HKSAR v. HSU MING-TUNG, TONY AND OTHERS

DCCC 241/11

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO. 241 OF 2011

REASONS FOR SENTENCE

1.  At all material times, D1 and D2 were respectively Financial Controller and Director of Gafeng Chemical (Canada) Company Limited (“Gafeng”), a company incorporated in Hong Kong. Gafeng had a Mainland subsidiary called Gafeng Lubricant (Dongguan) Company Limited (“Gafeng Lubricant”) which operated a factory in Dongguan, the Mainland to produce lubricant oils for use in vehicles and machines.

2.  D1 was responsible for the company’s finance whereas D2 was responsible for production operation in the Mainland. The shares of Gafeng were equally held by D1’s mother and D2’s wife, both were directors-cum -shareholders of Gafeng, who held the shares on behalf of D1 and D2.

3.  D3 was the Manager of Gafeng who was responsible for assisting in operating the factory in the Mainland and the accounting and administration work in Hong Kong.  D3 was also the director-cum-shareholder of a shell company called Join Creator Limited (“Join Creator”).

4.  D4 is the wife of D1.  She was the director-cum -shareholder of Brilliant Fine Asia Limited (“Brilliant Fine”), also a shell company.  She was also the authorized signatory of the bank account of Good Billion Corporation Limited (“Good Billion”), another shell company. 

5.  D5 and D6 were directors-cum-shareholders of Profit Smooth Technology Limited (“Profit Smooth”).

Fraudulent loan applications

6.  Between 2005 and 2008, D1 and D2 applied for credit facilities of import loans for Gafeng with six banks, namely DBS Bank (Hong Kong) Limited (“DBS”), Industrial and Commercial Bank of China (Asia) Limited (“ICBC”), Public Bank (Hong Kong) Limited (“Public Bank”), Bank of China (Hong Kong) Limited (“BOC”), Citibank N.A. (“Citbank”) and Dah Sing Bank, Limited (“Dah Sing”) (hereinafter collectively referred to as “the six banks”).  Credit limits ranging from $3.5 million to $9.5 million were granted by the six banks.  When drawing the import loans, the six banks would pay directly to the suppliers on behalf of Gafeng for settlement of the goods purchased by Gafeng. 

7.  In September 2006, D1 and D2 also applied for credit facilities for export loan for Gafeng from ICBC.  The credit limit granted was $1 million.  When drawing export loans, ICBC would pay Gafeng in advance on behalf of its customer for settlement of the goods Gafeng sold to the customers.

8.  On each application for import or export loan, the six banks required Gafeng to submit an application form, together with the relevant supporting sales invoices as a proof of the underlying commercial transaction before approval. 

9.  On different occasions between January 2006 and October 2008, D1 instructed  D3, D4 and Ms FOK Wia-ki, Vicky (“FOK”), an account clerk of Gafeng, to submit bogus invoices to the six banks for applying for the relevant import or export loans.  D1, in particular, instructed them to create false invoices of Brilliant Fine, Good Billion or Profit Smooth purporting that they had supplied oil products to Gafeng.  Likewise, D1 had also instructed D3 and FOK to create false invoices of Gafeng purporting that Gafeng had supplied oil products to Join Creator.  In fact, the underlying commercial transactions shown on all these invoices never existed.  After the bogus invoices were made, D1, D2 or D1’s mother signed on the application forms.  As a result, a number of fraudulent loan applications were made to the respective banks and they are as follows :-

Charge 1 (against D1 & D2)

10.  Between 10 January 2006 and 18 January 2006, D1 and D2 applied for five import loans with DBS for Gafeng by using the bogus invoices of Brilliant Fine.  DBS, in the belief that Brilliant Fine had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $4,003,400.00 to the bank account of Brilliant Fine.

Charge 3 (against D1 only)

11.  Between 15 March 2006 and 24 September 2008, D1 and FOK applied for 99 import loans with DBS for Gafeng by using the bogus invoices of Brilliant Fine and Good Billion.  DBS, in the belief that these two companies had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $77,348,080.00 to the bank accounts of Brilliant Fine and Good Billion.

Charge 5 (against D1 & D3)

12.  Between 31 October 2006 and 23 July 2008, D1, D3 and FOK applied for 23 export loans with ICBC for Gafeng by using the bogus invoices of Gafeng issued to Join Creator.  ICBC, in the belief that Gafeng had genuinely sold the goods to Join Creator, approved the loans and released a total sum of $6,286,508.00 to the bank account of Gafeng.

