HKSAR v. NG CHUN TO, RAYMOND

CACC 65/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 65 OF 2015

(ON APPEAL FROM DCCC NO. 405 OF 2009)

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J U D G M E N T

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Hon Lunn VP (giving the Judgment of the Court) :

1.  With the leave of the single judge [1], the appellant appeals against the sentences imposed after trial by District Court Judge Yiu on 30 January 2015 of four charges of conspiracy to defraud, contrary to Common Law and punishable under section 159C(6) of the Crimes Ordinance, Cap. 200, namely 4 years and 6 months’ imprisonment in respect of each charge, which sentences were ordered to be served concurrently. Leave was refused in respect of the appeal against conviction and the appellant has not sought to renew his application.

2.  The trial was a re-trial, following the order of this Court on 31 July 2013 allowing his appeal and quashing his convictions at the first trial.  In those circumstances, the Court did not consider the Secretary for Justice’s application for review of the sentences imposed on the appellant.  Leave for that application had been granted by Tang CJHC(Ag) on 8 June 2010.  It is to be noted that those representing the appellant opposed the application of the Secretary for Justice, filing written submissions with the Court dated 27 February 2013.

3.  The appellant was sentenced to 3½ years’ imprisonment on each of the same four charges and 15 months’ imprisonment on another charge, namely doing an act tending and with intent to pervert the course of public justice.  Six months of the sentence of imprisonment imposed on the latter charge was ordered to be served consecutively to the other sentences, so that the total sentence imposed on the appellant was 4 years’ imprisonment.  On 8 November 2013, this Court ordered that the appellant be re-tried on the four conspiracy to defraud charges.  The respondent made no application for a re-trial in respect of the perverting the course of public justice charge.  Having served 17 months’ imprisonment of the sentence imposed on him following his convictions, before he was granted bail pending appeal, the appellant has since served the sentence imposed on him in the retrial and has been discharged from prison.

The charges

4.  The Particulars of Offence of each of the four charges alleged that on and between various dates, in the overall period between1 September 2005 and 27 May 2008, the appellant conspired with stipulated persons and persons unknown to defraud various named companies, who acted as Liquidity Providers, and such companies, firms and persons as might be induced to trade in derivative warrants issued by stipulated companies by dishonestly:

a.   causing an employee(s) of a stipulated Liquidity Provider to render favorable prices for derivative warrants issued by a stipulated company to be quoted to people connected with the appellant;

b.   creating a false or misleading appearance of active trading in particular derivative warrants; and/or

c.   offering secret profits to the said employee(s) as an inducement to or reward for doing or having done an act referred to in (a) and (b).

5.  The period during which it was alleged that the respective conspiracies had occurred, the four Liquidity Providers and the Issuers of the derivative warrants stipulated in each of the four charges were respectively:

Charge 1 :    between 1 September 2005 and 27 May 2008, CLSA Limited and Calyon Financial Products (Guernsey) Limited (“Calyon”);

Charge 2 :    between 1 January 2007 and 27 May 2008, Citigroup Global Markets Asia Limited and Citigroup Global Markets Holdings Incorporation (“Citigroup”);

Charge 3 :   between a date unknown in 2007 and 27 May 2008, Standard Securities Asia Limited and Standard Bank PLC (“Standard Bank”); and

Charge 4 :   between a date unknown at the end of 2007 and 27 May 2008, Taifook Securities Company Limited and Dresdner Bank AG (“Dresdner”).

The prosecution case

6.  The prosecution case was that the appellant had orchestrated a derivative warrant ‘pushing’ scheme using an office in the Mainland to trade in derivative warrants listed in Hong Kong. He did so through Cheung Ching Ho (“CCH”) who in turn caused others to trade in derivative warrants using various trading accounts in different brokerage firms (“dummy accounts”) to create a false impression of active trading by buying and selling selected derivative warrants between the dummy accounts and also the Liquidity Providers, thereby enhancing their prices “pushing”, and luring other investors to trade directly in those warrants.  At trial, the account holders of the dummy accounts were referred to as “heads” and those that caused that trading at the behest of CCH were referred to as “hands”.

7.  With the assistance of traders employed by the derivative warrant issuing companies, referred to as “Insiders”, the warrants were sold back to the Liquidity Providers or to unwitting investors, referred to as “Fish”.

8.  In proof of its case, the prosecution adduced evidence at trial from a number of the traders employed in the Mainland office who operated the pushing scheme, most of whom were stipulated as co-conspirators in the various conspiracies the subject of the four charges and each of whom gave evidence under an ‘Immunity’ from prosecution.  They had been recruited into the operation by CCH who told them that his boss, from and to whom he received and made daily telephone calls in connection with the warrant pushing, was “Raymond”.  It was the prosecution case that Raymond was the appellant.

Sentence

9.  In sentencing the appellant, the judge noted that the appellant was a 47-year-old married man with three children of “clear record”.  Further, he said that in mitigation it had been submitted that the matter had been hanging over the appellant for more than six years, causing him both physical and mental stress.  Delay had been caused, first it was a retrial and secondly, because of the trial of the ICAC officers involved in the investigation of the conspiracies, resulting from their misconduct in respect of CCH.  None of the delay was the fault of the appellant.

10.  Of the role of the appellant, the judge said: [2]

“ ...the defendant had orchestrated through CCH and others to operate a warrant pushing scheme based in Mainland office to trade derivative warrants (DW) listed in Hong Kong.”

11.  Of the mechanics of the scheme, the judge noted that it employed: [3]

“ ... various trading accounts, i.e. 50 dummy accounts in 27 brokerage firms to keep on buying and selling selected DWs to create a false impression of active trading, so to enhance the price and lure other investors to trade and be sold for a profit and there were also insiders from LP to help buy back the DWs unsold to ensure the profitability of the scheme.

