HKSAR v. CHEE HOI SUEN, HENRY AND ANOTHER

DCCC263/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 263 OF 2009

----------------------

----------------------

-----------------------------

Reasons for Sentence

-----------------------------

1.  The 1st and 2nd defendants have been convicted after trial of 13 charges of conspiracy to defraud and the 1st defendant one further charge relating to the corruption charge under section 9(2) of the Prevention of Bribery Ordinance.

2.  The relevant facts are set out in the verdict I gave earlier.  I do not propose to rehearse them at this stage.  The gravamen of the offence in each of the conspiracy to defraud charges was that a bank was caused to extend a larger loan by way of letter of credit for purchase of textile machinery than it would otherwise have done.  And the defendants have conspired to present a false value of such machinery by way of inflated invoices.  These invoices enabled the defendants’ customers to gain larger or higher financings than they otherwise would have been able to do for the figures up to near 100 per cent of the machine financing where the bank’s policy at the time was to lend only 70 per cent of the value of the machine.

3.  The sums involved are large and are denominated in Euros.  The 1st charge involves 112 textile machines valued at €6.4 million odd and the financing released was some €0.456 million; on the 2nd charge, the 60 machines at €3.492 million, financing at €2.444 million; the 3rd charge involved 130 machines at 7.5 and just over €5 million of financing; 4th charge at €3.510 million and 60 textile machines and total sum released in financing €2.457 million; and on the 5th charge, 32 sets of machines at €1.872 million and the financing at €1.404 million; on the 6th charge, the figures are, respectively, €3.510 million and €2.632 million; 7th charge, the figures are €3.348 million and €2.207 million; the 8th charge, €2.088 million and €1.332 million; the 9th charge, €1.755 million and €1.260 million; the 10th charge, €1.760 million and €1.040 million; the 11th charge, €1.044 million and €637,000; the 12th charge, the figures are €1.680 million and €1.176 million; and the final charge, €1.740 million and the other figure €1.005 million.

4.  This is a case dealing with quite large sums of money denominated in millions of Euros and large sums of money loaned by way of letter of credit, from which the 1st and 2nd defendants were able to gain by way of earning commissions.  But both defendants have adopted mitigation that points out that this is not, and I should not approach this case as being, a typical letter of credit fraud.  Put in another way, this is not a typical case.

5.  Firstly, all the transactions in all the charges in all the evidence are genuine transactions.  This is real business between real parties.  And what the inflation of the invoices did in these cases was serve to oil the wheels of this business.  It enabled the customers on the mainland to obtain a level of finance they may not otherwise have been able to have access to to enable these machines to be bought and enabled the manufacturers to produce them, the finished products.

6.  And, secondly, based on the defendants’ admissions were adopted by the 2nd defendant.  On occasions, up to 10 to 15 per cent of the purported down payments were made.  So, in each case, the defendant was not in fact overlending by the 30 per cent that it thought it was.  And that figure could be from between 25 per cent to 10 per cent.  It was the bank itself which initiated the structure of these transactions.

7.  As far as we are aware, there has been no loss to the bank, the purported victim, as all loans and interest payments were met as far as we are aware.  Now, these kinds of charges are primarily based on exposure to risk.  However, the level of risk for the victim varies in different cases.  And there was evidence in this case that the customers had had their financial probity tested by the bank; in other words, their ability to pay had been tested by the bank.  And the bank considered them creditworthy for the amount of loan that they had exposed themselves to as the relevant customer.

8.  It could also possibly be said that the bank had no doubt securitised their own risks in any event, namely, that the risk itself has spread through the entire financial system at a very low level.  Now, these are all factors that I have to consider in assessing the level of penalty in this case that one cannot escape from the proofs the invoices themselves were inflated.

9.  Now, both defendants have strong personal mitigation.  The 1st defendant is aged 65 today.  Now, he is described as having indifferent health.  I have seen medical reports detailing his current condition.  The 1st defendant has a long established condition of diabetes which is related purportedly to his obesity.  He suffers from hypertension, a condition I suspect is high cholesterol, and testing is suggestive of coronary artery disease.  He also has both eye glaucoma and sleep apnea, for which he has a special breathing apparatus.  But I have seen many letters of support and who are able to speak of the defendant’s character.  They say he is a man of good character, of high character, and I respect the views set out in those letters.

