HKSAR v. YAN CHEUK FUNG, JONATHAN

DCCC 702/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 702 OF 2012

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Reasons for Sentence

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1.  Yan Cheuk-fung, you have been found guilty by me after trial of six offences of being an agent using a document with intent to deceive his principal, contrary to section 9(3) of the Prevention of Bribery Ordinance.

2.  The offences occurred between October 2010 and January 2011 when you were working as a Premier Relationship Manager at the Kowloon City Branch of the Hong Kong and Shanghai Bank.

3.  Part of your duties as Premier Relationship Manager included promoting financial products of the bank, including insurance policies issued by the bank’s subsidiary, HSBC Life (International) Limited.

4.  As Premier Relationship Manager, you handled the accounts of particular customers of the bank.  One of those customers was an elderly man, Chung Fook-lee, aged 73, who was a wealthy Chinese medical practitioner.  He is now deceased.

5.  On six occasions during the period in question, you submitted applications to HSBC (Life) for insurance policies in the name of a young man who appears to have been a friend of yours, Chong Wong-tang.  He was named as the insured person, but the application form also indicated that he was the policyholder, beneficiary and payor of the premia on the policies.

6.   Despite the fact that the application forms purported to show that the payor of the premia and the policyholder and the insured were the same person, namely Chong Wong-tang, the premia for these policies were made in each case by a one-off payment by way of transfer from the bank account of your customer, Chung Fook-lee.

7.  The premia for the six policies were substantial; in total, they amounted to US$1,632,816.  In Hong Kong dollar terms, that is approximately HK$12,700,000.  It was not suggested that Chung Fook-lee had not signed the bank transfer forms authorizing the payment of these premia.  

8.  At the relevant time, these policies were only open to people under 65 years of age.  After the policy was taken out, there would be a savings period of 8 years.  At the end of the savings period, the policyholder would receive a bonus payment and could then opt to receive a monthly annuity for 10 years or could withdraw the whole annuity sum at once. If at any time during the insured period, the insured person died, then the beneficiary would receive the relevant compensation. 

9.  Your explanation to the bank when you were asked to explain the circumstances of these applications was that despite the fact that Chung Fook-lee was not mentioned in the application forms, the policies actually belonged to Chung Fook-lee who could not take out the policies because of his age and that the policies would later be changed into his name. 

10.  As I stated in my reasons for verdict, I did not accept that explanation.  Chung Fook-lee’s age would not have prevented him being the policyholder and beneficiary of the policy, or indeed the payor of the premia.  You would have known that.  You had given no explanation as to what the real reason was for submitting application forms in this way.

11.  While your actions gave rise to the strong suspicion that you were involved in an attempt to defraud Chung Fook-lee, I found I could not exclude the slight possibility that you knew there was a chance that if it was disclosed to the bank that the payor was Chung Fook-lee, that might lead to enquiries which might lead to the bank discovering that the life of Chong Wong-tang was not an insurable interest for a policy taken out by Chung Fook-lee.

12.  I am obliged to sentence you on the basis of the interpretation of the facts most favourable to you.  On this most favourable basis, you were submitting an application which you knew might not be approved by HSBC (Life) if the true situation was revealed.  You had a personal interest in these six applications being successful because you received commission from successful applications.  You received $59,608.04 in commission in respect of the five of the six applications that were approved. Your sales record would also be boosted if these applications were successful.

13.  In submitting the applications in this way, you, as an officer of the bank, in a position of trust, were deceiving HSBC (Life) as to the true circumstances of the applications.  It was an abuse of the position of trust.  What is more, even on the most favourable way of looking at things, Mr Chung Fook-lee might be prejudiced.  He was payor for policies which might be voided at any stage by the bank.  What is more, the fact that Chong Wong-tang was the policyholder and named beneficiary left Chung Fook-lee or his estate exposed to the possibility of fraud.

14.  On the last occasion I ordered a background report and, on Mr Harris’ persuasion, I ordered a report as to your suitability for community service.  I made it clear that that was simply so that all the options were before the court today and that a community service order was not a course that I was likely to adopt.

15.  I have read the reports and listened to the eloquent submissions made by Mr Harris on your behalf.

16.  I bear in mind that you are a young man of previous good character.  It is clear that you worked very hard over the years to achieve the position of Relationship Manager with HSBC.  As a result of your convictions, that sort of employment will no longer be open to you.

17.  You come from a supportive family, and I bear in mind that your mother and sister are not in good health.  I also bear in mind that ultimately nobody suffered any loss as the bank returned the premia to Mr Chung and recovered the commission from you.  I am not however persuaded that this is a case for which a community service order is appropriate. 

18.  Firstly, you have not exhibited any remorse for what you did, and even to the reporting officer, you were still insisting that what you did was simply a mistake on your part.  Secondly, as I have stated, you held a responsible position of trust within the bank.  Bank officers in your position have to handle transactions involving very large sums of money.  Indeed these applications themselves involved large sums of money. In such circumstances, it is essential that bank officials be persons of complete integrity.

19.  The message must be sent in the clearest terms that those who fall short and breach the trust vested in them cannot expect leniency on the part of the court.  I am satisfied that an immediate term of imprisonment is inevitable.  However, bearing in mind the circumstances upon which I sentence you, I am satisfied that a sentence of 12 months’ imprisonment is the appropriate one in the circumstances.  I sentence you to 12 months’ imprisonment on each count to run concurrently.