HKSAR v. CHAN PAU-CHI AND OTHERS

DCCC 991, 1007-1010/2016 (Consolidated)

[2019] HKDC 1155

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 991, 1007, 1008, 1009 & 1010 OF 2016

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Reasons for Sentence

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1.  I am now going to sentence the remaining defendants on this indictment. They have all been convicted after trial. I am obviously dealing with a large number of defendants facing a large number of different charges, so I am going to deal in generality with the approach to sentencing first.

2.  There are three major areas of criminality. Firstly, there is what I will call the money-lending conspiracy, which constitutes the 1st charge.  The remaining defendants in respect of that charge are the 1st and 2nd defendants.

3.  There is the 2nd charge, which involves the conspiracy to live on the earnings of prostitution, arising out of the 141 website, and I have the 1st defendant to sentence and the 8th and 9th defendants.

4.  There are the money laundering offences, which involve either direct offences of money laundering, which is primarily the 1st and 2nd defendants, and then the other conspiracies that involve all the remaining defendants and are based on the use of their bank accounts to what, I believe, is to launder the money involved in the predicate offences, which is the first two conspiracies.

5.  As far as the 1st charge is concerned, it is clear there is no actual tariff for that offence.  I have been referred to a number of cases where sentences vary considerably and there is an appellate case called HKSAR v Wan Chi Wai, CACC 105/99.  Another case, HKSAR v Wong Kok Choi, is an appellate case, CACC

636/1998. It enumerates a number of factors that are said to be relevant to sentencing: whether the business is organised, the extent of the business and the period it would have been in operation, the rate of interest charged, whether there is what is described as a triad element, and, perhaps the most important aggravating factor, whether threats or intimidation are used in collection of the debts that are owed.

6.  In here, clearly the business was organised.  It was long lived.  The highest identifiable rate in the papers is 200%, which in these kind of cases is not, I would say, a very high rate, and there is no identifiable triad element nor is the mode of collection of debts anything other than normal.  What had been hit upon here was a device that was used to increase profitability and the remuneration of the business by the creation of what were effectively sham companies.  This would have enhanced the competitiveness of the businesses within the environment and may well have enabled them to offer a wide range of loans.

7.  There are mitigating factors in that they were of repeat customers, where this would be the longevity of the business.

8.  As far as the other conspiracy, conspiracy to live on the earnings of prostitution, is concerned, this can be a serious offence.  The most serious factor in offences of this nature is the control exercised on the prostitutes.  This was clearly identified by the appellate courts in the case of Chan Yuk Bun, CACC 187/2008.

9.  What this case is concerned is what I think is best described as an advertising platform for prostitutes.  It provided that service along with a number of other services.  It is clearly a very profitable enterprise.

10.  Nevertheless, in the case I referred to, the case of Chan, the Court of Appeal quite forcefully argued the sentences should reflect the fact that this is not control over the prostitutes and that takes the cases into a different category of sentencing, where in certain circumstances non-custodial sentences can be envisaged for persons taking part in those crimes.

11.  This is relevant to the approach I will take in respect of the 8th and 9th defendants.

12.  Finally, there is what we can describe as the money laundering offences.  I have to deal here with the substantive and inchoate offences, conspiracies.

13.  It is right to say that the appellate courts in Hong Kong have dealt with these issues on a large number of occasions.  Despite the large number of cases involved in sentencing, the most recent iteration by the Court of Appeal is to say there are no sentencing guidelines for the offence of money laundering.  There are a large number of factors that must be taken into consideration. 

14.  I have been referred to the case of Boma. I will give the reference to that later.  It sets out a number of factors, which would be the nature of the predicate offences; the value, it says, of the property laundered (whether that is the amount laundered or the value to the offendee is not clear); whether there is knowledge of the predicate offences; whether there is an international dimension (that can be discounted here); the sophistication of the operation; is it syndicated; the length of time it carries on for; and the defendant’s role within the general money laundering operation.

