HKSAR v. TABAGUA VALERIAN also known as TABAGUA VALERYAN

DCCC 130/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL ACTION NO 130 OF 2014

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REASONS FOR VERDICT

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BACKGROUND

1.  The Defendant is a Russian businessman. 

2.  On 15^th August 2013, the Defendant, together with a Mr Yang, went to the branch office of HSBC at Emperor Group Centre, Wanchai, for the purpose of making a telegraphic transfer of money.  The Defendant spoke through Mr Yang acting as his interpreted, indicated that he wanted to remit money from one account to another.  They sought to make a remittance of 332,432 Euro to a bank account in Estonia.

3.  The Defendant and Mr Yang went to the bank again on the following day and to enquire why the money had not been deducted from the applicant’s account.  The staff member found out that the remittance had been rejected and she was instructed to report to the police.

4.  The Defendant and Mr Yang were taken to Wan Chai Police Station for investigation.  The Defendant was later arrested.

5.  It is the Prosecution case that the moneys sought to be remitted were in fact proceeds of a fraud case.

6.  The Defendant was charged with an offence of “Attempting to deal 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 and section 159G of the Crimes Ordinance.

7.  The Defendant pleaded not guilty to the charge.

8.  The predicate offence took the form of a telephone deception.  It concerned a Dutch company Satfa BV and a Hong Kong company SpeedCast Limited (SpeedCast).  Satfa BV has its office in Rotterdam, Holland whereas SpeedCast’s office is in Causeway Bay, Hong Kong.

9.  Satfa BV is a subsidiary of SpeedCast.  Both companies are in the business of satellite telecommunications, specifically maritime satellite communication technology.

10.  Mr Pierre Jean Joseph Andre Beylier (PW1), a French National, has been the Chief Executive Officer (“CEO”) of SpeedCast since July 2004.

11.  Mr Mark Ellison (PW3), a U.K. national, has been the Chief Financial Officer (“CFO”) of SpeedCast since 22 November 2012.

12.  Both Mr Beylier and Mr Ellison were based in Hong Kong at the material times.

13.  Mr Mengal Cornelis Van Der Stel (PW2), a Dutch national, joined Satfa BV and became its Financial Controller on 1 July 2013.

14.  MN Technology Limited (“MNT”) was the applicant of the remittance that the Defendant and Mr Yang sought to make on 15^th August 2013.  MNT is a Hong Kong registered company with limited liability.  It was incorporated in Hong Kong on 9^th October 2008.

15.  On 22^nd May 2009, the Defendant was appointed as the sole director of MNT and he remained so at all material times.

16.  MNT operates a bank business account (“the HSBC bank account”) in Hong Kong with HSBC.  The said bank account was opened on 29^th October 2009.  The Defendant was the sole signatory of the HSBC bank account at the material times.  The HSBC bank account number is 640-050118-838.

17.  The HSBC bank account was handled by the branch office of HSBC at Emperor Group Centre, Wanchai, the branch office that the Defendant and Mr Yang visited on 15^thand 16^thAugust 2013.

18.  As a result of the fraud practiced against Satfa BV, two sums of 150,000 Euro and 200,000 Euro respectively were transferred from the bank account of Satfa BV with Rabobank to the HSBC bank account of MNT on 8 August 2013.  The sums deposited into the HSBC bank account were 149,983.20 Euro and 199,983.20 Euro after deduction of transmission charges.

19.  On 15^th August 2013, the Defendant sought to remit 332,432 Euro from the HSBC bank account of MNT to the bank account of an Octans Industries Limited (Octans) with Versobank in Tallin, Estonia.

20.  SpeedCast and Satfa BV never had any dealings with MNT.

THE TELEPHONE DECEPTION ON 8 AUGUST 2013

21.  At about 9:55 am on 8^th August 2013, Mr Van Der Stel (PW2) was in his office in Schiedam, part of metropolitan area of Rotterdam, the Netherlands.  He received a telephone call from a person who claimed himself to be Mr PJ Beylier , the president of SpeedCast.  PW2 only joined Satfa BV on 1^st July 2013and prior to 8^th August, he had not spoken to PW1, he had neither heard PW1’s voice nor seen PW1 in person.

22.  As the events unfolded, the caller was an imposter.  The imposter told PW2 that he was at the office of a lawyer Mr Eric Berg in the UK.  The imposter said he was closing on an acquisition of a company.  He impressed on PW2 that everything he told PW2 was confidential. The imposter said he was about to make a first installment payment to close the deal and the money had to come out of the Netherlands.  He asked PW2 how much Euros Satfa BV had in its bank account with Rabobank at that moment.  As PW2 needed to check the balance, the imposter provided PW2 with an e-mail address ‘Eric.Berg.com’.  Later on the same day, PW2 sent an email to the above e-mail address advising that the balance in the account was 391,368.04 Euro.

23.  PW2 received an email attached with an invoice of MNT titled ‘Investment’(P33) asking that 696,000 Euro be paid to an HSBC account no. 640-050118-838 in the name of MNT, ie the HSBC bank account.  After PW2 had advised the imposter by email about the balance in the company’s account, PW2 had a telephone conversation with the imposter and he was told to transfer 350,000 Euro.  As PW2 did not have any doubt about what was shown and told, he did what the imposter asked him to do.

24.  As the Rabobank advised PW2 that Satfa BV could only transfer up to 200,000 Euro in one payment, the transfer to the HSBC bank account was done in two payments, 200,000 Euro and 150,000 Euro. PW2 then sent an email confirmation to the email address of Mr Berg the lawyer.  The imposter told PW2 that the remaining balance should be sent next week if Satfa BV had the money in the bank.

25.  The aforesaid telephone conversations between PW2 and the imposter, the email exchanges and the money transfers took place on 8^th August 2013.

THE DISCOVERY OF THE TELEPONE DECEPTION

26.  As PW2 was due to go on holiday on 10 August 2013, later on 8^th August 2013, PW2 sent an email to PW1 informing the latter about his holiday plan and seeking instructions about payment of the balance.

27.  PW1 was then on a business trip in Denmark he did not know what PW2 was talking about when the latter mentioned transfers of moneys in the email.  In a reply email, he asked PW2 to contact Mr Mark Ellison (PW3).

28.  A few hours later, PW3 called PW1 and asked if the latter had instructed to transfer 700,000 Euro to a HSBC account in Hong Kong.  They then realized they were victims of a fraud.  PW3 and PW2 tried, but failed to stop Rabobank to stop the transfers.  Eventually PW3 contacted HSBC and managed to ask HSBC to freeze the recipient account.

29.  PW1 had not called PW2 instructing the latter to transfer money to MNT, he had never dealt with Mr Berg the lawyer.  SpeedCast and Satfa BV had never had any investment in MNT.

THE VISIT TO HSBC ON 15 AUGUST 2013

30.  Paragraphs 1 to 3 of the Admitted Facts (P37) set out what happened when the Defendant and Mr Yang went to the branch office of HSBC at Emperor Group Centre, Wanchai in the morning on 15 August 2013.  As the evidence unfolded, it is not in dispute that it was Mr Yang who translated and filled out the telegraphic transfer application form (P11) for the Defendant.  According to P11, the applicant was MNT and the account to be debited was the HSBC account of MNT, a sum of 332,432 Euro was asked to be remitted to the bank account of Octans with Versobank in Tallin, Estonia.  P11 was signed by the Defendant and accepted by HSBC.  It was later faxed to the Telegraphic Transfer Department of the bank for handling.

THE VISIT TO HSBC ON 16 AUGUST 2013

31.  Paragraph 4 of P37 set out what happened in the morning on 15^th August 2013.  The Defendant and Mr Yang went to the branch office of HSBC and made enquiries as to why the amount asked to be remitted had not been deducted from the HSBC account.  The bank staff concerned checked and learned that the remittance had been rejected and a report to the police should be made.  A report was made to the police.  A police officer arrived at the branch office and took the Defendant and Mr Yang to Wan Chai Police Station for investigation.

IITEMS FOUND IN THE DEFENDANT’S POSSESSION

32.  Upon arrest, the Defendant was searched and found in possession of:-

(1) 2 company chops of MNT (P9-10);

(2) a copy of P11, ie the telegraphic transfer application form submitted on 15 August 2013 (P11a);

(3) 2 sets of 2-page telegraphic transfer application form dated15 August 2013 (P12-13);

(4) a business registration document of MNT (P19);

(5) 4 pieces of paper with handwriting in Russian (P20 and certified English translation P20a).

