HKSAR v. FUNG HING WAI, VICTOR AND ANOTHER

DCCC820/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 820 OF 2010

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

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

Reasons for Sentence

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

1.  Both Defendants were charged jointly with three conspiracy counts, all alleging that they, as agents, conspired together to use documents to deceive their principal, contrary to sections 9(3) and 12(1) of the Prevention of Bribery Ordinance, Cap. 201, and sections 159A and 159C of the Crimes Ordinance, Cap. 200. They pleaded guilty to counts (1) and (3) but pleaded not guilty to count (2). The prosecution then applied for that count to be left on the court file and not to be proceeded with without the leave of the court. It was so ordered.

2.  The facts which the Defendants admitted disclosed that they were the employees of Federal Express (Hong Kong) Limited (“FedEx”). The 1st Defendant was the Operations Coordinator at the Chai Wan Station while the 2nd Defendant was the courier at Western Station. Since June 2007 and January 2008, the 1st Defendant used two companies, namely Leader Trading Company (“LTC”) and Well Smart International Trading Limited (“WSIT”) respectively to conduct co-loading business with FedEx. The two companies made profits by earning the difference in the rate they charged their customers and the rate that was charged by FedEx.

3.  Later, the 1st Defendant asked the 2nd Defendant to join him in the business. The 2nd Defendant agreed and he then persuaded existing FedEx customers to use the services of LTC and WSIT instead of engaging FedEx.

4.  In January 2008, the 2nd Defendant successfully asked Lydesign Company Limited (“LCL”) to deliver their parcels through LTC rather than through FedEx. Moreover, in order to increase their profits, the 1st Defendant agreed with the 2nd Defendant to understate on the relevant FedEx bills the weights of the parcels. After the 2nd Defendant had collected the parcels from LCL, he would give to LCL the sender’s copy which contained the correct weights of the parcels. However, the 2nd Defendant would then understate the weights on all the other copies of the relevant bill and would send the parcels for the 1st Defendant’s processing.

5.  Between January and December 2008, the 1st Defendant and the 2nd Defendant had fraudulently understated the weights of LCL’s parcels in 47 transactions with the total actual weight of 3,258.5 kg being understated to 330.2 kg. Since it was FedEx’s practice to conduct random inspection on just a few of the parcels collected, the bulk of the parcels with the understated weights were sent unnoticed. As a result, FedEx suffered a loss of HK$270,417. This is the subject matter of count 1.

6.  In June 2007, the 2nd Defendant successfully persuaded Zen Tailor (“ZT”) to deliver their parcels through WSIT instead of FedEx. Using the same modus operandi, the 1st Defendant and the 2nd Defendant, between June 2007 and September 2008, had fraudulently understated on the relevant FedEx bills the weights of the parcels sent by ZT in 93 transactions with the total actual weight of 2,115.2 kg being understated to 240.1 kg. As a result, FedEx had suffered a loss of HK$206,901. This is the subject matter of count 3.

7.  It was admitted that both LCL and ZT were not aware of the understatement and they settled the bills based on the actual weights of the parcels. It was further admitted that the 2nd Defendant had received a total of HK$153,317 as a result of these fraudulent activities.

8.  Both the 1st Defendant and the 2nd Defendant have a clear record.

9.  The 1st Defendant is aged 41 and is married with 2 children aged 15 and 13. He is the bread-winner of the family and he had worked for FedEx for over 18 years. However, owing to the present offences, he has now lost his job with FedEx. It was said that in 2005, the 1st Defendant lent a substantial sum to his elder sister by drawing cash from his credit cards. Subsequently, as he was unable to repay the debts, he therefore committed the present offences. In the course of mitigation, a bundle of letters written by the 1st Defendant’s ex-colleagues, his family members and his friends were submitted to the court. All the letters described the 1st Defendant as a responsible and caring person who was devoted to his work and who looked after his family well. The 1st Defendant’s ex-supervisor also had a high regard for his abilities, saying that he was a reliable and conscientious subordinate.

10.  After the 1st Defendant had been sacked by FedEx, he got himself the job of a night-shift taxi-driver. His wife, who had been a house-wife for a long time, has also found herself a job as a health-care assistant. In mitigation, it was said that the couple have now saved a sum of HK$60,000 which could be used for restitution.