15.  Relevant to this case to a large number of the defendants is the following opinion.  In this case, a number of the defendants are charged on the basis they conspired, particularly with the 3rd defendant, to enable him to use their bank accounts to launder the money from the predicate case conspiracies, and in Boma it says there are gradations of culpability, and they refer to “a petty crook” - presumably that would refer to any person - “who is paid a small” amount “to open an account and hand over its operation to another with no more participation and no more knowledge than that it is” “to be used for some sort of crime is much less culpable”.

16.  I take it from that that the amounts laundered within the accounts will be of less significance in determining sentence for a person in that category than in another category.

17.  There are two other cases which are of some significance:  HKSAR v Hsu Yu Yi [2010] 5 HKLRD 545, where the court looked at a range of sentencing and the amounts involved, and they said starting point suggest over 5 years’ imprisonment for amounts over 10 million; and finally then the case of HKSAR v Lam Hing Wan - that is a CACC Court of Appeal case, 387/2016 - where the court said there are no sentencing guidelines for the offence because the wide variety of circumstances in which offences are committed and the different roles mean it is not realistically possible or desirable to set down a guideline.

18.  Of course, in this case, the significance is the nature of the predicate offences and their mode of commission, which in both conspiracies do not display the usual aggravating factors one would expect, and one can say that they are not of a kind with other more normal money laundering cases such as drug trafficking, fraud or bribery, or even bookmaking, as was the case in Lam Hing Wan.  I find other cases of money laundering sentencing adopted as not particularly helpful and not particularly applicable in determining the starting points in this case.

19.  I will say at this stage that, in reference to the less culpable form of committing the offence - that is the agreement to allow one’s account to be used - I would expect the court to adopt a starting point of sentence of between 18 to 24 months’ imprisonment.  Due to the nature of seriousness of the offence, that would be a sentence of immediate imprisonment.

20.  Now, another factor that has been referred to in sentencing here is the length of the time we have taken to get to this point, which comes under the rubric of delay.  Objectively, in this case, there is delay.  As the prosecution has pointed out quite fairly, some of that delay has been caused by waiting for final Court of Appeal judgments. 

21.  With the benefit of hindsight, the estimated trial length of this case can be described as optimistic.  The case itself was sprawling and cumbersome, leading to adjournments which were difficult to accommodate due to diary issues of both the court and the parties concerned.

22.  My finding in this case is that the parties themselves are not at fault in this.  The prosecution, in my view, moved with economy and as quickly as they were able to do so.  The defence of these issues was conducted economically, with a desire to agree as much evidence as possible.  I will reference the defendants who made efforts to be here, most of them travelling long distances every day to get to trial, with a few days being lost due to illness or non-attendance.  The 15th defendant does seem to have been ill throughout the trial, but he made efforts to be here.

23.  Nevertheless, the length of investigation trial is considerable in this case and places onerous burdens on everybody.  There should be some benefit from this for the defendants.  Where a custodial sentence is to be passed on them, I consider they should receive a benefit of 2 months’ reduction from the starting point of sentence to reflect the length of time it has taken us to get here.

24.  For two of the defendants - that is the 7th and 14th defendants - there have been considerable changes to their lives from the time they were started to be investigated for this matter and that will provide me with a reason to approach their sentencing in a different manner to the other defendants.  I will articulate that more fully when I come to sentencing.

25.  Now, having gone through this excursus on the general approach to sentencing, I will particularise it down

to the individual defendants and their particular sentences.

26.  I turn now to the 1st defendant.  The 1st defendant is Mr Chan.  He is currently, according to the information I have, aged 53.  Mr Chan, in fact, is still married to the 2nd defendant although I understand during the course of trial they are separated.  He has three children who are of age, who are between the ages of 19 and 25. 

27.  The defendant has one conviction in 1987 in relation to arson.  That is not relevant to the proceedings today.  He has, I am told by the police, no triad background or illness.  I will not particularise all the matters that have been put forward in mitigation.  I will simply treat him as a person of previous good character. 

28.  From the trial, it is apparent the defendant and his wife still occupy the same residence.  The children and his elderly mother also continue to live with them.

29.  Now, as far as the sentencing of this defendant is concerned, he, as I have said, is involved in a number of charges.

