HKSAR v. RENATO CEMINE TANDOC

CACC377/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 377 OF 2002

(ON APPEAL FROM HCCC NO. 343 OF 2001)

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J U D G M E N T

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Jackson J (giving the judgment of the Court) :

1. On 9 July 2002, the applicant pleaded guilty in the High Court before Pang J to an indictment containing one count of using a false instrument contrary to section 73 of the Crimes Ordinance Cap.200 (Count 1), and four counts of dealing with property known or believed to represent proceeds of an indictable offence contrary to section 25(1) of the Organized and Serious Crime Ordinance Cap.455 (Counts 2, 3, 5 and 6).

2. He was sentenced to a term of 4 years' imprisonment in respect of Count 1; to 2 years and 8 months' in respect of Count 2; to 2 years' in respect of Count 3; to 2 years in respect of Count 5; and to 3 years and 4 months' in respect of Count 6. The terms imposed in respect of Counts 2, 3, 5 and 6 were ordered to be served concurrently as between themselves but consecutive to the sentence imposed in respect of Count 1. In other words, the total sentence ordered to be served was one of seven years and four months' imprisonment and it is against that sentence that the applicant seeks leave to appeal.

3. It is important to set out in full the facts admitted by the applicant relevant to his pleas as follows :

"Since 1997 a Filipino National Amador PASTRANA (hereinafter referred to as PASTRANA) has controlled a large number of companies practicing a particular fraud which is known in common parlance as Boiler Room Share Fraud. The PASTRANA syndicate targeted victim 'investors' worldwide and used a number of nominee companies, opened in Hong Kong, with Hong Kong bank accounts to launder the proceeds of the fraud. The syndicate operated from Manila until in late March 2001 the Philippines Securities and Exchange Commission (hereinafter SEC) and the national Bureau of Investigation (hereinafter NBI) mounted a series of raids and closed down his operation.

PASTRANA had a number of assistants who helped arrange the opening of the nominee companies and bank accounts in Hong Kong, one of these was the defendant Renato Cemine TANDOC. The defendant was part of the PASTRANA syndicate from July to December 1997 then he left.

The Defendant rejoined the syndicate in early 1999 until he was arrested.

In general the syndicate's method of fraud was as follows :-

List of 'leads' which were names, addresses and contact numbers of possible investors were purchased from various commercial companies. The defendant using a company incorporated by him in the Philippines, namely Marketgate International Inc. purchased such lead lists from companies in Hong Kong, Australia, New Zealand and the United Kingdom.

Based on these leads the potential investors would be contacted, by members of the syndicate in the Philippines, the telemarketers, and induced to buy shares or stock in a company claimed to be listed or about to list on the NASDAQ index in the United States. Sometimes the telemarketers would pass enquiries of potential investors to persons calling themselves 'brokers'. False claims were made about the companies nature of business or potential investment returns by the telemarketers and brokers.

The investors were asked to pay funds to purchase the shares to bank accounts in Manila. Some of the brokers also made false representations that they themselves were based in Hong Kong, when in fact there was no physical office in Hong Kong just fax, and mail forwarding facilities. The defendant paid money to a company in Hong Kong to provide such forwarding services to the syndicate. The investors who paid money were subjected to a two stage fraud :-

In respect of these who 'purchased stock', all were told that their stock was kept for them by the brokerage company, when they pushed to receive the actual stock certificates they were subjected to further stalling tactics, for instance, they were told their broker was out, had left the company, or their accounts had been 'transferred' to another company. Those that pushed hard did receive stock only to be informed it was 'restricted stock' not to be traded on the open market, or that the stock price had fallen from the price they paid for the stock and was essentially worthless. Only those who threatened to go to the Police were given refunds of the money paid and then not all.

In the second stage of the scam, the by now desperate investors were contacted by a supposed independent company who would offer to 'swap' the stocks the investors had purchased for United States 'Blue Chip' stock, in exchange for an advance fee to cover the difference between the amount they paid to purchase the stock and the current market value of the Blue Chip stock. Often they were also asked to pay some form of service charge. In fact this 'independent company' was part of the PASTRANA syndicate. Once paying this advance fee the investors lost all contact with the company and never received their Blue Chip stock or any refund of funds paid. All the funds from this 'second stage' were paid into accounts in Hong Kong opened and operated by the defendant.

The Defendant's Bank Accounts

In connection with his activities for the syndicate the defendant came to Hong Kong on numerous occasions and used the services of two company formation agents in Hong Kong to open both nominee offshore companies and bank accounts at either the Hong Kong and Shanghai Banking Corporation or the Standard Chartered Bank in Hong Kong.