Charge 11 (against D1 only)

13.  Between 8 October 2007 and 15 August 2008, D1 and FOK applied for 44 import loans with Public Bank for Gafeng by using the bogus invoices of Brilliant Fine, Good Billion and Profit Smooth. Public Bank, in the belief that these three companies had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $33,927,800.00 to the bank accounts of Brilliant Fine, Good Billion and Profit Smooth.

Charge 12 ( against D5 and D6)

14.  Between 7 December 2007 and 18 August 2008, after the bank account of Profit Smooth held with the Hongkong and Shanghai Banking Corporation limited received the loan proceeds totalling HKD14,469,070 released by Public Bank, City Bank, Bank of China and Dah Sing Bank for the settlement of the goods purportedly sold to Gafeng, D5 and D6 dealt with the monies in accordance with the instructions of  D1’ s associate,  Ng Hing. Ng Hing left Hong Kong in October 2008

Charge 13 (against D1 only)

15.  Between 3 March 2008 and 9 September 2008, D1 and FOK applied for 17 import loans with BOC for Gafeng by using the bogus invoices of Brilliant Fine, Good Billion and Profit Smooth.  BOC, in the belief that these three companies had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $15,788,080.00 to the bank accounts of Brilliant Fine, Good Billion and Profit Smooth.

Charge 15 (against D1 only)

16.  Between 17 July 2008 and 21 July 2008, D1 and FOK applied for four import loans with Dah Sing for Gafeng by using the bogus invoices of Brilliant Fine and Profit Smooth.  Dah Sing, in the belief that these two companies had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $3,965,900.00 to the bank accounts of Brilliant Fine and Profit Smooth.

Charge 16 (against D1 & D4)

17.  Between 10 September 2008 and 22 September 2008, D1, D4 and FOK applied for 5 import loans with Public Bank for Gafeng by using the bogus invoices of Brilliant Fine and Good Billion.  Public Bank, in the belief that these two companies had genuinely sold the goods to Gafeng, approved the loans and released a total sum of $3,432,090.00 to the bank accounts of Brilliant Fine and Good Billion.

Charge 17 (against D1 & D4)

18.  On 6 October 2008, D1 and FOK applied for an import loan with Citibank for Gafeng by using the one invoice of Brilliant Fine.  Citibank, in the belief that Brilliant Fine had genuinely sold the goods to Gafeng, approved the loans and released a sum of $549,900.00 to the bank accounts of Brilliant Fine.

19.  The six banks would not have approved the loans had they known that the underlying commercial transactions as mentioned in the supporting invoices were false or non-existent.

Money laundering charges in relation to D4 ( charges 2 and 10)

20.  On each occasion after the six banks had released the loan proceeds to the bank accounts of Brilliant Fine, Good Billion or Profit Smooth, D1 instructed D4 to withdraw the monies from their bank accounts, and then transfer them to the bank accounts of Gafeng or some other bank accounts as directed by D1.  D4 acceded to the requests and dealt with the monies accordingly.  As a result, the loan proceeds derived from the fraudulent loan applications were dealt with by D4 as follows :-

Charge 2 (against D4 only)

21.  Between 11 January 2006 and 12 April 2007, after the bank account of Brilliant Fine held with Nanyang Commercial Bank Limited (“NCB”) received the loan proceeds in the total sum of $31,041,010.00 released by the DBS and ICBC for the settlement of the goods purportedly sold to Gafeng, D4 dealt with the monies in accordance with D1’s instructions.

Charge 10 (against D4 only)

22.  Between 21 June 2007 and 23 September 2008, after the bank account of Good Billion held with Chiyu Banking Corporation Limited received the loan proceeds totalling $46,039,120.00 released by DBS, Public Bank and BOC for the settlement of the goods purportedly sold to Gafeng, D4 dealt with the monies in accordance with D1’s instructions.

Listing fraud

Charge 6 (against D1, D3 & D4)

23.  In early 2007, D1 had an agreement with his associate NG Hing (“NG”) to list China Green Resources Holdings Limited (“China Green”), which was a company registered in British Virgin Islands in 2005, on the then American Stock Exchange (“AMEX”) in the United States of America (“USA”).  China Green was the holding company of Gafeng, Gafeng Lubricant and Green Energy (China) Far East Limited (also a British Virgin Islands company, formerly known as Perfectcorp Far East Limited) (“Green Energy”). 