10.  The 2nd defendant has also many letters of support, including from his ex-wife and his daughter who is currently a P6 student.

11.  I will not detail what is in the letters but I have read them all and I take account of their contents.  Again, the letters themselves support partly the view I formed of the 1st and 2nd defendants during the trial, that in their working lives, they were both very hardworking men.  They would in English be called the “salt of the earth”.  And they are men who in this case, because of the exigencies of the cross-border trade, allowed themselves to take part in and be drawn into an arrangement where they had to present false documentation to the bank in order to ensure the growth of their business.  And, of course, both these men are of clear record.

12.  Both defendants say the special circumstances I have already outlined will permit me to suspend any sentences that I would impose upon them.  The 1st defendant also says there are humanitarian factors arising from his age and his health condition, which I should separately consider, whether there should be a suspension of any sentence of imprisonment I may impose upon him.

13.  And before I consider that issue, I must consider what is the correct level of sentence to be imposed for these offences.  I must bear in mind the atypical circumstances of these offences that I have already set out, that also that these crimes took place over a sustained period of about three years.  They involved large amounts of financing, up to some €27 million, a proportion of which would be due to the inflated invoices put forward by the defendants, that the defendants had purported to receive sums up to €12.7 million in deposits/down payments where we know only a proportion of those figures had been received.

14.  I have considered all those factors and also the difficulty and precisely putting a figure on the amount of risk the bank was exposed to and the amount of money that that risk involved and also the fact that the defendants or their companies profit from commission on those transactions as not being set out in the evidence.

15.  Having regard to all those factors, I consider an overall starting point for all these offences will be 30 months’ imprisonment.  Now, these offences, as have been put in mitigation, were some time ago.  The defendants were arrested in August 2007 and they have been living with this for a considerable time, and the offences themselves commencing in 2004.  Now, I am prepared to reduce that head figure of 30 months’ imprisonment by 4 months having regard to the time of these offences be hanging over the defendants’ heads.  The defendants have also cooperated considerably in the management of this case and I have only ever had to consider the essential issues, and this clearly also wants a further discount from sentence.  I will reduce the overall figure again by 2 months for that down to 24 months’ imprisonment.

16.  I also considered the 14th charge against the 1st defendant. It is put to this, that I could consider this to be a technical breach of the Ordinance.  However, I do not adopt that approach, especially as the acceptance of such advantage was expressly forbidden by Berbenni’s company.  I do note the case is somewhat unusual in that both Motionning and Promatech would have been assisted and their business enhanced by the encouragement of Mr Berbenni to work harder.  I would still impose a sentence of 3 months’ imprisonment but I would have to consider to what extent that should be served, consecutively or concurrently to the other sentence of imprisonment that I would impose.

17.  The order I would make is that only 1 month of that sentence be served consecutively to any existing sentence and the balance of 2 months will be served concurrently.

18.  Now, both defendants have made strong submissions as to whether any sentences imposed against them should be suspended, and those arise out of what has said to be the special circumstances of the offence and the special circumstances of the particular offender.  Now, I have been referred to mitigation in respect of the 1st defendant’s age and his health condition.  Obviously, a sentence of imprisonment are harder for a man of his age than for a younger man.  However, neither his age nor his level of health in my view is sufficiently serious for me to consider that they warrant either a reduction of sentence or a suspension of the existing sentence.

19.  Now, as for the other factors I have referred to, including special factors in respect of both the offence and the offender, I have already borne these in mind when dealing with the correct level of sentencing.  I do not consider that they themselves warrant further consideration by way of suspension of the sentences in this case.  So, the sentences that I will impose will be as follows.

20.  I have first the 13 sentences of conspiracy to defraud brought against both the 1st and 2nd defendants.  I will impose a sentence of 24 months’ imprisonment on each charge to be served concurrently to a total of 24 months’ imprisonment.  On the 14th charge against the 1st defendant only, I will impose a sentence of 3 months’ imprisonment, 1 month of which is to be served consecutively to the 1st to the 13th charges’ sentence of imprisonment, on the 1st to 13th charges, and 2 months to be served concurrently, giving an overall total of 25 months’ imprisonment for the 1st defendant and 24 months’ imprisonment for the 2nd defendant.