HKSAR v. WU CHI MAN

DCCC437/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 437 OF 2010

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Reasons for Sentence

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1.  The Defendant pleaded guilty to the following charges :

Charge (2) : offering an advantage to an agent, contrary to sections 9(2)(b) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201;

Charges (3)-(5) : an officer of a company knowingly making false statements to the auditors, contrary to sections 134 and 351 of the Companies Ordinance, Cap. 32; and

Charge (6) : offering an advantage to an agent, contrary to sections 9(2)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201.

2.  He pleaded not guilty to charges (1) and (7) which again related to the offence of offering an advantage to an agent. Pursuant to the prosecution’s application, these two charges have been ordered to be left on the court file and not to be proceeded with without the leave of the court.

3.  The facts which were admitted by the Defendant revealed that he was the director and shareholder of two companies, namely, Lap Wing Transport Company Limited (“Lap Wing”) and Fortune Fame Logistics Limited (“FFL”) which were set up in 1989 and 2003 respectively to provide transportation and logistics services.

Charge (2)

4. Since May 2003, the Defendant used FFL to conduct business with Oriental Air Transport Service Limited (“Oriental”). Between 26 August 2003 and 8 December 2006, the Defendant, either through himself, or through an accounts clerk working for him, offered a monthly payment of HK$5,000 as rebates to Keung Sing-chi (“Keung”) who was the Assistant General Manager of Oriental and who was responsible for supervising the Sales and Operations Department of Oriental. During the period mentioned, a total of HK$195,000 was made to Keung and the payments were bribes for Keung to show favour to FFL in relation to the business of Oriental. The payment was stopped in December 2006 when Keung left Oriental.

Charges (3) – (5)

5. Since 2003, the Defendant had instructed a number of his staff members to fabricate false receipts for production to FFL’s auditors who, believing that the documents were genuine, then prepared audited reports for submission to the Inland Revenue Department for the calculation of tax.

6. Between 1 April and 31 May 2006, the Defendant and two of his staff members knowingly made false statements to FFL’s auditor, Chu Yin-sum (“Chu”), by providing to Chu 7 false receipts of expenses in the total sum of HK$70,000 purportedly issued by a transportation company when in fact they were not. The false receipts were submitted to Chu for auditing the accounts of FFL for the financial year 2005/2006. The accounting expert opined that based on the profits earned by FFL for that financial year, the falsely inflated amount of expenses would have helped FFL evade HK$12,250 in taxes. This is the subject matter of charge (3).

7. Between 1 April and 31 May 2007, the Defendant and two of his staff members knowingly made false statements to Mingding Hong Kong Certified Public Accountants Limited (“Mingding”), the auditor of FFL, by providing to Mingding 65 false receipts involving a total sum of HK$429,581 purportedly issued by a number of companies, including a transportation company, a night-club and a ball-room when in fact they were not so issued. The said receipts were provided to Mingding for auditing the accounts of FFL for the financial year 2006/2007. The accounting expert opined that based on the profits earned by FFL for that financial year, the falsely inflated amount of expenses would have helped FFL evade HK$75,177 in taxes. This is the subject matter of charge (4).

8. Between 1 April and 31 May 2008, the Defendant and two of his staff members knowingly made false statements to Tse & Tse Partners (“Tse”), FFL’s auditor for the financial year 2007/2008, by providing to Tse 56 false receipts purportedly issued by a number of companies including a transportation company, a night-club, a ball-room and a lounge involving the total sum of HK$366,576 when in fact they were not so issued. The false receipts were provided to Tse for auditing the accounts of FFL for the year 2007/2008. The accounting expert opined that based on the profits earned by FFL for that financial year, the falsely inflated amount of expenses would have helped FFL evade HK$64,151 in taxes. This is the subject matter of charge (5).

Charge (6)

9. On or about 22 January 2009, the Defendant instructed one of his staff members to pay a sum of HK$6,500 cash as rebates to Chan Tak-chun (“Chan”) who was the Operation Manager of UFM Container Line and who was responsible for matters relating to airfreight logistics services, including the employment of contractors to provide logistics services to UFM. The admitted facts disclosed that the Defendant had agreed to offer to Chan half of the monthly fees earned by FFL for Chan’s assistance in recommending UFM to engage the services of FFL. As a result, following the recommendation of Chan, UFM rented the warehouse and employed the logistics services of FFL between April 2008 and February 2009 at a monthly fee of HK$7,000 which was reduced to HK$3,000 at the end of 2008. It was admitted by the Defendant that the cash payment of HK$6,500 he instructed his staff member to make to Chan was the rebates for the months of October, November and December 2008 pursuant to this rebate agreement he had with Chan. This is the subject matter of charge (6).

10. The Defendant is aged 45, and is single, but he has been cohabitating with his girl-friend for 25 years. The Defendant received education up to Form 5 level. In 1983, he joined the logistics industry as a clerk. Through his diligence and dedication, he set up Lap Wing with his friends in 1989. In 2003, he himself then set up FFL which has grown over the years from a company with about 10 workers to one with 40 odd workers. From the letters which have been placed before the court, I have no doubt that the Defendant is a very hard-working and tough person, who, at the same time, is caring and supportive towards his family members and employees. The letters from those who have worked with him invariably described him as reliable, diligent, resolute, as well as caring, and they all begged, on his behalf, for a lenient sentence to be imposed. Moreover, it was said that Oriental had indeed renewed the contract they had with FFL because of the good services provided.