24.  In order to satisfy the listing requirements of AMEX which included requiring the net profit after tax of the listing company for the last fiscal year to be over US$4 million, D1 and NG decided to falsify the accounting records of China Green and its subsidiaries by falsely inflating the volume of their profit and the turnover in order to satisfy the listing requirements of AMEX.  They intended to use the falsely inflated accounting records to mislead potential investors and attract their investments in the shares of China Green and to defraud AMEX in respect of their listing application.  D1 then instructed D3, D4 and FOK to falsely create fictitious transactions of purchases and sales of goods between Gafeng and a number of shell companies under the control of D1, D3 and D4 by instructing them to create bogus invoices, purchase orders, cargo receipts, delivery notes and payment receipts in the name of Gafeng and the shell companies, purporting to show that Gafeng had transacted with these shell companies.  They complied and made up the necessary documents. In fact, all these business transactions never existed.  D1 also instructed them to do the same for Green Energy and they did so. As a result, the profit of Gafeng and Green Energy were fraudulently inflated.

25.  By doing so, a total of 1,157 bogus business transactions involving about HK$390 million had been falsely recorded in the accounting records of Green Energy for the years of 2006 and 2007.   

26.  Likewise, a total of 775 bogus business transactions involving about HK$411 million had been falsely recorded in the accounting records of Gafeng for the years of 2006 and 2007. 

27.  In December 2007, D1, D2 and NG engaged WestPark Capital, Inc. (“WestPark”), a USA investment bank as its underwriter for the listing application on AMEX.  Being the underwriter, WestPark would on behalf of China Green secure investors to buy China Green’s shares by means of private share placement or initial public offer in the USA.  D1, D2 and NG also engaged Sense Capital Limited (“Sense Capital”), an agent of WestPark in Hong Kong, for the proposed listing application.

28.  Apart from that, in March 2008, D1, D2 and NG also engaged the Hong Kong office of Stonefield Josephson, Inc., Certified Public Accountants (“Stonefield”) of the USA, as its auditor for the listing application.  Stonefield would conduct the auditing work for China Green, Gafeng, Green Energy and Gafeng Lubricant, and filing relevant documents with AMEX and the Securities and Exchange Commission of the USA.

29.  Upon D1’s instruction FOK submitted the falsified accounting records to Stonefield and Sense Capital in order to fulfill the listing requirements.  Stonefield and Sense Capital, in the belief that all the accounting records were true and genuine, processed the listing application on behalf of China Green.

30.  In October 2008, when Gafeng started to default on repayments of loans to ICBC and five other banks, D1 and NG abandoned the listing plan and stopped the engagement with Stonefield and Sense Capital. 

31.  At 1812 hours on 9 December 2008, ICAC officers observed D3  and Fok pushing a trolley with three stuffed nylon bags from an industrial building in Wai Yip Street, Kwun Tong and took them on board a light goods vehicle.  D3 was arrested by ICAC officers who later seized a large number of documents mentioned contained in the three nylon bags.  D3 was going to destroy these documents upon D1’s instruction when confronted by ICAC officers.  The documents  were exhibited as pages 5782 to page 13332 of the trial bundle.

32.  Later ICAC officers searched the residence of D3 at Hin Keng Estate Shatin and found 16 bank deposit slips issued by DBS Bank (Hong Kong) Limited (“DBS”). 

33.  D3 joined Gafeng as Manager in October 2006 working in the Mainland. He started to work in Gafeng’s Hong Kong office in July 2007. D3 was the shareholder and director of Join Creator and upon D1’s request D3 has allowed D1 to use Join Creator to obtain loans from ICBC. D3 had given the company chop of Join Creator to D1 in mid 2007. Although Join Creator had no business dealings with Gafeng at any time D3 had signed and affixed the company chop of Join Creator on the bogus commercial invoices issued by Gafeng to Join Creator for submitting to ICBC to apply for loans in favour of Gafeng. The content of the invoices were false as there was no business dealings between Gafeng and Join Creator.

34.  Regarding the 16 deposit slips found from D3’s residence, on various occasions D1 accompanied D3 to a branch of DBS where D1 gave cash or D1’s personal cheque to D3 for depositing into the bank account of Join Creator.  Upon D1’s instruction, D3 would then transfer the money to the bank account of Gafeng with DBS purporting to show that Join Creator had settled payments with Gafeng for the bogus transactions. 

