HKSAR v. YEUNG KA SING, CARSON

DCCC 860/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CRIMINAL CASE NO.860 OF 2011

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Reasons for Verdict

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1.  The defendant pleaded not guilty to 5 charges of ‘dealing with property believed to represent proceeds of an indictable offence’, contrary to s.25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap.455, more commonly known as offences of money laundering.

Background

2.  Each of the 5 charges concerns one bank account and covers slightly different periods from 2001 to 2007. The bank accounts in charges 1, 2 and 3 (hereinafter as account A, B and C) were opened and held in the name of the defendant. The bank accounts in charges 4 and 5 (hereinafter as account D and E) were opened and held in the name of the defendant’s now deceased father, Yeung Chung, with the defendant as the only other signatory. It is the prosecution’s case that the defendant also dealt with the money in his father’s bank accounts.

3.  The forensic accountant, Mr. Sutton, for the prosecution reviewed the movement of funds in the 5 accounts over the years and claimed to have identified various hallmarks of money laundering.

4.  It is the prosecution’s case that the circumstances concerning the movement of funds into and out of the bank accounts were all known to the defendant, including those relating to the 2 accounts held in the name of his father, and that a right thinking member of community knowing those circumstances would have reasonable grounds to believe that the money being dealt with represented wholly or in part directly or indirectly proceeds of an indictable offence, hence the defendant himself is to be held as having reasonable grounds to so believe.

5.  The prosecution did not seek to identify any underlying indictable offence and they do not rely on the ‘knowing’ limb of the offence.

6.  It is further the prosecution’s case that the evidence the defendant had given in relation to various deposits into the various bank accounts is not the truth and do not reveal the true nature of the deposits.

The Trial

7.  The course of the trial is succinctly set out in the Introduction of the Prosecution’s Closing Submissions at paragraphs 2 to 7. A number of applications were made throughout the trial. The court’s rulings on those applications are annexed to this Reasons for Verdict.

Issues

8.  It is the prosecution’s case is that the money deposited into each of the bank accounts over the relevant periods were being dealt with and that they represented, wholly or in part, directly or indirectly proceeds of an indictable offence.

9.  It is the prosecution’s case that, first of all, evidence shows those deposits could not have been from the sources of income declared by the defendant and his father in their tax documents. With that in mind, the prosecution then proceeded to rely on the evidence of their forensic accountant to demonstrate to the court that the movements of the funds in the bank accounts bore the hallmarks of money laundering. The prosecution then seek to ask the court to find that, given that the circumstances of the deposits must be known to the defendant, any right-thinking member of the community would, knowing those circumstances, have reasonable grounds to believe that the deposits being dealt with represented proceeds of an indictable offence.

10.  The prosecution also rely on the fact that a total of $95 million odd was deposited into the various bank accounts by way of cash transactions as one of the circumstances that would cause a right thinking member of the community to have reasonable grounds to believe the deposits represented proceeds of an indictable offence.

11.  In relation to the evidence that securities firms had deposited about $121 million into the bank accounts, it is the prosecution’s case that there is no evidence to show where the shares deposited into the defendant’s securities accounts originated from, or to show where the money used to purchase shares in the defendant’s securities accounts came from.

12.  The prosecution singled out cash checks that were issued by Soceidade de Jogos de Macau S.A. (hereinafter “SJM”), a casino operator in the Macau Special Administration Region, which were deposited into the subject bank accounts, saying that there was no apparent connection between the checks and the defendant, and that any reasonable person would be immediately suspicious of cash checks issued by a casino operator.

13.  The prosecution identified deposits from other third parties totalling $265 million odd into the bank accounts and it is their case that there were no apparent reasons for their deposit, and as such would have form part of the circumstances that would have caused the right thinking member of community to have reasonable grounds to believe the money represented proceeds of an indictable offence.

14.  Although there are 5 separate charges, the prosecution case was presented as if the court was considering the entirety of the funds deposited into the 5 accounts in the total sum of $721,287,607, and the way the data is set out and analysed in the prosecution expert reports corresponded with that approach.

Hallmarks of money laundering

15.  In relation to the hallmarks of money laundering mentioned above, the prosecution identified 24 transactions where there were deposits and withdrawals with identical amounts which took place on the same day. 22 of those transactions involved deposits or withdrawals in cash, with the majority of the transactions being with securities companies. It is the prosecution’s case that these transactions prove that the bank accounts were being used as a repository for funds and as such would be reasonable grounds for the right thinking member of community to believe that the money involved represented proceeds of an indictable offence.

