HKSAR v. LIU KA HIN

HCCC291/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CRIMINAL CASE NO. 291 OF 2008

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Transcript of the Audio Recording
of the Sentence in the above case

COURT:  The defendant pleaded guilty at committal on 24 October 2008 to 11 charges of theft which, on the original indictment, were Charges 1, 2, 4, 5, 6, 8, 9, 10, 13, 14 and 15.  Five charges were left on file in the Magistracy not to be proceeded with without leave of that court, or a higher court.

The defendant was committed for sentence to the Court of First Instance where he appeared on 23 January 2009.  On that date, he confirmed his pleas and also confirmed the facts he had admitted before the magistrate. 

Those facts show that the defendant was a licensed securities broker and at the time of these offences, he was employed by Goldbond Securities Limited which is now Piper Jaffray Asia Securities Limited.  He had acted as broker for the victim, PW1, at the United Overseas Bank Kay Hian Limited and then joined Goldbond on 23 November 2006.  The victim followed him and he began share-trading with the defendant at Goldbond from 29 November 2006.

In December 2006, the defendant suggested to PW1 that he buy a new product referred to as ‘Equity Linked Notes’ (ELNs), endorsing this as a high-return, low-risk investment.  Between 4 December 2006 and 4 October 2007, the victim purchased $34.5 million approximately of these Equity Linked Notes and IPO shares.  To do that, he issued 15 cheques on three banks.  He would deposit the funds for the purchase into Goldbond’s account and fax copies of the pay-in slips to the defendant.  He would then confirm the purchase by fax or email.  The victim would order sales to be made to fund further purchases and would deposit any outstanding balance that resulted with Goldbond Securities.

In December 2007, the victim wanted to sell his Equity Linked Notes product, but was stalled by the defendant who told him that the notes had not been returned to his account by the bank and that he had reported the matter to the Securities and Futures Commission (SFC).

On 19 February 2008, the victim received an email purporting to come from a Compliance Officer at the SFC, confirming that the overdue issue of the Equity Linked Notes by BNP Paribas was being investigated.  However, when on the same day, the victim sent an email to the SFC to verify this, he was told that no officer of that name was employed by the SFC and the email address that he had been given was not a valid address for the Securities and Futures Commission.

On 27 February, the victim contacted the vice president of Goldbond, by now trading as Piper Jaffray.  This was PW2, who informed him that the company did not sell Equity Linked Note products.  After that, the defendant was interviewed by PW2 and he confessed that he had appropriated the victim’s money for his own business and had lost it all.

Investigation showed that the monies had been routed through the defendant’s account and those of his family members.  A report was made to police on 28 February 2008.  The total amount transferred was $29,623,513.47.  That covered the period from 4 December 2006 to 4 October 2007. 

Between 7 December 2006 and 21 February 2008, PW3, who was the settlement clerk with Goldbond, on the instructions of the defendant, transferred $16,225,000 from the accounts of the defendant and his family members’ accounts with Goldbond to the bank accounts of the defendant, his wife, his mother and his younger brother.  The sums were transferred to other bank accounts and the monies withdrawn during the period of 7 December 2008 to 25 February 2008, leaving negative or minimum balances as at 29 February 2008.

29 February 2008 was the date on which the defendant was arrested and he admitted appropriating about $30 million.  He explained the method that he had used to effect the false trades and explained how he had dealt with PW1.  He confirmed that his family members did not know what he was doing.  This was his own speculation, both for his own investment and for covering his previous investment losses.  The total sum stolen by the defendant was $29,623,513.

The defendant was born and educated in Hong Kong up to Form 7.  He is aged 28, having been born on 12 August 1980.  He married in October 2007, but as yet has no children.  His parents had had an inharmonious relationship due to his father’s gambling and failure to contribute financially to the family.  His parents separated in 2003 when his father effectively abandoned the family. 