35.  The documents found in the three nylon bags carried by D3 were false accounting documents some of which were prepared by D3 upon D1’s instructions since late 2007. They were documents prepared for the purposes of inflating the sales figures of Gafeng and other subsidiaries of China Green for the listing of Gafeng in the USA in order to fulfill the listing requirements. These documents had been used for auditing and had been submitted to the auditors from the USA. When ICAC officers found these documents D3 was in the course of disposing these documents.

36.  According to the promotional materials with regards to the listing, the company was seeking to raise between USD3-25 million

Arrests of D1 & D4

37.  D1 was arrested by ICAC officers in the evening of 9.12.2008 inside his residence in  Hung Hom, Kowloon. After D1 was taken to the ICAC Headquarter he was interviewed for the offences of this case on video on 4 occasions on 9^th and 10^th December 2008. During these interviews D1 admitted using bogus invoices to apply for and obtain loans from the banks mentioned in these facts. D1 told the ICAC that he did so to ease cash flow problems of Gafeng. Part of the loans obtained had been used to repay other loans which were due for repayment. D1 admitted that he bought Brilliant Fine from a secretarial company and admitted taking part in making up the false invoices of Brilliant Fine. D1 admitted asking D3 to supply false invoices of Join Creator to support the loan applications made to the banks. Good Billion was owned by Lo Wai Lin the cousin of his wife D4. D1 admitted that he was in fact the true operator of Good Billion and had used the invoices of Good Billion to deceive the banks to obtain bank loans. After the banks had credited the loan amounts to the bank accounts of the bogus suppliers, ie. Brilliant Fine, Good Billion, Join Creator and Profit Smooth, the funds would then be transferred to Gafeng’s bank accounts. Such included the loans paid by the banks to the bank account of Brilliant Fine which was controlled by D4. After receiving the funds D4 would transfer them to Gafeng’s bank accounts.

38.  Re Profit Smooth D1 admitted that he had used false purchase orders of Profit Smooth. D1 told that Profit Smooth was a company of Ng Hing.

39.  Re the listing fraud D1 admitted to ICAC that the idea of applying for Gafeng to be listed in the USA came from Ng Hing who was his friend and business partner. D1 told that Ng Hing joined Gafeng in 2007 but was not a shareholder. Ng Hing had a good relationship with bankers with good business network. D1 came to know that to fulfill the US listing requirements Gafeng needed to have profit of US$4 million and certain net asset value each year. Ng Hing had taught him to make up false account documents in order to fulfill such requirements. D1 told ICAC that the listing of Gafeng in the USA was a way to generate funds to help Gafeng to repay the bank loans. D1 admitted that he had rented a warehouse at 8^th Floor, Wang Cheung Industrial Building, 168, Wai Yip Street, Kwun Tong to store the false documents used in the listing application. A number of dummy companies were used when creating the bogus documents including “Antron” and Best Riverland Company Limited.

Arrest and Interview of D2

40.  D2 was arrested on by ICAC officers on 9 December 2008 inside the Sheung Wan MTR centre. When he was subsequently interviewed he told the ICAC that he and D1 were friends and ran the Gafeng business together. He said that he was aware that Gafeng obtained loans from DBS and ICBC and that bogus documents were submitted to support the applications. He said that he was aware that Brilliant Fine and Join Creator were being used for this purpose as he had to sign bank documents as guarantor of the loans. D2 said that this method of obtaining loans from banks was instigated by D1 before 2006. Loans were borrowed, repaid and then further loans were taken out.

Arrest and Interview of D3

41.  As mentioned above, D3 was arrested by ICAC officers at 1812 hours on 9 December 2008 when he and Fok were observed pushing a trolley with three stuffed nylon bags from an industrial building in Wai Yip Street, Kwun Tong and which they loaded into a light goods vehicle.  The bags contained thousands of false invoices and other documents. D3 later admitted to ICAC officers that he was going to destroy these documents upon D1’s instruction. 

42.  ICAC officers searched the residence of D3 at Hin Keng Estate, Shatin and found 16 bank deposit slips issued by DBS Bank (Hong Kong) Limited (“DBS”). 

43.  Up to this date, ICBC had incurred a loss of HK$553,898.11 due to the default in repayments of the above-mentioned 23 export loans by Gafeng.