Under the recruitment of CCH, about 10 people were working in Mainland office.  By controlling the above dummy accounts, the group was able to push the selected DWs as informed by the defendant through CCH of the quantity and accounts to be used so that any particular account may not earn so much to arouse suspicion.”

12.  Of the seriousness of the offences, the judge said: [4]

“ The offences were serious not only because of its scale involving a group of person undergoing the pushing exercises and by means of employing more than 50 accounts in 27 securities firms the detection of which was rendered very difficult and time-consuming, but also that the scheme was very sophisticated with the insiders of LP also involved whereupon daily activities were closely monitored and designed.”

13.  The judge went on to note that the appellant had been careful to conceal his role behind that of CCH and that, had it not been for “a very thorough investigation”, the appellant’s role as the “real mastermind behind CCH” would not have been discovered easily.

14.  Of the profits of the scheme, the judge said: [5]

“ The group had through the above exercises earned substantial profit, one could see from the cash withdrawals of the dummy accounts that millions were withdrawn from each account in the said period of time (AF1 / Table A).”

15.  Having noted that Ms Fung had calculated that about $5.1 million profit had been made in trading in selected derivative warrants for a selected period only, that $450 million had been withdrawn from the impugned accounts and that $150 million had been deposited in cash into the accounts of the appellant, his wife and related accounts or had been found in cash in their safes or safety deposit boxes, the judge said:[6] 

“ Thus it would be a fair approach to consider the above level of amount as the profit generated by the group as well as the profit that went to the defendant.”

Starting point for sentence

16.  In sentencing the appellant, the judge said:[7]

“ Conspiracy to defraud is a serious offence, there was no tariff and each case would be decided on its own facts. Given the scale and sophistication of the offences committed, the very substantial sum of money involved and the profit made and all the circumstances as stated above, I assess that it should attract imprisonment terms of 6 years or more.”

Discount

17.  Then, the judge identified factors which caused him to afford the appellant a discount of sentence from that taken as the starting point: [8]

“ ...considering that substantial part of the prosecution case was admitted and that it was a retrial where no doubt this matter had dragged on the defendant through years, it would be appropriate to reduce to 5. But one must also note the forceful submission of Mr Bruce SC, particularly that the lengthy proceedings was due to the misconduct of the investigation officers and not from the defendant. I therefore assess the overall sentence of 4½ years’ imprisonment be appropriate.”

18.  Having noted that the commission of the offences overlapped “in some period of time” the judge determined that the sentence of 4½ years’ imprisonment imposed in respect of each of the charges was to be served concurrently.

Grounds of appeal against sentence

19.  It was submitted that the judge had erred in imposing a sentence of 4½ years’ imprisonment, which was manifestly excessive and/or wrong in principle, having erred in stipulating a starting point for sentence of 6 years’ imprisonment.  The judge gave no reasons for identifying that starting point.  At the first trial, the appellant had been sentenced to 3½ years’ imprisonment on each of the four charges.  This Court was invited to consider the sentences imposed in HKSAR v Cheung Sing Chi  [9]and HKSAR v Mo Yuk Ping, [10] to which District Court Judge Douglas Yau, the judge in the first trial, had been referred.  The judge in the retrial gave no reasons at all to justify or explain the significant increase in the starting point taken for sentence or the actual sentence imposed on the appellant.

20.  Mr Duncan SC submitted that in a retrial, where the court sentences a defendant for the same offences of which he had been convicted in an earlier trial, “so far as concerns the head sentence, that passed on the first trial should ordinarily not be exceeded if the new trial results in conviction again.” [11]  A sentence imposed after a re-trial should not exceed the sentence imposed originally unless there is a good reason for an increase.[12]  Here, the judge had given no reason at all for the increase in the starting point taken for sentence.

21.  Next, Mr Duncan submitted that the judge had erred in stating, in respect of the profit generated by the conspiracies to defraud generally and to the appellant in particular, that he took into account that “...the total withdrawals from those accounts were about 450 million and that the total cash found in bank deposits and deposit boxes were about 150 million.”  Issue had been taken by the defence in written and oral submissions with the prosecution submissions as to profit.  In his oral submissions, Mr Duncan submitted that the only profit that was proved to have been made by the appellant was the $5.1 million that Ms Stella Fung had calculated had been derived from trading in warrants issued by the four stipulated Issuers in the respective periods of about a month that she chose to consider.

22.  Then, it was submitted that the judge had failed to take into account fully the mitigating factors advanced on behalf of the appellant.  First, it was to be noted that the alleged offences took place between 2005 and 2007, whereas the appellant had been arrested in May 2008 and charged in February 2009.  Secondly, that although the appellant’s first trial, which commenced in 2009, had been completed with his conviction and sentence in April 2010, his appeal against conviction to the Court of Appeal, of which he gave notice in May 2010, had been delayed by criminal proceedings brought against CCH and ICAC officers who were involved in the prosecution of the appellant.  Although the hearing took place in March 2013, the judgment, allowing the appeal, was not delivered until July 2013.  As a result, albeit that he had been granted bail pending appeal in September 2011, the appellant had served 17 months’ imprisonment of the sentence of 3½ years’ imprisonment which had been imposed on him.  The appellant was in no way responsible for any of the delay in the appeal process.

23.  Thirdly, the appellant’s first trial was both lengthy and costly as had been his appeal.  Fourthly, the appellant, his wife and family had suffered considerable stress as a result of delay in proceedings and the fact of his re-trial.

The respondent’s submissions

24.  For the respondent, Ms Lo reminded the Court that the sentence of 3½ years’ imprisonment imposed on the appellant on his conviction in the first trial was not considered by this Court, given that the application for leave to appeal against conviction was allowed and the appellant’s convictions and the consequent sentences quashed.