The defendant opened the companies, and bank accounts covered by Counts 2 to 5 in his own name and using his genuine passport to do so.

However as alleged in Count 1 in May 2000 the Defendant went to the office of Gemini Corporate Services Limited and used a Philippines passport bearing his photograph, but in the name of Christopher Rosales PEREZ as proof of identity to buy the shelf companies United American International Limited and Investment Advisers Consultant Limited referred to in Counts 6 and 7 and to open bank accounts in these companies' names at the Hongkong and Shanghai Bank. This passport was given to him by members of the syndicate, and the defendant used it to travel to Hong Kong on one occasion in 2000.

Gemini Corporate Services Limited was in the business of selling 'shelf companies' and opening bank accounts for the purchasers of them. The staff of Gemini Corporate Services Limited believed the Defendant was Chris PEREZ full name as above, and acted accordingly in selling the companies and opening the bank accounts for the Defendant.

Records of the bank accounts opened by the defendant were obtained from the respective banks by the Police. These showed that the defendant was the sole account signatory to all the accounts, and they could only be operated by him.

As a result of information from the bank account records the Police obtained witness statements from a large number of person based both in Hong Kong and elsewhere worldwide who claim to have paid money to the accounts.

These persons all gave a similar story, in which they had been the victims of the above mentioned two stage fraud. None of the victims received the 'Blue Chip' shares they had paid money for, or any refund of monies paid.

During the times mentioned in the charges, the sums mentioned in the charges passed into and then out of the accounts to bank accounts controlled by the syndicate in the Philippines, the ultimate destination of the funds is not known, due to Philippine bank secrecy laws. All the funds through the accounts mentioned in the charges are the proceeds of fraud practiced by the syndicate.

The defendant being part of the syndicate, and a friend and business associate of PASTRANA, had reasonable grounds to believe that the funds through the accounts mentioned in the charges was in whole or in part the proceeds of the fraud practiced by the syndicate.

The Arrest of the Defendant

The defendant was arrested for Dealing with the Proceeds of an Indictable offence on the morning of 4th April 2001 as he entered Hong Kong off a Cathay Pacific flight from Manila. He has been in Police or Gaol custody since 6th April 2001.

Under caution the defendant admitted that he had opened the above companies on the instruction of two members of the syndicate, he claimed to have been paid US$200 per company and US$500 each time he came to Hong Kong on behalf of the syndicate."

4. In his very full mitigation put before the learned judge Mr Choy, who appeared in the court below for the applicant, laid stress on the applicant's pleas of guilty not only as being indicative of remorse but also as saving of very considerable financial cost to the prosecuting authorities. From there Mr Choy proceeded to deal with the applicant's background and how it was that he first became involved with the Pastrana syndicate in 1997 and why he left it before, subsequently, rejoining it in 1999.

5. As to the nature of the applicant's involvement in the syndicate, Mr Choy said, inter alia, this :

"I submit that at the core of the Pastrana criminal enterprise, is ... the boiler room operation in the Philippines, where the so-called telemarketers, or brokers, employ deceitful practices to con international investors of their funds. That was how they practiced the fraud. ... it is important to note that the prosecution's case does not implicate the defendant to have ever participated in this core operation of the boiler room fraud.

He was, essentially, not the swindler [albeit that his role] was essential to the swindle. He was assigned the essential and necessary role of the traceable person. What does that mean, 'the traceable person?' For Pastrana and the other fraudsters to obtain their ill-gotten gains, they need to incorporate companies and set up bank accounts. The problem is, of course, ... that this would entail signing documents, thus leaving ... a paper trap.

This would certainly result in their being liable to be tracked down or traced. What Pastrana needed [was] to find a way to cover his tracks, and the trick [was] to get someone to sign all the papers. ... it is my submission that this defendant was cynically used as the 'fall guy', so that Pastrana and his immediate circle of criminals [could] fade away behind a screen. The defendant was and has always been, ... the man to be sacrificed ...

... the gravamen of this defendant's crime is his participation. He certainly had grounds to believe that the funds which flowed through the bank accounts of companies he assisted in incorporating, were proceeds of crime. However, ... what I endeavour to submit is that the defendant was used as a pawn by forces far more evil and cynical than the defendant himself would have imagined. ...

... the defendant did obtain benefits from his participation; certainly he was paid more money than he would have been paid, had he not joined the criminal enterprise. But, ... the defendant was never paid in any substantial amount. He remained out of the loop as far as the sharing of the proceeds of the fraud were concerned ...

