HKSAR v. ZHENG ZHI LONG

DCCC 971/2017

[2018] HKDC 610

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 971 OF 2017

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REASONS FOR VERDICT

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CHARGE

1.  The defendant was charged with one count of dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455.

2.  The particulars of offence are : he, between 2 February 2016 and 9 March 2016, both dates inclusive, in Hong Kong, knowing or having reasonable grounds to believe that property, namely, a sum of $5,000,000 United States currency in account numbered 048-866834-838 with The Hongkong and Shanghai Banking Corporation Limited held in the name of Excellent Century Holdings Limited, in whole or in part directly or indirectly represented the proceeds of an indictable offence, dealt with the said property.

PLEA

3.  The defendant pleaded not guilty to the charge.

INTRODUCTION

4.  An American male William De Jacma Frederick (PW1) was the director of two Hong Kong companies specializing in matching overseas investors to invest in Mainland business opportunities.

5.  The defendant was the only director and sole shareholder of the Excellent Century Holdings Limited which held a multicurrency account 048-866834-838 (the Account).

6.  The prosecution alleged that PW1 received an email from a Peterjohn Boshoff concerning an investment opportunity offered by a Met Bawi.  Such investment proposal involved an investment of US$5 million with a return of US$40 million in 45 days.  John Nock agreed with PW1 to make the investment by providing the funds of US$5 million.  Under their agreement, PW1 would receive 1% of the US$40 million as commission.  PW1 then accepted the investment proposal offered by Met Bawi who instructed the US$5 million was to be deposited into a designated account of a bank in Hong Kong (the Account held by defendant’s company).  Met Bawi provided an insurance policy for loss of trade for US$5 million.

7.  On 2 February 2016, the amount of US$5 million was transferred into the Account.  After the transfer, the defendant made several withdrawals and a number of transfers to other accounts with the total amount of US$4,397,378.87.

8.  The defence admitted that the defendant had dealt with the property.  The main issues in dispute were whether the prosecution could prove:-

(a) the property represented the proceeds of an indictable offence; and

(b) the defendant had the mens rea of “knowing or having reasonable grounds to believe…..”

PROGRESS OF TRIAL

9.  Two admitted Facts, two ATM cards, some photographs captured from the defendant’s mobile phone, banker’s affirmations in respect of the relevant companies and a video record of interview of the defendant were produced as exhibits.

10.  The prosecution called two witnesses to give evidence, namely PW1 and Mr Nip who made the transfer of US$5 million into the defendant’s company account.

11.  The prosecution applied to amend the charge in respect of the offence date before the closing of its case.  There was no objection from the defence. The amendment of charge was granted by the court on the grounds that there was no injustice caused to the defence.

12.  The defendant neither elected to give evidence nor called any witness.

THE PROSECUTION’S CASE

Mr De Jacma

13.  PW1, an American, resided both in Shenzhen and Hong Kong.  He was a physician and a medical doctor by training practicing in USA before.  He ceased his practice since 2007.  He was now a director of several corporations working mainly in China.  He was a CFO of the Global Natural Gas Development Limited.  He also worked for the Dragon Lotus Capital Limited (with the old name being Asia Lotus Investment Ltd).  He had relations with financial institutions and a group of keen investors around the world.  His role was to locate investors for raising capital for project funding.  He acted as a middleman dealing with projects varying from a million to 15 billion.  His company received commission for the project price.  He mainly communicated with his clients through email or phone all over the world.

14.  On 18 December 2015, he received an email (P1) from a Peterjohn Boshoff claiming to be the business partner of Met Bawi and referring PW1 to a USD 5 billion transaction.  Several weeks later, Met Bawi offered for a second transaction of raising USD 10 million with a return for 4 times.  PW1 asked whether he could provide any security. Later, PW1 located an investor, John Nock (PW1’s business partner and friend) who agreed to make an investment of USD 5 million.  On 20 January 2016, an email (P4-53) enclosing the contract was sent to PW1 who then requested for an insurance policy for the invested amount of USD 5 million. 

15.  P5 was the contract (dated 29 January 2016) signed by both parties electronically.  In the contract, the party B was named as North Star Assets Inc. represented by Ian Cumming whom PW1 knew and trusted.  The party A was PW1 and John C Nock.  According to the contract, the investment of USD 5 million provided by John Nock would have a return of USD 40 million in trade cycle of 45 banking days.  Under the contract, the USD 5 million was to be transferred into a designated HSBC Account No.048866834838, with account name of Excellent Century Holdings Limited and with Beneficiary as Met Bawi.  Also, under the contract, the USD 5 million was fully insured by an insurance policy for loss of trade.