25.  Ms Lo invited the Court to regard, as factors in aggravation in the commission of the serious offences committed over a period of three years, the following factors:

(i)   the offences were committed on a large scale, involved more than 10 conspirators, 50 ‘dummy accounts’ in 27 securities firms; [13]

(ii)   there was a cross-border element in the commission of the offences; [14]

(iii)   there was considerable sophistication involved in the offences, which required close monitoring of daily trading activities;

(iv)   having placed himself behind CCH in the commission of the offences, the appellant made it more difficult for the authorities to identify his role;

(v)   the appellant occupied the role of mastermind of the scheme; [15]

(vi)   substantial profits of about $150 million ended up in the possession of the appellant and his wife;[16] and

(vii)   the adverse impact on Hong Kong’s reputation as an international financial centre.

26.  Ms Lo submitted that in all those circumstances the judge’s stipulation of starting a sentence of 6 years’ imprisonment [17] was not manifestly excessive.  She suggested that the judge’s reduction of the starting point taken for sentence to 5 years’ imprisonment to reflect the fact that, “... (a) substantial part of the prosecution case was admitted and that it was a retrial where no doubt this matter had dragged on the defendant through the years” together with an additional reduction of 6 months’ imprisonment to reflect the fact that delay “was due to the misconduct of the investigation officers and not from the defendant” was a generous discount.

27.  Finally, Ms Lo submitted that the judge was entitled to find that the appellant had benefited to at least the amount of $150 million from the profits generated by the conspiracy to defraud.

A consideration of the submissions

28.  In the judgment of this Court in HKSAR v Chan Kau Tai [18] the Court rejected the submission made on behalf of the applicant, that in sentencing in a retrial the judge had erred in imposing an overall sentence of imprisonment on the applicant that was greater than the sentence imposed on the applicant on his conviction for those counts at the first trial. At the first trial, the applicant had been sentenced to a total of 7 years’ imprisonment.  At the re-trial, the applicant was acquitted of the first count, but convicted of the other counts of which he had been convicted at the first trial.  In the result, he was sentenced to a total of 6 years’ imprisonment.  In the judgment of this Court, Stuart-Moore VP said “The judge in these proceedings had provided ample justification for the course he adopted.”

29.  Of the importance of the judge providing a specific indication for taking such a course, Stuart-Moore VP noted [19] that in R v Gilmore [20] the Court of Criminal Appeal of New South Wales had identified the related relevant policy reasons as being:

“ ...that it would be wrong that someone who had suffered a defective trial should feel constrained to avoid exposing that defect lest, on a new trial, a heavier sentence was passed. It also found that an impression might be created of there being an element of retribution towards an appellant who had successfully overthrown the conviction at his original trial.”

30.  Stuart-Moore VP went on to note that in the judgment of the Court of Criminal Appeal of New South Wales in R v Bedford [21] the Court held that: [22]

“ Where the judge at the new trial considers that the circumstances of the case do call for a longer sentence he will not be absolutely fettered by the approach prima facie to be adopted. He is both at liberty, and indeed obliged, to give effect to his own assessment. It could be expected, however, that, if he did take the view that a longer sentence were called for than that passed at the first trial, then there would be a specific indication of the reasons leading him to this view.”

31.  Of the statement by Street CJ in R v Gilmore “But, so far as concerns the head sentence, that passed on the first trial should ordinarily not be exceeded if the new trial results in conviction again”, Stuart-Moore VP said:[23]

“ This observation is plainly an important consideration where the circumstances in which the retrial court finds itself sentencing a defendant on precisely the same charges.”

32.  In the judgment of this Court in HKSAR v Tse Hoi Pan, Dominic [24], Stuart-Moore VP cited with specific approval a passage from the joint judgment of McHugh, Gummow and Hayne JJ in the High Court of Australia in RH McL v The Queen: [25]

“ If the appellant is convicted on any count at the re-trial, the sentencing judge will also have to take into account another important factor in the sentencing process. Ordinarily but not invariably, a successful appellant should not receive, a longer sentence after conviction on a re-trial than he or she received at the original trial. ...

If the sentencing judge at the re-trial thinks that the original sentence was manifestly inadequate, it is open to that judge in the exercise of the sentencing discretion to give a sentence higher than that imposed on the first occasion.  But an exercise of discretion by a sentencing judge that increases the original sentence given to the accused is necessarily rare.”

33.  There is no dispute that, in the submissions made to the judge prior to sentencing, including mitigation, the judge was not referred to any authority relevant to the issue of sentencing a defendant in a retrial.

34.  For his part, in the course of his submissions in mitigation, Mr Bruce SC said: [26]

“ ...this is a retrial, and this court will know what Yau J ordered in -- on a previous occasion. I am bound to say that as a matter of law, sentence is at large in a retrial.

However, that being said, one of your brethren has obviously - can I say that respectfully, learned judge - obviously carefully considered that matter and that will, I think the politest thing I can say is that this court should bear that in mind, and bear it very firmly in mind.”

35.  At the conclusion of his submissions, Mr Bruce returned to that issue: [27]

“ And although I cannot, in law, submit that Yau J’s approach is binding on you, I venture to suggest that as an analytical starting point. One assumes that all the points that are being made now by the prosecution about money, were made to him, no suggestion otherwise. All the points about criminality were made to him, and that’s what he fixed.”

36.  The judge did not respond at all to the oral submissions made by Mr Bruce in the course of mitigation in respect of the sentences of imprisonment imposed on the appellant in the first trial.  Similarly, in his reasons for the sentence he did not advert to the sentences imposed on the appellant at the first trial.