The defendant completed Form 7 and left school aged about 19.  Thereafter, he worked as a stockbroker trainee and obtained a broker’s licence after about six months.  Since 2003, he earned over $100,000 a month and, by 2006, he was able to earn up to $200,000 a month.  He gave some assistance helping with the family finances, including assistance with his brother’s university education.

Counsel submitted that the defendant had been under pressure because of the need to help with the family finances and had developed a drinking problem.  I note, however, from the dates and the information in the background report that this is somewhat of an exaggeration.  The defendant’s mother said that, in recent years, she had not had financial hardship.  She had worked for her brother after her husband deserted and the defendant made intermittent payments only.

Between 2003 and 2006, the defendant engaged in buying and selling residential flats as well as engaging in speculative trades, using the accounts of family members.  His goal was to earn $100 million, so he could provide a comfortable living for his family without having to engage in risky transactions. 

His gains in the stock market, however, were offset by losses in the property market and, from 2006, the defendant engaged in the pernicious practice of after-hours socialising with clients.  As a result, his judgment in his dealings was adversely affected by alcohol.  When he did make financial gains, he spent extravagantly.  At one point, his losses were about $40 million and to cover the loss, he began this series of offences.

Letters of support from his wife, his mother and his younger brother have been put before the court.  All set out details of the defendant’s virtues in relation to themselves and set out their support for him and request leniency in sentencing.

A letter from the defendant himself expresses his remorse and was put before the court.  He said in that letter that his time in custody had taught him a lesson, had enabled him to reflect on his life, to recognise his errors and had shown him the need to adjust his moral values.  He blamed his criminal behaviour on excessive reliance on alcohol and an obsession with short-term profits. 

The defendant believed that, in prison from about April 2008, he had come to know God.  He was studying financial management through the Open University whilst in prison and he sought leniency in his sentence so he could support and care for his wife and mother.

The points of mitigation relied on by counsel were the defendant’s,

(1), remorse and acceptance of responsibility for his errors;

(2), previous good character;

(3), admission of his full involvement to the police;

(4), plea of guilty at the first opportunity;

(5), not having used the money to fund a lavish lifestyle. Counsel also relied on

(6) the fact that he was unlikely to re-offend;

(7) the fact that he had paid back $500,000 to the victim; and that he knew that the victim had received all the money back through the insurance company of Goldbond.

I was referred to various cases.  The Queen v Barrick (1995) 81 Cr App. R78 (CA)sets out matters to which the sentencer should have regard and the recommended levels for sentencing in these breach of trust cases.  Those principles were affirmed and the levels of money stolen adjusted to take account of inflation in the case of The Queen v Clark (1998) 2 Cr App. R 137. 

In Hong Kong, the courts have followed Barrick and Clark, and in The Queen v Cheung Mee Kiu (2006) 4 HKLRD 776, the Court of Appeal converted the Clark bands relating to theft by a person in a position of trust to cover the levels of sentence relevant to Hong Kong conditions.

In this particular case, involving as it did HK$29 million, the totality would bring this case under band 1 as set out in Cheung.  That equates Stg£1 million with HK$12.5 million and merits a 10-year sentence of imprisonment, or more.  I note that the maximum sentence for an offence of theft under section 9 of the Theft Ordinance, Cap.210 is 10 years’ imprisonment.

Mr Poon, who appeared for the defendant, referred the court to similar cases where, despite the defendants having stolen significantly more money than $29 million, the overall starting point was below or around the maximum of 10 years. 

In The Secretary for Justice v Chan Boon Ning CAAR1/2002, on a review of sentence of 6 years, a 9-year starting point was adopted for seven charges of theft and false accounting involving the sum of HK$81 million.  In The Secretary for Justice v Schmitt Charles Lee CAAR12/2006, also a review of sentence, a starting point of 12 years was suggested as proper on conviction after trial of 19 charges of theft and false accounting which involved a total of HK$231.8 million.

Mr Poon referred also to HKSAR v Leung Shuk Man (2002) 3 HKC 424 which considered to what extent restitution is a mitigating factor and how much, if any, discount should be granted for the efforts made at restitution in this particular case.  In Leung, the appellant’s payment of compensation at an early stage was considered to entitle her to an overall discount of 50 per cent.

