DCCC1202/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 1202 OF 2008

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Reasons for Sentence

1.  D1 and D2 stand convicted after trial of one charge of conspiracy to defraud.  This court found that D1 and D2 conspired together to defraud the DBS Bank (“the Bank”) with the use of a forged HSBC share certificate which states that Li Gui-hua was a shareholder of HSBC holding 200 million shares.  D1 approached PW2, a senior staff member of the bank, and asked for a tax loan of US$30 million.  D1 claimed himself to be a director of a company called YUMA Foundation, a company engaged in ground work of railways in Europe, Singapore and China.

2.  D1 also said Li Gui-hua, another director  of YUMA, had 600 million shares in HSBC.  D1 said Li would like to transfer the shares to YUMA and she had to pay stamp duty of US$30 million for the transfer of shares.  D1 asked the bank to make a tax loan to YUMA.  D1 also produced a photocopy of the forged HSBC share certificate to the bank in support of his claim.  Subsequently, the bank advised D1 that the registration of Li Gui-hua could not be found after checking conducted by DBS Vickers, an agent of the bank specialised in buying and selling of shares.

3.  D1 then arranged for the bank staff to attend PW1’s solicitor’s firm to inspect the documents.  D1 and D2 were both present at that meeting.  D2 said he was the chairman of YUMA.  D1 said he was a director.  D2 introduced some projects of YUMA to the bank staff and said he represented Li Gui-hua, an old lady residing in Chung Hing.  D2 said Li, due to old age, had authorised D2 to deal with her shares and D2 asked the bank to provide a tax loan of US$30 million so that stamp duty for the transfer of shares could be paid.  At the meeting, some ID documents of Li, a signed transfer form and an authorisation letter of Li were produced.

4.  Prior to the meeting, D2 had gone to PW1’s firm and asked the firm to provide legal service in relation to the HSBC share certificate in question.  D2 asked PW1’s firm to handle the share collateral and transfer of the shares.  As D2 did not pay any legal fees, PW1 did not open a file for D2.  At the request of D2, PW1 issued a receipt acknowledging that the firm had received from D2 the HSBC share certificates.

5.  After the meeting at PW1’s firm the bank finally decided not to proceed with the proposed loan application.  A report was made to the police and the defendants were arrested.

6.  D1 and D2 are men of previous clear record.  D1 is now aged 62.  He told the police that he completed a Master’s degree in the United Kingdom and he was conferred a PhD degree in Moscow.  He was living with his son in Singapore before his incarceration.  Counsel told me that D1 is a retired civil servant.

7.  D2 is now 59 years old.  He had attended a course in sales and marketing run by the Chinese University of Hong Kong.  He told the police that he has been working as a merchant and he is also a handwriting appraiser.  He is divorced, he is living alone.  Counsel told me that the whereabouts of D2’s sons is not known. 

8.  Both Mr Omar and Mr Leung submitted in mitigation that D1 and D2 had no chance of success in their scheme to get a loan from the bank.  No bank in Hong Kong would grant a loan of US$30 million to a client without verifying the authenticity of the share certificate and the registration.  Their conspiracy to defraud the bank was doomed to failure from the start.  Counsel asked me to be as lenient as possible.

9.  Mr Omar and Mr Leung did not refer me to any authority in mitigation, understandably so, as sentencing in each case would turn on its own facts.

10.  In sentencing both defendants I have taken into account the facts as found by the court. 

11.  The case before me is a serious case of conspiracy to defraud in that the defendants conspired together to use a false HSBC share certificate to induce the bank to grant a loan of US$30 million.  They used false documents in support of their case that the share certificate was genuine.  The documents used include ID documents of Li, authorisation letter and share transfer form purportedly signed by Li.  To give a false appearance of antiquity and authority to these documents letterhead of the Treasury Department of the old Nanking Government of the Republic of China was used and various official chops were fixed onto the latter.  ID card and membership card of the old Kuomintang regime were used. 

12.  The use of these documents show that the conspiracy was executed with some planning and effort.  Of course, it was naïve on the part of the defendants to use ID documents purportedly issued in the 30s with colour photographs of Li.  It was also naïve on the part of the defendants to think that the bank would accede to their request for a loan just on the strength of the documents they produced without verifying the shareholding as stated in the share certificate.

13.  The fact remains, however, that the defendants were serious about the proposed loan application.  Not only did they lie extensively to the bank, they produced false documents in support of their case.

14.  I am aware that the bank suffered no loss apart from the time and resources spent in dealing with these defendants.  If the bank suffered real loss a much heavier sentence would be imposed.

15.  In my judgment, those who are prepared to deceive financial institutions with false documents should be punished with immediate imprisonment.  The sentence should have a deterrent element in it so that like-minded people would be deterred from doing the same.

16.  On the facts before me I find D1 and D2 equally culpable.  I think a starting point of 2½ years’ imprisonment is appropriate for both defendants.  I will allow D1 and D2 2 months reduction for their clear records.  The defendants pleaded not guilty to the charge and they have shown no remorse during police investigation and at trial.  Apart from their clear records, there is no mitigating factor that can enable me to further reduce the sentence. 

17.  For the reasons given, I sentence D1 and D2 to 28 months’ imprisonment.