37.  As noted earlier, in the first trial in addition to having been convicted in respect of the four charges of conspiracy to defraud the appellant was also convicted of an offence of doing acts tending to and intending to pervert the course of public justice (Charge 5). Having been convicted by District Court Judge Douglas Yau of those five offences the appellant was sentenced to a total of 4 years’ imprisonment.[28]  In respect of the four charges of conspiracy to defraud, of which the appellant was convicted on retrial, the judge stipulated a starting point for sentence of 3½ years’ imprisonment.  In respect of Charge 5, he stipulated a starting point for sentence of 15 months’ imprisonment.  Determining that the appellant was not entitled to any discount of sentence, the judge imposed those sentences, ordering that the sentences of 3½ years’ imprisonment imposed in respect of Charges 1 - 4 be served concurrently.  Then, stating that he had regard to the “matter of totality”, he ordered that six months of the sentence of 15 months’ imprisonment imposed in respect of Charge 5 be served consecutively to the other sentences of imprisonment.

38.  Of the four conspiracies to defraud, the judge said:[29]

“ We are looking at conspiracies that spanned over a period of years and involved various people taking up different roles in a fraudulent trading scheme, making millions of dollars in profits in the process of carrying out the conspiracies.”

39.  In referring to the mitigation advanced on behalf of the appellant, the judge said: [30]

“ It was further submitted that, as stated in my finding, D1 was one of the ring leaders and not the sole ring leader. Cheung Ching Ho was very much in charge of the mainland base, but PW2 and some of the other conspirator witnesses who gave evidence under immunity played important roles in the conspiracy.”

40.  Having referred in some detail to the judgments of this Court in HKSAR v Cheung Sing Chi & Another [31] and HKSAR v Mo Yuk Ping [32], the judge said: [33]

“ The first obvious difference that we see between our case and the 2 cited cases is that our case involves a cross border element. The warrant pushing scheme was moved to mainland China to avoid detection by the Hong Kong authorities. Even when they were in China, they moved around different premises to avoid detection by mainland Chinese authorities.”

41.  Then, in sentencing the appellant, the judge said he had taken: [34]

“ ...into consideration on the one hand the scale of the schemes, the cross border element, the sophistication of the schemes, and on the other hand the mitigating factors put forward by D1.”

The Court of Appeal

42.  In the course of this Court’s judgment in respect of the appellant’s application for leave to appeal against conviction from his convictions in the first trial, Stock VP noted that the court was also seized of an application by the Secretary for Justice for review of the sentences imposed on the appellant.  Having allowed the appellant’s application for leave to appeal and quashed his convictions on all the charges on which he had been convicted, Stock VP said “The applications for review of sentence fall away.” However, notwithstanding that statement, he went on to note that:[35]

“ ...the argument in relation to review of sentence raised the question whether as a general approach the courts have accorded proper recognition to the principle of double jeopardy. The suggestion was that it is (a) factor which should be accorded more than a token recognition.”

43.  It is to be noted that the circumstances of the appellant at the time of sentencing in his retrial were similar in all material respects to the applicant in HKSAR v Chan Kau Tai. In their respective retrials the appellant and the applicant in that case, save for one charge/count, each was convicted of the same charges/counts as they had been at the first trial.  In the case of the appellant, he was not retried on the perverting the course of public justice charge, whereas in his retrial the applicantwas acquitted of Count 1, namely of accepting an advantage of $1.5 million.  At the first trial, he had been sentenced to 4 years’ imprisonment for that count. The judge ordered that all the sentences of 3 years’ imprisonment imposed in respect of each of the other counts were to be served concurrently, but consecutively to the sentence imposed on Count 1.

44.  In consequence, in the judgment of the Court in HKSAR v Chan Kau Tai Stuart-Moore VPsaid of the task of sentencing the applicant on his conviction in the retrial that “Totality had to be looked at afresh.” [36]

45.  In his judgment in HKSAR v Tse Hoi Pan, Dominic Stuart-Moore VP reiterated that to be the case: [37]

“ There was, however, an important distinction to be drawn between the situation which had arisen in Chan Kau-tai and the present case. In the former case, the totality of sentence had to be looked at afresh as the jury at the retrial had acquitted on two out of the nine counts on the indictment. In the instant case, sentencing was on almost precisely the same basis as it had been in the earlier trial.”

46.  In HKSAR v Tse Hoi Pan, Dominic the applicant had been sentenced on retrial to 6 years’ imprisonment for rape.  At his first trial he had been sentenced to 5 years’ imprisonment for that offence.  Stuart-Moore VP said that the issue that arose was “...whether the judge had properly exercised his discretion, on the facts of this case, to increase the sentence.”  He went on to note of the judge that “In his opinion a starting point of ‘no less than 6½ years’ was applicable for this offence but as this represents an increase of sentence, the judge moderated this to a sentence of 6 years’ imprisonment.” [38]

47.  In the result, Stuart-Moore VP said “We are satisfied that the judge took the correct approach to sentence in this case”.[39]  Of the sentence imposed by the judge in the first trial, Stuart-Moore VP said that it“...was manifestly inadequate having regard to all the circumstances, whether or not the judge at the retrial was minded to describe it as such.” [40]

48.  Mr Duncan answered in the negative the Court’s enquiry as to whether or not any of the cases to which he referred the Court were cases in which, in addition to an appeal against sentence, there was also an application for review of sentence.  However, as is evidenced by the observations made by Stuart-Moore VP in HKSAR v Tse Hoi Pan, Dominic the issue of the appropriateness of sentence, be it manifestly inadequate or otherwise, is obviously relevant to sentencing at a retrial.

49.  The fact that the Secretary for Justice had been granted leave to seek review of the sentence imposed on the appellant in the first trial put the appellant on notice that issue was taken that the sentence was manifestly inadequate.  In particular, the appellant was put on notice that it was asserted that the sentence was manifestly inadequate having regard to his role in the conspiracy; its duration and its scale and sophistication; the amount of money involved; the cross-border element and the effect on Hong Kong’s reputation as an international finance centre.

