HKSAR v. PALEVICI, IOSIF ADRIAN AND ANOTHER

DCCC 226/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 226 OF 2015

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Reasons for Sentence

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1. Both D1 and D2 pleaded guilty to one charge of conspiracy to steal (Charge 1). D2 also pleaded guilty to two other charges, namely, possession of equipment for making false instruments (Charge 2), and possessing false instruments (Charge 3).

2. This is a credit card fraud case where D1 and D2 used counterfeit cards, namely payment cards, encoded with credit card account data to steal cash from ATM machines in Hong Kong between 17 and 23 July 2014.

3. In the morning of 23 July 2014, whilst D1 was about to depart for the UK via Dubai from the Hong Kong International Airport, D1 was intercepted.  Upon body search, it was found between D1’s trousers and underpants a small packet wrapped with plastic tape and rubber band which contained 76,500 cash Euro currency.  

4. Soon after D1 was arrested in the same afternoon, a police officer witnessed that D2 disposed of a shoulder bag in a rubbish bin.  The abandoned shoulder bag was found to have 481 pieces of payment cards with magnetic stripes, each encoded with credit card account data, and a magnetic card encoder with adapter.

5. Upon body search, D2 was found to possess a notebook computer containing 1,712 sets of credit card account data and cash of HK$50,477.10. 

6. In the interviews with the police, under caution, D1 stated that together with D2, he had used the payment cards to make withdrawals from ATM.  The cash of 76,500 Euro currency seized from him were obtained by such withdrawals.  He alleged that the payment cards were collected in a toilet of a McDonald restaurant under the instructions of an unknown male, and he went there to collect those cards with D2.

7. During the interviews with the police, under caution, D2 stated that he came to Hong Kong with D1 on different flights but on the same day.  D1 told him that he owed some debts in the United Kingdom and therefore D1 came to Hong Kong for stealing by making ATM withdrawals with counterfeit payment cards.  Knowing that the payment cards were false, under the instructions of D1, D2 used those cards to make ATM withdrawals.  After making the withdrawals, he passed the money to D1 and D1 would pay him 2,000 to 3,000 Euro currency as reward.  He had used around 50 counterfeit payment cards to make withdrawals.

8. Immigration records show that both D1 and D2 arrived at Hong Kong on 17 July 2014.  Telephone call records show that between 18 July and 22 July 2014, D1 and D2 had communicated with each other many times.  The hotel records show that D1 and D2 stayed in the same hotel.

9. Forensic examination of the magnetic card encoder and the notebook computer seized from D2 revealed that the magnetic card encoder could read data from magnetic cards to computers and write data in computers to magnetic cards through the utility programme found in the said notebook computer.  All the payment cards seized by the police were counterfeit credit cards. 

10. Bank records of the Hongkong & Shanghai Banking Corporation Limited showed that at the material time, D1 had used 21 false payment cards to conduct a total of 44 transactions.  D2 had used 20 false payment cards to conduct a total of 42 transactions.  There were a total of 39 forged cards being used, as two false cards were used by both D1 and D2.

11. 86 attempts had been made by D1 and D2 intending to withdraw a total of HK$242,600 from the ATM machines.  Among the total attempted withdrawals, D1 and D2 successfully obtained HK$115,200.

12. Both defendants are Romanian nationals.  They have a clear record in Hong Kong.  They are single, aged 25 and 29 respectively. 

13. In mitigation, Mr Wong, counsel for both defendants informed the court that D1, born in Romania, received education up to secondary level, he went to the UK to work at the age of 19.  Before he came to Hong Kong, he was an air-conditioner technician in the UK, earning 1,800 pounds a month.  His father already passed away, and his mother and siblings are living in Romania.  He has never been in trouble with the police.  The reason why D1 committed the present offence was to earn quick money.  He was promised a reward of 1,000 Euro currency, which has not been received.  He shows his remorse, it is said, by co‑operating with the police and indicating his plea of guilty at the earliest opportunity. 

14. In respect of D2, he has received university education.  He had been a data entry assistant before, but was unemployed before he came to Hong Kong.  His father and sister died in a traffic accident, his mother suffering from a kind of cancer is very sick at home.  D2 therefore came to Hong Kong in order to make some quick money.  He shows his remorse, it is said, by his co-operation with the police and pleading guilty to the offences.