33.  It is the Prosecution case that the moneys which the Defendant sought to transfer were, as a matter of fact, the proceeds of an indictable offence.  It is the Prosecution case that when the Defendant asked for the telegraphic transfer of 332,432 Euro to the account of Octans on 15^th August 2013, he knew or had reasonable grounds that the moneys were the proceeds of an indictable offence.

THE DEFENCE CASE

34.  The Defendant exercised his right and elected not to give evidence.  The defence evidence came essentially from 3 defence witnesses called on the Defendant’s behalf.  They are:-

DW1 Miss Elena Kaplinskaya;

DW2 Mr Vitalie Palienko; and

DW3 Mr Yang Shu Wei.

35.  For easy understanding of the defence case, I would adopt the dramatis personae prepared by Mr McGowan.

THE DEFENDANT MR VALERIAN TABAGUA AKA VALERYAN TABAGUA

The background of the Defendant

36.  The Defendant is a Russian businessman, he has a clear record in Hong Kong.  The Defendant does not read, speak and write English and Chinese.

Companies related to the Defendant

(1) Transberia LLC is a Russian company, it is a major player in road fences and noise shield in Russia. The Defendant holds 20% ownership of Transberia;

(2) VIP-Pack Group is a company set up and wholly owned by the Defendant. VIP-Pack is a major supplier of capping devices designed by the Defendant for bottling of wine and vodka in Russia;

(3) MNT was set up in 2008 by Alexander Kholodnyy. At the material times of this case it was wholly owned by the Defendant as a holding company for Dalian Best Plastic Co, Ltd (“DBPP”) MNT’s HSBC bank account, ie the HSBC bank account, also acted as the source of funding for DBPP. MNT was responsible for selling the bottling caps produced by DBPP. The HSBC bank account was the nominated account for the sales of the bottling caps outside of China.

(4) DBPP, a Mainland company owned by MNT, was set up in or around November 2009 and it became operational in 2012. It was in the business of manufacturing bottling caps designed by the Defendant.

DW1 MISS ELENA KAPLINSKAYA (ELENA)

37.  DW1 was the Chief Financial Officer of VIP-Pack at the material times of this case.

DW2 MR VITALIE PALIENKO (PALIENKO)

38.  DW2 was the Legal Counsel of VIP-Pack.

DW3 MR YANG SHU WEI (YANG)

39.  DW3 was the freelance Putonghua-Russian interpreter who accompanied the Defendant to DBPP between 27^th July 2013 and 14^th August 2013 and later to Hong Kong between 15^th August 2013 and 16^th August 2013.

ALEXANDER KHOLODNYY

40.  He was the Defendant’s employee when MNT was set up in 2008, he was the original director and shareholder of MNT when the company was set up.

IGOR V KOLUPAEV (IGOR)

41.  He was the Defendant’s business partner.  At the material times he had a Marketing Service Agreement with MNT (D3) dated 10^th December 2012.

PAVEL

42.  Pavel was Igor’s representative. He dealt with DW1 in relation to the transfer of Euros.

THE BACKGROUND

43.  It is the defence case that all along the Defendant believed that the moneys transferred from Satfa BV into the HSBC account of MNT were related to a contract dated 7^th August 2013 signed by the Defendant on behalf MNT as seller and a Pieter Frans Van Kerckhoven on behalf of Satfa BV as buyer (“Contract No 015/8” -D1) for the sale of 7.25 million capping devices for bottling for 696,000 Euro, delivery of the goods was to be made before 4^th December 2013.

44.  D1 was procured by Igor, who was an agent engaged by MNT pursuant to a Market Service Agreement dated 10^th December 2012 (D3) and a related Service Order Agreement which took effect on 29^th April 2013 (D4).  Both D3 and D4 were signed by the Defendant on behalf of MNT and Igor as a self-employed person.  Under D3 and D4, Igor was a contractor to market capping devices manufactured by DBPP.  Under D4 a commission fee of 5% of the contract price was promised to Igor.

45.  It is the defence case that the Defendant signed D1on 7^th August 2013 when he was with Elena in Dalian.

PALIENKO’S EVIDENCE

46.  Palienko was the legal counselor of VIP-Pack.  He would advised the Defendant all legal matters that concerned the Defendant’s group of companies.

47.  Palienko was in his Moscow office hen Igor visited him on 8^th August 2013.

48.  When the two met, Igor presented D1 to Palienko.  Igor was agitated and evasive.  Igor was angry as he had apparently found out that given the production capacity of DBPP, MNT could never be able to meet the contractual obligations of D1.  Igor was evasive in that he did not answers the questions asked of him by Palienko.  Palienko realized that DBPP could in no way produce 7 million capping devices before the delivery date as DBPP could only produce 1 million capping devices per month. Palienko called the Defendant, who was together with Elena at the time. Palienko told the Defendant the contract presented by Igor, ie D1 was a “big problem” as DBPP could never produce the capping devices within the time scale.  The Defendant asked Palienko to get the issues resolved so that the interests of MNT could be safeguarded and the commissions of Igor could be preserved.

49.  With the aforesaid instructions from the Defendant, Palienko prepared a Mutual Rescission and Release Agreement dated 8^th August 2013 (D7).  Palienko signed D7 on behalf of MNT. Igor signed in his own capacity as contractor and he also purported to represent the buyer, Satfa BV.  Under D7, the original contract, D1 was terminated and made null and void, MNT would transfer forthwith the payment made by Satfa BV under D1 to the bank account of Octans with Versobank in Tallin, Estonia.  Clause 4 of D7 provides that:-

“MNT failure to transfer the moneys to Octans would be subject to penalty of 3,500 Euro per day of delay.”

50.  When Palienko signed D7, he had no idea about any arrival of any moneys to the bank account of MNT from Satfa BV.

51.  On 9^th August 2013, Palienko was on sick leave and he received a call from the Defendant in the afternoon.  Over the phone, Palienko advised the Defendant about the signing of D7 and the details of the agreement.  The Defendant told Palienko about his concern that Igor would send the money to MNT at a time when MNT did not have any document to confirm the legitimacy of the money.  Palienko told the Defendant that under the rescission agreement, MNT would have legitimate grounds to transfer money from one company to another one designated by Igor.  Igor’s commission could be preserved and the position of MNT secured.  The Defendant asked Palienko about the amount of the money delivered by Igor.  Palienko told the Defendant that he did not have access to the bank account of MNT and someone with the electronic keycard should be sent to the Moscow office to log into the Defendant’s computer and check through internet banking.  Though Palienko did not name any name, he was in fact pressing the Defendant to send Elena back to Moscow.

52.  On 12^th August 2013, Palienko saw Elena in the office. Elena showed Palienko some documents in English (D8) which she said were received from Pavel, Igor’s assistant.  As the documents were in English, Palienko explained the documents, ie the 2 swift confirmation cables, the Octans contract and an invoice from MNT, to Elena. Palienko told Elena the invoice was a “big mistake”.  The unsigned invoice did not sit well with MNT’s tradition that invoices should be signed.  The office address and email address were wrong, the banking details were suspicious.  The purpose of payment was stated as “investment” but the bank account of MNT had stopped collecting investments for 15 months and MNT had never invested in Euros.  Palienko had never heard of SpeedCast.  Palienko also discussed the Octans contract with Elena.

53.  The Octans contract was a contact with Octans as seller selling plastic capping devices for bottling to MNT.  In fact, Palienko had in mind an assignment contract to solve the problem, MNT would assign the production of the bottling caps to Octans. 

54.  Palienko was of the view that the MNT invoice could not be used as a document for the transfer of money.  For the Octans contract, as it was only signed by Octans but not MNT, Palienko thought it might, though he was not sure, constitute sufficient documentation for the transfer of money.  To Palienko, the rescission agreement (D7) provided sufficient legal basis enabling MNT to transfer money received from Satfa BV to Octans provided that the Igor would bring an original contract of assignment between MNT and Octans upon his return to Moscow.  Elena took the view that the papers available provided sufficient basis, from accounting and financial viewpoint, for the transfer of money.

