HKSAR v. CHOW CHUN YIN, STEVE

DCCC 440/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 440 OF 2016

____________

____________

REASONS FOR SENTENCE

D2 faces 6 charges of "Conspiracy to defraud" (Charges 1 and 5 to 9), which are charges jointly involving D1 (Madam CHAU Hang-yu). His trial was fixed for 3 days commencing on 28 November 2016.

2.  In September 2016, D1 pleaded guilty to Charges 1, 5, 6 and five other charges before me.  The prosecution offered no evidence against her in respect of Charges 7, 8, 9 and three other charges. I sentenced her to a total of 12 months' imprisonment.

3.  By a letter dated 18 November 2016, D2's counsel wrote to the court indicating D2's intention to plead guilty.  On 28 November, D2 pleaded guilty to Charges 1, 5 and 6.  The prosecution offered no evidence against him in respect of Charges 7, 8 and 9; those charges against him were accordingly dismissed.

Summary of Facts

Background

4.  D1, D2 and Madam LI Lee (PW1) began their employment with The Hongkong and Shanghai Banking Corporation Limited ("HSBC") respectively in late June 2010, mid-June 2010 and mid-June 2011 as Wealth Management Managers.  In August 2012, D1 was promoted to Associate Relationship Manager.

5.  D1, D2 and PW1 were responsible for, inter alia, promotion and sale of various investment and insurance products of HSBC (eg. unit trust funds).  They were remunerated by a basic salary plus a commission called "Sales Incentive", which was calculated based on their sales performance and subject to a monthly ceiling.

6.  In the course of selling investment or insurance products, HSBC requires its bank officers to personally explain the product details and features to the customers and to identify the customers' needs and investment risks.  Bank officers need to sign on the relevant investment subscription or insurance application forms to confirm that they, being the handling sales staff, have explained the above matters to the customers.  Furthermore, sales procedures of investment or insurance products must be carried out in Hong Kong.  Based on the information contained in the relevant forms, HSBC would calculate and award Sales Incentives to the bank officers who genuinely handled the sales.

7.  If HSBC knew that the relevant forms contain information which is false or known to be untrue, HSBC would not accept or process the transactions as the requirements have not been met.  As a result, the handling bank officers would not be granted any Sales Incentives.

8.  HSBC does not allow any of its employees to claim Sales Incentives on behalf of another employee by falsely claiming that he/she was the responsible sales staff member when the relevant product was in fact sold by another HSBC staff member.

9.  When D1 joined HSBC, she was assigned to work in the branch situated at Hay Wah Building in Wanchai. When D2 and PW1 joined HSBC, both were assigned to work on the same floor at the HSBC Headquarters in Central.  They became close friends.  D1 and D2 became friends at a private gathering in 2012.  On the other hand, PW1 and D1 did not know and had never met each other before the present case.

10.  One day in September 2012, D2 approached PW1 telling her that a friend of his working in the Wanchai branch could always achieve further sales beyond the Sales Incentive ceiling. That friend, however, could not receive any extra Sales Incentives because her had reached the ceiling.  In order to help that friend to obtain extra Sales Incentives, D2 suggested PW1 to assist his friend by submitting the sales forms of his friend in PW1's name.  PW1 did not agree with the suggestion immediately, but replied that she would consider it.  Later, D1 contacted PW1 directly and repeatedly requested PW1 to assist her by submitting the sales forms in PW1's name and then returning the extra Sales Incentives to D1.

11.  PW1 asked D2 whether there was anything wrong with the suggested practice.  D2 told her that he had done the same for D1 and nothing irregular had happened to him.  Under D2's persuasion, PW1 agreed to assist D1.   

Charge 1

12.  On 20 September 2012, through D2, D1 passed to PW1 an insurance application form for "EarlyIncome Annuity Plan" of a customer named ZHANG.  The form was dated 21 September 2012 and the initial premium was US$169,764.  As instructed by D1, PW1 declared on the form that she handled the sale and had explained the details of the insurance product to ZHANG in person.  HSBC approved ZHANG's application and paid Sales Incentive in the sum of HK$52,400 to PW1 in November 2012.

Charges 5 and 6

13.  On 24 October 2012, through D2, D1 passed to PW1 2 Unit Trust Subscription Orders of a customer named LEE. The dates and amounts of the 2 orders were respectively 22 October 2012; HK$499,990 (Deal No. P-0022468; Charge 5); and 24 October 2012; HK$499,990 (Deal No. P-0023921; Charge 6).  As instructed by D1, PW1 declared on the subscription orders that she handled the sales and had explained the details of the unit trust funds to LEE in person.  HSBC approved LEE's subscriptions.

