HKSAR v. HO HO SAM

DCCC 362-B/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO.362-B OF 2004

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Reasons for Sentence

1. The defendant pleaded guilty to 5 charges of Conspiracy to Defraud (charges 1-5), one charge of Dealing with property known or believed to represent proceeds of an indictable offence (charge 6), and one charge of failing to surrender to custody without reasonable excuse (charge 7).

Facts

2. This is a Loco-London Silver fraud case. In each of charges 1 to 5, the victims responded to recruitment advertisements and were told they were offered a job with the respective employers in the charges. While they were supposed to be working there, they were told how profitable investment in Loco-London Silver with one Treasure On Investment Limited was. The victims were eventually lured into investing in Loco-London Silver via Treasure On Investment, which was in fact a scam and none of the money handed over by any of the victims were invested in anything.

3. The victims handed over their money by depositing money into the bank account of Treasure On Investment Limited.

4. The victims were later told that their money had all been lost. They never recovered their money and they never received any salary.

5. Treasure On Investment Limited was incorporated on 10^th April 2000. The defendant and one Kwong Kin Ho were directors of Treasure On at the material time. In the scams, the defendant played the role of a responsible person of Treasure On who could open investment accounts for the victims. In charge 3 and 4, the defendant played the additional role of an employer.

Previous convictions

6. The defendant has 4 previous convictions with none similar to any of the present charges.

Mitigation

7. The defendant is 44, he received education up to form 3 level in Hong Kong. He worked in a garment factory as a wrapping worker after leaving school. In around 1991, he worked as a manager at various nightclubs. Since 1994, he worked as a day laborer and then at a gambling establishment. Between 2000 and 2001, the defendant worked for Treasure On Investment Limited. He is currently unemployed.

The other defendants

8. Prosecution’s records show that in DCCC 362/2004, the above mentioned Kwong Kin Ho pleaded guilty to charges 1, 2, 4 and 5 in that case, which are similar to charges 1, 2, 4 and 5 in our present case and are based on the same facts.

9. Kwong Kin Ho was sentenced to 3 years’ imprisonment after plea on each charge. After having regard to totality, Kwong was sentenced to a total term of 4 years’ imprisonment.

10. It is the prosecution’s case that the remaining conspirators were not as involved as Kwong and our defendant and therefore their sentences would not be of much relevance to the present case.

11. The prosecution also referred me to the case of HKSAR v Yung Chi Lok, DCCC 1276/2009. Yung was only charged with one count of conspiracy to defraud. The allegation in that count is actually charge 2 in our present case.

12. Yung pleaded guilty and was sentenced to 4 years and 4 months’ imprisonment after plea. Although Yung appealed and the total term was disturbed, the issue on appeal was whether the sentence should run concurrently or consecutively to another sentence Yung was facing. As far as the sentence itself in 1276/2009, it was not disturbed in the Court of Appeal.

HKSAR v Tsoi ShuCACC 461 of 2003

13. The prosecution also referred me to the case of Tsoi Shu where the applicants were charged with conspiracy to defraud investors via loco London Silver fraud. In considering the applicants’ appeal against sentence, the Court of Appeal set out at paragraph 41 the relevant principles to be applied when sentencing this kind of cases. The gist of their holding is that a proper starting point is that of 4 years’ imprisonment, which could be varied upwards depending on the role of the defendant.

“The relevant principles

41. (1) A heavy sentence will be imposed in this type of fraud because it is a heartless scam depriving gullible victims of their savings. It is meant to be a deterrent sentence.

(2) A starting point of 4 years imprisonment is usually adopted. However, as expected, this is not an inflexible rule. Obviously the final sentence may have to be increased depending on factors such as the role and involvement of the individual defendant in the fraud, the duration of the fraud and the amount of loss suffered by the victims.

(3) A heavier sentence will be imposed on a defendant who continues with the fraud after the police raid. This is akin to the situation of a defendant who commits a further crime while on bail. The mastermind of the fraud will also attract a higher sentence.

(4) But these two factors are not the only reason for increasing the starting point. Where a defendant has a greater involvement with the fraud, a heavier sentence is expected. The decision of this Court (Mayo VP, Cheung JA and Yeung JA) in HKSAR v. Dos Passos Anthony Joseph (CACC 517 of 2001) has not discounted the other factors which would attract a higher sentence. In HKSAR v. Ng Chi Wong and others, CACC No. 386 of 2002, this court (Stuart-Moore VP, Stock JA, Ma JA (as he then was)) upheld a seven years starting point for defendant who continued with his dishonest activities after his arrest and for his bullying of a victim by threatening to put a debt collecting company onto her. In HKSAR v. Cheung Kwok Kuen, CACC No. 171 of 2001 (Stuart-Moore VP, Stock JA, Seagroatt J) this Court was of the view that a starting point of eight years imprisonment was appropriate for someone who was the mastermind of a fraud which spanned over 19 months and who had engaged in the laundering of the whole of the proceeds of the fraud.