55.  Because of the Marketing Service Agreement (D3), the Original Agreement (D1) and the fact that he money paid into MNT’s account was from Satfa BV, the client that Igor had brought under D1, Palienko believed that the money that was transferred into MNT’s account from Satfa BV was a proper payment under the original agreement, D1.  He did not, however, communicate his view about the cleanliness of the money to the Defendant.

56.  Elena got the electronic key from the safe in the Defendant’s office.  Palienko and Elena tried several times to make the money transfer on 12^th and 13^th August 2013 but they failed.  Palienko called the bank to see if a transfer could be made via the telephone but was told for telephone transfer the person in charge of the account should be sitting next to the Palienko.

57.  Palienko suggested to Elena that the Defendant should visit the bank, the time was running against MNT as Igor would invoke the penalty clause in P7 and fine MNT after a seven-day grace period agreed between Igor and Palienko.  Palienko provided Elena with documents which should be forwarded to the Defendant.

58.  The commission that Igor would have earned under the original contract was round about 35,000 Euro, ie 5% of the contract sum 696,000 Euro.

THE EVIDENCE OF ELENA

59.  As said, Elena was the Chief Financial Officer of VIP-Pack at the material times, she went to Dalian with the Defendant and DW2 in July 2013 to find out the current situation DBPP, which was losing money as its production capacity could never reach its design production capacity.

60.  On 7^th August 2013, Elena was with the Defendant in the office of DBPP.  The Defendant spoke to several people over the phone on several occasions.  During these telephone conversations, the Defendant called the other parties by their names.  During one conversation, the Defendant asked Elena to go to the computer to see if there were any emails from the email address of Igor and print them out if there were.

61.  Elena found out there was an email from Igor which contained an agreement in a language that both the Defendant and Elena did not understand.  She printed the agreement and passed it to the Defendant. She overheard a few phrases of the telephone conversation that the Defendant was having.  The Defendant spoke in Russian and he addressed the party on the other end of the line as Igor.  The Defendant could not speak or read English. He was telling Igor that at that point of time, the factory could not produce so much over such a short period of time, it would take 8 months to produce 7 million pieces.  The Defendant also told Igor over the phone that they must draft a new contract which should have a Russian text and Igor should bring that contract to Moscow.  However, the Defendant would sign the contract before him so that Igor would not lose his client.  After the telephone conversation with Igor, the Defendant signed the agreement printed and given to him by Elena.

62.  Elena was shown D1, judging from the windmill logo of Satfa BV, Elena identified D1 was the scanned copy of the agreement that she downloaded, printed off and handed to the Defendant on 7^th August 2013 in the office of DBPP.  It was Elena who affixed the chop of MNT on the agreement.

63.  The Defendant asked Elena to scan the signed agreement and email it back to Igor and send the signed copy by regular mail to Igor.  Elena gave the document to DW2, passed the instructions from the Defendant to DW2 and asked DW2 to do that.

64.  In the evening on 8^th August 2013, while Elena was having dinner with the Defendant in the hotel restaurant, the Defendant had a telephone conversation with Palienko and Elena overheard part of what the Defendant said to Palienko.  The Defendant mentioned Igor during the telephone conversation.  The Defendant asked Palienko to sign an agreement with Igor, one that could indemnify or safeguard MNT from litigation and ensure Igor would get his commission at the same time.  The Defendant told Elena after the telephone conversation that Igor had gone to his office in Moscow angry and upset as he knew MNT, with its production capacity, could not fulfil its contractual obligations.

65.  On 9^th August 2013, while Elena was in the company car with the Defendant on their way back from DBPP to the hotel, Elena overheard part of what the Defendant said when the latter had a telephone conversation with Igor.  The Defendant was surprised that transfer was made when the amended contract had not been received.  The Defendant also said as he was in China at that moment he did not have access to verify the deposits.  He told Igor that Elena was with him.  After the telephone conversation with Igor, the Defendant called Palienko and Elena heard what was said by the Defendant.  He told Palienko the money had been transferred and he asked Palienko if he was able to secure an agreement with Igor.  The Defendant also said MNT had to fulfill its contractual obligations, ie, MNT must keep Igor’s commission and make the money transfer according to the agreement.  If the money that had been received was not transferred, there would be heavy penalty.

66.  After the telephone conversation with Palienko, the Defendant asked Elena to return to Moscow.  The Defendant could not attend to the matter as he had to fly to Szechuan, so Elena had to fly to Moscow to do the transfer.  The Defendant would give the security device to Elena and she had to do it before 15^th August 2013.

67.  On 10^th August 2013, Elena flew back to Moscow and she arrived in the morning on 11^th August, a Sunday.

68.  On 12^th August 2013, Elena returned to the office.  She logged on into her email account and saw the email at D13-7, the Defendant had forwarded an email with 5 attachments that he had received from Pavel.  Some were bank confirmations.  Before Elena left Dalian, the Defendant had told her he would send her these documents by email and she should check if the amount had been credited into MNT’s account.  The Defendant also said he would provide her with the payment details for the transfer of money.  As the documents were in English, Elena sought help from Palienko.  She learnt that the 2 confirmations were payment confirmations for 150,000 Euro and 200,000 Euro from Satfa BV.  One of the attachments was an invoice.  Palienko told Elena that the invoice looked strange and did not look like an invoice from MNT.  The portrait layout was different form the standard landscape layout of the company.  The invoice was not signed or chopped and the company’s email at the bottom was unknown to him.  SpeedCast, the company referred to in the invoice was unheard of.  Then there was a contract dated 8^th August 2013 between MNT as buyer and Octans as seller, signed by someone for Octans but not by MNT.  Palienko said the contract was the one that Igor had brought to his office before.  Palienko said they must comply with the agreement that MNT had reached with Igor.  Elena looked at the Marketing Service Agreement (D3), the Service Order Agreement (D4) and the Rescission Agreement (D7) at Palienko’ office.  Palienko assured Elena that they had enough documents to make the money transfer.  Elena looked through the documents and verified the account details.

69.  Elena tried to make the transfer on 13^th August 2013.  She went to the Defendant’s office with Palienko and retrieved the bank security key and the password with the key for the safe in given to her by the Defendant in Dalian.  She checked that payment had been made to the bank account of MNT and everything looked normal.  She tried several times but failed to the transfer the amount, ie the credited amount minus 5% which represented Igor’s commission, to Octans’ bank account according to D7.  Elena and Palienko decided to call HSBC in Hong Kong with the telephone number that they saw at the bank’s home page.  Palienko was the one who spoke to the bank.  The bank refused to discuss with Palienko any details about the HSBC account or assist him in making the transfer.  The bank insisted that either the Defendant should call the bank or that he should be sitting next to the caller.

70.  Palienko then told Elena that they were not able to make the transfer and that the Defendant must stop in Hong Kong on his way back to Hong Kong and make the transfer at the bank.  Palienko also told Elena that if the Defendant called the bank himself, he would probably be able to make the transfer.

71.  Elena called the Defendant and passed the information on to him.  She also sent the necessary information to the Defendant by 2 emails.  In D13-10, she informed the Defendant the bank account details of Octans and the amount to be transferred.  In D13-11, she set out how she calculated and arrived at the amount to be transferred, ie 332,432.80 Euro. 

72.  On 15^th August 2013, the Defendant forwarded D13-12 to Elena.

73.  Elena relied on Palienko’s opinion, as legal counselor of VIP-Pack, that the Rescission Agreement (D7) and all the preceding documents were sufficient to enable MNT to make the transfer.  As for Elena, she verified the bank account details and made sure that the details were sufficient to make the transfer and the details matched the details given in D7.

YANG’S EVIDENCE

74.  Mr Yang Shu Wei (DW2) worked as a freelance Russian/Chinese interpreter for the Defendant during the latter trip to Dalian and Hong Kong.  Yang’s service was required as the Defendant does not speak or read Chinese.

75.  Yang flew to Moscow from China on 18^th or 19^th July 2013 for his job interview.  He was recruited.  He went to Dalian with the Defendant and Elena.

76.  On 10^th August 2013, Yang travelled to Sichuan for business with the Defendant while Elena fled back to Moscow.  After the business trip to Dalian, Yang returned to Dalian with the Defendant.  On one occasion, the Defendant asked Yang to call HSBC on behalf of the Defendant.  The call was about remittance of money and the Defendant provided Yang with the telephone number of HSBC.  Yang called the bank but he was unable to deal with the matter that he was asked to do as the bank told him there was something wrong with the passport number or something was not clear.

