HKSAR v. LAM CHUN KIT, KEVIN AND ANOTHER

DCCC 1265/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1265 OF 2010

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Reasons for Sentence

1.  The defendants (D1 and D2 on the indictment and so termed throughout) are before me today for sentence. D2 had denied one count of dealing with property known or believed to represent the proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Chapter 455, count 11 on the indictment as amended, but was convicted after trial. At the outset, D1 pleaded guilty to all the charges on the indictment that he faced, namely 34 counts of theft, contrary to Section 9 of the Theft Ordinance, Cap. 210, namely counts 1 to 10 and 11 to 35 on the indictment. As it was indicated that he would be giving evidence on behalf of D2, his sentence was adjourned until the conclusion of the trial of D2. Mitigation on behalf of D1 was reserved, but I did call for a Background Report on D1, which is now before me. I delivered verdict in respect of D2 on 18 April 2011. As I indicated that I would be calling for a Background Report in respect of D2, Counsel on behalf of D2 reserved mitigation, and the matter was adjourned. The Background Report in respect of D2 is now before me as well.

2.  I have carefully considered all that had been urged upon me in mitigation by counsel on behalf of each defendant as well as the contents of the Background Reports in respect of each defendant which is before me.  No issue has been taken on the contents of these reports.

3.  D1 is sentenced on the basis of the facts admitted by him while D2 is sentenced on the basis of the facts found by this court.  I shall not recite the facts in detail.

4.  Full particulars of the offences admitted by D1 are set out in the summary of facts admitted by him.  Briefly, D1 had been employed as a salesman by Design & Distribution Link Ltd., a furniture company, since March 2007. He was the only salesman working at the company’s showroom in Central.  The mode of operation of the company at all material times was that when a customer placed an order with the salesman in the showroom, the salesman would request the customer to pay 50% of the purchase price as a deposit.  The customer would be given the original invoice whilst a copy of the invoice and the customer’s deposit would be submitted to the company for placing the order for the goods from Europe.  When the goods were delivered to Hong Kong, D1 would contact the customer to settle the balance payment.  He would issue a receipt to the customer upon receipt of the balance and arrangements were then made for the goods to be delivered to the customer.  The receipt and the balance payment would be returned to the Accounting Department of the company for processing.

5.  The matter came to light when a customer who had purchased a quantity of goods from the company and settled payment by depositing the money into a HSBC bank account in the name of ‘Design Link’ as instructed checked with the company on 19 January 2009 about his order of furniture and was informed that the company had not received full payment.  The company conducted checks of its records and liaised with other customers.  It was discovered that furniture had been delivered to customers, but the company had not received payment, either in part or in full for the furniture delivered.  A report was made to the police and D1 was arrested on 19 January 2009.  Investigations revealed that the HSBC bank account into which the customers has deposited funds as instructed to by D1 had been opened by D2, the girlfriend of D1 at the material time, on 30 June 2008 and she was the sole signatory of the account.

6.  Subsequent investigations revealed a total of 34 questionable transactions between December 2007 and January 2009, the subject matter of counts 1 to 10 and 12 to 35 on the indictment.  Upon placing an order with D1 in the showroom, customers were asked to make payments, either by cheque, cash, credit card, ATM transfer or telegraphic transfer to D1, either to his personal bank account with the Hang Seng Bank, or to the ‘Design Link’ bank account at the HSBC opened by D2.

7.  The total sum embezzled by D1 from his employer Design & Distribution Link Ltd. in these 34 counts amounted to HK$2,312,783.  D1 subsequently arranged repayment of HK$430,000 to his employer by way of a cashier order drawn by D2 from the Design Link bank account.  The balance amount was thus HK$1,882,783.  I shall come back to this matter as there has been further repayment by D1 to one of the customers of the victim company.

8.  D2 registered a company with the name ‘Design Link’ on 30 June 2008.  She was the sole proprietor of this company.  The registered address of this company was her own residential address.  She subsequently opened a bank account in the name of the company ‘Design Link’ with the HSBC.  Between 30 June 2008, and 15 January 2009, a total sum of HK$1,628,561 had been deposited by customers of Design & Distribution Link Ltd. into the ‘Design Link’ bank account set up by D2 at HSBC on 30 June 2008.  Fund flow analysis revealed that on 14 occasions, shortly after funds had been deposited into the bank account by customers, a total sum of HK$1,030,400 had been transferred to D2’s personal HSBC bank account.  These funds represented in whole or in part the proceeds of the theft of D1 from his employer Design & Distribution Link Ltd., and therefore represented the proceeds of an indictable offence.  D2 was aware of the transactions in the ‘Design Link’ bank account and the transfers made to her personal HSBC bank account.  She knew the source of the funds remitted into the accounts.  Between 30 June 2008 and 15 January 2009, knowing or having reasonable grounds to believe that this sum of HK$1,628,561 in whole or in part, directly or indirectly, represented the proceeds of an indictable offence, dealt with this sum of money.

