turned overt on 23 June 2008, a large number of persons were arrested. Shops 142 and 143 as well as all the other premises I have mentioned were searched. Homes of some of the arrested persons were also searched. Ultimately, 22 persons were charged, 8 were dealt with before trial. 14 defendants faced a total of nine charges.

10.  I found the roles of the defendants before me now for sentence as follows. They were a group of salesmen who worked in 143. 1st defendant, he was 18 at the time of his arrest and worked there between January 08 and June 08; six months. 2nd defendant was 21 at the time of the offence. He worked there from late May 2008 to 23 June; one month. The 3rd defendant, who was 23 at the time of the offence, worked there for seven days, of which five days he was seen receiving salary. The 19th defendant was 27 at the time of the offence. He worked there for a period of 11 months. The 21st defendant was 25 years old at the time of the offence. He had worked there for a period of nine months. The 22nd defendant was 28 at the time of the offence. He worked there for a period of four months.

11.  On the same footing were the couriers. The only courier on trial was D9. He was 23. At the time of the offence, he had worked there for a year.

12.  Next came the management level. Somewhere between a foot soldier and a manager was D15. He worked in Shop 142, assisting D12. I will not go into detail of what I found he had done to assist this conspiracy, but he was there for a period of three months, and today I have been told in mitigation that he earned the same salary as those working as salesmen or couriers. He was not seen after late May, and I found out today that that was because he was arrested in Shop 142 on 28 May 2008. He was not seen in that shop thereafter.

13.  D13 can only be described as management. He was in charge of delivery and couriers. He was there almost on a daily basis. He would receive money from Grand Master almost on every occasion after Grand Master had paid the salesmen. He would then clearly, from that money pay the couriers. Grand Master, who is not before the court yet, managed and operated this shop, its staff, daily takings and wages.

14.  D12 was in charge overall. His elder brother was involved before his arrest and imprisonment. It has been suggested that he had to take over from his elder brother. D12 was seen in these premises from the very beginning of the operation.

15.  D14 has to be described as being in a category of his own. I have found that he supplied the syndicate with discs. I would not describe him as being management.

16.  Charges 3, 4, 10 and to some extent 6 require some separate consideration. At the same time, they should all be interlinked. Some defendants, as I have said, pleaded guilty before this trial. They include D4, 5, 6, 7, 8 and 10. All but D10 were dealt with in March 2009. They pleaded guilty before his Honour Judge Yip and were sentenced by him. I am not bound by his sentence but I will consider it, but those defendants pleaded guilty to the same charge as Charge 1 here.

17.  I have had sight today of the facts that were put before him. They describe D4 and D5 as acting as salesmen, as being employed as salesmen in Shop 143, and describe the MO of Shop 143 as I have in my verdict.

18.  D11 pleaded guilty to a role as a courier. The facts indicate the existence of the storage centre and its proximity to 298 Computer Zone. D6, 7 and 8 were couriers as well.

19.  His Honour Judge Yip was not aware from the facts of the makeshift office in the rear alley, and nor was he aware of the use of 142 between February and early June and the fake tenants of 142 and 143. I have been given a copy of his reasons for sentence for my perusal. D4 and D5, he accepted worked there for four days, and D11 for four months. These three defendants were sentenced to 7 months for Charge 1. A 12 months’ starting point was deemed appropriate and because they pleaded guilty, they were all given a discount of 4 months. They were given an extra 1-month for saving preparation time that is very arduous in offences of this nature.

20.  D10 pleaded guilty before Deputy District Court Judge Josiah Lam in November 2009 and pleaded guilty to the same Charge 1. He was between 17 and 18 years old when he was arrested. Judge Lam also used a starting point of 12 months.

21.  Charge 1 here is a joint conspiracy between all defendants, but it can only be fair that different roles will attract different sentences. Foot soldiers will attract a lower sentence. Those that had been there a longer time will attract a longer sentence than those that had been there for a very short time. Management such as the 13th and the 12th defendants will attract longer sentences that reflect their roles. Factors such as the turnover or average daily takings will apply to management but, in my view, should not apply to the foot soldiers. I can be sure that the 12th defendant, for example, knew that the leases for 142 and 143 were signed with fake or forged identity cards whereas I would accept that the foot soldiers would not know that fact.

22.  I have been informed of the records of all those defendants before me. D1, 2, 3, 19, 12 and 22 have clear records. D9 and D21 do have one previous but they are not similar offences. D13 has one previous conviction that is similar dated 2006. D14 has three previous convictions, of which one is similar, a conviction in 2003.

23.  D15 has two previous convictions, of which both of them are similar. When I say “similar,” I mean selling infringing copies of copyright works. D15’s convictions were in 2003 and 2009. The 2009 conviction relates to his arrest in Shop 142 on 28 May 2008. I have seen the charge sheet, Brief Facts and the probation officer’s report obtained in that Eastern Magistracy case 6097/2008. He was charged with two very specific offences that related to items he sold out of Shop 142. He was sentenced to a probation order which he has completed. In my dealing with this conviction today, it is not my view that he is receiving a double punishment.

24.  I have considered all the mitigation put forward today, including letters from the defendants and family. I have taken into account all the facts of the case and the roles of each defendant. It has been said time and time again that offences of this nature, copyright offences, are serious because they affect the international reputation of Hong Kong. We have a reputation of selling fake discs. It has been said very often that because of this element, deterrent sentences are appropriate; imprisonment is entirely appropriate.

