SECRETARY FOR JUSTICE v. LI MAN TAK AND OTHERS

CAAR 1/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

APPLICATION for review NO. 1 OF 2005

(ON APPEAL FROM DCCC NO. 689 of 2004)

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J U D G M E N T

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Stuart-Moore, VP (giving the judgment of the Court):

Background

1.  This matter now comes before us as an application by the Secretary for Justice (the applicant) under section 81A of the Criminal Procedure Ordinance, Cap. 221, leave having been granted on 15 July 2005, to review the sentences imposed in the District Court on 25 June 2005 by Judge Sweeney in regard to each of the respondents.  This application follows the dismissal of an application for leave to appeal against conviction in CACC 303/2005 by Li Man-tak where the facts with which we are presently concerned are fully set out in the judgment.  In the same proceedings, Tan Chye-seng, Nicholas (D4)  was successful in his appeal against conviction.

2.  It suffices, for present purposes, to provide a brief account of the allegations against each of the respondents, Li Man-tak (D1) whose sentence in total was 3 years’ imprisonment, and Lin Chak-pui, Louis (D2) and Foo Tiang-hock, Adrian (D3) both of whose sentences totalled 2 years’ imprisonment.  The principal submission of the applicant is that the totality of the sentences each of them received was manifestly inadequate.

1.  There were seven charges before the court. These included two charges, 2A and 2B, which were alternatives to charge 2.  In due course, the 3^rd charge resulted in acquittals and the 5^th charge was left on the file.

3.  The 1^st charge, on which D1 was convicted after trial and to which D2 and D3 pleaded guilty, alleged a conspiracy to offer advantages to an agent, contrary to sections 9(2)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201, and sections 159A and 159C of the Crimes Ordinance, Cap. 200.  The particulars of this charge were that D1, D2 and D3:

“… between the 1^st day of July 2003 and the 25^th day of February 2004, in Hong Kong, conspired together and with Yum Vincent, without lawful authority or reasonable excuse, to offer advantages, namely gifts, loans, fees, rewards or commissions consisting of money to an agent the said Foo Tiang-hock, Adrian, an employee of ING Investment Management Asia Pacific (HK) Limited (“ING”), as in inducement to or reward for or otherwise on account of the said Foo Tiang-hock, Adrian doing or having done an act in relation to his principal’s affairs or business, namely causing ING to purchase and to hold the shares of Kwong Hing International Holdings (Bermuda) Limited.” (Appeal bundle pp. 9-10)

4.  The judge took a 2-year starting point for each of the respondents on the 1^st charge.  Giving a one-third discount to D2 and D3, they each received a sentence on this charge of 16 months’ imprisonment.  The sentence for D1 was 2 years’ imprisonment.

5.  The judge convicted D1 on charge 2B whereas D2 pleaded guilty to charge 2A.  These charges each alleged a conspiracy in identical terms to the 1^st charge but the particulars of charge 2A, where they differed from the 1^st charge, were that D2 conspired with D1, D3 and D4 to offer advantages … to D4:

“… an employee of UBS AG (“UBS”), as an inducement to or reward for or otherwise on account of the said Tan Chye-seng, Nicholas [D4] doing or having done an act in relation to his principal’s affairs or business, namely promoting the shares of Kwong Hing International Holdings (Bermuda) Limited (“Kwong Hing”) by introducing Kwong Hing at a UBS promotion conference, by introducing Kwong Hing to UBS clients by inclusion in an UBS publication and by recommending Kwong Hing shares to UBS clients and / or customers.”

6.  Again, the particulars of charge 2B were in slightly different terms and alleged against D1, D2 and D3 (and D4) that they conspired to offer advantages … to D4:

“… an employee of UBS AG (“UBS”), as an inducement to or reward for or otherwise on account of the said Tan Chye-seng, Nicholas doing or having done an act in relation to his principal’s affairs or business, namely by causing UBS to publish a favourable report in relation to the shares of the said Kwong Hing International Holdings (Bermuda) Limited.”

7.  The judge again took a 2-year starting point on these charges.  In D1’s case, taking totality into account, he ordered that one year of the sentence should be served consecutively to the sentence on the 1^st charge, making 3 years in all.  D2, received the usual discount of a third for his plea, leaving 16 months on charge 2A.  As to this, the judge ordered that 8 months should be served consecutively to the sentence on the 1^st charge, making 2 years’ imprisonment in all.