16.  On 2 February 2016, the amount of USD 5 million was transferred into the designated Account.  PW1 then sent an email (P4-60) to Met Bawi to inform him of the transfer of money and requested for the insurance policy.  Met Bawi provided the insurance policy (P6) as security for loss of trade with coverage up to USD 5 million and the name of insured being John Charles Nock.  PW1 believed it was a genuine insurance policy.  P11 was the Co-operative Financing Agreement between PW1’s company and John Nock.  P10 showed that PW1 was one of the signatory of the Asia Lotus Investment Limited.

17.  PW1 explained that at the material time, as he was negotiating a 5-billion contract with Met Bawi, he trusted Met Bawi.  Also it was secured by an insurance policy.  Before the transfer of money to the designated Account, he had talked to Bawi about 10 times through skype or phone.

18.  At the expiry of the contracting period of P5, PW1 had received nothing from Bawi and lost contact with him.  He could not get any compensation from the insurance company as the Insurance Policy (P6) was not a genuine policy. He later reported the case to the police.

19.  PW1 did not know the defendant before.  After enquiries, at a later time, he was able to get some information of the defendant.  On 28 June 2016, he contacted the defendant through skype.  The photographs captured from defendant’s phone (P26 (1)-(7)) showed the communication between them.  

20.  PW1 had only heard the name of Huang Guoshen and met him several years ago but did not know him.  He never heard a USA firm “Abbott and Abbott” and a name of Salikhova Elena. 

21.  PW1’s company had commenced civil proceedings against Excellent Century Holdings Limited.

22.  Under cross-examination, PW1 did not find the transaction suspicious by earning 8 times of capital in 45 days.  This offer was very standard in the industry for short term buy and sell transaction.  He agreed that there was a deal between him and John Nock that 1 percent of the USD 40 million would be the commission for PW1 and the amount of USD 10 million would go into the project funding of PW1’s company.  The defence suggested the contract, P5 was a complete mess and some wordings did not make sense.  PW1 agreed that in the contract, party A and B had been mixed up.  He explained the contract was provided by Bawi and he proceeded with the deal upon the security of insurance policy.  He agreed the USD 5 million did not come from John Nock’s own money and it was from oversea investor of Europe.  PW1 was satisfied that the source of USD 5 million was “clean” money and not from any proceeds of crime.

23.  Under re-examination, PW1 said that he knew the office name of Ian Cumming.  He had no direct contact with him and only knew his name from the financial world.

Mr Nip Joe

24.  PW2, a Hong Kong resident, owned a corporate consultancy company.  P18 was his name card.  The Wealth Mark International Investment Limited (Wealth Mark) was set up by an American Kevin Griffith and him for investment purpose.  As Mr Griffith was not always in Hong Kong, PW2 was asked to be the director.  He opened a Hang Seng Bank account (796-054-914-883) for the company.  He was the sole signatory of the account. 

25.  He also set up the Smart Jobs Ltd (Smart Jobs) at the request of an American Alexander Ituma.  This company only carried out business overseas and not in Hong Kong.  As Ituma was not always in Hong Kong, he employed PW2 to act as the Chief Financial Officer of the company (P19).  Smart Jobs held a HSBC account 499-818599-838.  PW2 was one of the signatories of the account. 

26.  P8 was a funding agreement showing that EUR 10 million was transferred into the account of Wealth Mark.  He then received instruction from Griffith to transfer USD 5 million into the HSBC account of Excellent Century Holdings Ltd. He then made the transfer from the Hang Seng Bank account of Wealth Mark to the HSBC account of Excellent Century.  However, such transfer on 30 January 2016 (P30) was rejected by the bank as there was no relationship between these two companies.

27.  P9 was a funding agreement showing that USD 5 million was transferred from the account of Wealth Mark to the account of Smart Jobs.  As PW2 was the director of both companies, such transfer was accepted by the bank.  P15 was the bank record for the transfer of USD 5 million from Hang Seng Bank account of Wealth Mark to the HSBC account of Smart Jobs.  He received instruction from Ituma to transfer USD 5 million to the HSBC account of Excellent Century.  He then made the transfer from Smart Jobs to Excellent Century within the same bank (P17) on 2 February 2016.  After the transfer, he informed Ituma enclosing a copy of P15 and P17 via Whats App. 