16.  The prosecution singled out one cashier order which was made out from account A in December 2004. Documents showed that the source of the fund for the cashier order was from 7 cash deposits (3 into account A, 4 into account D) in identical amount of $200,000 deposited within 3 days prior to the issuance of the cashier order. It is the prosecution’s case that this pattern of cash deposits to cover the issuance of the cashier order is a hallmark of money laundering in that it would hide the source of the fund for the cashier order, and that it would form one of the grounds to believe that the money being deposited represented proceeds of an indictable offence.

17.  The prosecution also pointed to one particular instance on 13^th September 2007 when a remittance of $36 million odd to a solicitors firm in the UK was funded by an $18 million check deposit from one Cheung Chi Tai, a $10 million check deposit from Artune Limited and a $9 million odd remittance from Kingston Securities. The $9 million odd that was remitted from Kingston Securities were deposited into account A on 12^th September. There were then 5 bank transfers from account A the following day when the $9 million odd was transferred into account B. The remittance to the UK solicitors firm was made on the same day of the transfers. It is the prosecution’s case that there was no apparent reason why the transfer of $9 million odd from account A into account B could not have been done by way of a single transfer. The only reason must have been so that the source of the funds could be hidden. This manner of deposit and transfer of funds from the defendant’s one account to another would be reasonable grounds to believe that the money represented proceeds of an indictable offence.

18.  Lastly, it is the prosecution’s case that the equally and relatively low opening and closing balance of each of the 5 bank accounts in the charged periods is evidence that the accounts had been used as a repository for funds. Any right thinking member of the community, knowing what the defendant must have known in relation to the usage of the bank accounts, must have reasonable grounds to believe that the deposits represented proceeds of an indictable offence.

19.  All the above referred movement of funds are distilled from the raw material of bank and securities firm statements available to the prosecution, and defence. It is the interpretation of the movement of the funds and the reason behind the movements that is in issue. It is for the prosecution to prove beyond reasonable doubt that the above referred to movements of funds were known to the defendant, and that a right thinking member of the community knowing those same circumstances would conclude that there were reasonable grounds to believe that the deposits into each of the 5 bank accounts represented proceeds of an indictable offence.

Summaries of Prosecution Witness’ evidence

20.  The prosecution called 8 live witnesses to give evidence. Their evidence, together with the admitted facts (P-203) and various witness statements read into evidence under s.65B of the Criminal Procedure Ordinance (“the CPO”) form the prosecution case.

21.  The 8 live prosecution witnesses included the investigating officer of the case, staff members of various securities companies and Mr. Sutton the forensic accountant expert.

Sergeant Johnny Kwan the Investigating Officer

22.  Sergeant Kwan was the leading investigating officer tasked with the gathering and collating of data contained in the statements of the 5 bank accounts over the charge periods. He made 5 witness statements (P-188(A) to (E)). Sergeant Kwan’s statements included summaries of breakdowns and analyses of the deposits and withdrawals in each account. All the data used in the summaries were based on bank records produced into evidence.

23.  Sergeant Kwan was cross-examined on the topic of whether he had received any specialist training as a financial investigator. He did take part in an internal financial investigation course of the Police but has no other accounting qualifications. Sergeant Kwan spoke of other bank accounts that were operated by the defendant in addition to the present 5 charged accounts, but he was no longer able to remember the details about those accounts.

24.  Sergeant Kwan was asked if he had investigated the defendant’s property transactions shortly prior to the beginning of the charge period and he said he did not. This line of questioning laid the foundation for the defendant’s later claim that investment in properties was one of his sources of income and path to his accumulation of wealth.

25.  Mr. Harris brought up the fact that the defendant had pleaded guilty to a number of summonses for failing to disclose his interest in a company called Cedar Base in Kwun Tong Magistracy in 2004 and asked if Sergeant Kwan had obtained any documents in relation to that case, to which Sergeant Kwan answered he had not. It seems that the defendant was trying to establish that the Police had somehow targeted the defendant from the outset and that there was non-disclosure by the prosecution of matters relating to the Cedar Base prosecution.

26.  Sergeant Kwan was the officer who applied by way of a Production Order documents in relation to the defendant and his father’s securities accounts with 11 firm of stockbrokers. Those 11 firms were identified from the banking documents that Sergeant Kwan had received. Mr. Harris pointed out to the witness that the banking documents also disclosed dealings with 8 other brokerage firms. It is Sergeant Kwan’s evidence that in relation to the Production Order, he had always been chasing the banks and institutions for documents and even in the end he still had not gotten everything. This line of questioning was directed towards the claim that not all documents requested for in the Production Orders had been provided to the defence.