(5) The commercial operations in the loco London gold/silver fraud are a charade. Although the company involved has the appearance of a commercial operation with office premises and equipment, there are no real transactions being carried out. The defendants, who either assumed the role of new recruits, lecturers or managers, were all actors pretending to be engaged in some commercial transactions that did not exist.

(6) While in one sense the role of one individual actor is the same as the other because each of them was pretending to be engaged in the operation of a commercial concern, obviously the actors played different roles in the hierarchy of the fraud operation. As a matter of commonsense, one would expect someone who, say, assumed the role of a manager to be more closely involved with the fraud than someone who merely acted as a decoy.

(7) The title of the post would not by itself necessarily attract such a higher degree of culpability. But if the post would actually require the actor to further the fraud, such as a ‘latter part’ manager who would ask a victim who had already lost his initial investment to put up more money in order to recoup his loss, then one would expect this job would only be handled by someone who had more experience with the fraud or was higher up in the hierarchy. In such a case the court will impose a higher sentence than the starting point of 4 years. The decision of this Court (Nazareth VP, Stuart-Moore VP, Keith JA) in HKSAR v. Sam Wai Keung CACC 226 of 1999 is consistent with this view.

(8) Likewise when a defendant played more than one role in the fraud, this is a clear indication that he had a higher degree of involvement with the fraud and a higher sentence will be imposed.

(9) The view expressed in paragraphs 40(7) and (8) above is consistent with the fact that each of the players took part in a joint criminal enterprise and as such were equally guilty of the crime. The issue here is concerned with the appropriate level of sentence which obviously has to take into account the degree of culpability of the individual player.

(10) Since the starting point is 4 years imprisonment, the Court will not reduce the sentence of a defendant who simply claimed that he played a minor role such as a decoy in the fraud. The starting point is appropriate to all the players who took part in the fraud.

(11) In HKSAR v. Chiang Chun Wai CACC 11/2001, this Court (Stuart-Moore VP, Woo JA and Stock JA) reduced the sentence of two defendants who did not continue with the fraud after the police raid. It is clear from a careful reading of the judgment that the Court did not say that a reduction in sentence should be given as of right in such a situation. The Court emphasised that the four years starting point was correct by itself. The reduction occurred because the Court was clearly concerned with the sense of unfairness that these two defendants must have felt when the sentences of the other defendants who had played a far greater role in the fraud received the same starting point which Stuart-Moore VP criticised as being inadequate when applied to these other defendants. Hence the two defendants’ sentences were reduced to redress this unfairness.”

HKSAR v BomaCACC 335 of 2010

14. The prosecution referred me to this case in relation to sentencing for the money laundering charge. Ms. Fung directed me to holding number 5 of the reported case where the Court set out the non-exhaustive list of features to take into account when sentencing, which is actually a summary of paragraph 40 of Stock V-P’s judgment.

“40. Less helpful though this may be than we had hoped, the best we can therefore do is to identify some of the significant features for which the court should look and take into account, though it is not possible to produce an exhaustive list: we can do no better than echo obvious factors that have been referred to by the cases:

(1) The nature of the predicate offence, if known, and the penalty available for the predicate offence….. So, for example, where the predicate offence is trafficking in dangerous drugs, the offender should expect a sentence significantly greater than where the predicate offence is gambling…..

(2) This brings us to the question of the state of knowledge of the offender. This divides itself in two – knowledge of the nature of the predicate offence, where the predicate offence is known to the court; and knowledge of the fact that the funds are the proceeds of an indictable offence:

(a) Where the predicate offence is known to the court, the question of knowledge of the offender as to the nature of the predicate offence is relevant in that the person who knows the nature of the predicate offence is more culpable than the person who does not…..

(b) As to the second question, there seems to me to be unassailable logic in the scheme of the Australian legislation which draws a distinction in culpability between the person who intentionally deals with the proceeds of crime, meaning the person who knows or believes that the funds in question are the proceeds of crime; the person who is reckless as to that question; and the person who is negligent about it. (This is not applicable in our present case since the defendant dealt with the money knowingly and intentionally)

(3) An international dimension will always be a significant aggravating feature; and by international dimension we include money laundered from, or for those operating in, the Mainland.