... at a later stage, the defendant did become increasingly unhappy with the situation that his real name was repeatedly employed as the registered person responsible for these activities. As a result, Pastrana supplied the defendant with a false passport purportedly issued by the Philippines under the name of Christopher Perez, hence the 1st charge of using a false document.

... the defendant is pleading guilty because he agrees that he is guilty as charged. The defendant is willing to assume responsibility for the offences he committed. What I have endeavoured to achieve is to illustrate ... the extent of the defendant's culpability which I submit should be viewed as lesser than the primary movers of the whole syndicate."

6. When the learned judge proceeded to sentence the applicant he said, inter alia, this :

" As to the part you played I do not subscribe to your counsel's suggestion of the minimal involvement approach. The fact that you were entrusted with the task to come to Hong Kong to open bank accounts of which you were the sole signatory suggested that you were one of the trusted lieutenants of Mr Pastrana."

and this :

"I agree with your counsel that there is very little information regarding the sentencing approach as to crimes of this nature in Hong Kong."

7. The perfected written grounds of appeal settled by Mr Bruce SC, who appears before us with Mr Choy on this application, are (in shortened from) as follows :

"GROUND 1

The learned sentencing judge erred in adopting a starting point of 6 years for Count One. ... A starting point of 6 years is manifestly excessive with regards to the facts of the case and to current sentencing practice on offences of a similar nature.

GROUND 2

The learned sentencing judge erred in ordering the sentence of 4 years' imprisonment for Count One to be served consecutively in its entirety with the sentence of 3 years and 4 months' imprisonment for the rest of the Counts on which the Applicant was convicted (the 'Money Laundering Counts'). The use of the false passport in Count One was part and parcel of the criminal transactions involved in the Money Laundering Counts. As such, it is wrong in principle to order the two sets of sentences to be served consecutively.

GROUND 3

The combined sentence of 7 years and 4 months (88 months) is manifestly excessive after a guilty plea and with regards to the facts of the case. The learned sentencing judge erred in failing to temper this combined sentence in accordance with the totality principle.

GROUND 4

The learned sentencing judge overstated the role of the Applicant in finding that the Applicant was a 'trusted lieutenant' of the Pastrana syndicate when there was no evidential basis for such a finding."

The first ground

8. In support of his first ground of appeal, Mr Bruce has sought to argue, in essence, that there are a number of judgments of this court concerning sentence for offences of using false passports which suggest an appropriate starting point of the order of 18 months' imprisonment or, in an aggravated case, 2 years' imprisonment.

9. The first thing to be said about that is that each of the cases to which he has referred us in respect of this ground of appeal concerned offences committed contrary to sections 42(2)(b) and (c) of the Immigration Ordinance, Cap.115 which, whilst they are punishable by a penalty of 14 years' imprisonment, relate to "use" or "possession" of false documents for immigration or travel purposes. The applicant was not charged under section 42 of the Immigration Ordinance but under section 73 of the Crimes Ordinance. That section whilst also providing for a maximum penalty of 14 years' imprisonment reads as follows :

" A person who uses an instrument which is, and which he knows or believes to be, false, with the intention of inducing somebody to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any others prejudice, commits an offence ..."

10. Mr Bruce submits, if we have understood him correctly, that the gravamen of the applicant's offence concerning the false passport was simply that he was representing that he was someone who he was not, and that insofar as sentence is concerned it should make no difference whether he was charged under the Immigration Ordinance or under the Crimes Ordinance because it is the gravamen of the offence that is relevant to sentence and not the motive behind it.

11. In response to that argument Mr Ryan suggests that motive is highly relevant to sentence in a case such as this (charged under the Crimes Ordinance) where the applicant used the false passport to purchase shelf companies and open bank accounts in furtherance of a criminal enterprise which involved cheating victims of such fraud out of millions of dollars.

12. More particularly, in his helpful written submissions, Mr Ryan says this :

" The applicant submits that the gravamen of the applicant's offence was to use the false passport as a means of representing that the user is someone who he is not. But it is submitted by the respondent that whereas in the instance of an offence under the Immigration Ordinance of using a false travel document the motive may be merely to enter Hong Kong, in this case the false passport was used to facilitate money laundering offences, arising from what was obviously a conspiracy to defraud and therefore has to be looked upon much more seriously. It is submitted also that in view of the prejudice to the victims to the extent of an amount in the region of HK$13 million, the fact that the accused was not acting alone but was effectively involved in a conspiracy to defraud and the fact that the offences occurred over a period of almost 3 years, that the case can be distinguished from HKSAR v Rohrer [2001] 3 HKC 371 referred to in the applicant's submission."