27.  Sergeant Kwan was then asked if he had interviewed anyone identified as having dealings with the bank accounts and he answered he had not. Sergeant Kwan also never had any meetings with Mr. Sutton the prosecution forensic accountant expert, nor direct communications. He did however have 2 meetings with Mr. Sutton’s team members to hand over and get back documents.

28.  Sergeant Kwan was also questioned as to why the defendant was not arrested earlier than June 2011 since he had formed the view that there was reasonable cause to suspect the defendant had committed a criminal offence by the end of 2008. Sergeant Kwan explained that they had to collect and see more evidence. He was also aware that the case was sent to the Department of Justice for consideration. This and the above line of questioning about interviewing the depositors is to laid the foundation for the claim that the Police’s failure to properly investigate the case resulted in an unfair trial for the defendant.

29.  Mr. Harris never suggested to Sergeant Kwan that the summaries and breakdowns prepared by him were erroneous in their contents. The direction of Mr. Harris’s cross-examination was geared towards the failure of the Police to investigate the entities who made the deposits into the bank accounts or who received the money from withdrawals out of the bank accounts, as well as the lack of documents from securities firms.

Ms. Li Yuet Mei Dilys of Kingston Securities

30.  Ms. Li is the General Manager of Kingston Securities Limited and made 4 witness statements (P-189(A) to (D)) which are produced into evidence pursuant to s.65B of the Criminal Procedure Ordinance, Cap.221.

31.  Mr. Reading went through the documents of the defendant and his father’s accounts with Kingston with Ms. Li to seek her explanation on certain items therein. Ms. Li explained about use of Cash and Margin account when dealing in shares. For cash account, one must settle on the settlement date which is ‘T+2’. As for margin account, they would give the client a credit line, but client would have to deposit money when they required him or her to do so. Instead of depositing money, the client can choose to deposit shares instead.

32.  Ms. Li explained that a margin call would be made if the margin exceeded their credit limit and the account executive will chase for payment. The account executive will contact the client immediately and the client is expected as a matter of extreme urgency to top up the account. If the client ignores the call, the broker is entitled under the account agreement to start selling the client’s shares without further reference to the client in order to regularize the margin limit. Ms. Li agreed in cross-examination that it was not unusual when there is a margin call for a client to settle quickly and sometimes in cash or by way of cash checks because that would take less time for the money to clear.

33.  When a client sold shares, Kingston would generally issue checks but the client can request other methods of payment such as bank transfers of cash checks. They would however not pay the client with cash.

34.  In cross-examination, Ms. Li confirmed one Nicholas Chu Yuk Yui as the boss of both Kingston Finance and Kingston Securities, and a relative of hers. The defendant was one of the biggest and most important private individual clients of Kingston. Ms. Li was referred to a $140 million loan made to the defendant by Kingston Finance in 2004 and agreed that it was one of the biggest loans they had ever made. Ms. Li can see from the documents that the amount from that loan had gone to a Birmingham company but at the time of the loan she was not aware if it was for the acquisition of Birmingham City Football Club. The loan was repaid in full by March 2010. Ms. Li was then shown documents indicating that the credit of $140 million eventually went to one Grandtop International Holdings, and this Grandtop was later renamed to Birmingham International Holdings Limited, which was the company that held the football club.

35.  Mr. Harris pointed out to Ms. Li that the defendant’s trading in shares through Kingston in his margin account in the period of 2001 to 2007 totalled $351,115,990. As at 28^th September 2001, the defendant had almost $12 million worth of shares in his account. Mr. Harris also focused on the margin limit available to the defendant to try to demonstrate how the defendant must already have been someone of considerable worth when he opened the account with Kingston and they granted him a credit limit of $5 million. Ms. Li did not have direct personal knowledge of the defendant’s net worth at that time.

Chan Kwok On of Chung Nam Securities Limited

36.  Mr. Chan’s witness statement was also read into evidence. In his statement, he listed out various cash and check deposits into the defendant’s securities account with Chung Nam between 2000 and 2007, as well as producing the account opening documents, monthly statements and other supporting documents.

37.  In cross-examination, Mr. Chan confirmed the defendant’s margin limit went as high as $8 million odd. Mr. Chan agreed that most of the trading in this account took place in 2001, when the volume of trade was $59,165,056.

