HKSAR v. CHAE MAN TOCK AND ANOTHER

DCCC 973/11

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 973 OF 2011

____________________

____________________

REASONS FOR SENTENCE

1.   The defendants pleaded not guilty to charges of bribery and fraud. I convicted D1 after trial of 2 offences of bribery ( Charges 1 and 2) and 25 joint charges of fraud ( Charges 6,9-11, 19-39).

2.   I convicted D2, the wife of D1, of 5 offences of bribery (( Charges 17, and 18 [ alternative charges to charges 1 and 2], 3- 5 and the 25 joint offences of fraud.

Background

3.   Promo International Limited (PIL), which has been trading as “Olympicpromo” ( OIL-UK), is a trading company incorporated in the United Kingdom by Peter John Townsend, PW1. It engages in the trading of premium products. PW24, Philip Palmer, is the operations manager for PIL.

4.   In 2003 OIL-UK set up an office in Shenzhen to source mainland suppliers of goods. The arrangement was that the suppliers would submit purchase invoices to the Shenzhen office who would forward the invoices to OIL-UK. If the quotations were acceptable, OIL-UK would send a supplier purchase order to the mainland supplier and pay a deposit, usually 30% of the purchase price. Upon delivery of the goods, OIL-UK would pay the balance of the purchase price to the mainland supplier. No money was paid to the OIL Shenzhen office. All wages and outgoings for the Shenzhen office were paid from OIL-UK.

5.   The Shenzhen office manager was a lady called Brenda Chang. She opened a dedicated personal bank account for payment of office expenses and petty cash. Wages were paid direct to the personal accounts of the employees.

6.   PW24 was the effective line manager for the Shenzhen office and spent some time each year working out of that office.

7.   In April 2006, D1 was employed as a merchandiser in the Shenzhen office. PW1 was concerned about the expenses for running the Shenzhen office. He had discussions with D1 who told PW1 that an office in Hong Kong could operate more economically. Eventually it was decided to open an office in Hong Kong in May 2007 with D1 as the general manager. Brenda Chang left the employment of OIL-UK some time in March 2007.

8.   The prosecution case was that the Hong Office of OIL ( OIL-HK) was to be run in the same way as the Shenzhen office. OIL-HK would forward invoices from mainland suppliers to OIL-UK who paid the mainland supplier directly. No payments were to be made in Hong Kong except for exceptional cases where payment had to be made to the supplier in cash on the mainland. D1 maintained at trial that when OIL-HK opened he became a business partner of PW1. I rejected this contention. I was satisfied that D1 was employed by OIL-UK as the manager of OIL-HK.

9.   D2’s employment with OIL at the Hong Kong office started in August 2007.

10.   D1 and D2 were involved in a fraudulent scheme whereby, unknown to OIL-UK, the prices in mainland suppliers’ invoices were inflated and sent on to OIL-UK. After the payment of the inflated price had been made by OIL-UK to the mainland supplier, OIL-HK would contact the supplier for the price difference to be paid to the personal bank account of D2 or exceptionally to the personal bank account of D1. In addition to inflating the prices, D1 and D2 would sometimes arrange for tooling costs to be inflated and the difference paid to D2. In respect of some of the orders commission payments were made to D2 by mainland suppliers without the knowledge or consent of OIL-UK.

11.   D1 and D2 embarked on this criminal enterprise event before the Hong Kong office opened. They had come to a similar arrangement with the proprietor of a mainland supplier, Mega Handbag Manufatory Limited ( Mega), whilst D1 was employed by OIL in Shenzhen and therefore long before D2 joined OIL-HK. The Mega invoices at inflated prices were sent to OIL-UK and the price differences paid into the bank account of D2 after Mega had been paid by OIL-UK.

Charges 1 and 2 ( Alternative Charges 17 and 18) - D1 and D2

12.   In May and July 2007, D1, as an employee of PIL, secretly solicited and accepted the payments the subject of the charges from Mega which were paid into the bank account of D2. D2 was a party to this arrangement with the proprietor of Mega and aware that prices were being inflated unbeknown to D1’ s employer. I convicted D1 on charges 1 and 2 and D2 of charges 17 and 18, charges of aiding and abetting D1 in the commission of offences 1 and 2. The amount involved in Charge 1 was HKD7,488 and in charge 2 HKD21,192.

Charges 3,4 and 5 – D2 only

13.   D2 was involved in negotiations with the suppliers referred to in the charges. In addition to the prices for goods being inflated it was agreed that D2 should receive commission from the suppliers. Some of the payments were paid to her in cash at the downstairs of her office, other payments were made by cheque. The total amount involved in these 3 charges was HKD65,780

The Fraud Charges – Charges 6,9,10,11, 19-39

14.   Invoices supplied by the various mainland suppliers referred to in the charges were sent to OIL-UK at inflated prices. The mainland suppliers were paid by OIL-UK the inflated prices contained in the invoices and the price differences were paid into the personal bank account of D2 or exceptionally the account of D1.

15.   The total amount involved in charges 6,9,10 and 11 was HKD818,882. The total amount involved in charges 19-39 was HKD1,051,838.

Background of Defendants

16.   D2 has a clear record. D1 was convicted of a minor offence several years ago. I treated him as having a clear record.

17.   D1 and D2 are married and have no children. D1 is 45 and D2 is 39. D1 was educated to Form 7 standard and worked previously for a manufacturer and then as a merchandiser. D2 graduated in the 1980’s from Citypolytechnic with a degree in engineering and has worked as a merchandiser for several years.

The offences

18.   The offences are serious offences involving a breach of trust. The fraud perpetrated on OIL-UK lasted for over 3 years and involved substantial sums of money. It was sophisticated in that it involved the creation of false documentation and required the cooperation of a large number of mainland suppliers.

19.   Many international companies use Hong Kong as a safe and reliable business centre from which to do business on the mainland. Offences of this kind do immense damage to Hong Kong’s international reputation in this regard.

20.   In respect of the first two charges and the related charges 17 and 18 for D2, the total amount involved is HKD28,680. I impose concurrent sentences of 12 months imprisonment. Under s12(1) of the Prevention of Bribery Ordinance Cap 201 I order D1and D2 to make restitution in the sum of HKD28,860.

21.   In relation to charges 3-5 against D2, I take into account that the total amount involved is HKD65,780, I impose concurrent sentences of 12 months imprisonment. Under s.12(1) of the Prevention of Bribery Ordinance I order D2 to make restitution in the sum of HKD65,780.

22.   For the 25 fraud charges, the total amount involved is HKD1,870,720. These offences were committed over a period in excess of three years. In respect of these offences I impose concurrent sentences of 3 years and 6 months imprisonment.

23.   I have considered the question of totality and decided all the sentences should be served concurrently. D1 and D2 will go to prison for three years and 6 months.