44.  When interviewed under caution by ICAC officers  D3 admitted that he joined Gafeng as Manager in October 2006 working in the Mainland.  He started to work in Gafeng’s Hong Kong office in July 2007.  D3 was the shareholder and director of Join Creator and upon D1’s request D3 has allowed D1 to use Join Creater to obtain loans from ICBC.  D3 had given the company chop of Join Creator to D1 in mid 2007.  D3 admitted that Join Creator had no business dealings with Gafeng at any time but D3 had signed and affixed the company chop of Join Creator on the bogus commercial invoices issued by Gafeng to Join Creator for submitting to ICBC to apply for loans in favour of Gafeng.  D3 admitted that the content of the invoices were false as there was no business dealings between Gafeng and Join Creator.

45.  Regarding the 16 deposit slips found from his residence D3 admitted that on various occasions, D1 accompanied D3 to a branch of DBS where D1 gave cash or D1’s personal cheque to D3 for depositing into the bank account of Join Creator.  Upon D1’s instruction, D3 would then transfer the money to the bank account of Gafeng with DBS purporting to show that Join Creator had settled payments with Gafeng for the bogus transactions.

46.  Regarding the documents found in the three nylon bags D3 admitted that they were false accounting documents some of which were prepared by him upon D1’s instructions since late 2007.  D3 admitted that they were documents prepared for the purposes of inflating the sales figures of Gafeng and other subsidiaries of China Green for the listing of Gafeng in the USA in order to fulfil the listing requirements.  These documents had been used for auditing and had been submitted to the auditors from the USA.  When ICAC officers found these documents D3 was in the course of disposing these documents.

Arrest and Interview of D4

47.  On 18.12.2008 D4 was interviewed by ICAC officers about the case at the ICAC headquarters. After ICAC officers explained the allegations to her and cautioned her D4 denied knowing when and why Brilliant Fine was set up but admitted that she had transferred money from Brilliant Fine’s bank account to her own personal bank account before transferring them to D1’s personal account or Gafeng’s bank account according to D1’s instructions. D4 admitted signing Brilliant Fine’s documents but claimed she did not know that business nature of Brilliant Fine. D4 said D1 had given her the company chop of Brilliant Fine to open the company’s bank account with NCB. D4 also admitted that she had signed Brilliant Fine’s cheques.

Loans paid into the bank account of Brilliant Fine

48.  Acting upon the truth of the content of the loan applications and the invoices, in particular believing that Brilliant Fine had sold the goods described in the invoices to Gafeng, DBS approved the loans applications and released:

(1) a total of $4,003,400 (Re charge 1relating to 5 import loans);

(2) a total of $19,906,600 which was part of the sum of $77,348,080

(Re charge 3 relating to 99 import loans)

The 2 amounts were paid into the bank account of Brilliant Fine at NCB between 10 January 2006 and 24 September 2008. DBS would not have approved the loans if it had known that the transactions mentioned in the loan applications and the supporting documents were bogus transactions.

49.  Also, acting upon the truth of the content of the loan applications and the invoices, in particular believing that Brilliant Fine had sold the goods described in the invoices to Gafeng ICBC approved the loans applications and released a total of $7,131,000 which was part of the sum of $28,049,770 (Re charge 4 for 40 import loans) which amounts were paid into the bank account of Brilliant Fine at NCB between (11 January 2006 and 19 January 2006). ICBC would not have approved the loans if it had known that the transactions mentioned in the loan applications and the supporting documents were bogus transactions.

Charge 2

50.  The bank account of Brilliant Fine at NCB (No. 043-472-00427643) was opened on 16.12.2005. D4 as director of Brilliant Fine was the sole authorized signatory of this bank account. Between 10.1.2006 & 10.7.2008 a total sum of $31,041,010 was paid into this bank account by 2 banks namely DBS and ICBC which were loans approved by the banks upon applications supported by the invoices of Brilliant Fine.

51.  After the total sum of $31,041,010 was paid into Brilliant Fine’s bank account at NCB D4 dealt with the funds as follows:

52.  $11,085,000 was paid to Gafeng’s bank account at ICBC & Public Bank

53.  $4,096,500 was paid to D1’s personal account at DBS

54.  $4,432,415 was withdrawn by D4 in cash

55.  $3,661,000 was paid into D4’s personal accounts at DBS

56.  $113,000 was paid into D4’s personal account at BOC

Charge 10

57.  After the total sum of $46,039,120 (representing part of the loans of charges 3, 11, 13, & 16, namely the sums of $27,092,470, $9,992,200, $7,485,240 & $1,469,210 respectively) was paid into the bank account of Good Billion at Chiyu Banking Corporation Ltd, 2 sums of $9,523,025 and $32,492,560 were transferred to 2 personal bank accounts of D4 respectively at BOC. Part of these sums was then paid into the bank account of Gafeng at ICBC and to the personal bank account of D1 at DBS.