The trouble with that argument, so it seems to us, is partly this. Whatever the admitted facts may say, the applicant was not specifically indicted for a conspiracy to defraud and nor was he indicted for a number of offences of "using a false instrument" over a period of 3 years. The particulars of Count 1 relate to a single offence committed "on a day in 2000" at the premises of Gemini Corporate Services Limited.

13. Whilst we accept, of course, that it was for the sentencing judge to impose a total sentence in respect of the applicant's conduct as reflected in the indictment where supported by the admitted facts, we have some difficulty in this case (in the light of the authorities cited to us) in finding justification for the imposition of a sentence on the first count which, whilst extremely light, would not be wholly inappropriate for an offence of conspiracy to defraud. As we have said, and focusing upon Count 1, that is not what he was charged with, albeit that the admitted facts and some of Mr Ryan's submissions might appear to suggest otherwise.

The second ground

14. Mr Bruce submits that as the applicant used a false passport to enter Hong Kong; to incorporate the companies, and to set up the relevant bank accounts it is indisputable that the use of that passport was part and parcel of the scheme to launder the funds involved in the fraud. Mr Bruce goes on from there to suggest that, accordingly, the "one transaction rule" should apply and that it was wrong in principle to impose consecutive sentences in this case.

15. We find ourselves unable to agree with that contention. Whilst it is undoubtedly so that the offences were necessarily "inter connected" it does not follow that they formed a single transaction in the sense that that term is used as a principle of sentencing. In our judgment despite the "inter connection" each offence was separate and distinct. Whilst the prosecution might have charged a single conspiracy to defraud relying upon each count in the indictment as an act in furtherance of that conspiracy (and resulting in the applicant being sentenced for his participation in an offence which, at least arguably, fell just short of being the worst kind) that is not how the prosecution chose to proceed and no criticism is made of that decision. Given the way in which the prosecution did choose to proceed it was plainly open to the sentencing judge to determine the appropriate sentence in respect of each count, and to then consider the question of totality before addressing the question of concurrent or consecutive sentences. That is exactly what he did. Mr Bruce cannot, in our judgment, have it both ways.

16. All of that said, whilst the false passport was used by the applicant only in relation to Count 6 (the sentence for which was in reality made consecutive to that for Count 1) which might arguably militate against a wholly consecutive term in respect of those 2 counts considered in isolation - the sentences for Counts 2, 3 and 5 do not fall into that category and accordingly whilst there might be some technical merit in Mr Bruce's argument - in practical terms it avails the applicant nothing.

The third ground

17. It should be apparent from the above and from what we will say later, that in our view there is merit in this ground. We come to that view having sought to answer the question posed by Mr Bruce, and paraphrased by us, which was in these terms :

"Is a notional starting point of 11 years' imprisonment proper for the applicant who clearly was not the prime mover of the [fraudulent scheme, albeit that his activities were essential to its success]?"

Our answer to that question is "no" - an appropriate notional starting point would be 9 years' imprisonment.

The fourth ground

18. We reject this ground of appeal. In our judgment the sentencing judge was saying no more and no less than that he did not accept any suggestion that the part played by the applicant was minimal. That was a view which he was perfectly entitled to come to on the admitted facts. Indeed, for our part, we would have been surprised had he come to any other view.

19. It is quite plain to us that the applicant was a "trusted lieutenant" of Pastrana. Were it otherwise the applicant would never have been despatched to Hong Kong inter alia to fraudulently set up bank accounts to which he was the sole signatory. He, the applicant, could at any time have emptied those accounts for his own benefit had he chosen to do so. Pastrana (and others) must have been well aware of that, and from that awareness sprang the obvious trust.

Summary

20. For all of these reasons it is our considered view that the sentence imposed in respect of Count 1 was manifestly excessive. Given the nature of the offence (and taking into account the motive behind it) the appropriate starting point in sentence was one of 4 years' imprisonment which should then be reduced to 2 years and 8 months' because of the applicant's plea.

21. As to the sentences imposed in respect of Counts 2, 3, 5 and 6 (i.e. 2 years and 8 months; 2 years; 2 years and 3 years and 4 months) these cannot be faulted and nor can the learned judge's decision to make only 3 years and 4 months of those sentences consecutive to the term imposed in respect of Count 1.

22. In consequence we grant leave to appeal against sentence and, treating the hearing of the application as the appeal, we reduce the sentence imposed in respect of Count 1 to a term of 2 years and 8 months' imprisonment; we decline to interfere with the sentences imposed in respect of Counts 2, 3, 5 and 6 which are to be served concurrently as between themselves but consecutive the sentence for Count 1.

23. In the result the total sentence to be served by the applicant is reduced from one of 7 years and 4 months to one of 6 years.