38.  Mr. Chan was asked about a write off of $2 million as outstanding balance of the defendant’s account. The relevant document is a minutes of meeting of the board of directors and it was resolved that $2 million of the overdue amount would be written off. The witness confirmed that this write off was later reversed on 13^th September 2002. Mr. Chan explained that at the time of the write off they intended to write off $2 million and the defendant would repay the balance of $556,777.10, but in the end the defendant did not repay even that amount and so after 3 months of the write off they reinstated the $2 million as money owed by the defendant to them. Interest on the outstanding amount continued to be accrued until November 2003 when the defendant deposited the money with Chung Nam and they treated that as a repayment.

Lam Hiu Tung of Taiwan Securities (changed to KGI Securities (Asia) Limited in 2009)

39.  Mr. Lam is the assistant deputy executive director of KGI and his 2 witness statements were read into evidence under s.65B. He produced the documents in relation to the defendant and Yeung Chung’s account with Taiwan Securities, including account opening documents and transaction records.

40.  Mr. Lam’s evidence is that when a client sold shares, the proceeds from the sale would usually be paid to the client by way of checks. He could not remember if they were ever paid by way of bank transfers. He was not sure if they used to issue cash checks or just checks with client’s name as payee.

41.  In cross-examination, it was suggested that between the opening of the defendant’s account in 1999 and end of September 2001, there was very extensive trading through the account. In 2001, the total volume of trading was $587,749,506 worth of shares. Mr. Lam thought that should be the case. He agreed that the defendant was one of Taiwan’s biggest clients and considered a VIP. It also seemed to be the case that the defendant was operating a multiplicity of accounts through many different brokers.

Lee Yin Yi Kathy of Emperor Securities Limited

42.  Ms. Lee is the Associate Director – Operations of Emperor and joined the company in 2009. Her 2 witness statements were read into evidence under s.65B. According to documents kept by the company, the defendant opened a Margin Securities Account with Emperor on 15^th September 1999, account number 28600-009045 (or referred to in the documents usually in short as 9045). The defendant was the sole authorized signatory to the account.

43.  The documents produced by Ms. Lee recorded transactions of the defendant’s account between 2^nd January 2001 and 4^th March 2004. As at 28^th July 2008, the balance of the account was zero and no transactions were made.

44.  It is Ms. Lee’s evidence that cash can mean either cash given to her company or that the client transferred money via his or her bank account into the company’s bank account.

45.  Ms. Lee’s 2^nd statement deals with Yeung Chung’s account with Emperor. The account was opened on 28^th December 1999 with account number 9671. She produced the monthly statements for the account from 5^th January 2001 to 16^th May 2002. As at 28^th July 2008, the account has zero balance.

46.  According to Ms. Lee, if a client wanted to withdraw fund, the company would usually issue a check and deposit it into a bank account as instructed by the client, or the client can go to the company and collect the check physically and then deposit it himself. It is her evidence that as a market practice they would not pay folding cash to clients.

Tang Siu Kei of Guotai Junan Securities (HK) Limited

47.  Mr. Tang has been the Associate Director of Guotai Junan since 2010. His statement to the Police dated 7^th May 2012 was read into evidence pursuant to s.65B.

48.  The defendant opened a securities account on 20^th September 2001 with account number 7588. Various documents relating to the opening and the trading of the account are produced in his statement.

49.  Mr. Tang in cross-examination stated that his company’s policy, both present day and back in 2001 is that they do not deal in folding cash in any sum over $1000.

Ho Ping Yin of Lippo Securities

50.  Mr. Ho gave evidence in place of Ms. Wong Wai Ha of Lippo, who was not able to come to court for health reasons. Mr. Ho is the assistant compliance officer of Lippo since July 2010 and a colleague of Ms. Wong. Mr. Ho was asked some questions in relation to Ms. Wong’s witness statement that was read into evidence earlier.

51.  Mr. Ho was asked about certain terminologies in the account statements and he gave the following answers. “Delivered free” means the shares would be transferred to other broker. “Received Free” means the shares received from other brokers, transferred through the CCASS (Central Clearing and Settlement System). Just purely looking at “Received Free” alone, it would not involve any money, but would have to see whether there was a corresponding CCASS transfer on the same day.

52.  In cross-examination, Mr. Ho said he would consider the volume of trading in 2001 at $465,470,330 in the defendant’s account with Lippo as high.

Mr. Rod Sutton, the prosecution forensic accountant expert

53.  The prosecution rely on the expert evidence of Mr. Sutton to assist the court “in determining objectively, whether a right thinking reasonable person would conclude that there were reasonable grounds to believe that monies which were deposited to and withdrawn from the 5 bank accounts were the proceeds of an indictable offence” (paragraph 43 of the prosecution’s Closing Submissions).