58.  D4 dealt with the funds mentioned in the 2^nd and 10^th charges knowing or having reasonable grounds to believe that they were in whole or in part directly or indirectly represented the proceeds of an indictable offence.

Losses incurred by banks

59.  Up to this date, the losses incurred by 5 out of the 6 banks due to the default in repayments of the loans by Gafeng are as follows:

Name of Bank	Amount of loss
DBS Bank	$4,648,655.48
ICBC	$ 533,898.11
Public Bank	No information
BOC	$4,908,488.19
Citibank N.A.	$2,000,000.00
Dah Sing Bank	$3,676,744.70
	$15,767,786.48

Money laundering charge in relation to D5 and D6 ( Charge 12)

60.  As mentioned above, in early 2007, D1 had an agreement with Ng Hing as regards the listing of  China Green. Ng Hing also introduced D1 to various banks through which D1 could make fraudulent loan applications.

61.  In 2007, Ng Hing was working for a company called Stanford Anti- Couterfeit Digital Technology Limited ( Standford) together with D5 and D6. They were work colleagues, close friends and committed members of the Hong Kong Church of Christ.

62.  In November 2006,  a company called Profit Smooth Technology Limited ( Profit Smooth) was set up in the name of D5’ s wife using the as the registered address, the address of a friend of D5. At that time Ng Hing, D5 and D6 were working in the Beijing office of Stanford and according to D5, Profit Smooth was set up, to facilitate Ng Hing, D5 and D6 pursuing business ventures in their spare time.

63.  In October 2007, D5 and D6 became the only shareholders and directors of Profit Smooth and a week later a corporate bank account was opened with D5 and D6 as bank signatories and the address for bank statements and other correspondence was the business address of D5’ s friend.

64.  Ng Hing informed D1 that Profit Smooth could be used as a vehicle for obtaining loans from banks derived from fraudulent loan applications. Between 06 December 2007 and 15 August 2008, 17 loan applications were made to 4 banks by Gafeng supported by fraudulent Profit Smooth documentation. As a result of these fraudulent applications, funds totalling HKD14,468,900 were paid into the Profit Smooth account. Between 7 December 2007 and 18 August 2008 HKD13,606,011.65 was either transferred  by D5 and D6 to the personal account of  Ng Hing or withdrawn by Ng Hing with cash cheques signed by  D5 or D6. Out of this sum HKD6,130,135.50 was authorised by D5 between December 2007 and June 2008 and HKD7,475,876.15 was authorised by D6 between June and August 2008.

65.  D5 and D6 were interviewed by the ICAC in March 2009 and charged in March 2011. After trial, for the reasons set out in my reasons for verdict,  I was satisfied so that I was sure, that D5 and D6 either knew that the monies being paid into the Profit Smooth account were the proceeds of an indictable offence or deliberately closed their minds to what was occurring.

Sentences

Delay

66.  A number of counsel suggested that a discount should be allowed against the sentences because of the delay in these proceedings being brought to court. The offences took place in 2006 to 2008 and D1 to D4 were arrested at the end of 2008. D5 and D6 were interviewed in March 2009 but were not charged until March 2011.

67.  In this case the ICAC were tasked with investigating a substantial and elaborate fraud involving a number of companies, bank accounts and thousands of documentary exhibits. When PW4 and D3 were arrested in December 2008, they were found in possession of  3 nylon bags full of fraudulent documentation. These documents were photocopied and formed over 7,500 pages of  the exhibits bundles.

68.  Enquiries had to be made with auditors and accountants connected with the company’s activities here and in connection with their listing intentions which involved, American auditors and accountants and their Hong Kong agents.

69.  In my view there was no undue delay in this prosecution.

D1- charges 1,3,5,6,11,13,15,16,and 17

70.  D1 pleaded guilty to 7 charges of fraud, charges 1,3,5,,11,13,15 and 16 which relate to  the submission of  202 import loans from 5 banks and 23 export loans from another bank. The total amount obtained from the banks in relation to these applications was HKD145,301,758. The amounts involved in charges 3 and 11 were particularly large, HKD77,348,080 and HKD33,927,800 respectively.

