HKSAR v. LEE TUNG SANG

DCCC 903/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 903 OF 2010

--------------------

--------------------

REASONS FOR SENTENCE

1.  The Defendants, D1 and D2 on the indictment and so termed throughout,  are each convicted  on the charges they each face on the indictment.  At the outset, D1 pleaded guilty to 3 counts of conspiracy to defraud, contrary to common law and punishable under Section 159C(6) of the Crimes Ordinance, Cap. 200, Counts 1 to 3 on the indictment.  D2 has been convicted after trial of one count of conspiracy to defraud, contrary to common law and punishable under Section 159C(6) of the Crimes Ordinance, Cap. 200, Count 3 on the indictment.

2.  Full particulars of the offences are set out in my verdict delivered on 9 May, 2011 in respect of D2.

3.  Suffice it to say that the essence of each of the three counts of conspiracy to defraud, namely counts 1 and 2 against D1, and count 3 against D1 and D2 jointly, was that there was no underlying transaction for the purchase of karaoke equipment from Goodfield Trading Company as shown on the documents submitted for the application of hire-purchase loans from Public Finance Ltd.  These were all bogus transactions and staff of Public Finance Ltd. were induced by these false applications to approve loans and make payments to Goodfield Trading Company. D1 was the operator of Goodfield Trading Company, a local company registered on 10 September, 2006 under the name of Madam Wong Yim-fan, the wife of D1.  Goodfield was engaged in the supply of karaoke equipment.  At the time material to the charges, D2 was employed by Public Finance Ltd. as a marketing officer in its hire-purchase/leasing department.  D2 was responsible for procuring applicants for hire-purchase loans from Public Finance Ltd. He was required to scrutinize the credit profiles of applicants including their personal background, financial status and the relevant supporting documents submitted with the hire-purchase loan application.  He would prepare a credit loan proposal in respect of the applicant for the approval of his superior and would recommend the hire-purchase loan if the applicant could afford the monthly repayments, given his income and financial status. The karaoke equipment supposedly purchased by the hire-purchase loan applicants from Goodfield was the underlying security for the loans.  The loans were approved because it appeared from the credit proposals submitted that the applicants were purchasing the karaoke equipment from Goodfield for their own use in Hong Kong and because the financial status of the applicants was satisfactory.  The full purchase price for the equipment was not being borrowed as Public Finance Ltd. required hire-purchase loan applicants to pay a deposit to Goodfield of about 6 monthly installments, and the balance was the loan amount borrowed from Public Finance Ltd. as a hire-purchase loan, which Public Finance Ltd. paid to Goodfield.

4.  Counts 1 and 2 involved 2 bogus hire-purchase loans, each for HK$96,208. In respect of count 1, D1 conspired with one of the hire-purchase loan applicants, Cheng Chi-yung. Cheng had debts of almost HK$190,000.  D1 agreed to apply for a hire-purchase loan for Cheng to Public Finance Ltd.,  falsely representing that Cheng was purchasing audio equipment from Goodfield and had paid Goodfield a deposit for the audio equipment. After the loan for HK$96,208 was approved relying on the accuracy of the documents submitted by Goodfield,  and Goodfield paid by Public Finance Ltd., a handling fee was deducted and the balance money given to Cheng. Cheng did repay the loan to Public Finance Ltd.

5.  In respect of Count 2, D1 conspired with another hire-purchase loan applicant, Chong Shing.  Mr. Chong’s company had cash flow problems and his application to a bank for a loan had been refused.  Again, D1 applied for a hire-purchase loan wherein Chong was the applicant, and falsely represented that Chong had bought karaoke equipment from Goodfield and submitted documents in support of the application.  Relying on the accuracy of the documents, the loan was approved, and a cheque for HK$96,208 was paid to Goodfield.  In fact, Chong had not purchased any equipment from Goodfield.  He did pay off the loan to Public Finance Ltd, by installments.