14.  On 26 November 2012, over the phone, D1 asked PW1 to meet her at a coffee shop and to return to D1 a sum of HK$55,000, being the Sales Incentive in relation to ZHANG's insurance application.  D1 had also reminded PW1 to return to her later the Sales Incentive in relation to LEE's unit trust subscriptions.  PW1 then asked D2 to accompany her to the coffee shop, where she gave HK$55,000 cash to D1.

The Truth

15.  PW1 had never met customers ZHANG or LEE.  She did not handle the sales of the relevant products or explain to them the details of such products.  PW1 simply followed D1's instructions to falsely declare that she was the bank officer responsible for the relevant sales of insurance and investment products to the customers named above.  Had HSBC known that PW1 was not the genuine handling bank officer of ZHANG's insurance application, it would not have released the Sales Incentive in relation to Charge 1 to her.

Termination of PW1

16.  PW1's employment with HSBC was terminated in January 2013.  Owing to the discovery of the fraudulent activities of PW1, D1 and D2, HSBC withheld payment of Sales Incentives to PW1 in a total sum of HK$66,000, which included the Sales Incentives receivable for the transaction in relation to LEE (i.e. the Sales Incentives in relation to Charges 5 and 6).

Arrest

17.  D2 was arrested on 17 September 2013.  In April 2016, he was invited to attend a cautioned interview, but he refused to attend.

Mitigation & Sentence

18.  D2 is 32 and single. Although he is currently serving a sentence of 15 months' imprisonment (for 2 charges of "Fraud" and 1 charge of "Offering an advantage to an agent" in DCCC 130/2015), prosecuting counsel Ms. LAI confirmed that both DCCC 130/2015 and the present case arose from the same investigation.  I will treat D2 as a person of clear record.

19.  Defence counsel Mr. YUEN informed me that D2 studied in Canada.  He worked for HSBC for 2.5 years.  From 2013 to 2016, he worked for PCCW.  In mitigation, Mr. YUEN submitted that D2 merely acted as a messenger between D1 and PW1.  Out of stupidity, he brought the 2 ladies together.  Mr. YUEN stressed that D2 gained nothing for helping D1; his own sales record was not improved either for doing so.  Furthermore, the offence period was less than 2 months.  A bundle of mitigation letters was placed before me; their contents are duly noted.

20.  I am not familiar with the banking or financial industries.  As an ordinary bystander, I have difficulty understanding the rationale behind the policy of imposing a ceiling on the monthly sales commission to be received by bank staff.  From the bank's perspective, the sales of financial products must be the more the merrier; and commission is plainly a key motivating factor for the sales staff to push themselves harder.  Then why put a cap on their monthly sales commission?

21.  Without the benefit of any explanation from HSBC, I shall refrain from making further comments; suffice it to say that D1, D2 and PW1 all have my sympathy.  What they did was clearly wrong, and each of them would be punished accordingly.  What I do not understand is why D1 was not entitled to receive any commission for the sales which exceeded her monthly targets.

22.  When I dealt with D1, I was given to understand that the repercussion of D1's fraudulent practice is HSBC would have potential liabilities since the forms were false in the sense that PW1 was not the actual sales person.  Be that as it may, assuming that D1 had conducted the relevant sale transactions properly in that she did not mislead HSBC or the customers named in the charges in any other ways[1], I consider it proper and just to sentence D2 based on the amount of commission which D1 was not entitled to earn instead of the sales volume.

23.  This case is a classic Barrick type of breach of trust situation.  I have reminded myself of the sentencing guidelines laid down by the Court of Appeal in HKSAR v NG Kwok Wing [2008] 4 HKLRD 1017.  I stress that it is not an easy task and saddens me to send someone like D2, who is not a hardcore criminal, to prison.

24.  I accept that D2 only acted as a messenger for D1 and he gained nothing for doing so.  His culpability is perhaps slightly less than D1's.  For each charge, I adopt a starting point of 12 months' imprisonment.  With the guilty plea, the sentence is reduced to 8 months.  Apart from this, I see no other mitigating factors which warrant any further reduction.  I sentence D2 to 8 months' imprisonment each for Charges 1, 5 and 6.

25.  The total sum of "extra" commission involved in the present case is HK$118,400[2]. I consider a global starting point of 15 months' imprisonment to be appropriate. With the guilty pleas, the overall sentence is reduced to 10 months.  Hence, I order the sentences for Charges 5 and 6 to run concurrently; but 2 months consecutive to Charge 1.  Thus, arriving at a total prison term of 10 months.

26.  Mr. YUEN has informed me that D2 is expected to be released on 21 February 2017 for his existing sentence in DCCC 130/2015.  When I dealt with D1, I had the benefit of perusing the relevant papers in DCCC 130/2015 (including the Reasons for Sentence). Bearing in mind the totality principle, I order 6 weeks in the present case to run concurrently with D2's sentences in DCCC 130/2015.