9.  There was a lapse of over a year before charges were laid against the defendants.  It is not a result of fault from either the prosecution or defence.  There has been no delay in prosecution.  Prompt investigation was carried out upon discovery of the matter.  A considerable period of time was obviously necessary in investigation of a case of this nature and complexity.  I am satisfied that there was no delay in prosecution.

D1

10.  Ms Lai, Counsel for D1, in mitigation on 5 May 2011, submitted letters from D1 and his parents seeking leniency for D1.  She also submitted a payment schedule (Item 3 in the bundle of documents submitted in mitigation) setting out repayments that had been made by D1 to Zhou Chuankui (PW17 on the summary of facts admitted by D1 upon plea) who had remitted HK$1,124,900 upon D1’s instructions (Charges 27, 28, 30 and 31).  Pursuant to this schedule, D1 had repaid HK$825,000 to Mr. Zhou or to his authorized agent Mr. Huang Chun Fa (Item 6 of the bundle of documents).  There was an outstanding of HK$300,000.  On 15 March, 2011, an agreement was entered into between D1 and D1’s uncle, Lam Hon Wai, as gurantor, and Mr. Huang, wherein D1’s uncle agreed to pay HK$50,000 on 15 March 2011 and the balance in monthly installments of HK$10,000 beginning from 28 April 2011 (item 4 of the bundle of documents).  Also produced is a document entitled ‘witness to loan’ dated 8 January 2009 (item 5 of the bundle of documents, wherein Mr. Huang is a witness and the sum of HK$1,125.000 is referred to as loan between Mr. Zhou and D1.  Item 6 of the bundle of documents produced is entitled ‘letter of authorization, wherein Mr. Zhou authorized Mr. Huang to represent him in the ‘debt dispute’ between himself and D1.

11.  Counsel for the Prosecution was unable to confirm any of this as they had been unable to contact Mr. Zhou – the matter was further adjourned to 12 May 2011 for the Prosecution to make inquiries.

12.  When the hearing resumed before me on 12 May 2011, I was informed by Mr. Chan for the Prosecution that the police had been able to contact Mr. Zhou by e-mail and he had confirmed that he had authorized Mr. Huang to collect the repayment from D1.  The translations of 2 e-mails were submitted by Mr. Chan – however it was unclear how much had been repaid by D1 to Mr. Zhou or Mr. Huang.  The matter was then adjourned until 25 May 2011 for the Prosecution to clarify this.

13.  When the hearing resumed before me on 25 May 2011, Mr. Chan for the Prosecution submitted translations of an exchange of e-mails between the police and Mr. Zhou.  Ms. Lai for D1 had also prepared a revised schedule of payments made by D1.  It was accepted by the Prosecution and D1 that D1 had repaid HK$430,000 to his employer Design & Distribution Link Ltd. before his arrest and HK$270,000 to Mr. Zhou and his agent Mr. Huang.

14.  I had before me a Background Report in respect of each defendant.  They took no issue with the contents of the reports.  I have before me also letters in mitigation written by D1 and his parents.  I have carefully considered all that has been urged upon me in mitigation by Ms. Lai on behalf of D1, as well as the contents of the Background Report and the letters and the authorities that she has referred to.

15.  D1 is now aged 35years.  He was born in Hong Kong.  He lived with his parents and younger brother.  He had been educated until Form 5, and started to work in 1992.  He joined Design & Distribution Link Ltd. in 2007 and worked there until his arrest in January 2009.  He was unemployed for some 18 months, and worked briefly as an operation handler in an airline catering section in August 2010 and as a tallyman in a cosmetic shop for a month.  Since October 2010, he had been unemployed.  D1 said when interviewed by the probation officer that he had accumulated debts as a result of his personal spending and gambling debts, and used the money he stole on football gambling, repaying money to financial institutions from where he had obtained loans and on shopping.  He acted out of greed and did not think of the legal consequences.

16.  D1 stole a total of HK$2,312,783.00 excluding bank charges from his employer between 17 December 2007 and 13 January 2009, a period of almost 13 months.  He asked his girlfriend, D2, to register a company in a name very similar to that of his employer, and monies received from customers of his employer for the purchase of goods was deposited into this bank account opened by his girlfriend, and soon after the money was deposited, it was transferred to various bank accounts held by himself and D2.  D1 had stolen from his employer, a clear breach of trust.  Some HK$700,000 has been repaid - HK$430,000 to his employer before he was arrested and HK$270,000 to one of the customers, Mr. Zhou.  Ms. Lai has submitted that D1’s uncle will continue to pay Mr. Zhou, but it is clear from Mr. Zhou’s e-mail that the only monies he has received are as set out in his e-mails.