6.  In respect of Count 3, D1 through Goodfield referred borrowers to Public Finance Ltd. for hire-purchase loans.  Public Finance Ltd. approved 80 hire-purchase loans between 29 March, 2007 and 27 October, 2008, totaling HK$7,426,894. All but one of these were processed by D2 – he prepared the credit proposals for approval after reviewing the relevant personal and financial information of the applicants.  D2 met the borrowers.  These were all bogus applications and there was no purchase of equipment of any kind from Goodfield.  31 of the hire-purchase applicants referred to Public Finance Ltd. by Goodfield had defaulted in making payments, and the total amount written off by Public Finance Ltd. was HK$982,759.57 as at 28 April, 2011. 68 applicants had settled their loans in full, and one was still making payment.

7.  D1 is sentenced on the basis of the facts admitted by him, while D2 is sentenced on the basis of the facts found by this Court.

8.  Both D1 and D2 are of hitherto clear record.

9.  I have carefully considered all that has been urged upon me in mitigation by counsel on behalf of each defendant, as well as the Background Reports of each defendant before me.  I have also considered the contents of the letter written by D1. In respect of D2, I also have the reports prepared by Dr. Karen Hau Yan Shum as well as the various letters written on his behalf by his family and friends, which speak well of him, and I have considered the contents. I am told that each Defendant accepts the contents of their respective Background Report. The background of each defendant is set out in detail in the reports, and I do not propose to rehearse the contents herein.

10.  As I have already said, both defendants  are of hitherto clear record, both are family men, and both have been in employment throughout most of their lives. I accept that, in each case, each defendant’s incarceration will involve a devastating effect on their families.

11.  I accept, too, that the likelihood of each defendant re-offending is low.

12.  I view these as serious offences. False documentation were prepared to support the hire-purchase loan applications by D1.  D2, being employed by Public Finance Ltd., and with the responsibility to vet the loan applications and to prepare the credit proposals, recommended approval of these loans knowing full well that these were bogus applications for hire-purchase loans.         

13.  D2 has been convicted after trial, and had shown no remorse, not even when interviewed by the probation officer for the preparation of the Background Report. However, Mr. Hui on behalf of D2 submitted at the hearing on 20 May, 2011 that D2 is now remorseful.  D1 has been more forthcoming, and has admitted his guilt from the outset.

14.  The motive, certainly as far as D1 was concerned, was financial. He was the sole breadwinner of his family and committed the present offences to support his business and family expenses. So far as D2 is concerned, his motive, according to what he said when interviewed under caution, was to meet the quota of loans he had to reach each month. Mr. Hui submitted on behalf of D2 that D2 joined the scheme to keep his job.

15.  It is obvious that the purpose of the conspiracy was not to steal the whole sum of loan outright but to obtain cheap loans, or to obtain loans for persons who otherwise would not be approved  for loans.

16.  Though as a matter of fact some repayment had been made, without the security of the property, namely the karaoke equipment, that Public Finance Ltd. was supposed to have, it was exposed to great financial risk.  Indeed, in respect of count 3,  Public Finance Ltd. did suffer actual financial loss. A ‘summary of the write-off amount in relation to charge 3’ as of 28 April, 2011 handed in by Mr. Hui for D2 sets out the loss to the bank of HK$ 982,759.57as a result of the loans not being repaid to the bank. In my view, the defendants cannot claim much credit for the repayment, indeed whether there would in fact have been repayments was something not within their control. Once the bank was defrauded into the approval and paying of the loan, the extent of the loss was left in the hands of the borrower.  It cannot be said to be restitution in the sense that it would attract any reduction in sentence. Besides, the lack of loss was not resulted from any effort of the defendants.