77.  On 14^th August 2013, the Defendant and Yang flew to Hong Kong.

78.  On 15^th August 2013, the two went to the Wanchai branch of HSBC.  With Yang acting as the interpreter for the Defendant, they made enquiries about making a remittance. They also undated the Defendant’s passport details at the Small and Medium Enterprises Centre.  For the remittance of money, they were given some forms to fill in.  Yang filled out the application form with the information shown on the screen of the Defendant’s IPad (D13-10).  The Defendant also told Yang the amounts that had to be filled out.  P12 and P13 were rejected by the bank as they were not filled out all in English.

79.  P14 was another attempt to complete the form.

80.  They spent quite some time in filling out the remittance forms.  P11 was the form that the bank eventually accepted.  Both Yang and the Defendant had written on P11.  Yang had some help from the staff.  P11 was signed by the Defendant and accepted by the bank. 

81.  On 16^th August 2013, the Defendant and Yang went back to the bank as the money had not been transferred.  The bank staff asked them to wait at the bank.  Then the police came and arrested them.

ANALYSIS OF THE EVIDENCE

Mr Van Der Stel (PW2)

82.  I accept the evidence of PW2 as to why he made the transfer of 200,000 Euro and 150,000 Euro from the account of Satfa BV to the HSBC account of MNT.  He acted on the instructions of the imposter and made the transfers. 

83.  Amongst the documents sent to PW2 by the imposter via email on 8^th August 2013 was an invoice purported issued by MNT to SpeedCast (P30).  That invoice was the same as the one that Palienko and Elena said they received from the Defendant via email on 12 August 2013.

84.  I accept the evidence of PW2 that based on what he was told over the phone and what he saw from the documents he received, he believed the moneys to be transferred would be used to fund a company acquisition.

85.  I accept the evidence of PW2 that he breached the authorized level of transfer that he was allowed to make as he believed the caller was PW1, the CEO of SpeedCast.  The evidence of PW2 in this regard is consistent with the email he sent to PW1 at 5:35 pm on 8^th August 2013 (Email 3 of P32).  Had PW2 not believed that the caller he had spoken to was PW1, he would not have sent the email to PW1 mentioning the transfers.

86.  Mr McGowan insinuated to PW2 that he might not be a completely innocent party.  It was insinuated to PW2 that given the fact that PW2 was able to send Email 3 to PW1 using the latter’s email address, he shouldn’t have emailed details of the account balance to a lawyer’s office.  In my judgment, if PW2 believed at the time the caller was PW1, it is not surprising that he would do what the caller told him to do, ie to send the details of the bank balance to where the caller was, the office of Eric Berg, the lawyer.  There is nothing inherently improbable in the aforesaid evidence of PW2.

87.  Mr McGowen queried why PW2 made no mention in his witness statement that the imposter called him while he was giving a statement at the police station in Rotterdam.  On this issue, I accept the evidence of PW2 that he did tell the Dutch police the imposter was calling again but was told there was nothing that the Dutch police could do.

88.  On the evidence before me, I find PW2 and honest and reliable witness.  If PW3 was complicit in the fraud against Satfa BV, he would not have emailed PW1 on 8^th August 2013 and mentioned the transfers (Email no 3 of D33).

89.  In my judgment, even if PW2 were a party to the fraud against Satfa BV, Satfa BV was still defrauded in the case and the moneys transferred to MNT’s account.  Apparently when Igor visited Palienko on 8^th August 2013, the Defenno one knew moneys from Satfa BV would be paid into the bank account of MNT were still proceeds of crime. The attacks mounted on PW2 by Mr McGowen do not assist the Defendant.

Mr Andre Beylier (PW1)and Mr Mark Ellison (PW3)

90.  I find the evidence of PW1 Mr Andre Beylier and PW3 Mr Mark Ellison credible and reliable.

91.  I accept the evidence of PW1 that he had not called PW2 and authorized the transfers of moneys from the bank account of Satfa BV to the HSBC account of MNT.  I accept the evidence of PW1 that SpeedCast and Satfa BV never had any business dealings with MNT and the 2 companies had no reason to transfer moneys to the HSBC account of MNT.

Ms Chung Oi Yee (PW6)

92.  I find PW6 Ms Cheung Oi Yee’s evidence as to what happened at the HSBC Emperor Group Centre on 15^th August 2013 credible and reliable.  She was the person who handled the Defendant’s remittance with Yang acting as the interpreter for the Defendant.  P11 was the form that the Defendant signed.  PW6 verified checked the signature on P11, the name of the Defendant’s passport and the authorized signature of MNT’s bank account.  She then faxed the form to the Telegraphic Transfer Centre of HSBC for further processing.

93.  I accept PW6’s evidence that when she dealt with the Defendant and Yang on 15^th August 2013, it was Yang who spoke to her.  She never heard the Defendant speak.  As far as she was aware, the Defendant did not speak English or Chinese.

94.  I am aware of the length of stay that the Defendant and Yang spent at the bank on 15^th August 2013. In my judgment, if the filling out of the application forms and the updating of the Defendant’s passport details took them 5 hours then they had no choice but to stay at the branch office as the process required.

Mr Tang Wai Pong (PW16)

95.  PW16 Mr. Tang Wan Pong, Supervisor of the Banking Operations Department of HSBC was the person who prepared the 2 affirmations, P28 and P40.  P28 and P40 contained the documents requested by the police and produced by HSBC.  Documents that had not been asked for would not be included in the affirmations.

96.  I find PW16 an honest and reliable witness.  He confirmed the HSBC account of MNT could be operated electronically when one had the username of the account, the password and a security device. I accept also as true PW16’s evidence that P28 and P40 contained the documents requested by the police and produced by HSBC.  Documents that had not been asked for would not be included in the affirmations.

97.  I find the 5 live witnesses called by the Prosecution, ie PW1 Mr Pierre Jean Joseph Andre Beylier, PW2 Mr Mengel Cornelis Van Der Stel, PW3 Mr Mark Elison, PW6 Ms Cheung Oi Yee and PW16 Mr Tam Wan Pong all honest and reliable.

Elena (DW1)

98.  Elena admitted under cross-examination that after the Defendant was arrested and after he was put on bail, the Defendant and Elena had discussed various subjects and the overall situation, including the matters that touched upon the telephone conversation that she partly overheard on 7^th August 2013.

99.  Elena also admitted that it was possible that she had discussed with the Defendants about the phone calls on 8^th and 9^th August 2013 but she cannot particular details of what had been discussed.

100.  Apart from the three telephone calls which she said she overheard on 7^th, 8^th and 9^th August 2013, Elena was unable to recall the contents of any other telephone conversations that the Defendant had with others, nor was she able to recall how many telephone conversations there were apart from the ones that she overheard.  I agree with Mr Kelly that the memory of Elena was selective and was tailored to assist the Defendant in his defence wherever possible.

101.  Elena admitted she, as the Chief Financial Officer of VIP-Pack, did not know the source of the money that she was putting into DNPP as it was outside her scope of responsibilities and she just did what the Defendant asked her to do.

102.  From the evidence of Elena, we know that DBPP was no longer in operation at the time of this trial.  Its last shipment was sometime in 2013 after the Defendant’s arrest.

103.  In my judgment, it really defies common sense that the Defendant would sign an agreement in a language that he did not understand.  The evidence of Elena as to how she searched a copy of D1 from the computer for the Defendant to sign and her affixing a chop of MNT onto the signed agreement does not have a ring of truth. 

104.  The Defendant did not understand English but Palienko, who was  in Moscow, was the one who could check the contents of D1to see if the document said what it was supposed to say, the Defendant should have asked Palienko to check the contents of D1 before the Defendant signed on it.  If Palienko could sign something like the Rescission Agreement (D7) on behalf of MNT, the Defendant could have asked Palienko to sign D1 on MNT’s behalf after checking the contents.   

105.  I reject Elena’s evidence that she did not think at the time the MNT invoice was false or forged and that she thought it was only a draft.  In my judgment, apart from the facts that the format of the invoice should have been landscape instead of a portrait and that a wrong office address of MNT was used, the fact that a false email address of MNT was used at the bottom of the document should have alerted Elena.