25.  Prosecution has asked for an enhancement of the sentence I intend to impose under OSCO. Enhancement would be a draconian measure. This type of shop and operation requires planning and organisation to be set up, and I have defined this offence as organised crime mainly because the definition is so wide. However under section 27(11) I have a discretion even if I declare the offence an organised crime. And taking the words of section 27(11), I do not think fit to enhance the sentence.

26.  The factor I have taken into account to reach that decision is that this is one shop. The team of persons involved are not that many. It was not highly sophisticated. There is one storage centre and seems to be one supplier. This use of this rear alley was because of the building’s location, quite fortuitous. It would be different if there was a number of shops and perhaps evidence of triad activity or triad control. In the one year that this surveillance took place, the organisation did not change or grow in size. So, in my view, it is not facts such as these that the legislation behind enhancement intended to target. Ultimately, I find no basis for enhancing the sentence.

27.  As I have said, deterrent sentences are required and a term of imprisonment is inevitable. The leading case which I have referred myself to is Secretary of Justice v Choi Sai Lok [1999] 4 HKC 334. It does not set out tariff sentences but it is generally regarded after this authority that the usual range of sentence would be between 6 and 18 months. I am not going to additionally penalise or take a higher starting point because it is a conspiracy. To make this modus operandi work, this operation had to be run in this manner.

28.  I do not also take too much stock of the fact it survived between July 07 and June 08 without interruption. I do not place much weight on the fact the operation survived a year. Clearly, the Customs and Excise intended it to go on until they decided when to break it up.

29.  D14 faces additional charges. Charges 3, 4 and 10 were offences that we can say were set up at home; was an operation he had set up at home. He possessed infringing discs, possessed obscene discs and equipment to make infringing copies. And I take into account that it was at home there were four DVD writers that were operable. He was able to do this alone. And I also consider the number of discs, be it infringing or obscene, that were found.

30.  Where the obscene discs are concerned, I have to take into account the degree of obscenity and it has been agreed by both parties it comes in at the low end of the scale.

(Discussion re content of obscene discs)

31.  What would be left is two money-laundering charges that applied only to D12 (Charge 5) and D14 (Charge 6). The amounts are relevant. Charge 5, which the 12th defendant faces, the particulars refer to HK$43,000. Charge 6 for the 14th defendant, the particulars refer to $1,241,910 over a four‑year period.

32.  The $1,241,910 particularised in the charge D14 was convicted of, it specifies a period of four years. And in my verdict, I set out the payments made over that period of time; mainly cash deposits into which account. That of course has come from the hard work of the bankers’ affidavits and the treasury accountant.

33.  There are some factors that I have considered relevant in these money-laundering charges, relevant to sentence. The flow of money was not difficult to detect. This is not a sophisticated money-laundering scheme. In fact, D12 and D14 are dealing with their own proceeds of indictable offences, and the money goes back to themselves. In short, these money-laundering offences are not the most serious cases for charges of this nature. There are no guidelines set out for money‑laundering offences.

34.  I intend to first deal with the salesmen and couriers, and I will state my starting points. These salesmen and couriers face Charge 1 only.

35.  For the 1st defendant, I will take a starting point of 12 months. For the 2nd and 3rd defendants, I take starting points of 9 months. For D19, D21, D22 and the courier D9, I will take the same starting point of 12 months. I see no reason to consider any discounts.

36.  D15, as I have set out, I found him to assist in 142. I take into account his salary was no different from the salesmen and couriers. Nor was he there for any substantial period of time. For D15, I take a starting point of 12 months.

37.  D13, I found that he plays a senior management role. Factors relevant to sentence differ than those of the foot soldiers, and I take a starting point of 21 months.

38.  D12, as I have found him to be the most senior syndicate member arrested and convicted, Charge 1, I take a starting point of 24 months; Charge 5, a starting point of 15 months. These offences will run concurrently.

39.  The 14th defendant, Charge 1, I take a starting point of 12 months; Charge 3, starting point of 12 months; Charge 4, starting point of 15 months; Charge 6, a starting point of 15 months; Charge 10, a starting point of 12 months. Charges 3, 4 and 10 are part of his relationship with the syndicate and related to some extent to Charge 1, and I will order them to run concurrently. Charge 6 also relates to his illegal business activity and can be reflected in all the charges. Charge 6 will also be ordered to be served concurrently.

40.  I see no reason to consider any discounts for any defendant on any charge. So I repeat. Charge 1, 1st defendant is sentenced to 12 months; 2nd defendant, 9 months; 3rd defendant, 9 months; and 9th defendant, 12 months; 12th defendant, 24 months; 13th defendant, 21 months; 14th defendant, 12 months; 15th defendant, 12 months; 19th defendant, 12 months; 21st defendant, 12 months; 22nd defendant, 12 months.

41.  Charge 3, the 14th defendant sentenced to 12 months. Charge 4, 14th defendant sentenced to 15 months. Charge 5, the 12th defendant sentenced to 15 months. Charge 6, the 14th defendant, sentenced to 15 months. Charge 10, 14th defendant, 12 months.

42.  For the 12th defendant, Charges 1 and 5 will be ordered to be served concurrently. That is a total sentence of 24 months. 14th defendant, Charges 1, 3, 4, 6 and 10 will be ordered to be served concurrently. That is a total of 15 months.