15. Mr Wong made the point that both defendants are not the mastermind of the case.  He asked the court to take into consideration the principle of totality and order at least a partly concurrent sentence for the three offences D2 is facing. 

16. While the prosecution draws my attention to four cases¹, Mr Wong also brings to my notice a District Court Reason for Sentence. 

17. I have received letters from both defendants expressing their remorse and asking for leniency. 

18. Letter from D2’s mother and documents in Romanian language said to prove her medical condition have also been submitted to the court.  I would accept the claim that D2’s mother is suffering from cancer. 

19. There are no guidelines for the present offences.  However, they are no doubt serious offences.  In R v Chan Sui To and Another, a case referred to by the prosecution, the Court of Appeal set out some relevant sentencing factors that a sentencing judge will need to consider in credit card frauds.  Such factors include the size of the operation; the planning that has gone into perpetrating the fraud; whether there is international dimension; whether the accused played a major role.  The factors are not exhaustive.  The Court of Appeal continued to state that:

“Allowing for the different facts and the varying degrees of culpability, it is impossible to formulate a set of principles of sentencing from those decisions. We think however it would be helpful to the courts if they were guided by some criterion. We would therefore suggest that an accused who plays an active but not necessarily a key role in a medium size operation involving between $50,000 and $150,000, with no elaborate planning and equipment, and without an international dimension, should receive a sentence of 5 to 6 years after trial. Sentences may be adjusted upwards or downwards according to circumstances.”

20. The circumstances of the present case are significantly more serious than those in Chan Sui To.  Both defendants deliberately came to Hong Kong, embarking on the fraud activities.  D1 admitted that the cash of 76,500 Euro currency, equivalent to about HK$658,000 seized from him were obtained by withdrawals using the false bank cards.  D2 was also in possession of about HK$50,000.  He admitted he had used around 50 counterfeit payment cards to make withdrawals.  I am sure the money in his possession was also proceeds of the crime.

21. The total sum of money successfully obtained by the fraudulent withdrawal in the conspiracy is in the order of HK$700,000. 

22. D2 was in possession of 481 false bank cards, each encoded with credit cad account data, a magnetic card encoder with adapter, and a notebook computer containing 1,712 sets of credit card account data. 

23. A phenomenal aggravating feature in the case is the presence of the magnetic card encoder and the computer.  The encoder could read data from magnetic cards to computers and write data in computers to magnetic cards through a programme found in the computer.  The account holders of these accounts were all potential victims.  The potential for losses was therefore huge. 

24. I initiated discussion with both parties as to the relevance of these equipment, in particular, the encoder and the computer, to the culpability of both defendants in Charge 1.  The prosecution confirms that their case is that the use of these equipment were within the scope of the conspiracy in Charge 1.  Mr Wong for both defendants said this is not admitted.  When I indicated to hold a Newton hearing, Mr Wong objected to such course be taken.  He did not rely on any authorities, but he said if that was the basis of the prosecution in Charge 1, that should have been included in the Summary of Facts which both defendants had admitted. 

25. With respect to Mr Wong, I rule that the defence is not entitled to oppose to a Newton hearing.  In my view, the basis of the conspiracy charge, being the scope of conspiracy included the use of equipment including the encoder and computer, is apparent on the Summary of Facts admitted by the defendants.  If that has been misunderstood by the defence, this misunderstanding is now cleared.  If that was not the basis of the guilty plea entered by both defendants, they are entitled to deny and contest the prosecution case. 

26. In my view, and that is not disputed, whether the scope of conspiracy included the use of the encoder and computer would substantially affect the sentence.  A Newton hearing is therefore necessary for the court to make a clear finding of facts and basis of conviction, for the defendants to know on what basis they are to submit their mitigation.

27. Having taken further instructions, Mr Wong states that on the issue of the scope of conspiracy, both defendants agree that the intention to use the encoder and the computer was part of their conspiracy to steal.  Mr Wong further accepts that this is an aggravating factor.  That admission is also confirmed by both defendants in court. 