11.  The 2nd Defendant is aged 33 and is single. Originally, he planned to get married in October but owing to the present offences, that did not materialize. The 2nd Defendant is the youngest son in the family and he lives with his aged parents, both of whom do not enjoy good health and rely on the 2nd Defendant to look after them.

12.  It was said that the 2nd Defendant committed the present offences as he wanted to get more money for his mother to conduct a knee operation. After he had been fired by FedEx, the 2nd Defendant has got himself another job in September 2009. The court was told that his current employer would continue to employ him if a community service order is imposed or, if not, after his release from prison. Further, the prosecution has confirmed that the 2nd Defendant had given a statement to the ICAC which implicated the 1st Defendant in relation to count 3. As a result, the charge was amended and the 1st Defendant was added as the co-accused. In short, the prosecution accepted that the 2nd Defendant had given some useful assistance to the authority. I would therefore give him credit for this when considering his sentence.

13.  In the course of mitigation, Ms. Lau for the 2nd Defendant also informed the court that a solicitor’s cheque in the sum of HK$153,317 had been prepared and would be given as restitution. When asked why such was not done earlier, Ms. Lau explained that it took them some time to have the sum agreed with the prosecution. Letters which begged for leniency on behalf of the 2nd Defendant were also received from a few District Council and District Rural Committee members who mentioned the voluntary work undertaken by the 2nd Defendant. All of them stated that the 2nd Defendant is a responsible and helpful person and all said that he only succumbed to the temptation in order to earn some quick money to help his mother to perform the knee operation.

14.  I should state at the outset that on the facts admitted by the Defendants, no corruption and no bribery were disclosed. If these elements were present, no doubt, the offences would be viewed even more seriously as the court has repeatedly stressed the seriousness of commercial corruption.

15.  Nonetheless, this case, as it now stands, is still a serious matter. The present offences did not only involve a one-off fraud practised on the Defendants’ principal, FedEx, it was a sustained conspiracy and a fraud practised over a period of 1 year in respect of count 1 and a period of 15 months in respect of count 3.

16.  The 2nd Defendant, being the front-line courier who collected parcels from the customers made use of his capacity to have the weights of the parcels understated on the relevant bills. He then sent the parcels to Chai Wan Station for processing, no doubt because the 1st Defendant was the Operations Coordinator there and would see to it that their fraud would not be easily spotted. Clearly, both Defendants were aware of FedEx’s practice to have only a few parcels selected for random inspection and they therefore made use of this to grossly understate the weights of the parcels. The facts admitted by them revealed that only about 1/10 of the actual weights were stated on the relevant bills. Given this huge difference in the weights, I am sure that if the 1st Defendant had not abused his position as the Operations Coordinator at the Chai Wan Station and allowed the parcels to go through, the fraud would easily have been detected. 

17.  Moreover, judging from the large number of transactions involved, that is, 47 and 93 transactions respectively, it is clear that the fraudulent practice was carried out rather extensively over a prolonged period of time which eventually led FedEx to have suffered losses of about HK$270,000 and HK$206,000 respectively.

18.  Needless to say, there was a gross breach of trust on the part of the 1st Defendant and the 2nd Defendant. They, pursuant to their secret agreement, submitted to their principal 140 false bills involving two customers and which covered a period of 1½ years in total. As a result, their principal, FedEx, had suffered a total loss of about half a million dollars whereas they themselves had benefited secretly. The 2nd Defendant admitted that the sum he had received from the said fraudulent activities amounted to some HK$153,000.

19.  In my view, for services like that carried out by FedEx, it is important that the trust reposed by the company on the employees is not to be abused. The 1st Defendant and the 2nd Defendant were the ones at the forefront of the operation to see to it that the actual weights of the parcels were stated on the relevant bills and verified. They, however, made use of their capacity as FedEx’s employees, and took advantage of FedEx’s practice to have only a few parcels selected for random inspection, to grossly understate the weights involved which led to the relatively large loss suffered by FedEx.   

