HKSAR v. KAZUSHI IKEGAYA AND ANOTHER

Case No. DCCC 353/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO 353 OF 2014

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Reasons for Verdict

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Introduction

1.  According to the prosecution, this is a case of cashier order fraud- D1 and D2, both Japanese, together with another person, Kinoshita Shunji (Kinoshita) also Japanese, laundered money in the sum of 1.9 million US dollars (charge 2 against both defendants jointly - dealing with property known or believed to represent proceeds of an indictable offence, contrary to section 25 of the Organized and Serious Crimes Ordinance). 

2.  The defendants’ role in the scheme was to come to Hong Kong, set up a company in the name of the payee company of the cashier order, i.e. Evzen Mobilya Limited, and open up bank account of the company.

3.  D1 presented a forged cashier order to the bank and successfully deposited a sum of 1.9 million US dollars in the company’s account (charge 1 against D1 only - using a false instrument, contrary to section 73 of the Crimes Ordinance); on the following day, D1 transferred out of the jurisdiction a substantial part of the deposit.

Pleas

4.  D1 pleaded guilty to both charges while D2 denied the sole charge against him (charge 2).

Undisputed Facts

5.  The majority of the prosecution case are not in dispute, and they can be summarized as follows:

2 October 2013

A Madam Chan went to Standard Chartered Bank (SCB) and bought a cashier order in the sum of 1.9 million US dollars (See exhibit P12), payable to Evzen Mobilya Limited for the purpose of doing business with an overseas supplier.

28 October 2013

D1 and D2 arrived in Hong Kong and went to an accountancy firm (Stephen M.S. Lai & Co CPA Limited), which helped them set up a company in the name of Evzen Mobilya Limited. D1 was listed in the company document as the Chief Financial Officer while D2 the Chief Executive Officer (CEO) of the company.

30 October 2013

Both defendants went together to a Citibank branch to open a bank account in the name of the company. Either of D1 or D2 is signatory to the account.

1 November 2013

Both defendants left Hong Kong together.

14 November 2013

D1 returned to Hong Kong, went to Citibank where he presented a forged cashier order (See exhibit P14) which looked very much like the genuine one (but when one examines the forged cashier order closely, one can easily find a printing mistake in that the entry title “US Dollars”, its Chinese words equivalent to “US Dollars” were misprinted as “Hong Kong Dollars”) and successfully deposited 1.9 million US dollars in the company account.

15 November 2013

D1 went to Citibank where he withdrew cash $110,000 US dollars ($10,000 of which converted into Hong Kong dollars) from the company account and remitted $1,779,000 US dollars to an overseas account in Japan, leaving a balance of slightly more than $10,000 US dollars in the account.

4 December 2013

As the deal fell through in the end, Madam Chan went to SCB intending to cash the cashier order, but only to be told that it had been paid out already. The matter was then referred to the police.

19 December 2013

D1 entered Hong Kong.

20 December 2013

D2 was arrested upon his arrival at the Hong Kong Airport.

Evidence

6.  The undisputed facts as stated in the preceding paragraph have been established by live witnesses called by the prosecution as well as by way of admitted evidence pursuant to S.65C or S.65B of the Criminal Procedure Ordinance.

7.  The prosecution also relied on the video-recorded interview (VRI) of D2 the admissibility of which was challenged by the Defence. The court adopted the alternative procedure to determine the issue and admitted it into evidence in the end.

8.  D2 elected to give evidence both on the special as well as general issues, but called no witnesses on his behalf.

The Issue

9.  Undisputed are the facts that he came over, set up the company together with D1 here in Hong Kong, and afterwards they opened up the company bank account, either one of them is the signatory to the account. Then D2 left Hong Kong and about 7 weeks later, he was arrested at the airport when he tried to enter Hong Kong. A sum of money passed through the company account while D2 was away.