Profit of the conspiracies

50.  Of the amount of money involved, it is to be noted that at the first trial the judge said merely that it involved “making millions of dollars in profits”.

Table A

51.  At the retrial, it was an admitted fact that Table A accurately set out various facts in respect of “...54 trading accounts opened with 30 brokerage firms by 44 individuals and one company limited.” [41]  Table A set out the 54 accounts by reference to, inter-alia: [42]

•   account holder name;

•   brokerage firm and account number;

•   the date the account was opened;

•   the date and amount of money deposited into the account; and

•   the date and amount of the money withdrawn from the account.

Closing submissions

52.  In his written closing submissions for the prosecution Mr Mitchell contended that, by the evidence of PWs 1 to 8 and PW 10 it had been proved that “...account nos. 16, 17, 24, 28, 33, 35, 36, 45, 50, 52, 53 were dummy accounts used in pushing warrants.” [43]  Having noted that those witnesses had identified the “numbers of 27 brokerage firms” [44], it was contended that there was “...a total of 27 brokerage firms where there were dummy accounts”.[45]  In the result, it was submitted that “The distinct trading pattern leads to the irresistible inference the 54 accounts...were being used as part of the warrant pushing operation (for details, please refer to Annex 1).” [46]  Annex 1 set out a detailed analysis of the various accounts, including the date the accounts were opened, the pattern of trading in derivative warrants, in particular the trading in the period considered by Ms Stella Fung, the withdrawal of monies and the cessation of activities in the accounts.[47]

53.  For his part, Mr Bruce took issue with the suggestion that, from the pattern of trading in the dummy accounts listed in Table A, the accounts could be identified as accounts used in the various conspiracies.  Of that, he said that “...is largely an element of guesswork or speculation and simply ignores any reasonable alternatives, in the absence of direct evidence showing actual use of that account.” [48]  Further, he submitted that “...it would be wholly improper to simply assert that all withdrawals were definitely designated wholly or in part for the PRC scheme.” [49]  Finally, he contended that it was not permissible to infer that the appellant was the beneficiary of the withdrawals of monies from the various accounts.  The evidence was “...at most equivocal, but at worst and in truth again simply hearsay by Cheung Ching Ho.” [50]

54.  In Annex 1 to his submissions, Mr Bruce took issue with the prosecution analysis of the derivative warrants trading in the dummy accounts.  He submitted that, apart from the testimony of PWs 1-6 and PW 9, there was no evidence led by the prosecution identifying any of the dummy accounts.  He refuted the prosecution contention that the trading pattern of the accounts was necessarily for pushing warrants.  Trading in the various accounts sometimes occurred in other warrants and sometimes in stocks as was set out in his Annex 1.

Sentencing

55.  On 9 January 2015, in advance of sentencing at the retrial, the judge invited the parties “to see... if there is a rough estimation of the profits generated for the court’s reference.”

56.  As a result, in advance of the hearing of 30 January 2015, the prosecution provided the judge with three Annexes, A-C, which addressed the ‘Summary of Deposits & Withdrawals of Securities Accounts’ (Annex A); ‘Cash deposited into banks and found in safes and safety deposit boxes’ (Annex B); and ‘Profit made by the group in the trading of four derivative warrants (DWs) during the review period calculated by Ms Fung Sau-hong (PW29)’ (Annex C).

Annex A

57.  Annex A was based on Table A and provided the aggregate total of the amount of money deposited into and withdrawn from each of the 54 accounts.  In addition, it provided the aggregate total of all deposits into ($203,977,891.05) and withdrawn from ($453,767,118.25) the 54 accounts.

58.  For its part, the defence provided the judge with a four-page written submission in which issue was taken with the use of the material contained in the three Annexes.

59.  In submissions to the judge in advance of mitigation, Ms Lo referred to the three Annexes, describing them as tables, and explained their content:[51]

“ MS LO: ... table A shows the summary of deposits and throws in the various dummy accounts. On page 2 of table A, you would see the total amount of deposits and total amount of withdrawal, which amounts to over 200 million and over 400 million respectively. That really -- the prosecution submission is that that really shows the extent of the whole operation.

...

MS LO: Table B is all the cash found in the various safes of the defendant and his wife, and in the bank accounts, or accounts related to them.

...

MS LO:  It all adds up to over $150 million.  And table C shows the profits restricted to only four warrants, and restricted, as your Honour well know, to a very short period of time.”

60.  Of the judge’s request for a figure reflecting the appellant’s profits from the scheme, Ms Lo said: [52]

“ Your Honour...knows very well the -- how the scheme operated, and really, by the nature of the operation itself, the exact amount of profits, again, by the defendant, cannot be ascertained.” [Italics added.]

61.  Nevertheless, Ms Lo went on to say:[53]

“ But these figures in tables A, B and C really showed the extent of it, and if we would like to have a comparison, table C is a very good illustration, because for only four warrants, for only a limited period of time, they were able to make over $5 million profit out of it.

And I would also say table B, cash found with -- under the defendant’s control.  By paragraph 274 of your Honour’s reasons of verdict, they really are linked to the operation, they could be regarded as at least part of the profits that the defendant made.”

62.  For his part, in his written submissions Mr Bruce said of Annex A:[54]

“ ...the use of these figures for sentencing would be wholly arbitrary and unreliable as (a) basis in inferring the amount of criminal profits from these charged conspiracies.... Clearly without further evidence, the prosecution cannot identify the precise amount of profit and all loss made from the charged conspiracies.”

63.  In respect of Annex B, namely cash and cash transactions, Mr Bruce said: [55]

“ The Defence does not agree with the sums of withdrawals or profits represent the profits of the charged conspiracies, or that they represent in any way the profits received by the Defendant as a result of the charged conspiracies. There is simply insufficient evidence to prove beyond reasonable doubt that the figures were correct.”