30.  I first need to deal with the 1st charge.  That is conspiracy to lend money at excessive interest rate.  There is evidence from the papers, as I have already indicated, the defendant was involved in that conspiracy, but his role must have been less prominent than the other two persons convicted of that offence:  the 2nd and 3rd defendants. 

31.  In respect of the 1st charge, I am going to take a starting point of 20 months’ imprisonment for the 1st defendant and reduce that to 18 months’ imprisonment for the fact of delay.

32.  On the 2nd charge - that is conspiracy to live on the earnings of prostitution - the defendant I found on the evidence to have had a prominent role.  I did consider a sentence of immediate imprisonment as appropriate here. 

33.  I am going to take a starting point of 9 months’ imprisonment, reduce that to 7 months’ imprisonment for the fact of delay.

34.  The remaining charges the 1st defendant faces are the 3rd, 4th and 5th charges, which relate to the dealing with property known or believed to represent proceeds of indictable offences.  I convicted the defendant on the basis of the cash sums in those accounts. 

35.  Now, taking into consideration the factors I have already outlined, I am going to impose the following sentences on those charges:

(1) on the 3rd charge, there will be a starting point of 28 months, reduced to 26 months for the delay;

(2) on Charge 4, 32 months reduced to 30 months;

(3) on Charge 5, 27 months reduced to 25 months.

36.  I need to iterate an overall total sentence for these offences.  I consider, taking into account all matters, the overall total sentence for the 1st defendant should be 48 months’ imprisonment.

37.  I am going to achieve this as follows.  I am going to order that the first two offences be served concurrently to each other (that is 1 and 2); that the 3rd and 4th offences be served concurrently to each other.  I am going to order that 3 months of the 1st and 2nd offences be served consecutively to the others.  Sorry, consecutively to 3 to 5.  3 months will be consecutive to 3 to 5.

(Clarification of calculation)

38.  1 and 2 are concurrent to each other.  3 months of those will be served consecutively to 3 and 4.  That is a total of 33 months, and 15 months of 5 will be served consecutively to 1 to 4.  That adds up to 48 months.

39.  I turn to the 2nd defendant.  She, the 2nd defendant, is aged 46.  She is of clear record.  She, as I have already indicated, was married to the 1st defendant.  She has worked in a bank and then subsequently worked in her money-lending business.  She has three children who are of age, who are adults.

40.  I have already indicated some of the factors that I will take into account in sentencing her, and I will deal with it in a little bit more detail with the money-lending business that she was running. 

41.  She was brought into that business some time around 2004/2005.  As far as the interest rates were concerned, there is evidence of interest rates ranging between 180 to 613 per cent, and other rates above both 2 and 3 hundred per cent.  Most of the loans range between 3 to 30 thousand Hong Kong dollars. 

42.  It has been submitted that this is not the most serious of these forms of crime because there was no triad involvement, no violence and no coercion in the course of the money-lending operation.  The business itself used adverts for introduction of clients.  There was no sophisticated planning or international element involved in the conspiracy. The business finished in 2017 and, for the purposes of tax in the six final years, there was a total of 3.3 million in profits.  It is said to be not a sophisticated enterprise and certainly no international element.

43.  The majority of the charges the defendant faces are based on the accounts which ran the business, which would reflect a gross turnover for the business out of which the expenses of running the business will naturally have to be paid to arrive at a profit figure.

44.  There are two other charges, 6 and 14, that relate to personal accounts of the defendant, which I convicted the defendant on the basis that certain of the proceeds of the business had been moved into those accounts and as all the proceeds of the business must be the proceeds of an indictable offence she would be guilty of in respect of those accounts.

45.  It would appear to be a more sensible approach to see this as one whole criminal operation, all the charges she faces, looking at the profits, the monies used and diverted to her own use, and then arrive at what one would consider to be a correct overall figure for the sentencing of the defendant, taking into account that the predicate offences are of the nature of a money-lending business.  There is no suggestion of any involvement in respect of any of the other predicate offence. 