71.  Losses incurred by 5 out of the 6 banks amount to HKD15,767.48.

72.  D1 is 48 years old and was educated to Form 7. He started work performing relatively low grade clerical work. Eventually, through his hard work, his company sponsored him to take a BBA course with Newport University in the USA. He started a trading business in 1993. In 1997 he was declared bankrupt when he acted as guarantor for a friend who was involved in a failed hotel project on the mainland. D1 was able to discharge his bankruptcy four years later. He married his wife, D4, in 2006. Since her arrest she has been suffering from severe depression. There are no children of  that marriage, D4 has a child from a former marriage.

73.  Prior to his remand he looked after his parents, his father has had a stroke. Several letters of support were submitted which attested to positive character and the devoted support he has given to his family.

74.  This was a sophisticated and elaborate fraud committed over a period of three years involving substantial amounts of money. Numerous bogus documents were created to support the loan applications.  Two members of his staff, both with clear records, were invited to join in preparing the false documentation and making the loan applications. D1 was the financial controller of Gafeng. The maximum sentence for offences of fraud is 14 years imprisonment.

75.  The defendant pleaded guilty and offered to become a prosecution witness. After this indication D2 changed his plea to guilty. D1gave evidence in the trial of D5 and D6. D1 gave no evidence in relation to D5 and in relation to D6 I did not accept his evidence. He alleged that D6 had attended meetings when the creation of false documents was discussed and actually assisted in the creation of such documents. His evidence was not corroborated by D3 or another employee of Gafeng who gave evidence under immunity, Fok (PW4). Had his evidence been true,  I would have expected that they would have been able to confirm such evidence. In the circumstances I took the view that a 40% discount in his sentence was appropriate. I also considered the question of totality. In respect of charges 3 and 13 I took a starting point of 6 years imprisonment and reduced that  to 43 month. For the other fraud charges, charges 1,5,11,15,16 and 17,  I took a starting point of  4 years imprisonment which I reduced to 28 months to run concurrently to the sentences on charges 3 and 13.

76.  D1 also pleaded guilty to a charge of conspiracy to defraud, Charge 6, which related to the attempt to list China Green on AMEX with a view to raising between US3-25 million. This was an audacious scam. 1,157 bogus business transactions involving HKD390 million had been falsely recorded in the accounting records of Green Energy for the years 2006 and 2007. 775 bogus business transactions involving about HKD411 million had been falsely recorded in the accounting records of  Gafeng for the years 2006 and 2007. International firms of auditors and underwriters had been engaged to deal with the listing. This was a huge fraud and the kind of  commercial fraud that causes enormous damage to the international reputation of  Hong Kong. In my view the defendant is most fortunate that these proceedings were not committed the High Court. I take a starting point of 8 years imprisonment which I reduce to 57 months. The sentence shall be served concurrently with the other sentences.

77.  D1 will therefore serve a total sentence of  57 months.

D2 Charge 1

78.  D2 is 55  years of age and married. He and his wife separated because of these proceedings. They have a son aged 30. D2 used to support his mother but because of the present case the flat in which she lived has been repossessed by the bank. His mother now lives with his elder brother.

79.  In 1980 the defendant became a civil servant and worked for the Fire Services Department from which he retired after 10 years. Had it not been for these proceedings, on reaching his retirement age on 13 January 2012 he has lost his pension entitlement of  HKD370,000 and HKD2000 per month. Because of these proceedings he has lost that entitlement.

80.  On leaving the Fire Service he started a business dealing in lubricants. I was informed by counsel that D2 played only a minor role in the present case. Although D2 was a company director, he worked for D1 in the mainland lubricant factory earning HKD9,000 per month.

81.  D2 pleaded guilty to one charge of fraud relating to 5 import loans totaling  just over 4 million. D2 was responsible for the production operation on the mainland.  I noted that his wife was one of the two shareholders and directors of  Gafeng. The five loan applications amounting to around HKD4 million were fully repaid by Gafeng and DBS suffered no loss.

82.  Taking into account all the circumstances I took a starting point of 4 years imprisonment for this offence and reduced that to 32 months to reflect his guilty plea.

D3 Charges 5 and 6

83.  D3 pleaded guilty to one charge of  fraud, charge 5, concerning  23 export loans applications involving HDK7.9 million. A company he controlled was used as a vehicle for channeling the funds back to Gafeng.

84.  Charge 6 relates to the conspiracy with  D1 and D4 to have China Green listed on AMEX.

85.  D3 is 49. He married three years ago and they have no children.

86.  D3 had a clear record and I accepted that when he joined Gafeng he did not know of the fraudulent acts being committed by D1. It was only after the worked for Gafeng for some that he came to know of the frauds being perpetrated by Gafeng on its bankers and he allowed a company he controlled to be used to assist with a fraud on ICBC. Although D3 was described as a manager of the company he was in fact one of only two employees in Hong Kong and was a comparatively lowly employee. He had assisted in the creation of a huge number of false accounting documents to be used for the listing of China Green and was in the process of disposing of them when arrested by the ICAC.