(4) The sophistication of the offence is always relevant. This will include the degree of planning and whether deceit is practised to achieve the objective.

(5) Where the offence is committed by or on behalf of an organized criminal syndicate, that is an aggravating fact.

(6) It is relevant to take into account whether there is one transaction or many and the length of time over which the offence was committed.

(7) As in the case of Herzberg, it will be an aggravating feature where the offender continues to launder funds after he has discovered as a fact that the funds are the proceeds of an offence or after he has discovered the nature of an offence which is serious.

(8) The sentencing court should have regard to the role of the offender and the acts performed by him. In this regard, the director of a laundering operation or scheme should attract a greater sentence than a person engaged by him although sentences should be sufficient to deter those who might be prevailed upon by directing minds. In the case of a person down the chain, the court will wish to have regard to whether a benefit has been received and if so the nature and size of the benefit. But within the category of persons down the chain there will gradations of culpability. So for example the drug addict or petty crook who is paid a small sum to open an account and hand over its operation to another with no more participation and no more knowledge than that it is going to be used for some sort of crime is much less culpable than an offender of a different sort not “used” in that way.”

Sentence

Charges 1, 2, 3, 4 and 5: The Conspiracy to Defraud charges

15. Charge 1 actually took place over a 2 month period within the charge 2 period, which covered a 6 months period. Charge 1 was committed after 2 raids had been conducted against the defendant’s premises in charge 2. Even after another raid on the premises in charge 1 and after the defendant was arrested and released on bail, the scam in relation to both charge 1 and charge 2 had continued until the end of February 2001.

16. Whilst the defendant was still on bail for his arrest on 19^th January 2001 in relation to charges 1 and 2, the defendant and his co-conspirators started another Local London Silver operation in the charge 3 period in July 2001. After this premises was raided on 12^th September 2001, they moved the company they named Treasure On Technology from one address to another and continued to falsely employ prospective victims about 6 months after the said raid, which began the charge 4 period.

17. This charge 4 period started on 1^st February 2002 and lasted about 2 months. Another raid was conducted on this new premises of Treasure On Technology on 6^th March 2002. The operation however carried on. Not only did the defendant and his co-conspirators carried on this operation, they simultaneously started another operation using Luck Star Engineering Limited as the new employing company and started to recruit new victims on 1^st April 2002. This began the charge 5 period.

18. The defendant was arrested in relation to charge 4 while the operation in charge 5 was ongoing. The defendant was eventually arrested for the 3^rd time on 27^th May 2002 and was granted Police bail again. The charge 5 operation however continued until 30^th June 2002.

19. In the meantime, between 15^th June 2000, that is even before the charge period of charge 2 had begun, and 4^th June 2002, which was before the end date of charge 5, the defendant had dealt with the money in the Treasure On Investment account, knowing that they were proceeds of the indictable offence of conspiracy to defraud the various victims in the 5 different local London Silver scam operations.

20. The trial of all the defendants were set down and the defendant was to appear in court on 13^th October 2004. He failed to so appear and did not surrender himself to Police until 27^th June 2012.

21. According to the summary of facts, the defendant was one of the 2 directors of Treasure On Investment Limited, the company which held the account where all the moneys from the victims were deposited. The other director being his co-conspirator, later co-defendant, Kwong Kin Ho. The defendant played the role of a responsible person of Treasure On Investment who could open investment accounts for the victims.

22. In charges 3 and 4, the defendant also played the role of the employer.

23. The defendant was the sole signatory of the savings account which Treasure On Investment held with the Bank of China. All the victims were told to deposit their investment money into this account. The victims in charges 1 to 5 all together lost a total of HK$2,838,825.

Sentencing Discount

24. In the case of HKSAR v Chow Tak Fuk CACC 428 of 2004, the applicant pleaded guilty to a charge of trafficking in dangerous drugs but was not given the usual full one third discount by the learned Recorder. In upholding the lesser discount, the Court said this,

“7. The applicant then complains that he was not given full credit for his plea of guilty, namely the one-third discount that normally follows such a plea. In this regard the Recorder denied the full discount because the applicant had absconded. The Recorder was correct in viewing that fact as one that will normally cut into the discount that might otherwise be expected. That said, surrender to the authorities is a mitigating feature but the extent of the mitigating effect is always a contextual question. Thus, for example, surrender by a person whose participation in an offence may not otherwise have come to light would be a significant mitigating factor indeed; much more so than surrender of an arrested person after he has absconded, and even in the latter case the circumstances behind that surrender will vary from case to case. Whilst the courts must always encourage persons to surrender, so that some credit for that fact will normally be given, those who might be minded to flee should not be led to believe that if ultimately they return they will be in no worse a position than had they not fled in the first place.”