28.  He had heard the name of John Nock before.

Arrest of the defendant

29.  On 5 July 2017, the defendant was arrested at the Lo Wu Report Centre of the Lo Wu Control Point.  Two ATM cards bearing the defendant’s name with account No. 048-866834-838 and 609-868708-888 were seized from him.

Excellent Century Holdings Limited

30.  The Excellent Century was incorporated on 8 August 2011 in British Virgin Island.  The defendant was the only director and sole shareholder.  The company held a multicurrency Account: 048-866834-838 of HSBC which was opened by the defendant on 26 September 2011.  The business as stated in the opening mandate was consultancy and the purpose of opening the account was for settlement of intercompany transfers.

31.  The summary of transactions in the Account was as follows:-

(a) In 2012, there were several transactions of less than HK$ 10,000.

(b) In 2013, there were several transactions of a few hundred or a few thousand dollars.

(c) Until Mid 2014, there were several transactions of a few thousand dollars. From July to October 2014, the balance varied from HK$260,000 to HK$1,730,000. Until December 2014, the balance was around HK$20,000.

(d) In 2015, there were a few transactions of a few thousand dollars except in April with deposits of about HK$180,000 and in May with deposits of around HK$40,000.

(e) In January 2016, there were transactions of a few thousand dollars.

(f) As at 16 March 2016, the balance was US$602,000, HK$258,000 and AU$27,000.

Period between 2 February 2016 and 9 March 2016 (Offending Period)

32.  The summary of transactions in the Account was as follows:-

(a) In February 2016, there were 3 deposits of total HK$1.3 million,

(b) On 2 February 2016, there was a deposit of US$5 million (from Smart Jobs)

(c) Between 2 February and 9 March 2016, there were 9 cash withdrawals of total HK$408,598.53.

(d) On 3 February 2016, US$5,000 was transferred to the account of a female Salikhova Elena.

(e) On 3 February 2016 and 15 February 2016, a total of US$400,000 was transferred to personal bank account of a male Huang Guoshen.

(f) On 5 February 2016, 25 February 2016 and 2 March 2016, a total of US$353,000 was transferred to the personal bank account of the defendant.

(g) On 11 February 2016, US$3.2 million was transferred to a USA company “Abbott and Abbott”.

33.  The total amount of withdrawals and transfers during the period was US$4,397,378.87.

Insurance Policy (P6)

34.  It was admitted in the Admitted Facts (P31) that P6 was not a genuine document.

Contents of the defendant’s mobile phone

35.  There were some communication between the defendant and PW1 on the Skype App. (P26(1)-(7)).

36.  There was some communication between the defendant and Met Bawi on the Skype App. (P26(8)-(9)).

37.  In the photograph Album of the defendant’s phone, there was a picture of bank record (P26(10)) showing a transfer of USD 5 million from the Account of Wealth Mark to the account of Excellent Century.  This is exactly the same as P30 which PW2 said the transfer was rejected by the bank.

The defendant’s record of interview

38.  In the record of interview, the defendant said the followings:-

(a) He was born in Mainland China. He emigrated to Australia in 1990. He worked as a middleman dealing with import and export of commodities, such as sugar. He made profit from the price difference.

(b) He was the sole owner and manager of Excellent Century Holdings Ltd. He opened the company Account in Hong Kong. He was the only one to manage the Account. He had never borrowed the Account to the other. He also had a personal bank account.

(c) He did not know who made the deposit of US$5 million into the Account on 2 February 2016. A Met Bawi sent him a receipt for the transfer (P30).

(d) He used to contact Met Bawi by using Skype, telephone and email. He had some contact with Met Bawi but could no longer contact him.

(e) He did not know PW1, PW2, Peterjohn Boshoff, Ian Cumming and Met Bawi.

(f) As shown on the receipt (P30), he had checked the company and found that Nip Joe (PW2) was the director of the company.

(g) The transfer from company Account to his personal bank account in February and March 2016 were made by him and he had spent some of the money.

(h) The transfer of US$5,000 to female Salikhova Elena was made by him as reward for providing Russian translation and consultancy services.

(i) The transfer of total US$430,000 to HUANG Guoshen was made by him for repayment of debt.

(j) The transfer of US$3.2 million to the Account of “Abbott and Abbott” was made by him. He knew it was a lawyer account of United States. He did not tell why he made the transfer.

Analysis of Evidence

39.  The prosecution bears the burden of proof and has to prove the case beyond reasonable doubts.  The defence needs not to prove anything.  The defendant elected not to give evidence.  It was his right.  No adverse inference would be drawn against him.  The defendant has a clear record.  I remind myself of the Berrada’s warning as to the credibility of the defendant and the less propensity to commit crime by a person of good character like the defendant.