In this case, the only restitution on which the defendant can rely is the HK$500,000 that he repaid.  All other monies were repaid to the victim by the insurance company of Goldbond, so there is no basis on which the defendant could rely on that repayment as being restitution.  There is no realistic chance of greater restitution being made.  Given the amount of the restitution which appears to have been, in reality, the unexpended stolen monies, the additional discount for restitution over and above the one-third discount for plea can only be nominal.

It was submitted by Mr Poon that, in this case, given the authorities, a starting point of 8 years would be appropriate.  In considering sentence, I took into account that the amounts obtained for each of the 11 charges ranged from the lowest amount of $1,439,863 (Charge 11) to the highest of $5,025,000 (Charge 9).  The remaining charges were all in excess of $1.7 million and the time span ran from December 2006 to October 2007.

I also took into account the following matters, based on the Barrick principles.  The quality and degree of trust placed on the defendant by the victim was high.  The defendant was a licensed broker working under the auspices of Goldbond and the SFC.  His victim clearly relied on that fact when he entrusted his money to him for investment.  The period of time over which the thefts occurred was quite lengthy, about nine months.  The defendant began the series of thefts within a very short time of his joining Goldbond as a broker.  The money was used to cover losses from the defendant’s unsuccessful investments.

The victim clearly relied on the defendant’s professional integrity and trusted him sufficiently to follow him when he moved to Goldbond, and the defendant doubtless counted on that trust when he began these offences.  It appears that his victim was earmarked, as such, given the very short time which elapsed between the defendant beginning to work for Goldbond and the first of these offences.

When the whole story came out, the victim would no doubt have been affected by the abuse of his trust, his worry about his substantial losses, the extra work and expense which was necessarily involved in his obtaining the return of the money, and the probable loss of investment income during, the time it took for him to recover the funds from the insurance company.

Public confidence in the Hong Kong regulatory authorities undoubtedly would be undermined by public knowledge of the depredations of the defendant.  The reputation of the SFC would suffer, both in Hong Kong and outside it, because of the perception that the SFC was not able to control those accredited parties it was tasked to supervise, and in all likelihood, other brokers would have to bear a consequential increase in insurance premiums.  The reputation generally of brokerage firms would suffer as a result of this type of offence.

This was not opportunistic stealing.  Planning was needed.  An investment product was invented.  A false story was made up when the victim began to ask for his money back and the defendant even created a false Compliance Officer at the SFC in order to strengthen his story about why he could not return the funds.

Under those matters of mitigation special to himself, I considered the defendant’s need to support his family in the absence of his father and his alcoholic habit.  I treated the defendant as a man of clear record, but a clear record is only what one would expect of a man who was in a position of trust as a licensed broker.  It was his clear record which enabled Goldbond to employ him and also enabled him to commit these offences.

The total amount of money stolen by the defendant is not the only consideration on sentence.  It is not to be ignored, but neither is it the sole or necessarily reliable indicator of culpability.  Here, the sum stolen was very large but not so large as to require the maximum sentence to be passed.  However, a lengthy prison term is inevitable in the circumstances of this case. 

The only mitigation of substance is the plea of guilty which entitles the defendant to a full one-third discount.  I do note the amount of restitution made and will give a modest discount in addition for that.  As I said, there appears little or no prospect of the defendant being able to make any further compensation.  The burden of restitution thus falls directly on the insurance company and indirectly on all those members of the public who will suffer the inevitability of increases in premiums for professional liability insurance.

Taking all those matters into account, I adopt an overall starting point of 9 years.  I give a full one-third discount for the plea.  I give a further 2 months for the restitution made to acknowledge the importance that the courts place on such restitution as a mitigating factor.

On each of the 11 charges, the defendant is sentenced to 5 years and 10 months’ imprisonment.  I order that those sentences run concurrently.