25. In the case of HKSAR v Kwan Po Keung CACC 79 of 2011, a similar 25% discount was given for the applicant who had absconded and did not surrender until after 12 years and 7 months on the run:

“29. The judge fell into error in affording the applicant a discount of one third from the starting points taken for sentence. Here, the applicant absconded and successfully remained a fugitive from justice for 12 years’ and 7 months. His eventual surrender to the police and his pleas of guilty entitled him to some discount, albeit a lower discount than that afforded to those who plead guilty in the normal course of proceedings…..”

26. It is noted that a charge of failing to surrender to custody was left on file in Kwan Po Keung. The Court of Appeal was aware of that and did not mention anything about whether the lesser discount would be affected had the charge been proceeded with against the applicant at first instance.

27. The defendant in our present case had been on the run for close to 8 years. I find that in the circumstances a discount of 25% only for his guilty plea is appropriate.

Charges 1 to 5

28. The defendant played a significant role in all the conspiracies in all 5 charges. The fact that he was the sole signatory to the savings account of Treasure On Investment must mean that he ranked higher than the other co-conspirators in the operations.

29. The defendant and his co-conspirators carried on the scams despite Police raiding the various premises and despite himself being arrested for 3 times. He had scant regard for the law.

30. I find that a proper starting point for each of the 5 charges should be 4 and a half years’ imprisonment. For reasons given above in relation to discount, I will reduce this sentence by 25% for each charge, resulting in a sentence of 40.5 months’ imprisonment.

Charge 6: Money Laundering

31. The nature of the predicate offence is a heartless scam practiced against innocent people. The defendant not only knew about the offence but was one of the main proponents of the operations. There is no evidence to show that there is any international dimension in relation to the money laundering. The money laundering is not sophisticated. The defendant was merely making withdrawals which apparently were easily traced.

32. The various operations involved the renting of premises, setting up of the fake offices, engagement of different people playing different roles. Although there is no direct evidence to prove that money from the laundering were put back into the operations, I find it safe to infer that at least some money must have been used to assist in the operations.

33. The money laundering period lasted around 2 years. There is however no evidence to suggest how many withdrawals had been made over the years and where the money had gone.

34. The defendant, just as in the local London Silver scams, played a significant role in the money laundering as well. He was the sole signatory for the account in question, meaning that he alone had the power to deal with the money which were the proceeds of the predicate indictable offence.

35. Taking all the above factors into consideration, I find that a proper starting point is 3 and a half years’ imprisonment. For reasons given above, I will only grant the defendant a 25% discount for his plea of guilty. The reduced sentence is therefore 31.5 months’ imprisonment.

Charge 7: Failing to surrender to custody

36. The maximum sentence for Failing to Surrender to custody without reasonable excuse under s.9L(3) is a fine of any amount and imprisonment for 12 months.

37. There was no reasonable excuse for failing to surrender, the defendant absconded to try to avoid his trial. The defendant did not surrender to custody until some 8 years later. I find that a proper starting point is that of 9 months’ imprisonment. I will however grant the defendant the full one third discount on this charge because the charge arose only out of his absconding. To deprive him of the 1/3 discount because he absconded would mean he is punished twice for the offence. The defendant is therefore sentenced to 6 months’ imprisonment for this offence.

Totality

38. In considering totality, I have borne in mind the sentence of the other co-conspirator Kwong Kin Ho, but also that the defendant pleaded guilty to one more charge of conspiracy to defraud than Kwong as well as having his own charges of money laundering and failing to surrender.

39. I find however that although there is an extra charge of money laundering, the money were all taken from the London Silver scam and as such the offences are connected.

40. I order that 3 months of each of the charges 2, 3, 4 and 5 to be served consecutively to the sentence in charge 1, taking the total to 52.5 months’ imprisonment.

41. I order that 1.5 months of the sentence in charge 6 to be served consecutively to the sentences in charges 1-5, taking the total sentence to 54 months’ imprisonment.

42. In relation to the failing to surrender charge, I am of the view that some regard must be given to the fact that as a result of his absconding, the defendant has been punished by way of the lesser reduction in sentence in the other charges. That being the case, I will order 3 months of charge 7 to be served consecutively to the rest of the sentences.

43. The defendant is therefore sentenced to a total of 57 months’ imprisonment.