106.  If MNT needed to issue an invoice to SpeedCast and if MNT needed any input from Igor or Pavel, either Igor or Pavel could send the necessary details to MNT.  An invoice like the one in D8 should not have been sent by Pavel, let alone prepared by him. Elena could not have believed that the MNT invoice sent to her by Pavel was only a draft.

107.  Elena was cross-examined about D13-7 and the use of the email address “Klin.Klinom@gmail.com”.  According to Elena, D13-7 was an email that she opened on 12^th August 2013 at the Moscow office.  That email account was not her email account but one that she had access to.  The email account was created before the email account of VIP-Pack was created.  “Klin.Klinom@gmail.com was used to receive emails and it was not assigned to a particular company.  Elena could not explain why that email account was still used when the Defendant and Elena could use the email address of VIP-Pack for the sending of the bank payment confirmations, the MNT invoice, the 2 documents from Rabobank and the Octans contract, ie the documents in D8. 

108.  The evidence is clear that the MNT invoice was a forged invoice and a copy of it was used to deceive PW2 (The MNT invoice in P33). 

109.  The Octans contract contained a glaring mistake about the total contract price.  The 2 bank payment confirmations obviously concerned the transfers of 150,000 EUR and 200,000 from Satfa BV to MNT. 

110.  When the Defendant forwarded the email from “motor.headAaol.com” to Elena in the course of business, one would expect him to use the email account of VIP-Pack.  In my judgment, the use of an email address which was not assigned to any particular company for the receipt of these documents was suspicious.

111.  In my judgment, the evidence of Elena is neither credible nor reliable.  In particular, I reject the evidence of Elena on the following issues:-

(i) that she overheard the 3 conversations that the Defendant had with others when they were in Dalian;

(ii) her retrieval of D1 from the computer and the affixing of MNT’s company chop after the same was signed by the Defendant;

(iii) the background leading to her travelling back to Moscow;

(iv) the background against which she received D8 from the Defendant;

(v) the background leading to the attempts to transfer the moneys via internet banking and telephone enquiries made in Moscow with Palienko; and

(vi) what she was told by the Defendant.

Palienko (DW3)

112.  The evidence of Palienko is contrived.

113.  Very often when he was asked to explain why he reacted in a certain way or made a certain decision, he would resort to his training and experience in the army, ie he had to think fast and to obey orders.

114.  During his examination in chief, Palienko was shown D18 and asked if they were the sort of bottle caps produced by DBPP.  Palineko’s answer was that D18 were produced or they could have been produced at DBPP.  Palienko further explained why they could have been produced at DBPP, because pressed forms are used in the production of bottle caps and these pressed forms may be installed in any shaping machine in China, in Russia, in Canada and Saudi Arabia.   The aforesaid evidence of Palienko does not sit well with his evidence as to how he and the Defendant sought to solve the problem caused by the signing of the agreement between MNT and Satfa BV (D1) and DBPP’s inability to produce the quantity stipulated in D1.  There would be financial sanction if MNT did not perform in accordance with D1.

115.  According to Palienko, when Igor spoke to him in his office on 8^th August 2013 and complained about the inability of DBPP to produce the contracted quantity, Igor advocated that Palienko should accept D8, ie the contract with Octans as Seller and MNT as Buyer of 7.25 million bottle caps.  To Palienko, the contract with Octans (D8) was not acceptable, it was a pretence contract which did not reflect the real economic situation.  MNT was a producer of plastic caps and was not buying any plastic caps.  He spoke to the Defendant and finally he used a rescission agreement (D7) to resolve the issue.

116.  Palienko held the view that, instead of buying from Octans under D8 to meet the contractual duty under the original contract made with Satfa BV(D1), MNT would rescind D1by a rescission agreement ( D7) which provided for the transfer of “the balance of moneys net of commissions and other charges, under the Original Contract”to Octans. (Article 3 of D7)

117.  Palienko’s outright rejection of D8 seems at odds with his knowledge that bottle caps could be produced elsewhere with the installation of the appropriate pressed forms to the shaping machine of the plant called upon to produce the caps. 

118.  Under D1, the contract price for 7.25 million units of bottle caps was 696,000 Euro, under the Octans contract in D8, the contract price for the same quantity of bottle caps was only 332,432.80 Euro, less than half of the total amount under D1. 

119.  The aforesaid total contract price in D8 was very eye-catching, it appeared in Article 2 of the contract under the title “Contract Pricing and the Total Amount” and Appendix 1.  On the face of D1 and D8, there was obvious incentive for MNT to explore the possibility of procuring the bottle caps from Octans.  Palienko said he rejected D8 and refused from even recommending it to the Defendant.  Palienko did not want a purchase contract, he said MNT should have an assignment contract under which MNT would, upon concession of Satfa BV, assign the production of plastic caps to Octans.  Though Palienko wanted to have an assignment contract, what he created was a rescission contract which did not have the effect of assigning the production of the plastic caps to Octans.  He just had Igor’s words that the latter would bring an assignment contract between MNT and Octans upon Igor’s return to Moscow. 

120.  In my judgment, Palienko’s strong preference for an assignment agreement is quite inconsistent with his signing of the Rescission Agreement (D7).  There was no guarantee that Igor would bring an assignment contract on his return to Moscow.

121.  In fact the total contract sum of 332,432.80 Euro in D8 was a glaring mistake.  The unit price was 0.888 Euro according to Appendix 1.  For 7.25 million units, the total contract price should be 643,800 Euro, not 332,432.80 Euro as stated in Appendix 1.  In other words, the total contract price as stated in D3 was plainly wrong.  Upon seeing the Octans contract in D8, Palienko could not have failed to notice the much lower contract price of 332,432.80 Euro stated there.  If he had just looked at the unit price of 0.0888 Euro stated in the Octans contract, he would easily realize the total amount of 332,432.80 Euro was wrong.

122.  In my judgment, this glaring mistake alone should have made D8 questionable, the person who signed D8 on behalf of Octans could not have made a mistake as glaring as the one we see in D8, ie the contract price was wrongly stated, it was grossly understated.  If Palienko was aware of this obvious and glaring mistake, one would expect him, as the legal counsel for the Defendant, to question if Octans was a genuine selling party.  Palienko said he rejected D8 because he did not want a purchase contract. 

123.  In my judgment, Palienko’s evidence is not credible.  He knew he could not mention the glaring mistake about the contract price, which would make one even question if Octans was a bona fide seller of bottling caps.  If D8 was a fake contract, then Octans might not be trustworthy at all and Palienko had no reason to sign D7 in which Octans was stated as the party to whom the moneys would be transferred and a company which Igor worked as its authorized representative.  Palienko could only resort to say he rejected D8 because he wanted only an assignment contract, not a purchase contract.  In my judgment, Palienko tried to distance himself from D8 but his evidence about his treatment of D8 and his signing of D7 is not credible.

124.  When Igor signed D7, Palienko could only take Igor’s words that he had authority from Satfa BV to act on its behalf (Article 5 of D7), he could only take Igor’s words that he had authority from Octans to act on its behalf (Article 6).

125.  Palienko accepted that he took the signing of D7 as a short cut which allowed MNT to close the situation.  He accepted that, before the signing of the rescission agreement, he had not contacted Satfa BV, the counterpart to MNT under D1, and he had not checked the credentials of Octans, the party who would receive “the balance of moneys net of commissions and other charges” under D1.  Palienko’s explanation he did so to avoid panic and he had consulted others.  I do not think his explanation is reasonable.  He should contact Satfa BV or at least he could ask Igor to produce proof that Satfa BV agreed to rescind D1 with MNT in terms of D7 and have the production of the plastic caps assigned to Octans.  He should have checked the credentials of Octans, knowing that under the rescission agreement, moneys would be transferred from the account of MNT to that of Octans.  If Palienko saw fit to put in article 4 in D7, which provided a daily penalty of 3,500 Euro, one would expect him to check beforehand if MNT had received any moneys from Satfa BV before he included article 4 in D7.  It is a relevant and important information that Palienko should have found out with the Defendant and/or Igor.