Charges 1 & 2 against D1

17.  The loans granted as a result of the fraudulent conspiracy in respect of each of these two charges was $96,208.  As said, D1 was instrumental to the successful carrying out of the illegal plan in that he knowingly caused and permitted an application to be made to Public Finance Ltd. for the granting of a hire-purchase loan to the persons named in the particulars of these charges, he caused and permitted the falsification of documentation required by Public Finance Ltd. for the said loans and he falsely represented that there was a genuine purchase of karaoke equipment by the applicants for the hire-purchase loan from Goodfield.

Charge 3 against D1 and D2

18.  Between 29 March, 2007 and 27 October, 2008, a period of about 18 months, D1 and D2 conspired together to defraud Public Finance Ltd. by dishonestly procuring purchaser to apply for and obtain hire-purchase loans from Public finance Ltd. knowing that they were not genuine purchasers of karaoke equipment from Goodfield, falsely representing to Public Finance Ltd. that there were genuine purchases of karaoke equipment from Goodfield,  causing and permitting applications to be made to Public Finance Ltd. for the granting of hire-purchase loans totaling HK$7,426,894 in favor of 80 purported purchases, and causing and permitting the falsification of documentation required to be submitted by Public Finance Ltd. for the said loans.  D1 was the one in Goodfield who arranged the false documentation whilst D2 was the employee of Public Finance Ltd. who recommended the loans knowing full well that there was no genuine purchase by the loan applicants from Goodfield.

19.  Whilst there is no evidence to rebut the assertion that D2 did not receive any financial  reward for his conduct, it was submitted that by doing what he did, he was able to meet the quota of hire-purchase loans he had to procure monthly for Public Finance Ltd. Had he failed to meet the monthly quota, he would have received a warning letter from his superior, and this would affect his job prospects.  That in itself is a benefit that he received.

20.  For offences of this nature, the only appropriate sentence must be an immediate custodial one.  In particular, in relation to count 3, the offence continued for about 18 months, and involved some 80 hire-purchase applications wherein false documentation was used to support the applications for hire-purchase loans and there was no karaoke equipment purchased and thus the supposed underlying security  for the hire-purchase loans was non-existent.

21.  There was a lapse of almost two years from the arrest of the defendants until the charges were laid. It is not a result of fault from either the prosecution or the defendant.  There had been no delay in prosecution.  Prompt investigation was carried out upon discovery of the matter.  A considerable period of time was obviously necessarily in investigation of a case of this nature and complexity.  I am satisfied that there was no delay in prosecution.

22.  On charges 1 and 2, on each charge, I take as a starting point 18 months’ imprisonment, discount this by one-third to reflect his plea, and sentence D1 to 12 months’ imprisonment on each charge.

23.  On charge 3, in respect of both D1 and D2, I take as a starting point 3 ½ years’ imprisonment.

24.  D1 pleaded guilty from the outset. He is entitled to a discount of one-third to reflect this. He is sentenced to 2 years and 4 months’ imprisonment on charge 3.

25.  Counts 1, 2 and 3 are all separate and distinct offences and warrant consecutive sentences.  But I do bear in mind the totality principle of sentence. I shall order that the 10 months of the sentence on counts 1 and 2 be concurrent, 2 months of the sentence on count 2 be consecutive to count 1, and the sentence on count 3 be consecutive to that of counts 1 and 2, thus the total is 3 ½ years’ imprisonment.

26.  D2 has been convicted after trial.   Counsel for D2 has produced a table of the  sentences imposed on the loan-applicants of the hire-purchase loans who were charged with various offences in respect of these fraudulent loans. Their sentences ranged from community service orders to suspended sentences and even immediate custodial sentences.  In my view, the sentences imposed upon them is of little relevance here. D2 was an employee of Public Finance Ltd. and clearly there has been a breach of trust by him. I can see no other matters put before me that would warrant further reduction in sentence for D2.

27.  Counsel on behalf of D2 had sought a community service order or a suspended sentence.  In my view, a community service order is inappropriate for an offence of this nature. D2 is sentenced to 3 ½ years’ imprisonment on charge 3.  I have considered whether there are factors to warrant my suspending this sentence.  I can see none.