8.  D3 pleaded guilty to the 4^th charge of accepting an advantage as an agent, contrary to sections 9(1)(a) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201.  The particulars were that he:

“… being an agent, namely an employee of ING Investment Management Asia Pacific (HK) Limited (“ING”), on a date unknown between the 1^st day of September 2003 and the 31^st day of December 2003, in Hong Kong, without lawful authority or reasonable excuse, accepted an advantage, namely a gift, loan, fee, reward or commission consisting of $1,000,000.00 cash in Hong Kong currency from Yum Vincent, as an inducement to or reward for or otherwise on account of the said Foo Tiang-hock, Adrian doing or having done an act in relation to his principal’s affairs or business, namely causing ING to purchase the shares of LeRoi Holdings Limited.”

Again the judge adopted a starting point of 2 years and reduced this by a third to 16 months ordering that 8 months of D3’s sentence should be served consecutively to his sentence on the 1^st charge, making a total of 2 years’ imprisonment.

9.  In addition to the custodial orders made by the judge, he ordered that the $700,000 seized from D3’s safe deposit box at his bank should be forfeited to the government.  A similar order was made in respect of the monies represented by a cheque for $591,000 which D2 admitted receiving as the result of the conspiracy covered by the 1^st charge.  This review is not concerned with the propriety of those orders.

Overview of prosecution’s case

10.  Mr McWalters SC, on the applicant’s behalf, has put before us a most useful synopsis of the evidence which in large measure we can adopt.  He correctly pointed out that there were three separate areas of corrupt conduct covered by the charges on which the respondents were convicted.  Two of these concerned D1 whose family controlled about forty-five per cent of the shares of Kwong Hing International Holdings (Bermuda) Limited (“Kwong Hing”).  This company, which manufactured and sold knitted fabric and dyed yarn, was registered in Hong Kong as an overseas company and was listed on the Hong Kong Stock Exchange.

11.  In short, D1, an executive director of Kwong Hing, made corrupt efforts to manipulate the value of Kwong Hing’s stock by offering bribes to employees of two other companies whose opinion about the worth of Kwong Hing stock could influence the perception in the marketplace of its value.  These employees were D3 who was a fund manager of ING Investment Management Asia Pacific (Hong Kong) Limited (“ING”) and, allegedly, D4, who was a research analyst for UBS AG (“UBS”).

12.  In D1’s dealings with D3 and D4, D2 was used as an intermediary together with his colleague, Vincent Yum.  D2 and Vincent Yum, who gave evidence for the prosecution under immunity, worked for an investment company, SBI E2-Capital China Holdings Limited (“SBI E2”) which advised its clients (including Kwong Hing and ING), about share placements.  D2 was the director in charge of the Corporate Finance Department and Vincent Yum was in charge of the Equity Capital Market Department.

13.  The conspiracy, the subject of the 1^st charge, related to bribes of $589,000 paid by D1 to D3 for D3 to arrange for ING to purchase blocks of Kwong Hing shares and to hold them for six months and $591,000 was paid to D2 as intermediary.  Vincent Yum received a similar sum.  In all, the corrupt money involved in this charge was said to be just under $2.4 million.

14.  The 2^nd conspiracy involving D2 on charge 2A and D1 on charge 2B related to a bribe offered by D1 to D4 for D4 to arrange the publication by UBS of a favourable market research report on Kwong Hing, again with D2 acting as an intermediary.  D4 was said to have received a share amounting to $800,000 out of the total bribe of a million dollars offered by D1.  Vincent Yum as intermediary received $100,000 and D2 was offered an amount representing a percentage of the value of the shares involved in this conspiracy which was likely to have amounted to a high figure.  However, as officers attached to the Independent Commission Against Corruption (ICAC) carried out the arrests of the corrupt participants on 25 February 2004, D2 was unable to receive any payment.

15.  The third area of criminality to which Mr McWalters directed our attention concerned D3 alone on the 4^th charge.  D3 admitted that Vincent Yum entered into an agreement with a person known as Lee Yuen-tsu, Lincoln, to assist a company known as LeRoi Holdings Limited to effect placement of its shares.  The amount to be paid to Vincent Yum was to be calculated by reference to the difference between HK$0.17 per share and the placement price of the shares.  20 percent of this amount was to go to Vincent Yum who then approached D3 who, in turn, agreed to use ING’s funds to take up a tranche of LeRoi’s shares in return for a monetary reward.