126.  The Defendant all along was keen to preserve Igor’s commission.  The Marketing Service Agreement (D3) is dated 10 December 2012 whereas the Service Order No 1 (D4) was entered into and took effect on 29 April 2014.  If Igor was tasked to market the bottling caps produced by DBPP, one would expect Igor would be aware of the production capacity of DBPP.  It would be impossible for Igor to enter into any contact with a purchaser if he did not know whether DBPP could produce the plastic caps within the deadline set by the contract.  If as Palienko and Elena suggested, Igor brought MNT into trouble by bring a contract for the sale of 7.25 million units of plastic caps that DBPP could never be able to produce within the scheduled time, Igor was the one to blame and one see no reason why the Defendant should sign D1 for the sake saving a client for Igor, knowing full well that DBPP would not be able to produce the quantity required.

127.  The Defendant specifically instructed Palienko to find a way out so that MNT’s position would be secured and Igor’s commission could be saved.  Igor’s commission under D1 should be 5% of 696,000 Euro, ie 34,800 Euro.  Under D7, MNT had to transfer the moneys it had received from Satfa BV net 5% commission and other charges to Octans (Articles 2 and 3), a company which was unknown to MNT before the incident in question.  The only thing known about Octans was that, according to the Octans contract in D8, Octans was a company in Beliz which be able to produce 7.25 million units of plastic caps not only within the deadline for delivery under the original agreement (D1). 

128.  Instead of transferring the money to Octans, it would be much simpler and saver for MNT to transfer the balance of any moneys MNT had received back to Satfa BV net 5% commission and other charges.  Simpler because under D7, Igor had to make 2 undertakings to indemnify MNT, one as authorized representative of Satfa BV (Article 5), the other one as authorized representative of Octans (Article 6), whereas if balance of moneys was to be transferred back to where the moneys came from, ie Satfa BV, only one undertaking to indemnify MNT was required from Igor, as authorized representative of Satfa BV.  Obviously such course would be safer when MNT was transferring the moneys back to where they came from.  In short, a rescission agreement for the purpose of making D1 null and void should not necessitate the transfer of moneys to a third party like Octans, particularly so when its credentials were completely unknown to MNT.

129.  In my judgment, when Palienko gave evidence in court, he was aware that there were obvious and logical reasons against the signing of D7.  That was why he said a rescission agreement like D7 “would be the best option, or at least the best out of the worst options.”  He also resorted to the advice he said he had received from people had had worked under similar conditions in different companies as his basis for taking a rescission agreement as a way out. 

130.  According to Palienko, time started to tick after the arrival of the transfer from Satfa BV, they had to act fast to transfer the moneys to Octans or else Igor would charge MNT a daily penalty of 3,500 Euro per day of delay.  Palienko was unable to explain why the 7-day grace period was not mentioned in the Rescission Agreement, but only discussed and agreed upon between Igor and Palienko on behalf of MNT. 

131.  Article 4 of D7 read “MNT failure to transfer the moneys to Octans would be subject to penalty of 3,500 Euro per day of delay.”  Nowhere in D7 was it mentioned to whom the penalty should be paid: Igor, Satfa BV or Octans?  If D7 was meant to be a genuine Rescission Agreement to save MNT from potential litigation, the omission to mention who would be entitled to enforce Article 4 is something glaring to naked eyes and defies common sense.

132.  In my judgment, if Igor had said anything like theoretically, he could have started fining MNT the moment he knew the moneys had been received by MNT, Palienko should be alerted that the party who would be entitled to enforce the penalty clause under D7 should be clearly stated. 

133.  In my judgment, the failure to put in the 7 days grace period in D7 and the omission to mention in D7 who would be entitled to the daily penalty render the agreement suspect.

134.  When Palienko saw the Octans contract in D8, he also saw the MNT invoice (the same invoice that was used to deceive Mr Van Del Stel).  He knew that the invoice was “one big mistake”, using his own words.  In my judgment, it is an understatement to describe the MNT invoice as a big mistake.  It must be plain to Palienko that the invoice was a forgery.  The address of MNT and the email address of MNT were both incorrect and MNT had stopped using its HSBC account to collect investments for about 15 months before.

135.  Palienko said he had asked Elena if the documents before them were sufficient from the accounting and financial point of view.  He testified that as a senior company officer, he was supposed to take into account his legal view but also the accounting view.  What Palienko referred to as the accounting and financial advice form Elena, as we can see from the evidence of Elena, was only the verification of the bank details , ie to see if there were sufficient details to make the transfer and those details matched the details sent to Palienko and Elena by Pavel and the details contained in D7.  Elena said she relied on Palienko’s professional opinion as to whether all the documents needed for the transfer were there. 

136.  According to the defence evidence, the Defendant signed the Original Agreement (D1) on 7^th August 2013.  Palienko and Igor signed the rescission agreement (D7) on 8^th August 2013.  It is an admitted fact that Satfa BV transferred 350,000 Euro to the HSBC account of MNT on 8^th August 2013. 

137.  The evidence is not clear as to whether the transfer of moneys by Satfa BV preceded the time that Palienko said he and Igor signed D7.  Palienko said he finished late at night on 8^th August 2013.  The bank statement of MNT in the Affirmation of Mr Tang shows only the date, ie 8^th August 2013 but not the time of the transfers.  It is a known fact that Moscow is 5 hours behind Hong Kong.  On the evidence before me, I am unable to say whether the signing of D7 took place before or after the 2 transfers on 8^th August 2013.

138.  But in any event, it is clear from Palienko and Elena’s evidence that the first attempt to transfer the moneys to Octans took place on 13^th August 2013.  In other words, the moneys from Satfa BV had stayed in the bank account of MNT for a period of 5 days.  It seems implausible that the fraudster would be happy to allow the fruits of the fraud to stay in the bank account of MNT.  Even with the signing of D7 on 8^th August 2013, there was no certainty that the Defendant, with Palienko advising him on legal issues and Elena advising him on accounting and financial issues, would agree to transfer the moneys that MNT had received net commission and charges to a bank account desired by the fraudster.  It defies common sense that the fraudster would want the moneys they had successfully deceived be transferred to, and stayed for days, in a bank account which they had no control. 

139.  In the end, I reject the evidence of Palienko on the following issues:-

(i) the meeting that he had with Igor in Moscow and the telephone conversation he had with the Defendant on 8^th August 2013;

(ii) the background leading to his preparation of D7, the signing of D7, the intended use of D7 as a solution to the impasse caused by D1, the agreement reached between Palienko and Igor and his conversation with the Defendant on 8^th August 2013;

(iii) the telephone conversation he had with the Defendant and the advice given on 9^th August 2013;

(iv) the background leading to the attempts to transfer the moneys to Octans on 12^th August 2013 and the telephone enquiries made with the HSBC, Palienko’s attitude towards D8; and

(v) his beliefs as to the legitimacy or otherwise of the moneys transferred to MNT’s bank account from Satfa BV.

Yang Shu Wei (DW2)

140.  Yang was not present when Elena said she overheard the telephone conversations that the Defendant had with Igor and Palienko on 7^th and 8^th August 2013 respectively. 

141.  Yang said he was on a car journey with the Defendant and Elena to the hotel from DBPP on 9^th August 2013 but he was unable to recall if the Defendant received any telephone call during the journey.

142.  I accept Yang’s evidence that he had called HSBC in Hong Kong with a telephone number provided by the Defendant. The telephone call concerned a remittance.  I accept Yang’s evidence that the call to HSBC in Hong Kong was unsuccessful.  In my judgment, had Yang and the Defendant been able to make the transfer by telephone, the Defendant would not have taken all the trouble to travel to Hong Kong with Yang for the purpose of making the transfers.

143.  Mr Kelly said it was unusual for Yang to travel to Moscow from China.  In my judgment, little turned on the job interview in Moscow between Yang and the Defendant, it is not in dispute that Yang acted as a Russian/Chinese interpreter for the Defendant when they were in Dalian, Sichuan and Hong Kong.  I do not think the fact that Yang had only received partial payment for his work affects the credibility or reliability of his evidence.

THE LAW

144.  The current law on money laundering is stated in HKSAR v Pang Hung Fai (2014) 17 HKCFAR 77.

145.  It is for the Prosecution to prove beyond reasonable doubt that the Defendant had grounds for believing that the moneys represented the proceeds of crime.  In the process of assessing the whole of the evidence, the judge or jury can give such weight to an accused’s belief, perception or prejudice as s/he believes is warranted.