46.  The only caveat that I would express in respect of that is, of course, that the fact that the amounts determined in the profit and loss account and submitted to the Inland Revenue clearly would not have been correct and would not have correctly and properly reflected the actual overall business of this company, UT Finance.

47.  Taking all these factors into consideration, I will approach sentencing as follows:

(1) on the 1st charge, which is the conspiracy charge, I will take her starting point at 30 months. I will reduce that to 28 months for the delay incurred in the trial;

(2) on Charge 6, I will take a starting point of 30 months and reduce that to 28 months for the delay;

(3) on Charges 8 through to 13, I shall take a starting point of 47 months and reduce that to 45 months for the delay;

(4) on Charge 14, I will take the starting point of 18 months, reduce that to 16 months, having regard to the delay.

48.  All sentences will be served concurrently, total 45 months.

(Discussion re schedule of next hearing)

49.  Now, I move on to the other defendants.

50.  We now move on to Charge 19, the 4th defendant charged along with the 3rd defendant. 

51.  The 4th defendant is currently aged 45.  He does have a number of previous involvements with the courts.  The defendant seems to have had a problem with drugs in the past, leading to sentences involving both imprisonment and Drug Addiction Treatment Centre in the 1980s and 1990s, also involvement in trafficking in drugs and wounding, which have led to prison sentences.  Certainly, in the past he has become what in Boma they would have called as a “petty crook”.

52.  I rejected his evidence in this trial, but the mitigation would tend to show that the defendant had a limited gain, limited awareness of the criminal activity, little or no involvement in the actual operation of the accounts, and we are dealing with two accounts with an excess of over $11 million having moved through the accounts. 

53.  There are some mitigating factors from this defendant, particularly his support for the education of others, and I have been referred to a number of letters of mitigation.  The defendant is married. He has two children.  He has no involvement in similar criminal activities. The defendant was arrested in apparently 2012 and admitted his involvement at an early stage. 

54.  I consider that an appropriate sentence for the defendant after deducting 2 months for the delay would be a sentence of 18 months’ imprisonment, having regard to the extent of his involvement in these matters.  That will be my sentence.

55.  I turn now to the 5th defendant.  He is aged 34.  He has a clear record.  He has worked in a number of fields:  hairdresser, transportation worker, and health clubs.  He again has no triad background or criminal involvement besides this matter.  He was 26 years old at the time of the offence.  He has a 4-year-old son who he supports.  I have obtained a report on conditions of the son.  He is, according to the report, happy and well cared for. 

56.  In mitigation, it was said the prosecution case was unchallenged by the 5th defendant and that most of the facts were admitted by him.  There is no evidence to suggest the defendant had knowledge of the predicate offences or the amount of monies involved.

57.  I have been referred to the rewards for other defendants who made admissions and it is clear from that that the amount of money received for the loan of the account was small.  In respect of the 5th defendant, the amount of monies is in the region of $11 million.  Again, I take the starting point of 20 months, reduce that to 18 months, having regard to the delay.  That is on Charge 20.

58.  I turn to the 6th defendant.

(Proceedings from 10.54 am not required)

Court adjourns - 10.54 am

Court resumes - 11.05 am

Defendants present. Appearances as before.

59.  I turn to the 6th defendant, Mr Chim.  Mr Chim is currently 37 years old and convicted on the 21st charge in the conspiracy with the 3rd defendant with a total amount in what were a number of accounts - eight accounts, I believe - exceeding $15 million. 

60.  Mr Chim does have some minor convictions in the past and was sentenced to imprisonment for unrelated offences in 2010.  At the time his background was assessed, he was single, living with his mother and elder brother.  He has worked as a clerk, a delivery driver, debt collector, and has no triad background.

61.  The normal matters are raised in mitigation for this defendant, that he would have had no knowledge of predicate offences, that he is involved by loaning the accounts.  I am also referred to the tragedy of his father’s death in 2017, exerting great pressure on him in relation to these matters.

62.  This defendant has obviously allowed more accounts to be used here than other defendants have.  In his case, I am going to take a starting point of 21 months, reduce that to 19 months for the delay, and that will be the sentence on this charge.