20.  After considering the facts of this case, the extent of the offending, and that a gross breach of trust was involved, I have come to the conclusion that an immediate custodial sentence is appropriate and that the community service order urged upon this court by Ms. Lau for the 2nd Defendant is inappropriate. As I have indicated above, those in commercial enterprises almost always have to rely on their employees to carry out work dutifully and honestly on their behalf. A breach of that trust is a matter which the court should view seriously, especially when that breach was not the result of a momentary loss of self-control but that it had occurred over a substantial period of time pursuant to a scheme devised by the defendants to have their employer continually defrauded.

21.  For each of counts 1 and 3, I consider a starting point of 18 months to be appropriate. Although the 1st Defendant could be described as the prime mover of this conspiracy as he was the one who asked the 2nd Defendant to join in the scheme and he was the one who controlled or operated LTC and WSIT, the 2nd Defendant also played an important role in the scheme as he was the one who persuaded LCL and ZT to employ the services of LTC and WSIT instead of that of FedEx and he was the one who went to collect the parcels and who understated the weights on the copies of the relevant bills. Therefore, their culpability is not much different and I take the view that the starting point of 18 months should apply to both of them.  

22.  Insofar as the 1st Defendant is concerned, he has pleaded guilty and he will be given a 1/3 reduction for his pleas. Mr. Tang acting for the 1st Defendant has told the court that a restitution of HK$60,000 would be made. Of course, if such sum has been made at an early stage, it is a much stronger mitigation as it is indicative of the 1st Defendant’s genuine remorse and that he is prepared to face up to his responsibilities and return his ill-gotten gains. In this case, I am, however, prepared to accept that such sum was the hard-earned savings of the 1st Defendant and his wife and therefore it could not have been paid earlier. In this circumstance and in view of the 1st Defendant’s personal background, I would give the 1st Defendant a further reduction of 2 months.

23.  Concerning the reason why the 1st Defendant committed the present offences, I do not see it as warranting any further reduction in sentence. To say the least, financial hardship should not be the excuse for committing a crime. I also notice that these offences were committed between June 2007 and December 2008 whereas the loan said to have been given to the 1st Defendant’s elder sister was made in 2005. In the circumstances, there should have been plenty of time in between for the 1st Defendant to realise his financial difficulties and to find a legal way to have such resolved rather than resorting to the commission of these offences.

24.  Therefore, for count 1, 18 months reduced by 1/3 is a term of 12 months. A further reduction of 2 months to take account of the restitution and his personal background will result in a term of 10 months. The same applies for count 3 which will also produce a term of 10 months’ imprisonment. These two counts relate to separate and different offences and the sentences should in principle be served consecutively. However, applying the totality principle, I consider that an overall term of 15 months for both counts is appropriate. I therefore order that 5 months of the 10-month term in respect of count 3 is to be served wholly consecutively to the 10-month term in respect of count 1, resulting in a total term of 15 months’ imprisonment.

25.  I now turn to the 2nd Defendant. Again, he will be given a 1/3 reduction for his pleas. Further, as he has provided useful assistance to the authority, I am going to give him a further reduction of 2 months for the assistance he rendered. Similarly, Ms. Lau for the 2nd Defendant has told the court that a solicitor’s cheque in the sum of HK$153,317 has been prepared and that sum represents the entire dishonest gains the 2nd Defendant got from the fraudulent transactions. For this restitution and in view of the 2nd Defendant’s personal background, I am prepared to give to the 2nd Defendant another reduction of 3 months. Therefore, for each of counts (1) and (3), the 2nd Defendant is to serve a term of 7 months.

26.  Apart from these matters, I do not see any other reason for reducing the sentence further. The fact that the 2nd Defendant’s mother is in need of an operation should not be used as the excuse for his committing the present offences for there must have been many other ways to seek assistance in relation to that, whether from the government or from other legitimate means. In my view, such cannot be a valid mitigating factor for getting himself engaged in the conspiracy and for committing this prolonged fraud on his employer.

27.  Again, these offences are separate and distinct and the sentences should in principle be served consecutively. However, I would also apply the totality principle and I consider that an overall term of 11 months for the two counts is appropriate in the case of the 2nd Defendant. I therefore order that 4 months of the 7-month term in respect of count 3 are to be served wholly consecutively to the 7-month term in respect of count 1, making a total of 11 months’ imprisonment.