146.  Such grounds must be ones that would lead to the belief that the moneys represented the proceeds of crime.

147.  Such grounds must be reasonable in that anyone looking at those grounds objectively would so believe.

148.  If the belief that the moneys represented the proceeds of crime is based on circumstantial evidence, there must be sufficient evidence to draw the irresistible inference that the Defendant must have had reasonable grounds to believe or ought to have known that the moneys represented the proceeds of crime.

149.  In section 25(1) the word “believe” is used in the sense of “know”.  The two elements in the section should be understood as if they read : knew or ought to have known.

FINDINGS

The 200,000 Euro and 150,000 Euro transferred to MNT from Satfa BV were proceeds of indictable offence

150.  Satfa BV and SpeedCast had no business dealings with MNT.  Satfa BV and SpeedCast were in the business of marine satellite telecommunications, MNT and DNPP were concerned with production and sale of bottling caps.  Satfa BV and SpeedCast had no reason to transfer any money to SatfaBV and Octans (the evidence of PW1 and PW2).

151.  PW2 followed the instructions of the caller and effected the aforesaid transfers because he believed the caller was PW1when in fact the person who called PW2 and claimed himself to be PW1 was a imposter.

152.  Satfa BV and SpeedCast were victims of a telephone fraud, Satfa BV transferred 150,000 Euro and 200,000 Euro to the HSBC account of MNT on 8th August 2013 as a result of the telephone fraud.

153.  The 149,983.20 Euro and 199,983.20 Euro totaling 349,966.40 (after deduction of bank charges) deposited into the HSBC account of MNT on 8^th August 2013 were proceeds of a fraud case committed against Satfa BV and SpeedCast (the evidence of PW1 to PW3 and P40 at pg 714).

GROUNDS THAT THE DEFENDANT KNEW OR OUGHT TO HAVE KNOWN

154.  I find that the following grounds were ones that the Defendant knew or ought to have known.

155.  MNT was as used as the holding company of DBPP and was responsible for selling the bottling caps produced by DBPP. 

156.  DBPP was a loss making venture in August 2013.  In other words, the 2 transfers by Satfa BV were made at a time when DBPP was making a loss.

157.  The HSBC account of MNT had been inactive for at least over a year prior to 8^th August 2013 (P40 at pages 680 -712).  Prior to the transfers of 200,000 Euro and 150,000 Euro on 8^th August 2013 from the Rabobank account of Satfa BV, all the transactions were in US dollars.

158.  The Defendant was the sole signatory of the bank account at all material times.  (Paragraph 10 of P41 Admitted Facts II) MNT did not have a financial officer.  The Defendant would ask Elena to make payments that concerned MNT using the documents provided to her by the Defendant.

159.  By 9^th August 2013, the Defendant must be aware of the 2 transfers of MNT of 200,000 Euro and 150,000 Euro from the Rabobank bank account of Satfa BV to the HSBC account of MNT on 8^th August 2013 (D13-7 and D8).

160.  The documents in D8 were sent to Elena by the Defendant on 9^th August 2013 (D13-7), the Defendant knew that documents could be used as supporting documents in the transfer that the Defendant wanted to make.

161.  The MNT invoice and the Octans contract in D8 contained glaring and fundamental mistakes.  Elena was with Palienko in Moscow when she received D8 from the Defendant via email.  Palienko was aware of the glaring mistakes in the MNT invoice, he must also be aware of the important mistake about the total contract sum in the Octans contract. Whilst the Defendant could not read or write English, he could always ask Palienko for his assistance as Palienko was the legal counselor of VIP-Pack and was skilled in the English language.  The Defendant ought to have known the MNT invoice and the Octans contract contained many glaring mistakes.  Hence, he should view any request to transfer the moneys received from Satfa BV to Octans with suspicion.  The provenance of the moneys received from Satfa BV became questionable once the Defendant had doubts about the supporting documents that could be used in the moneys transfer.

162.  D1, ie Contract No 015/8, allegedly made between MNT as seller and Satfa BV as buyer, also contained obvious mistakes.  Under clause number 8 ‘Parties’ Details’, MNT was described as the buyer whereas Satfa BV was stated as the seller.  The same mistake appeared in Appendix 1 of the contract, entitled ‘Specifications of Goods’: Satfa BV was described as the seller and MNT the buyer.  It defies common sense that those who signed D1 could have failed to notice these glaring mistakes. 

163.  The Defendant was a successful businessman; he had no reason to sign an important contract like D1 under the circumstances described by Elena.  D1 was in a language that the Defendant did not understand.  He had no reason not to consult Palienko beforehand before signing.  More so when the Defendant knew at the time DBPP could in no way have 7.25 million bottling caps produced and delivered to the buyer before 4 December 2013 as DBPP could only produce on average 1.2 million caps per month.

164.  In my judgment, the defence evidence surrounding D1 does have a ring of truth.  I reject the defence evidence that when the Defendant signed D1, he believed the document he signed was a contract between MNT and a client brought by Igor.  I reject the defence evidence that the Defendant believed that the production capacity of DBPP and the signing of D1 meant that MNT would not be able to carry out its contractual duties and hence he had to look for a solution to protect MNT from potential litigation.  I reject the defence evidence that Palienko saw D7 as a solution to the problems created by D1.  I reject also the defence evidence that the attempts to transfer the sums received from Satfa BV minus 5% to Octans were done on the basis of the Rescission Agreement, D7.

165.  It is not in dispute that the business of Satfa BV and SpeedCast was totally unrelated to the business of MNT and DBPP.  Given the fact that there were glaring mistakes on the face of:-

(i) D1 in which Satfa BV was stated as a party to the contract;

(ii) the MNT invoice in which SpeedCast was mentioned; and

(iii) the Octans contract in which Satfa BV was mentioned.

166.  I reject the defence evidence that the Defendant, Elena and Palienko believed that Satfa BV transferred the moneys to MNT on the basis of D1.  From the above analysis, I am sure the Defendant knew at the time he attempted to make the telegraphic transfer under complaint, that MNT did not have any business dealings with Satfa BV.  Satfa BV had no reason to transfer 200,000 Euro and 150,000 Euro to MNT on 8 August 2013 or any sum at any time. 

167.  I am sure the Defendant knew the 2 transfers by Satfa BV were not done as a result of a mistake, the documents in D8, which the Defendant sent to Elena, show that the 2 transfers were conscious acts on the part of Satfa BV.  The act of sending the documents in D8, including the MNT invoice and the Octans contract to Elena by the Defendant on 9 August 2013 shows that there were strong materials before the Defendant which show that the 2 transfers by Satfa BV might be related to a serious fraud.  The Defendant had very strong grounds to believe that the moneys he sought to transfer on 15 August 2013 were proceeds of a serious crime.  Among the documents that the Defendant sent to Elena, the MNT invoice was plainly not issued by MNT.  The name of Satfa BV was mentioned in the 2 Rabobank slips and the Octans contract.  The Defendant knew, and he told Elena, that the documents concerned moneys that MNT had received or would receive and payment details that MNT had to follow in the transfer that would take place.

168.  As I said, I reject the defence evidence that the Defendant signed D1 under the belief that it was a contract between MNT and Satfa BV, a buyer brought by Igor.  The Octans contract in D8 was sent to Elena by the Defendant on 9 August 2013. (D13-7)  Satfa BV was mentioned in the Octans contract.  Both D1 and the Octans contract referred to 7.25 million units of bottling caps.  I am quite sure D1 had come into existence before the Octans contract.  Elena gave evidence that D1 was signed by the Defendant on 7 August 2013 when he was in Dalian, China.  Given my findings that the Defendant did not sign D1 under the belief that D1 was a contract between MNT and Satfa BV, it begs the question: why did the Defendant sign D1 at all? 

169.  On the evidence before me, I am sure that D1, ie the original contract and D7, ie the Rescission Agreement were just documents created for the purpose of justifying a transfer by MNT the moneys it had received from Satfa BV.  They could be used as supporting documents in a money transfer, indeed D1 was mentioned in P11, the telegraphic transfer application form submitted on 15 August 2013.  In other words, D1 and D7 were not genuine commercial agreements.  As for the Octans contract in D8, obviously it was something that was created in the process, it could not be used as the mistakes about the total contract sum was so obvious to naked eyes.