10.  His situation is similar to that of someone lending his bank accounts to others for them to use. Notwithstanding the facts that it was that other person who dealt with the money in the accounts, there are authorities in which it was held that lenders of such accounts were considered having dealt with monies in the accounts (See Lau Sui Hing CACC 111/2008 and Wong Chor Wo CACC 314/2006).

11.  Defence counsel made a half-time submission of “No case to answer” that there was no evidence of dealing by D2 because he was not in Hong Kong when the cashier order was cashed here, but he agreed that there was a prima facie case for a conspiracy.

12.  Clearly their agreement was put into action when D1 and D2 traveled to Hong Kong and successfully set up the company and the bank accounts, and there seemed nothing to suggest that D2 had backed out from the plan as evidenced by his returning to Hong Kong to get the ATM cash card of the accounts with the intention of further dealing with the accounts in question.

13.  True to say there is no direct evidence to prove that D2 knew about the cashier order fraud at the time, and the prosecution concedes on this point. The issue in the present case seems to me to be a question of reasonable belief, viz the application of the 2-stage test as stipulated in the recent case Pang Hung Fai CACC 34/2012, the two questions to be asked are:

1^st question

“What were the facts known to the defendant and the objective factual circumstances in which he found himself and of which he was aware at the time at which he dealt with the property which is the subject of the charge?”

It is for the prosecution to establish the facts and circumstances relied upon.

2^nd question

“Do those facts and circumstances provide reasonable grounds that that property in whole or in part represented the proceeds of an indictable offence?”

In other words, whether there were grounds that a commonsense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented the proceeds of an indictable offence.

(See paragraph 41-73 of Archbold Hong Kong 2014)

D2’s VRI

Special Issue

14.  Defence say the interview was given by D2 through a combination of inducement by a senior officer and improper questioning by the interviewing officer, which sapped the will of the defendant and his answers were not voluntarily and freely given.

15.  The senior officer was never identified, but it was said the inducement was made through the Japanese interpreter. It was alleged that D2 was told that the other arrested person (meaning D1) had been co-operative telling the police everything and it would be better for him if he did the same, as well as about the trait of Japanese culture that Japanese people are generally cooperative and apologetic.

16.  The Japanese interpreter concerned testified that there was nothing of this sort happened. I believe him for it would only make sense the police would not do such thing in a situation like this, for there was no guarantee what an independent third party like the interpreter would do when he came to know about the impropriety of the police. Any officer would realize he would only be asking for trouble if he uttered such improper remarks through an interpreter who was not one of their number.  

17.  Defence also criticize the interviewing officer for being misleading in his questioning so as to try and coerce D2 into accepting he had done something wrong and must now take responsibility.

18.  It is true to say that the interviewing officer when cautioning D2 did say that he had reasons to believe that D2 had used a forged cashier order on 14 November 2013 at a local bank. When questioned by defence counsel, the officer maintained that he only knew D2 was in Hong Kong on 28 October through to 1 November but did not know if D2 was here on 14 November. If that was the case, one might wonder why he would caution D2 in the way as he did.

19.  The objective factual situation is that it was D1 who presented the forged cashier order to the bank and there was no evidence to suggest that D2 was in Hong Kong then.

20.  The officer said that information was supplied to him by the police prior to the interview, and I think the officer might have made a mistake himself when he cautioned D2 that he used the forged cashier order because later in the interview he told D2 that D1 used the forged cashier order on 14 November 2013 (See 519 – 522 of the transcript exhibit P18A).

21.  Looking at the matter as a whole, I do not think that that mistake on the part of the officer might have misled D2 in any way for such matter was within his personal knowledge- whether he was the one who presented the forged cashier order, and he could not be misled. And in fact throughout the interview, D2 had not admitted that he was that person.

22.  I find the interviewing officer to be a truthful witness and I accept his evidence, and I do not find his way of questioning on the whole coercive or unfair in any way.

23.  As far as D2 was concerned, he did not strike me as an honest witness. His evidence did not even go so far as to support the defence allegations; for example, D2 said under cross-examination that the officer told him another arrested Japanese had told everything but the officer did not say it would be better for him if he told everything, which is contrary to his original allegations that the officer also said it would be better if he did the same. When further asked about the Japanese culture, D2 then added a little more by saying that he was told because D1 had told everything, he should tell everything as well. Put it simply, I do not think D2 was telling me the truth.