11. In mitigation, it was said that the Defendant is a man of previous good character and he has, over the years, made financial contributions to different charitable organizations. His pleas of guilty also indicate his genuine remorse. Further, a sum of HK$151,578, which was said to be the taxes evaded, has been paid to the Inland Revenue Department as restitution.

12. Insofar as charge (2) is concerned, it was said that the Defendant was approached by Keung of Oriental at the time and was asked to make the monthly payment of HK$5,000. As the Defendant had just set up FFL at the time, he feared that if he did not give Keung the payments, FFL would not be able to get any orders from Oriental and because it was during the SARS period when Hong Kong was hard hit economically, the Defendant therefore succumbed to the temptation.

13. The Defendant is a diabetic who requires regular medical attention. He had a brain operation in 2003 and since then, his health has not been as good as before. Moreover, since his current arrest, the Defendant has been suffering from insomnia and a depressed mood. After consulting a psychiatrist, the Defendant was confirmed to have been suffering from Bipolar Affective Disorder and he has been put on medication so that his condition could be stabilized.

14. Mr. Yu for the Defendant told the court that Keung has also been charged by the ICAC for the offence of accepting an advantage, which was the sum of HK$195,000 as particularized in charge (2) of these proceedings. Keung pleaded guilty in the magistrates’ court and a term of 6 months’ imprisonment suspended for 2 years was imposed. Ms. Lau for the prosecution, however, informed the court that the Secretary for Justice is seeking a review of that sentence. Whatever that result may be, I do not consider the term imposed on Keung to have any direct bearing on how I should deal with the Defendant in this case for, to say the least, the aggravating and mitigating factors that could be found in the two cases might be completely different.

15. In SJ v Kwan Chi-Cheong & Others [2009] 4 HKLRD 273, Stuart-Moore, V-P, observed that,

“The Prevention of Bribery Ordinance provides the sanctions necessary to deal with breaches of this kind. The Ordinance was intended to be draconian in its effect. Bribery, whether in its acceptance or by the offering of an advantage, is an evil which can strike at the heart of commercial and public life if it is left unchecked. A punishment that fails to deter will produce all the wrong signals just as sentences which act as a deterrent will reinforce this community’s efforts to rid itself of corruption.

For these reasons, even the first offender charged with an offence of corruption under the Ordinance, unless it is merely a technical breach, must usually expect a deterrent sentence. This will almost invariably involve a sentence of immediate imprisonment.”

16. The court has all along emphasized the importance of the element of deterrence when considering the sentence for corruption offences. For charges (2) and (6) admitted by the Defendant, the sentences which I am going to impose will no doubt need to address this concern of the community.

17. Charge (2) involved an amount of HK$195,000 paid over a period of about 3½ years by way of a monthly sum of HK$5,000. The corruption was committed over a prolonged period of time and it was only stopped when Keung left Oriental in 2006. Taking into account the facts relating to this charge, I consider a starting point of 15 months to be appropriate.

18. In respect of charge (6), although only a total sum of HK$6,500 was involved. However, as admitted by the Defendant, that sum was paid pursuant to an agreement he had with Chan which was to give half of the monthly fees earned by FFL as rebates to Chan. Again, though a relatively small sum that was, it represented the rebates for a period of 3 months. On the facts relating to this charge, I consider a starting point of 6 months to be appropriate.

19. For charges (3) to (5) which are the false statements charges, no doubt, the purpose of providing those false receipts was to have the tax payable by FFL reduced. As the Defendant did not act alone, but had asked his staff members to help making those false receipts, I regard this as an aggravating factor. Moreover, as the Defendant had repeatedly employed the same strategy to falsely inflate the expenses over a period of three consecutive financial years, I again regard this as an aggravating factor since it illustrated that the Defendant had made it a practice to have such false receipts provided to FFL’s auditors as if he were doing something legal.

20. This offence, according to Schedule 12 of the Companies Ordinance, Cap. 32, is punishable, on indictment, with a maximum fine of HK$150,000 and a term of 2 years’ imprisonment. Having considered the facts of these charges, I consider an overall starting point of 6 months to be appropriate.

21. Therefore, the sentences in relation to the charges are :

Charge (2) : 15 months reduced by 1/3 to take account of the Defendant’s plea : 10 months

Charge (6) : 6 months reduced by 1/3 to take account of the Defendant’s plea : 4 months

Charges (2) and (6) are separate offences involving different companies and consecutive sentences should be passed save and except the consideration of the totality principle which I shall deal with later.

Charges (3) – (5) : 6 months each reduced by 1/3 to take account of the Defendant’s pleas : 4 months each. For this group of offences, I am also prepared to give a further reduction of 1 month to the Defendant in view of the restitution. Therefore, he is going to serve a term of 3 months for each of charges (3) – (5).

22. Having considered all the matters urged upon me in mitigation, including the Defendant’s previous positive good character, I am going to give him a further reduction of 2 months in addition to the reduction for his pleas.

23. Applying the totality principle, for these charges, I consider an overall sentence of 15 months to be appropriate but, as I have indicated, I am prepared to give the Defendant a further reduction of 2 months, thus the overall sentence will be reduced to one of 13 months and I order that :

(a) The sentences for charges (2) and (6) are to be served wholly concurrently; and

(b) The sentences for charges (3)-(5) are also to be served wholly concurrently, but this term of 3 months is to be served wholly consecutively to the terms imposed in respect of charges (2) and (6), making a total of 13 months’ imprisonment.