63.  The next defendant who is in custody is the 11th defendant and he is charged in respect of the 22nd charge.  The 11th defendant is now aged 41 years old.  He is married and was living in Wong Tai Sin at the time of his arrest.  I am told he has no triad background.  He has convictions from the 1990s, the most serious involving trafficking in a dangerous drug, for which he was sentenced to imprisonment.

64.  Now, the defendant, as I say, was charged in the 22nd offence involving a total amount of some $5.4 million, charged with the 3rd defendant again.

65.  In mitigation, I am asked to consider the factors put forward in the Boma case and also the evidence in the defence that the defendant at the time of these offences was in work and providing work as an Internet commentator, and that showed that, in respect of the accounts that we are dealing with, there was money paid in by what were legitimate businesses, those being the restaurant concerns that were evidenced in the course of  defence case, and the submission is that the total amount put forward in the charge does not necessarily represent the amount of actual proceeds of indictable offence that went through the accounts.

66.  I have decided, in respect of the 11th defendant, what I shall do is take a starting point of sentence of 20 months, reduce that due to delay to 18 months’ imprisonment.

67.  I turn now to the next defendant in custody.  It is the 13th defendant.  He is being convicted of his involvement in offences in Charges 23, 24 and 25, convicted largely on the basis of his admissions and providing the accounts in relation to the 7th, 14th and 15th defendants.

(Clarification of charges)

68.  And also the 26th offence, 26th charge as well, based on his admission.

69.  The background to the 13th defendant is that he is currently aged 37.  He is married with two children, living in Sheung Shui. He has a previous involvement with the police and the criminal justice system and has been sentenced to a Drug Addiction Treatment Centre in the past.

70.  I have been referred to a number of mitigation letters for the 13th defendant, showing his involvement in voluntary work and has in fact been elected in the past as a village representative.

71.  And, as far as this defendant is concerned, it is said his involvement appears to be on the providing of other accounts to the 3rd defendant rather than the operation of the accounts themselves. Nevertheless, that is still a serious form of the offence of dealing in the proceeds of indictable offences.

72.  I have decided in respect of this defendant that his overall sentence should be one of starting point of 21 months, reduced to 19 months for the delay.  For that reason, I shall impose a sentence of 19 months on each sentence - 23, 24, 25 and 26 - to be served concurrently.

73.  Final defendant who is currently in custody is the 15th defendant, Mr Ho, convicted in respect of the 25th offence, involving the dealing in a total of some 5 million-odd dollars.

74.  The defendant himself is now aged 38.  He is divorced, living with his grandparents.  I am told he has no triad background. He does have a number of previous appearances before the court, involving what I describe as petty crime, but no involvement since 2005.  Again, that does not seem particularly relevant to the approach to sentence today.

75.  Again, I am referred to the mitigation which is common to all defendants:  there is no evidence of benefit or knowledge of the predicate offences; he is a peripheral offender.  He has no similar record.  He has medical problems in relation to hypertension, which featured during the trial.  I am in fact told he has been hospitalised after.

76.  Taking all those factors into consideration, what I shall do for him is take a starting point of 18 months.  Having regard to the delay, I shall reduce that to 16 months for the delay.

77.  There should be four defendants left to sentence now: 7, 8, 9 and 14.

(Discussion re schedule of forfeiture hearing)

Court adjourns - 11.20 am

Court resumes - 11.46 am

Defendants present. Appearances as before.

(Proceedings to 11.47 am not required)

78.  Now, the four remaining defendants. 

79.  First, the 8th and 9th defendants, convicted in respect of the 2nd charge, and I have already indicated the approach to sentencing that should be taken in respect of them, their involvement being to provide what is described as technical support to the operation, and they fall within the rubric of the Chan Yuk Bun case, which would mean that I need not impose a sentence of immediate custodial imprisonment on either of them.

80.  For that reason, I obtained reports on their suitability for other forms of sentencing, particularly community service.  The outcome of that was that the 8th defendant is not recommended and the 9th defendant is.