Summary of Contents of VRI

24. 

 a) A friend, Kinoshita Shunji, whom D2 had known for   about 16 years, had asked him to come to Hong Kong to set up a company and open up the bank account; his friend’s main work was in the music producing industry something like making CDs;

b) Kinoshita asked D2 to do it with D1 because D1 knew English; through the introduction of Kinoshita, D2 came to know D1 about a year ago but he did not know what D1 did for a living;

c) D2 was a university graduate in Radiology. He was out of work at the time and he used to work part-time as a painter or a renovation worker;

d) D2 came to Hong Kong on 28^th October 2013 setting up the company and opening up the bank accounts with D1 and then he left on 1^st November 2013.

e) He was promised a commission of 2.5% of the money deposited into the accounts; but he knew nothing about the details of the money as it was all arranged by Kinoshita;

f) He did not know about the cashier order in question, nor the deposit of 1.9 million US dollars by way of the order into the company account; however, he was once shown a cheque in Japan by Kinoshita, and he was not sure if it was the same one; D2 was told by Kinoshita that the job involving the use of the account for depositing money would be 5 to 6 times;

g) He expressed surprise, even anger, when he was told by the police for the first time in the interview that almost all of the 1.9 million had been transferred out of the account because he understood it to be the case that nothing would be done before the ATM cash card was ready, and the money would be transferred to somewhere else by internet banking when they had the ATM cash card. He came on 20^th December 2013 on the instructions of Kinoshita to pick up the cash card.

D2’s “admission” - something a bit dangerous

25.  In summarizing the points of D2’s evidence, the prosecutor said at paragraph 64 of his written submission that “He (D2) agreed with his VRI record at 577 whereby he thought the matter involved ‘…………something a bit dangerous’ ”. And at paragraph 100, in submitting that the elements of the offence have been proved, he said that “…………..and given D2’s belief that the job he was asked to do was ‘something a bit dangerous’ and ‘improper’,………… ”

26.  Having gone through the relevant parts of D2’s VRI, I do not think he really meant to say “he thought the matter involved was something a bit dangerous or improper”.

27.  The relevant parts are from 577 to 586. It is worth noting that the original interview was conducted in Cantonese and Japanese only, it was later translated into English. I will now set out the relevant parts:                                        

(A) - the interviewing officer

(B) - D2

(C) - the interpreter

577(B)- “It might sound strange to say I’m not a child, but a little, well, I thought the money is something a bit dangerous, how to say, it was a money matter but I do not think of a fraud or something like that, a little”

578(C)- “That’s, I’m not a child, I did not think”

579(B)- “Something like a forgery, neither”

580(C)- “did think the money was probably some money obtained from improper way, but then, didn’t ever think that (it’s related) to a fraud or something like that”

581(A)- “Well, you didn’t ever think it’s fraud, but then, you felt that it’s money obtained from improper way”

582(C)- “Then”

583(A)- “Well, from what improper way did you think the money was obtained?”

584(C)- “Then, well, you said, said you have never imagined about a fraud but you thought that the money is dangerous, but in your idea which, what is dangerous money, did you think of to begin with?”

585(B)- “Let me think, well in fact, I don’t know about the process or how to do it, so I cannot say it is dangerous that I have just said so by my myself. Well, specifically, I don’t quite know”

586(C)- “In fact, I really don’t know, how they did it, I just thought that it’s money obtained from improper way, but to what specific the improper way was, I actually have no idea ”

28.  It is clear from the above exchanges, D2 never used the word “improper”, and it was the word used by the interpreter when he interpreted “dangerous”. D2 did use the word “dangerous” at 577 but then he said at 585 “……….so I cannot say it is dangerous that I have just said so by myself…..” Looking at what D2’s said as a whole, I do not think it would be fair to say he admitted that he had the idea that the money matter was something dangerous or improper.

