HKSAR v. TABAGUA VALERIAN also known as TABAGUA VALERYAN

DCCC 130/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 130 OF 2014

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REASONS FOR SENTENCE

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1.  I convicted the Defendant, Tabagua Valerian, also known as Tabagua Valeryan, after trial of 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 Organised and Serious Crimes Ordinance, Cap 455 and section 159G of the Crimes Ordinance.

2.  The trial before me was a retrial. 

3.  The Defendant was a Russian businessman at the material times. 

4.  I found that the Defendant attempted to deal with €332,432 which were proceeds of a telephone fraud practised on a Dutch company, Satfa BV.  On 15 August 2013, the Defendant went to the branch office of HSBC at Emperor Group Centre in Hennessy Road, Wan Chai, and attempted to make a telegraphic transfer of €332,432 from the bank account of MNT, a company wholly owned by the Defendant, to a bank account of a bank account in Estonia. 

5.  The moneys that the Defendant attempted to deal with were proceeds of a telephone fraud.  As a result of the telephone deception, the Chief Financial Officer of Satfa BV, transferred €150,000 and €200,000 to the bank account of MNT held with HSBC on 8 August 2013.  €149,983.20 and €199,983.20 were deposited into HSBC account of MNT after deduction of transmission charges.  The moneys that the Defendant attempted to deal with on 15 August 2013 represented the total amount received by MNT minus 5 per cent. 

6.  The Defendant has a clear record in Hong Kong.  He was a successful businessman in Russia, he owns many companies in Russia.  He holds 20 per cent share of Transberia LLC, a company in Russia specialised in road fences and noise shields.  He wholly owns VIP-Pack, a Russian company set up by the Defendant.  VIP-Pack is a major supplier of capping devices designed by the Defendant for bottling of wine and vodka in Russia.  At the material times, the Defendant also owned MNT, the account holder of HSBC account in question.  MNT was used as a holding company for DBPP.  DBPP was in the business of manufacturing bottling caps designed by the Defendant. 

7.  The businesses of the Defendant suffered greatly after the arrest of the Defendant.  DBPP had never been a profit making venture, it was closed down not long after the Defendant’s arrest.  The turnover of other businesses of the Defendant also shrunk greatly after the Defendant’s arrest.  The Defendant was unable to attend to his businesses as he was either in custody or he had to stay in Hong Kong after he was put on bail.  Mr. McGowan told me the turnover of VIP-Pack suffered 90 per cent drop whereas the turnover of Transberia dropped by half. 

8.  The Defendant had been remanded in custody for some three months before he was given bail.  He had been tried and convicted of the present offence, before his conviction was set aside and a retrial ordered, he had been in custody for eight months.  In other words, the Defendant had been in custody for a total of 11 months.

9.  Mr. McGowan told me the Defendant is now 54.  He had received university education in Russia.  He suffers from bronchitis and is on medications. 

10.  The Defendant, a married man, lived with his wife and three children, aged 5, 9 and 16 in Russia.

11.  The wife of the Defendant, in her mitigation letter, pleads that the case has affected not only the family but also the families of those under the employment by the Defendant’s companies.  There are signs that the Defendant’s absence is beginning to affect the upbringing of Valerianovna, the youngest daughter of the Defendant. 

12.  Mr. McGowan drew my attention to the mitigation letters written by the business partners/associates of the Defendant.

13.  For the present predicate offence in question, Mr. McGowan drew my attention to the tariffs set down in Cheung Mee Kiu.  Mr McGowan also drew my attention to HKSAR v Cai Zhaorong CACC 365/2011.  In Cai, the Court of Appeal approved the practice adopted by the sentencing judge, Cai was a theft case which did not involve a breach of trust and the sentencing judge imposed a term of imprisonment which was half of what would have been imposed had there been a breach of trust.  Mr. McGowan submitted that as the telephone fraud did not involve any breach of trust, given the amount deceived, the starting point for the telephone fraud practised on Satfa BV should be half of 5 to 10 years’ imprisonment, closer to half of 5 years, given the amount.

14.  Mr. McGowan drew my attention to the sentencing considerations set out in HKSAR v Boma [2012] 2 HKLRD 33.  For the offence in question, Mr. McGowan submitted that the Defendant had no knowledge of the fraud in question.  There is no evidence that he had anything to do with the Estonian bank account.  There is no evidence that the Defendant had anything to gain from the offence he committed.  Mr. McGowan submitted that as all the proceeds had been recovered by Satfa BV, the victim had suffered no loss in the end.  The offence involved only one single attempt by the Defendant on 15 August 2013.

15.  Mr. McGowan submitted that the Defendant had to go back to custody for the third time if he is sentenced to prison again.  For the reasons he advanced, he urged me to pass a merciful sentence on the Defendant.  He submitted that the present case is one that any imprisonment term that the court thinks appropriate, ought to be suspended.

16.  I have borne in mind all the matters brought to my attention by Mr. McGowan.

17.  The offence of attempting to deal with property known or believed to represent proceeds of an indictable offence is a serious offence.  The maximum penalty is one of 14 years’ imprisonment. 

18.  I recognise the importance of deterrence.  I accept that the 11 months’ incarceration has certain deterrent effect on the Defendant, who had a hitherto clear record, but the sentence I am to pass, apart from having an individual deterrent effect on the Defendant, should also have a general deterrent effect on others. 

19.  The Defendant attempted to transfer €332,432, a little under HK$3.5 million, to an Estonian bank account on 15 August 2013.   Though the case concerned one single act to transfer the proceeds on one single day, the amount that the Defendant sought to transfer was substantial.  There was an international element to the offence.  The proceeds came were transferred to the HSBC account of MNT by a Dutch company and the Defendant travelled to Hong Kong to deal with the transfer. 

20.  Though there was no evidence that the Defendant had knowledge of the telephone deception, he had reasonable grounds to believe that the moneys received by MNT from Satfa BV were proceeds of indictable offence.

21.  It is true that there is no evidence that the Defendant would be remunerated for the transfer of moneys, but there is evidence that Igor was indebted to MNT at that time.  Any monetary gain by Igor would put Igor in a position that would enable him to repay MNT the debt he owed.

22.  In my judgment, the scheme to launder the proceeds was a sophisticated one; a contract was made up and mentioned in the Telegraphic Transfer Application to account for the transfer (P11).  The Defendant played a pivotal role in the attempt to launder the proceeds as he was the sole signatory of the HSBC account of MNT and he was the one who appeared at the branch office on 15 August 2013. 

23.  I am sympathetic to the family members of the Defendant, especially the little daughter who, I am sure, is longing for the return of her father.  Family and business hardships suffered as a result of this case, however, cannot count as a mitigating factor.  The Defendant should have thought about the welfare of his family members before he committed the offence.

24.  The time that the Defendant had spent in custody would count towards his sentence.

25.  All matter taken into consideration, in my judgment, a starting point of 3 years’ imprisonment is appropriate. 

26.  I allow a 4 months’ reduction because of the Defendant’s clear record and his positive good character. 

27.  I can see no other mitigating factor that can enable me to further reduce the sentence.

28.  For the reasons given, I sentence the defendant to 32 months’ imprisonment.

29.  Mr. McGowan has said everything he could for the Defendant, but all the matters urged on the Defendant’s behalf by Mr McGowan, whether taken individually or collectively, cannot constitute humanitarian ground or exceptional circumstances to justify the suspension of the prison term. 

30.  The 32 months’ imprisonment shall take effect immediately.