87.  D3 is a mature person of clear record. He was a low salaried employee of the company and foolishly followed the instructions of  D1. He received no benefit from his participation. He indicated that he was prepared to plead guilty to the offences as soon as his lawyers had had the opportunity of reading the translations of his records of interview. Fok, PW4, another low salaried employee of Gafeng was allowed to become a prosecution witness without being charged when her lawyers approached the ICAC at an early stage in the investigation.

88.  D3 pleaded guilty to the two offences and indicated at an early stage that he was prepared to give evidence against the co-accused. After this indication, three co-defendants pleaded guilty and he gave evidence against D5 which was not challenged. I decided that D3 should receive a reduction of 50% on the original sentences

89.  In respect of charge 5 I took a starting point of  3years and six months and for charge 6, 6 years. I decided that these sentences should run concurrently I impose sentences of 21 months and 3 years imprisonment.

D4 – Charges 2,6,10 and 16

90.  D4 pleaded guilty to 2 charges of money laundering, charges 2 and 10, one charge of conspiracy to defraud, charge 6 and one charge of fraud, charge 16.

91.  D4 is 35 years of age and came from a humble background. Her father died when she was young and she has a number of  brothers and sisters from different mothers and fathers. She was educated to Form 1 standard and married at 16. She has a son by that relationship and she and her first husband are now divorced. Her ex-husband was in court to support her. She has held a number of low paying jobs but is essentially a housewife. She married D1 in 2006 and has been emotionally and financially dependent upon him. In relation to these offences she did what she was told to do.

92.  Since these proceedings began, D4 has been under great emotional strain and is being treated for anxiety, depression and insomnia. She has been diagnosed as suffering from acute adjustment disorder. A number of  letters of  support were submitted.

93.  Charge 2 related to laundering over HKD31 million though the bank account of Brilliant Fine and charge 10 concerned laundering over HKD 46 million through the account of  Good Billion.  The offences were committed over a two year period, involved a large number of transactions and were sophisticated . I take  starting point of  5 years for the two offences and reduced that sentence by one third to 40 months to reflect her guilty pleas.

94.  In relation to charge 6, I take into account that D4 played a relatively subordinate role as compared with D1, I take a starting point of 6 years and reduce that to 4 years which I order to run concurrently with the sentence on charges 2 and 10.

95.  Charge 16 relates to the obtaining of  HKD3.4 million using false Good Billion and Brilliant Fine invoices. I take a starting point of 3 years and 6 months and reduce that to 2 years and four months to reflect the guilty plea. The sentence shall run concurrently with the other sentences.

96.  D4 will go to prison for 4 years.

D5 and D6 – Money Laundering Charge 12

97.  D5 and D6 were convicted after trial of laundering HKD14.4 million through the bank account of Profit Smooth. They were the directors and shareholders of that company and signatories to its bank account. I was satisfied that they either knew that the monies represented the proceeds of an indictable offence or deliberately closed their eyes to what was happening.

98.  The bank account was opened shortly before the money laundering commenced. The offence was committed over a period of 10 months and involved a number of transactions. All the monies paid into the account were for the purpose of laundering and apart from a few small payments, all the transfers out were for the same purpose.

99.  D5 is 46 years of age and married with a 17 year old daughter. He is currently working in Space Interior Solution Company as a project system officer since 2009 and is highly regarded by his employer. Numerous letters of support were submitted to the court which I took into consideration.

100.  It was urged upon the court that D5 as well as D6 became involved in this offence because of their association with Ng Hing, a man they trusted and respected.  Ng Hing was a fellow church member and senior bible reader. He was also their superior at work.

101.  D6 is 46 years-old a married man with twin 5-year old daughters who suffer from asthma. Again numerous letters of support were submitted to the court which I took into account when deciding the appropriate sentence.

102.  It was submitted on behalf of  D5 that he should only be held accountable for the monies laundered which were authorized by him up to June 2008. However, I took the view that this was an account for which he was jointly responsible and the bank statements throughout were sent to the companies registered address which was the business address of a friend of D5. I therefore rejected this contention.

103.  I decided that the appropriate sentence for this offence should be 4 years imprisonment.