64.  Of Annex C, Mr Bruce invited the judge to note that Ms Fung’s calculation that an aggregate profit of about $5.1 million had been made in the trading of four derivative warrants had been based on an analysis of trading in short-term specific periods of less than one month. [56]  A calculation of the overall profits/losses required “...full calculations on all the periods for all the suspected traded warrants.”

65.  In his oral submissions in mitigation, Mr Bruce said of the issue of the profits made by the appellant:[57]

“ I am glad to see that my learned friend accepts that it is not capable of quantification so far as the profits, alleged to be made by my client from this scheme. That large amounts of money may or may not have been moved through all of these accounts, is something which I do not propose to run away from.

But I say this.  First of all, we haven’t heard from all of the people in those alleged dummy accounts.  They haven’t come to this court to speak to these matters.  It was never admitted that it was true, we admitted there were these accounts, there is no question of that.”

66.  In his determination of the profits generated by the scheme and, in particular the profit made by the appellant, the judge said that he had regard to Table A, adduced into evidence in the Admitted Facts, and to the Annexes A-C produced to him in advance of mitigation.  Then, the judge said: [58]

“ When referring to those 4 selected DWs, the profit was about 5.1 million, however, one may easily tell from all the account statements that there were many more other DWs the group had traded in where the total withdrawals from those accounts were about 450 million and that the total cash found in bank deposits and deposit boxes were about 150 million.”

67.  Of the submissions made on behalf of the appellant, the judge said:

“ On those figures, I note that the defence also submitted that there were other unrelated personal investment in those dummy accounts and that there were other third parties in their associated companies...”

68.  However, the judge rejected the submission:

“ ...nonetheless, the personal investment were comparatively very insignificant and so were the revenue generated from those associated companies as shown in their respective tax returns.”

69.  In the result, he concluded: 

“ Thus it would be a fair approach to consider the above level of amount as the profit generated by the group as well as the profit that went to the defendant.”

The ambit of the charges

70.  As noted earlier, the Particulars of Offence of each of the four charges alleged the appellant conspired with others to defraud in respect of derivative warrants issued by the Issuers of the derivative warrants stipulated in each of the four charges were respectively:

Calyon derivative warrants,between 1 September 2005 and 27 May 2008;

Citigroup derivative warrants, between 1 January 2007 and 27 May 2008;

Standard Bank derivative warrants, between a date unknown at the end of 2007 and 27 May 2008; and

Dresdner derivative warrants, between a date unknown at the end of 2007 and 27 May 2008.

71.  Clearly, the impugned trading was in all derivative warrants issued by those four named companies in the stipulated period of the respective conspiracies.  By contrast, Ms Stella Fung, gave evidence in respect of trading in four stipulated derivative warrants only, one each from the four stipulated Issuers of derivative warrants, and only for limited periods of less than one month during the overall period of the alleged conspiracies.[59]  She calculated the overall profit made in trading those warrants over that period of time was $5,149,195. [60]  So, that presented merely a narrow snapshot of a much larger picture of impugned conduct.

72.  In his Reasons for Verdict, having noted that there were 54 alleged “dummy accounts” [61], the judge said that the immunised witnesses PWs 1-6 and PW 9, together with PWs 7, 8 and 10 had “...confirmed in their evidence that the account  nos. 16, 17, 24, 28, 33, 35, 36, 45, 50, 52, 53 were dummy accounts used in pushing warrants.” [62]  Earlier, the judge noted that account # s 1-3 stipulated in Table A were accounts held in brokerages in which those three accounts were the only accounts trading in the derivative warrants the subject of Ms Stella Fung’s enquiry in the time period of that investigation.  Also, he noted that “Those were all day-trade transactions with no DW’s held overnight.”  That was the same pattern of trading that Ms Stella Fung had observed in all of the accounts in which the stipulated derivative warrants were traded in the period of about a month that she examined in the trading of those particular warrants issued by the four warrant Issuers.[63]  Further, in late May or June 2008 the full balance of the monies in those accounts were all withdrawn.[64]  The judge went on to note:[65]

“ For the rest of other 27 brokerage firms, there were other 51 accounts with trade transactions only in the above selected DWs during the specified period, and invariably they were all day-trade transactions and most of which had the balance withdrawn in June 2008. Table A attached to AF1 showed all these accounts with respective deposits and withdrawals.”

73.  Of the submissions of Mr Bruce as to the weight to be attached to that evidence, the judge said: [66]

“ the defence criticized that without the direct evidence of all the dummy account holders nor from all the hands, the alleged conspiracies to such a scale merely remained the prosecution’s theory or proposition”

74.  The judge rejected the submission determining:

“ ...however, if one may go through the detail trading transactions of all these dummy accounts, one must find it so surprising or astonishing to see the similarities or matching of those selected DWs regarding the volume, focus or concentration of active trading particularly on the respective dates or period of time, not to mention it was mostly the case that these dummy accounts were also the only account in those brokerage firms with trades on the selected DWs and had the full balance been withdrawn in May or June 2008 in quite some accounts, so that it must go without saying of their participation or involvement in the conspiracies as stated. (Also see the full analysis of dummy accounts in Annex 1 of the Prosecution Closing Submission).” [Italics added.]

75.  From the account statements, the existing balances in the respective accounts at the time of the commencement of the separate conspiracies were readily apparent.  None was of any significance, having regard to the difference between the deposits and withdrawals in those accounts during the periods of the conspiracies.  As the judge noted, following the arrest of the appellant on 28 May 2008, trading in the derivative warrants of the four stipulated warrant Issuers in many of the 54 accounts ceased and/or account balances were withdrawn.