40.  I have carefully considered the evidence of PW1 and 2.  Their evidence was clear and straightforward.  They gave a detailed account of the event.

41.  There was no dispute as to PW2’s evidence by the defence.  The main thrust by the defence on PW1’s evidence was why he trusted people he did not know before; the wordings of the contract (P5) was confusing and the profit of 8 times within 45 days was beyond the normal trade and business.

42.  PW1 had acted as a middleman to locate various investors all over the world to raise capital for project funding.  He had the experience of handling deals varying from a million to 15 billion.  In the eyes of ordinary people, US$5 million was huge.  It was not such a case for him.  He also explained that the offer of the current deal was quite standard in the industry for short term buy and sell transaction.  He added that he was negotiating the first transaction with Met Bawi.  So, he trusted him.  He admitted that the wordings of the contract (P5) were not clear.  However, he had placed reliance on the security of insurance policy provided by Met Bawi.  Therefore, he proceeded with the deal.

43.  By assessing the whole course of the transaction and the background of PW1’s work, I found his evidence being reasonable, acceptable and believable.  I found him to be an honest and truthful witness.  I accordingly accepted and relied on his evidence.

44.  Having examined PW2’s evidence, I also found him an honest and credible witness.  I accordingly accepted and relied on his evidence.

Weight as to P2

45.  P2 related to some documents heading Spectrum Dominium Commodities.  Though it was ruled admissible, I attached no weight on it as PW1 said it was related to the first transaction.

The defendant’s record of interview

46.  Having considered the contents, the available evidence and all the circumstance of the case, I attached full weight as to the contents mentioned in paragraph 38 above.

CONSIDERATION OF CHARGE

Property represented the proceeds of an indictable offence

47.  In HKSAR v Pang Hung Fai, FACC 8/2013, Spigelman NPJ in paragraph 17, had this to say:-

“On the basis of authority, it was unnecessary for the prosecution to prove that these monies were, as a matter of fact, the proceeds of an indictable offence. Because the conduct element of the offence is dealing with property (see Oei Hengky Wiryo v HKSAR (No 2) (2007) 10 HKCFAR 98).”

48.  Nonetheless, having relied upon the evidence of PW1 and 2, I found that the deposit of US$5 million into the Account of Excellent Century was as a result of a fraud administered on PW1.  I was satisfied beyond reasonable doubt that such deposit was property representing proceeds of an indictable offence.

Dealt with the property

49.  The defence had no dispute on this issue.  On the available evidence that the defendant did make several withdrawals and transfers to other accounts from the Account of Excellent Century, I found that the defendant had dealt with the property.

Knowing or having reasonable grounds to believe

50.  I have considered the following points:-

(a) As mentioned in paragraph 31 above, from 2012 to January 2016, the amount of transactions in the Account of Excellent Century varied mainly from a few hundred to a few thousand dollars. There were only several occasions of deposits up to HK$180,000. The maximum balance had once up to HK$1,730,000 .

(b) A deposit of US$5 million into the Account was huge and extraordinary.

(c) The defendant admitted he received a receipt from Met Bawi, that was the bank record (P30) of the unsuccessful transfer of US$5 million from Wealth Mark to Excellent Century.

(d) The defendant had checked with the company and found that Nip Joe (PW2) was the director of the company.

(e) The defendant had some contacts with Met Bawi by using Skype, telephone and email.

(f) Shortly after the deposit of US$5 million, he made a number of cash withdrawals and transfers to other accounts including his personal bank account.

(g) The defendant spent the money for his own use.

(h) By the transfers to other accounts, he paid for consultancy services and even repaid his personal debt owed to another.

(i) The defendant made a transfer of huge amount of US$3.2 million to a lawyer account in USA without giving any details or reasons for that.

(j) All along, he had not made any enquiries with the bank or Nip Joe as to the deposit of huge amount of money.

51.  By applying the test as laid down in Pang Hung Fai, I found that an irresistible and unique inference could be drawn by the court that the defendant was “having reasonable grounds to believe”.  I accordingly drew the said inference.  As such, I was satisfied beyond reasonable doubts that the defendant did have reasonable grounds to believe the property representing proceeds of an indictable offence. 

CONCLUSION

52.  Having considered all the evidence and circumstances of the case, I found that the prosecution had proved the case beyond reasonable doubts.

53.  I accordingly convicted the defendant as charged.