81.  Dealing with the 8th defendant, as I said, he is not recommended for community service.  He is, in fact, 50 years old, with a grown-up son.  He has been involved in criminal offences in the past.  I do not propose to require him to perform a community service order, as I think it would be of little help to him and would be of no help at all to the officers who have to supervise him on the scheme.

82.  What I shall do, in fact, for this defendant is to impose a suspended sentence.  The suspended sentence I impose upon him is 6 months’ imprisonment, suspended for 2 years. 

COURT: That means that you are sentenced to a term of 6 months’ imprisonment. That will not have immediate effect, and if you commit any further offence punishable by imprisonment in the course of the next two years, you will be liable to serve that term of imprisonment. Mr Chan, do you understand that?

8th DEFENDANT: (Answers in English) Understand, your Honour.

COURT: Right, thank you.

83.  Now, as far as the other defendants are concerned - that is D9, 7 and 14 - they are all recommended for a community service order.  That is the order I am going to make in respect of them, and the order will be the same for each defendant.  In respect of all defendants, it is going to be an order of 160 hours.

84.  Now, I will deal with 9th defendant now; he is standing.  The 9th defendant convicted on the 2nd charge, again, in the role of what appeared to me to be a largely technician and what was described as editor.  He has a clear record.  He is described as having a remorseful attitude, clear record and positive family support, and for those reasons, that it is the right sentence for him, that is the order that I am going to impose.

COURT: I will explain it to you later. You can sit down now.

85.  Yes, I will deal with the 7th and 14th defendants now.  Now, from my sentencing exercise so far, it is clear that the offences for which I have convicted the appropriate sentence is an immediate custodial sentence.  As I see it, it is only in rare and unusual circumstances that one will consider either a suspended sentence or a community service order for people in your position, and I am persuaded that a community service order is appropriate for both of you because it is the right sentence for you.

86.  Now, both of these ladies are 25 years old, so they were young ladies when these offences were committed, and both of them apparently in what may be somewhat inappropriate relationships at that time.  I will not go any further into that, but that is what the evidence tended to show.

87.  The 7th defendant has a troubled past as a youngster and has had a drug problem in the past.  I am told she has made positive changes and has changed her life completely, so in her case the delay seems to have worked in her favour.  She is ready to take up community service order and, most important, she is the sole carer of her son. 

88.  I consider these factors, particularly the fact that she is, as it were, the sole immediate carer of a young child, is an unusual and exceptional circumstance in terms of sentencing here.  I am persuaded both her and her family will benefit from the imposition of such an order, so I will impose such an order on her.

89.  As far as the 14th defendant is concerned, she is again now aged 25.  She has a clear record.  She has two children, one of them born during the currency of these proceedings.  Clearly, the imposition of a custodial sentence will be devastating to her family members and I think would be a wholly inappropriate sentence for her.

90.  Again, the delay to a certain extent has worked in her favour and, as I said, I am persuaded that the imposition of community service order for her is again the right order that should be made.

91.  Now, in respect of each defendant here, and the charges they face, I am going to require that they perform a community service order of 160 hours. 

COURT: So if you would all stand up, I am going to explain it to you. You are going to be required to provide a total of 160 hours of unpaid work to the community. You will do this at the direction of a supervising officer of the scheme.

Now, you have to follow the directions of that supervising officer as to the work that you will do, as to the time when it is done, and the time which it is completed. Now, the work must be completed within 12 months of today. If you have any difficulty in performing the work within that period, the matter must be referred back to me through your supervising officer.

The order also provides that you must keep the peace and be of good behaviour generally, and you must not commit any further offences during the currency of the order.

Now, if you breach any of the conditions, or you commit any further offences while the order is enforced, you can be brought back to this court and sentenced again for the offences of which you have originally been convicted. Do you understand all that?

INTERPRETER: All indicated that they understood.

COURT: Now, you will be given a form to sign. That will have a reporting condition on it. You must comply with that reporting condition. Now one thing left of that is you must again indicate you understand everything I have told you and you must indicate whether you consent to perform the work order.

INTERPRETER: Understood and confirmed by D7. Understood and confirmed by D9. Understood and confirmed by D14.

COURT: Right, thank you. The order is confirmed then.