29.  When cross-examined by the prosecutor about “his idea of  dangerous or improper”, he answered that he did not think so. When further asked if he had said so in the interview using the word “dangerous”, D2 said it was because the policeman told him dangerous. “You gave the answer”, asked the prosecutor, and D2 answered, “Yes”.

30.  Based on this answer “Yes” to say that “D2 agreed with his VRI at 577 whereby he thought the matter involved ‘……….something a bit dangerous’ ” would be a misstatement. One cannot ignore what D2 said in the interview at 585, and the matter had not been further explored or clarified while he was in the stand.

31.  Given the evidence as it now stands, I will not hold it against D2; in other words, I will not treat it as his admission that he had thought that the money matter was something dangerous or improper.  

Defence Case

32.  Basically there isn’t any major difference between what he tells the court in his own defence and what he tells the police in the interview, the tenor is the same - D2 denied any knowledge of the cashier order fraud, and regarding the job arrangement he had with Kinoshita, there was nothing there to put him on alert something fishy might be going on for he knew Kinoshita was in the music production industry.

Analysis

33.  The onus is on the prosecution to prove the charge beyond reasonable doubt; as a defendant, he is under no duty to prove anything.

34.  The court is aware that D2 is a person of good character, that helps him in two ways-

(1)- He is less likely to have committed the offence as alleged by the prosecution;

(2)- What he says is more likely to be the truth.

When I consider the evidence of the case, I’ll bear this in mind.

1^st Question – What facts were known to D2

35.  On the evidence before the court, I am satisfied that at least the following facts were known to D2 at the material times.

36.  a) On 28^th October 2013, D1 and D2 came over to Hong Kong and set up the company (Evzen Mobilya Limited) in which D2 was made the director or CEO;

b) Two days later, D1 and D2 opened the company’s bank accounts at a local bank; D2 left on 1^st November 2013;

c) He was asked by Kinoshita, who he said was in the business of music production, to do all this, and he was to be paid a commission of 2.5% of the money passing through the accounts;

d) D2 was once shown a cheque by Kinoshita in Japan prior to his coming to Hong Kong and was told by Kinoshita that there would be deposits made in the account 5 or 6 times;

e) The money in the account would be transferred to somewhere else by internet banking when the ATM cash card was ready. D2 came on 20^th December 2013 with the intention of collecting the cash card;

f) D2 was unemployed before coming to Hong Kong. Before that, he did some part-time jobs for a long time as a painter or renovation worker.

2^nd Question–A common sense right-thinking member

37.  D2 said he was out of work at the time when this job opportunity came along, he seized it and he wanted to do well in the business. Not to forget- he was appointed straight as the head of the company, the CEO. No disrespect to D2, but he just did not seem to have the relevant experience or managerial skills in managing the company whatever business it was said to be doing.

38.  As either D1 or D2 is signatory to the company accounts, which means either one of them can deal with the accounts alone. Undoubtedly D2 could easily embezzle money from the company should he want to. If Kinoshita was a genuine businessman as D2 said he was, by entrusting the finance of the company to D2’s care, given the background of D2, it didn’t make any business sense at all.  

39.  On the evidence before the court, there wasn’t any genuine business the company seemed to carry on; the sole purpose of creating the bank accounts was to deal with money. D2 was told there would be deposits made into the accounts 5 to 6 times, but what were these funds? Clearly this was something Kinoshita would not dare to use his own name to deal with, and had to pay someone to do it, so D2 came into the picture.

40.  Putting a commonsense, right-thinking member of the community in D2’s shoes, I am sure he would say that there was something fishy going on here. Put it in another way, there were grounds that a commonsense, right-thinking member of the community would consider sufficient to lead a person to believe that the property in whole or in part represented the proceeds of an indictable offence.

Conclusion

41.  For the reasons given above, I am satisfied that the prosecution has proved the charge against D2 to the required standard, and D2 is duly convicted.