170.  Looking at the chronology of events, it is an admitted fact that the transfers from Satfa BV took place on 8 August 2013.  It is the evidence of Elena that the Defendant signed D1 when they were in Dalian on 7 August 2013.  In other words, the Defendant signed D1 before the 2 transfers by Satfa BV.  From D13-7, it is clear that the Defendant sent the documents in D8 to Elena via email on 9 August 2013.  It is the evidence of Palenko that he and Igor signed the Rescission Agreement, ie D7, on 8 August 2013.

171.  The defence portrayed Igor as the culpable villain.  A contract like D1 would be of no use to Igor without the moneys from Satfa BV.  In my judgment, it would make utterly no sense for Igor to ask the Defendant to sign D1 before the moneys were received by MNT.  There was no basis for Igor to assume that MNT would agree to transfer the moneys it had received from Satfa BV to the account of Octans designated by Igor before the signing of the Rescission Agreement (D7) on 8 August 2013. 

172.  Even with the signing of D7 on 8 August 2013, according to the evidence of Palienko and Elena, they only tried to transfer the moneys on 13 August 2013.  It is the evidence of Yang that after the trip to Sichuan he called the office HSBC on behalf of the Defendant on matters relating to remittance of money.  On 15 August 2013, the Defendant attended the Wanchai branch office of HSBC with Yang and attempted to make the transfer.  From the chronology of events, one can see that the moneys from Satfa BV had remained in the HSBC bank account of MNT between 8 August and 12 August 2013.  It was only on 13 August 2013 that Palienko and Elena tried to transfer the moneys received from Satfa BV. 

173.  In my judgment, the fraudster(s) would not ask PW2 to transfer the moneys to the HSBC account of MNT unless the fraudster(s) knew that the HSBC account of MNT was a safe place to keep the proceeds of crime.  As a matter of fact, the proceeds did stay in the account until 13 August 2013, when Palienko and Elena tried in vain to transfer the moneys to the bank account designated by Igor.

174.  The Defendant was the sole signatory of the HSBC account of MNT.  He alone had the key to the safe in the Moscow office when the electronic key and passcode for the internet banking facilities were kept.  Once the moneys were transferred to the bank account of MNT, the Defendant was the only person who could deal with the proceeds. Before the fraudster(s) chose the HSBC as the bank account to receive the moneys from Satfa BV, the co-operation of the Defendant must first be secured. The Defendant must be someone who could be trusted with the moneys and he must be someone who would follow the instructions and transfer the proceeds to the designated account.

175.  The evidence shows that the moneys that Satfa BV transferred to MNT remained intact after the transfers on 8 August 2013.  Beginning on 13 August 2013, the Defendant did everything he could to transfer the moneys to the bank account of Octans as designated by Igor.  He attempted to do so via Elena and Palienko, he tried to do it by telephone with help of Yang, he attended the bank office in Hong Kong in person on 15 August 2013.  In my judgment, the Defendant knew all along that he had been trusted with the moneys transferred to MNT from Satfa BV. 

176.  Obviously, the Defendant and Yang travelled to Hong Kong because the Defendant knew he had to attend the office of HSBC in person in order to transfer the moneys to the bank account of Octans.  Prior to 15 August 2013, Elena and Palienko had tried, but failed to make the transfer by internet banking.  The Defendant, with the help of Yang, had also tried, but failed to make the transfer by telephone. 

177.  The Defendant knew that P11 that he signed, ie the telegraphic transfer application from, concerned a request to transfer 332,432 Euro form the HSBC account of MNT to the bank account of Octans with Versobank.

178.  In my judgment, the Defendant had no reason to believe that Satfa BV transferred 150,000 Euro and 200,000 Euro to MNT because of D1. 

179.  He had no reason to believe that the 332,432 Euro that he sought to transfer on 15 August 2013 was based on D7.

180.  The Defendant knew he was trying to transfer the moneys that MNT had received form Satfa BV on 8 August 2013 minus 5%.

181.  In attempting to transfer the moneys that MNT had received from Satfa BV, the Defendant knew he was acting on payment details provided to him by Igor but not Satfa BV, the party who sent the moneys.

182.  The Defendant knew that Satfa BV had no reason to transfer 150,000 Euro and 200,000 Euro to MNT.

183.  D1, the MNT invoice and the Octans contract contained glaring mistakes that the Defendant ought to have known. 

GROUNDS THAT WOULD LEAD TO THE BELIEF THAT THE MONIES REPRESENTED PROCEEDS OF CRIME AND THE REASONABLENESS OF THE GROUNDS

184.  In my judgment, when the Defendant sought to transfer the 332,432 Euro on 15 August 2013, there were reasonable grounds which would lead to the belief that the sum the Defendant sought to transfer represented proceeds of a serious crime.  Anyone looking at those grounds objectively would so believe.  In my judgment, when the Defendant sought to deal with the property in question, he ought to have known the moneys he sought to transfer represented proceeds of a serious crime. 

The Defendant attempted to deal with proceeds of the telephone fraud practiced on Satfa BV

185.  On the evidence before me, I am satisfied beyond reasonable doubt that the Defendant had reasonable grounds to believe that the 2 deposits into the HSBC account of 149,983.20 Euro and 199,983.20 Euro totaling 349,966.40 Euro (after deduction of transmission charges), in whole or in part directly or indirectly represented proceeds of an indictable offence.

186.  The evidence of Elena and Palienko show that they tried to transfer 332,432 Euro to the bank account of Octans at the behest of the Defendant on 13^th August 2013.  The evidence of Yang shows that he tried to call the HSBC to remit the moneys at the request of the Defendant when they were in China.  The evidence of these attempts did not come from the Prosecution case, but came instead from the 3 defence witnesses called.  When Elena and Palienko tried to transfer the monies at the behest of the Defendant, Elena and Palienko were in Moscow and the Defendant was in Mainland China.  When Yang called the HSBC, he and the Defendant were in Mainland China.  In my judgment, these attempts to transfer the moneys disclosed by Elena, Palienko and Yang do not properly form the subject matter of the charge. These attempts made by Elena, Palienko and Yang only explained why the Defendant had to attend the Wan Chai branch office of HSBC and dealt with the telegraphic transfer application on 15^th August 2013.

187.  The particulars of the offence alleged that the Defendant attempted to deal with the proceeds between 8^th August 2013 and 16^th August 2013.  The 8^th of August 2013 was the day MNT received the 2 deposits from Satfa BV.  In my judgment, the 2 transfers made by Satfa BV and the receipt of the moneys by MNT, without more, do not constitute acts of attempt to deal with the proceeds on the part of the Defendant.

188.  On 16^th August 2013, the Defendant and Yang returned to the bank and make enquiries as to why the amount requested had not been deducted from the account (Paragraph 4 of P37, the Admitted Facts).  In my judgment, I do not think the inquiries made on 16^th August 2013 constituted an attempt to deal with the proceeds.

189.  On 15^th August 2013, when the Defendant visited the branch office of HSBC at Emperor Group Centre in Hennessy Road, Wan Chai, he attempted to make a telegraphic transfer of 332,432 Euro from the bank account of MNT to the bank account of Octans held with Versobank in Estonia. (P11the Telegraphic Transfer Form, P37 the Admitted Facts and the evidence of PW6 and Yang).

190.  The Defendant sought to transfer the amount of moneys MNT had received from Satfa BV minus 5% to the bank account of Octans, i.e. 332,432 Euro.  (P11 the Telegraphic Transfer Form, P37 the Admitted Facts, P40 the Affirmation of PW16 and the evidence of Elena).

191.  The Defendant knew that 332,432 Euro that he attempted to deal with on 15th August 2013 all came from the 2 deposits by Satfa BV on 8^th August 2013, hence the Defendant also had reasonable grounds to believe that the 332,432 Euro he attempted to transfer on 15th August 2013 in whole or in part directly or indirectly represented proceeds of an indictable offence.

192.  For the remaining 5% of the sums received from Satfa BV, the evidence shows that the Defendant had reasonable grounds to believe that the 5% balance of the moneys received from Satfa BV represented proceeds of an indictable offence but it cannot be said that the Defendant had attempted to deal with the 5% balance.

RESULT

193.  I am satisfied beyond reasonable doubt that all the elements of the offence are proved against the Defendant saved that the property that the Defendant attempted to deal with should be 332,432 Euro.

194.  I find the Defendant guilty of the offence of attempting to deal with property known or believed to represent proceeds of an indictable offence.