76.  The aggregate amount of deposits into and withdrawals from the accounts in the names of the immune witnesses, PWs 1-6 and those operated by PW 8 and in the name of PW 10 described in Annex A were stated to be:

Account Name & #	Deposits (HKD$)	Withdrawals (HKD$)
Wong Ho Yin (PW1) Sanfull Securities Ltd Account # 45	8,101,000	8,168,583.21
Chan Wing Tung Tony (PW2) Hantec Securities Co. Ltd	1,130,000	3,406,000
Account # 24
Leung Yiu Kei (PW3) Head and Shoulders Securities Ltd Account # 28	200,000	423,090.25
Leung Yiu Kei (PW3) Winfaith Securities Ltd Account #53	100,000	6,106,710.21
Lee Wai Ming (PW4) Vermont Securities Co. Ltd Account # 50	1,237,860	9,724,893.87
Lee Wai Tung (PW5) GOA Securities Ltd Account # 17	0	7,474,278.52
Mak Kai Tong (PW6) Get Nice Investment Ltd Account # 16	300,000	7,600,000
Cheung Lai Fan (PW7) Victory Securities Ltd Account # 52	300,339.13	2,822,682.54
Yang Aizhen (PW8) Operated by Wong Lok Him Account # 33	nil[67]	2,989,617.87
Tse Tai Tai (PW10) Newpont Securities Ltd Account # 35 & 36	200,000	5,900,000

77.  In his summary of the evidence, the judge noted that in his evidence Leung Yiu Kei (PW3) had described the profits made in his trading of derivative warrants issued by the four stipulated Issuers in an account in his name with Winfaith Securities [68] in a chart, Annex H: [69]

Winfaith Annex H
For 6/9/07-26/5/08	Total profit	$ 5,292,839
	Total amount hand in	$ 2,900,000
	Total salary & bonuses	$2,393,839

78.  The judge noted that it was Leung Yiu Kei’s evidence that profits made in trading derivative warrants in the account had been transferred to his HSBC account from which he made withdrawals in cash in order to make payments to CCH.

79.  Although Mr Bruce conceded in his written closing submission [70] that there had been no trading in stocks in that account, in fact one stock, Stella Holdings had been bought on 18 September 2007 and then sold in two tranches on 2 and 3 October 2007. [71]  Those transactions resulted in a debit of $872,697 and credits of $595,594 and $365,904 respectively.  That represented a profit of $88,801.  It is to be noted that the profit in the share transaction was not incorporated into Annex H.

80.  It is clear that the profit generated by the trading of derivative warrants issued by the four stipulated Issuers in the period of the conspiracy in this account alone was greater than the profit of $5,149,195 that Ms Stella Fong’s calculation was made in the snapshot view that she took of trading in stipulated derivative warrants in all the accounts, including this account, in the period in each case of less than one month only.

81.  On the other hand, it is clear from the account statements [72] of Lee Wai Ming (PW4) with Vermont Securities [73] that a significant amount of the monies withdrawn and credited to his bank account came from profits generated by trading in warrants issued by parties other than the four stipulated Issuers and by trading in stocks.  Lee Wai Ming testified that he had traded in the account other than as directed to trade.  He had done so on his own behalf. [74]  The aggregate of the profits generated in that trading, prior to his arrest on 28 May 2008, was $2,714,382.  So, from the total withdrawals of $9,724,893, only $5,772,651 came from profits generated by trading derivative warrants issued by the four Issuers.

Other dummy accounts

82.  As noted earlier, the judge determined that trading in derivative warrants issued by the four Issuers in other dummy accounts, to which no witnesses testified directly in respect of the trading, was nevertheless part of the conspiracy.  One of those accounts was in the name of Yan Man Yiu, Alfred.[75]  Annex A, stated that during the period of the conspiracies $17,030,000 had been withdrawn from that account.[76]  Further, that trading in those derivative warrants had begun without any initial deposit being made.  As Mr Bruce conceded in Annex 1 of his closing written submissions, the trading in derivative warrants was only in warrants issued by the four Issuers.[77]  Similarly, he was correct to concede that insofar as there was trading in stocks it was in “Few” stocks only.  It is clear that in the approximately 225 pages of account statements [78] which describe many thousands of trades in the stipulated derivative warrants, there are only tens of transactions in shares, which contributed an insignificant amount to the overall profit which was withdrawn from the account on a regular basis.

83.  On the other hand, in respect of trading in the account of Able Fortune Limited with Celestial Securities [79], Mr Bruce had submitted in Annex 1 of his written closing submissions that, apart from trading in the derivative warrants issued by the four Issuers, there was “substantial trading of other warrants”.  It is apparent from the account statements of Able Fortune Limited with Celestial Securities that from the outset there was trading in derivative warrants in the account in both derivative warrants issued by the four Issuers and by those issued by other Issuers. [80]  That pattern of trading continued until the end of May 2007 [81], after which trading in derivative warrants issued by other Issuers became less frequent.  However, it is apparent from the account statements that the profits generated by trading in derivative warrants issued by other Issuers was greater ($5,111,760) than the profits generated by trading in derivative warrants issued by the four Issuers ($1,383,962).  So of the aggregate withdrawals from the account of $7,342,152 less than 25% was attributable to trading in derivative warrants issued by the four Issuers.

Cash

84.  In his review of the evidence of the prosecution witnesses, who testified that they had traded in the dummy accounts, the judge noted the pattern in their evidence that they were required to withdraw the profits of the trading in cash which was passed over to CCH. [82]  Further, some of those witnesses described taking large sums of cash to Macau, which they then handed over to CCH. [83]  Of that evidence, the judge said: [84]

“ The crew said they were given cash taken to Macau for CCH to pay to that person. From the travel movement records as admitted in para 293 of AF1, CCH went with the crew to Macau about once per month in 2006 until CCH said it was no longer convenient. Surprisingly and coincidentally by referring to Defendant’s travel record as also shown in Annex J with the Crew, Defendant also went to Macau on exactly the same dates from February to December 2006 on 11 occasions. They also came back to Hong Kong on the very same or the following day.”