16.  In September 2003, Vincent Yum, through a subsidiary of SBI E2 placed a total of 120 million LeRoi shares to investors, including 18 million to ING, at a placing price of HK0.37 per share.  After Vincent Yum had received his share of the profit, he paid D3 HK$1 million as his reward for ING taking a placement of LeRoi shares.

17.  Further background to the case appears as we have said in the earlier judgment given in CACC 303/2005 which we do not for present purposes need to repeat.

18.  When dismissing D1’s leave application on 13 September 2006 in CACC 303/2005, this court (at paras. 110 and 111) described the offences as a “very serious case of corruption, involving the managing director of a public listed company and senior employees of leading international finance houses in Hong Kong” adding that it was “a fraud against not just the company and its shareholders or the respective financial houses, but the public at large”.  Emphasis was also placed on the  impact on Hong Kong’s image as a world-class financial centre.

Mitigation

19.  The judge in the court below took into account the mitigation advanced on behalf of each of the respondents.  In the light of this and having read “eloquent letters” in support of what had been stated, the judge was satisfied that the respondents, all of whom had clear records, came from hard-working and respectable families.  In this respect, they had suffered “a great fall from grace” and he described each of them as facing “personal, financial and career ruination”.  He went on to say:

“23.   I view the behaviour of the defendants in this case as akin to, or similar to, insider dealing in so far as the participants were profiting from secret information not known to the general public, i.e., that ING had purchased and was holding on to a large shareholding in Kwong Hing International because its fund manager had taken a bribe, and in turn, that UBS had published a favourable research report on the same company because its research analyst had taken a bribe.

24.     It may well be, as all defence counsel have stressed, that Kwong Hing was a good company anyway, whose shares were worth holding on to and which deserved a favourable research report in any event.  But, with respect, that is to miss the point.  The level playing field that should operate in the market has been tilted in favour of one particular company by corrupt means.

25.     It would be idle to speculate how often this sort of behaviour goes on in our stock market.  In all probability we will never know the true picture, as this type of offence is so difficult to detect.  However, when it is detected it warrants stiff terms of imprisonment, so that other players in the market will think twice before deciding whether or not to manipulate the market in their favour.  Hong Kong is a commercial city that relies heavily on the success of its financial markets, and anyone who attempts to interfere with the smooth running of those markets must realise that the consequences will be severe if they are caught.”

The application

20.  Earlier in his sentencing remarks, in a comment which is criticised by Mr McWalters, the judge had spoken of D1 as merely having made efforts to “illegally ramp up the share price of his family-owned textile company” which was listed on the Hong Kong Stock Exchange.  Mr McWalters contended also that the judge had erred by belittling the impact of the respondents’ conduct when describing this as the tilting of a level playing field in favour of a particular company by corrupt means.  In addition, he submitted that the judge had failed to give proper weight to the breach of trust which was involved in the conduct of D3 or to the impact of D3’s conduct on the company employing him.

21.  The stance taken by the applicant overall was that the sentences imposed by the judge failed to reflect the need for sentencing in cases involving corruption to contain a significant element of general deterrence.  In this regard, Mr McWalters emphasised the importance of giving proper weight when sentencing to the impact of conduct which adversely affected the integrity of the securities marketplace in Hong Kong as well as the particular impact in the present case upon institutional and private investors who may have acted upon the endorsement of Kwong Hing by ING and UBS.

22.  Mr McWalters criticised also the application of the totality principle in regard to all the respondents and the narrow focus of the judge’s sentencing remarks (set out in paragraphs 23 to 25 of the Reasons for Sentence to which we have already referred) without making reference also to the corrupt means by which these conspiracies were carried out.

23.  With these considerations in mind, Mr McWalters submitted that the starting points adopted by the judge were manifestly inadequate and furthermore, as each respondent faced charges involving two separate and distinct conspiracies, the judge would have been fully entitled to have imposed wholly consecutive sentences in respect of them.  Mr McWalters accepted, however, that if the judge had adopted proper starting points for these offences, there might then have been room for the application of the totality principle.

24.  We can see some force in the applicant’s submissions in so far as these sentences were, in our opinion, plainly on the low side.  This is not, however, to say that we consider that they were so inadequate as to call for our intervention.  In this respect, the respondents can regard themselves as having been fortunate to have received merciful sentences which, on these facts, were undeserved.

25.  Accordingly, this application is refused.