17.  For offences of theft where there has been a breach of trust, the only appropriate sentence must be an immediate custodial sentence.  For theft from employers of HK$1 million to HK$3 million, the guideline is an immediate custodial sentence of 3 to 5 years.  However, here, the amounts stolen on each occasion was less than HK$1 million.  Where the amount stolen is HK$250,000 or less, the sentence is less than 2 years, and for HK$250,000 to HK$1 million, it is 3 to 4 years’ imprisonment. 

18.  Save for his plea of guilty, there is little else in mitigation of weight before me.  D1 has made partial repayment to his employer and one of the customers of his employer, and for this he is entitled to credit as well.

19.  D1 is sentenced as follows;

Counts 1 – 10, 12 – 26, 29, 32-35, 18 months’ starting, 1/3 discount for plea, further discount for repayment made – D1 is sentenced to 10 months’ imprisonment on each count.

Count 27 – 28, 31 3½ years’ starting, 1/3 discount for plea. Further discount for repayment made – D1 is sentenced to 25 months’ imprisonment on each count.

Count 30 2 years’ starting, 1/3 discount for plea, further discount for repayment – 14 months’ imprisonment.

These are all separate and distinct offences and warrant consecutive sentences. But I do bear in mind the totality principle of sentence. I shall order that all the sentences be served concurrently, which I am satisfied properly reflects his criminal culpability on all the charges.

D2

20.  Money laundering is a serious offence for which deterrent sentences are required not only to punish the defendants but also to deter others from behaving in this way.  It is not wrong in principle to impose an immediate custodial sentence on a first offender (see HKSAR v HUI Kam [2000] 3 HKLRD 211).  There are no guidelines for offences of this nature, the reason for this being that the circumstances of each case may vary almost infinitely.  There is a general recognition that sentences must be custodial and must be substantial to deter others.  The sentences must also reflect public and commercial concerns about the use of bank accounts to launder funds derived from criminal enterprises.  The fact that the victims were being asked to pay money into bank accounts adds a veneer of legitimacy to the underlying scam and serves to reassure the victims.  Anybody who attaches himself to an international fraudulent scheme must expect to be dealt with severely if he is caught.

21.  As to the seriousness of the offence and the need for deterrence the Court of Appeal in HKSAR v XU Xia-li & another, CACC 395/2003, said,

“The prohibition of the offence is in order to strike at those who give assistance to criminals to dispose of or retain their ill-gotten gains as if they were derived from legitimate activities. Without the assistance of money launderers, it would be more difficult for criminals to clothe their illegal proceeds with the same respect as lawful gains and the chances of law enforcement detection of illegal activities that produce monetary benefits would be enhanced. Money laundering is therefore treated as a serious offence. If money laundering activities were allowed to be carried out in Hong Kong with impunity or treated lightly with minor penalties it would mar Hong Kong's reputation as a world-class financial and banking centre.”

22.  The Court of Appeal reviewed a number of cases in XU Xia-li, HKSAR v Javid Kamran, CACC 400/2004, and in HKSAR v YEUNG Kin-chai, CACC 341/2008. In Javid Kamran as applied in HKSAR v Jain Nikhil [2007] 2 HKLRD 640 and in HKSAR v LEONG Wai-keong, CACC 476/2007, the court said that it was not possible to lay down guidelines, as there is a very wide range of culpability.  The court went on to set out some of the factors relevant in determining the culpability of a defendant including the nature of the offence that generated the laundered money, the extent to which the offence assisted the crime or hindered its detection, the degree of sophistication of the offence and perhaps the defendant's participation, including the length of time the offence lasted and the benefit he derived from the offence.  Another factor to be added is the degree to which an offence had an international dimension.

24.  In passing sentence I take into account everything said on behalf of D2 by Counsel.  Whether or not the defendant received a reward is insignificant as a sentencing factor for the reality is the offence of money laundering is very serious (see HKSAR v CHEN Szu-ming, CACC 270/2005 at paragraph 23).

25.  In my view this was a carefully planned scheme.  The opening up of a bank account with a name almost identical to that of D1’s employer clearly was to deceive the customers into thinking that they were making payment to D1’s employer.  D2 actually was the one who registered the company and opened the bank account, and knew the purpose for which the bank account was being opened.  This was a course of conduct over a period of about 6 months.

26.  Taking into account the role played by the D2 and all the circumstances of the offence, I am satisfied the appropriate starting point after trial for D2 is 2 years’ imprisonment on count 11.  She has been convicted after trial and has shown no remorse – I can see no factors to warrant further reducing this sentence.  D2 is sentenced to 2 years’ imprisonment.