28. Mr Wong further submits that there is no tariff in this type of crime, and there has been a wide range of sentences in the past.  He says that the present case is not the most serious of its kind.  He accepts that there is no difference between a false bank card and a false credit card in the seriousness of the offence. 

29. There are indeed no guidelines for these offences.  In my judgment, the present case is a very serious one, if not the most serious of its kind.  There is clearly an international element in the case.  Both defendants came to Hong Kong deliberately to commit a serious crime.  The presence of the encoder and computer and the admission of the defendants all proved that it was a syndicated crime and it was a well-organized and sophisticated operation.  Two of them were acting in concert in the commission of the crime. 

30. From the record of the Hongkong & Shanghai Banking Corporation, they had made 86 attempts to steal, successfully stealing $115,200.  They have altogether successfully stolen money in the order of HK$700,000, which is a very substantial sum of money.  Fortunately, the money is now recovered and that is a factor I will take into consideration. 

31. Mr Wong fairly concedes, quite properly in my view, that there is no real difference between a false credit card and a false payment card or whatever bank card using credit card account data to steal money from the ATM machines.  In my view, it is more difficult for the crime of stealing money from ATM with a false bank card to be detected.  In using a false credit card to purchase, a fraudster is running a high risk of being detected and caught by the shops, whereas a fraudster using a false card to withdraw money in ATM machines, even if detected by the machine, is unlikely to be caught immediately. 

32. This crime has to be deterred.  I accept that both defendants are not the mastermind of the syndicate.  If they were, they would be sentenced more severely.  And I find both of them are equally culpable for the crime in Charge 1.

33. Mr Wong draws my attention to the Reasons for Sentence in DCCC 224/2014, that was a sentencing case of the District Court.  The case is not binding on a district judge, and the defendants in that case were sentenced on the specific circumstances of the case and background of the defendants, who were not charged with possession of equipment for making false instruments as D2 in this case.  That case, with respect, is not of much assistance to this court. 

34. I have drawn the attention of Mr Wong to HKSAR v Lee Tsung Lin CACC 53/2002, in which case the trial judge, in a similar case, took a much higher overall starting point for various offences of possession of forged credit card and possession of equipment for making forged credit cards, namely an encoder, a transformer and an adapter.  On appeal the Court of Appeal said at paragraph 16 of the judgment that the starting point of 7½ years’ imprisonment was amply justified on all the facts.  The applicant in that case was regarded as the provider of the resources to extend the campaign of fraud, see paragraph 6 of the judgment. 

35. In HKSAR v Arturs Ludins CACC 363/2013, the applicant was in possession of 68 forged bank cards, and an encoder machine.  While the exact loss that the applicant had caused to others could not be ascertained, the Court of Appeal said the sheer number of forged bank cards and the presence of the encoder must necessarily mean that the potential loss to others, if the applicant had not been caught, would be significant.

36. The Court of Appeal also commented that the sentence by the judge, a starting point at 5½ years being taken, far from being manifestly excessive, was, in their view, a lenient one.

37. In my judgment, having considered all the circumstances of this case and the defendants, the proper starting point for both defendants is 6½ years’ imprisonment on Charge 1.  For Charges 2 and 3, the starting point should be 5 years’ imprisonment. 

38. Despite that much time has been spent on the issue of Newton hearing, I am still prepared to give the defendants one-third discount for their plea of guilty. 

39. I have much sympathy for D2’s mother, for her sickness. However, I am afraid that no reduction of sentence can be given for that in this type of serious offence. 

40. The fact that they have a clear record has little weight in this case.  There are no effective mitigation to reduce the sentence apart from the plea of guilty.

41. On Charge 1, both defendants are sentenced to 4 years and 4 months’ imprisonment.  On Charges 2 and 3, D2 is sentenced to 3 years and 4 months’ imprisonment respectively.  The sentences on Charges 2 and 3 are to run concurrently with the sentence on Charge 1.  The total sentence for D2, therefore, remains 4 years and 4 months’ imprisonment. 

1. - HKSAR v. Arturs Ludins, CACC 363/2013

-  The Queen v. Chan Sui To and another, [1996]2HKCLR 128

-  HKSAR v. Ng Swee Thiam and others, [2000]1HKLRD 772

-  HKSAR v. Cheng Hung Man (鄭雄文), CACC 49/2014