85.  Then, the judge considered the significance of the evidence of cash found in the possession of the appellant and his wife, together with the deposit of cash to their respective accounts and to related accounts:[85]

“ Moreover, there were also substantial cash deposits into various bank accounts under (the) Defendant and his wife’s control (as shown in Annex 2 & 5 of the Prosecution’s Closing submission) that in 2006 about 1.4 to 3.7 Million cash deposited each month, then it went up(.) (I)in October 2007 the amount increased to 7.7 Million which was consistent with the facts that more DWs were pushed and involved later on. All in all, the aggregate sum of cash deposited was over 110 Million (about 40 Million in Defendant and with wife’s joint account and 70 Million in wife and associated companies’ accounts, see Annex 5). Such sum went far in excess of the declared income of the Defendant and his wife and all their associated companies but they were just in line with the vast sum of cash generated from each dummy account for millions as seen in AF1 Table A.” [Italics added.]

Conclusion

86.  As noted earlier, having received written and oral submissions on the issue, the judge determined that it was “a fair approach” in sentencing the appellant to consider the four conspiracies to defraud have generated profits of about $450 million and that the appellant had benefited to the extent of receiving about $150 million of those profits.  The former rounded-off figure obviously resonated with the sum of $453,767,118 stipulated in Annex A, provided to the judge by the prosecution, as being the aggregate of all the monies withdrawn from all 54 accounts in the period of the conspiracies.  The latter rounded-off figure resonated with the aggregate of $150,566,000 described in Annex B as having been found as cash in the appellant’s safes, the deposit box of his wife and deposited in cash into his bank accounts and those of his wife and connected companies or persons.

87.  Given that Ms Lo had conceded in the course of oral submissions prior to mitigation that “the exact amount of profits...cannot be ascertained”, it is surprising that the judge stated that he proceeded to sentence on the basis of a specific monetary figure, $450 million, as the profit generated by the conspiracies.  Also, as noted earlier, the judge had received evidence from a witness, Lee Wai Ming, to the effect that he had traded in shares and other derivative warrants on his own account in his account with Vermont Securities.  That trading accounted for about 25% of the aggregate of the monies withdrawn from that account.  Furthermore, it was clear from the account statements of other accounts that there was similar trading in those accounts, namely other than in derivative warrants issued by the four Issuers.

88.  On the other hand, in all the circumstances of the case the judge was entitled to proceed to sentence on the basis that all the cash found in the possession of the appellant and his wife, together with the cash deposits made to their bank accounts and related bank accounts during the overall period of the conspiracies, were the proceeds of the conspiracies, which he had “orchestrated”. [86]

89.  We are satisfied that the appropriate approach to the issue of the overall profit generated by the conspiracies is to give the appellant credit for the uncertainty as to the exact figure, but nevertheless having regard to the overall evidence it is clear that several hundred million dollars of profit were generated by the conspiracies.

90.  As the judge noted, the conspiracies encompassed the overall period of September 2005 to May 2008, a period of about 2½ years.[87]  Moreover, as the Particulars of Offence of the four charges stipulate, multiple co-conspirators had been recruited to the various conspiracies.  The judge was entitled to have regard to the role played by the appellant, namely as orchestrating the conspiracies.  Similarly, he was entitled to have regard, as he said he did, to the “...scale and sophistication of the offences committed, very substantial sum of money involved and the profit made.”  There were tens of thousands of fraudulent transactions.  The criminality was well organised, persistent and profitable.  Moreover, it undermined the reputation for integrity of the stock market in Hong Kong and the conduct, with its effects in Hong Kong, had its origins in the Mainland.

91.  In the result, on the basis that the conspiracies had generated several hundred million dollars worth of profits, from which the appellant had benefited to the tune of $150 million, we are satisfied that the judge was correct to stipulate a starting point for sentence of 6 years’ imprisonment.  However, given that he was sentencing in a retrial, the judge ought to have explained why it was that he stipulated that as the starting point for sentence, having regard to the fact that the judge in the first trial had stipulated sentences for these offences of 3½ years’ imprisonment.  As noted earlier, the judge in the first trial was dealing with the appellant not only on the four charges of conspiracy but also on a charge of conspiracy to pervert the course of public justice, in consequence of which imposed an overall sentence of 4 years’ imprisonment.

92.  For our part, notwithstanding the judge’s failure to address the issue, we are satisfied that the sentences of imprisonment imposed by the judge in the first trial for the same offences of which the appellant has been convicted in this trial were manifestly inadequate.  As the judge observed, although he dealt with the cases in considerable detail, the judgments of this court in HKSAR v Cheung Sing Chi & Another and HKSAR v Mo Yuk Ping did not address the issues of the sentences imposed on the appellant in the District Court.  The appeals were against conviction only.  In those circumstances, the approach of the two District Court judges to sentence in factual circumstances, which were quite different from those obtaining in this appeal, was of no assistance whatever to the judge.

93.  The overall discount that the judge afforded the appellant from the sentence of 6 years’ imprisonment which he took as a starting point, namely 1½ years’ imprisonment, amounted to a discount of 25% from that starting point.  On any view, that was a most generous discount.  It is to be noted that the judge made specific reference to the fact that he was sentencing in a retrial. [88]  In the result, we are satisfied that the sentences of 4½ years’ imprisonment, which the judge imposed on the appellant for each of the four charges, were entirely appropriate.

94.  For the reasons that we have given, we refuse the appeal against sentence.