54.  Mr. Sutton prepared 2 reports dated 7^th December 2010 and 26^th October 2011 respectively (to be referred to as the first and second report). He also prepared a witness statement dated 21^st May 2013, which was 2 days before he started to give evidence in court. This statement was read into evidence pursuant to s.65B.

55.  Mr. Sutton’s expertise was properly established in his evidence and was not challenged by the defence. Leave was granted for him to give opinion evidence as an accounting expert.

The First Report

56.  The scope of review for his first report is stated in paragraph 2 of the report. Mr. Sutton was instructed by the Department of Justice to report on whether there were any hallmarks of money laundering in the funds flows recorded in each of the 5 bank accounts. He was also instructed to note and comment on patterns of deposits and withdrawals of the bank accounts.

57.  At the time of the preparation of the first report, the covert investigation on the defendant and his father was ongoing and therefore the Police were not able to provide Mr. Sutton with all the information related to the case at that stage. Mr. Sutton operated on what was then available to him.

58.  Mr. Sutton in the preparation of this report reviewed the spreadsheets prepared by the Police regarding the breakdown of the 5 bank accounts. He also reviewed the bank statements and bank supporting documents and the opening documentation, where available, for the accounts, as well as the tax records from the Inland Revenue Department of the defendant and his father.

59.  Mr. Sutton did not verify the accuracy of the data contained in the spreadsheets that were prepared by Sergeant Johnny Kwan. The defence did not seek to challenge the accuracy of data in the spreadsheets at trial.

60.  Mr. Sutton set out the limitations of scope of his report and reserved the right to amend his opinion later on when provided with further documents and information, if necessary. It is however his evidence in court that even after he had been provided with further documents and information later on and up to the time of his giving of evidence, there was no need to amend his opinion as to the presence of all the hallmarks of money laundering as identified in this report.

The Second Report

61.  After the defendant’s arrest in June 2011, and subsequent to the defendant submitting for the purpose of this criminal trial as evidence a report dated 22^nd August 2011 by Mr. Mark Pulvirenti originally prepared for a separate set of legal proceedings in the High Court, Mr. Sutton was instructed by the Department of Justice to review the Pulvirenti report and to respond, where necessary, to any issues raised or conclusions Mr. Pulvirenti has made in respect of the contents of Mr. Sutton’s first report. Mr. Sutton was also instructed to respond to issues or conclusions in Mr. Pulvirenti’s report with which he did not agree.

62.  Additionally, Mr. Sutton was also to review the transactions between the 5 bank accounts and various securities companies and opine on the fund flow analysis on those transactions.

63.  Mr. Sutton was provided with further documents before his second report.

64.  In relation to the defendant, the documents included supporting documents and statements for 8 securities companies with which the defendant had held an account during the relevant period. They are BOCI, Taiwan, Hooray, Chung Nam, Lippo, Kingston, Guotai Junan and Emperor.

65.  In relation to Yeung Chung, the documents included supporting documents and statements for 5 securities companies with which he had held an account during the relevant period. They are Taiwan, Hooray, Kingston, Lippo and Emperor.

66.  There was also a statement of account of an account held in the name of the defendant with Kingston Finance Limited (“Kingston Finance”), together with 42 items which were listed out in Annexure B of Mr. Pulvirenti’s report.

67.  Mr. Sutton maintained his opinion as expressed in his first report that the movements of funds in the 5 bank accounts bore the hallmarks of money laundering and stated that the documents he had been provided with did not alter his position.

The defendant’s application for two witnesses to be tendered

68.  The prosecution case closed with the end of Mr. Sutton’s re-examination. The defendant made an application at this point for the prosecution to tender two witnesses (Officer in Charge of the case Inspector Lam, and Mr. Sutton’s assistance Stephen Lau) for cross-examination in relation to whether the Police has undisclosed documents that they had received pursuant to any of the Production Orders issued in relation to this case. I ruled against the defendant’s application. The ruling is at the end of this Reasons for Verdict.

69.  There was no submission of no case to answer and I found that there is a case for the defendant to answer in relation to each of the 5 charges. The facts admitted pursuant to s.65C of the Criminal Procedure Ordinance were then read into evidence.

The defendant’s case and summaries of evidence

70.  At the commencement of the defence case, the defendant applied to reserve his decision to give evidence or not until after calling his defence witnesses. I granted the defendant’s application (ruling as annexed) and the defendant proceeded to call the following defence witnesses.

DW1 PAN Chik Jackie

71.  Mr. Pan used to work for Lippo. He joined in 1993 and left in 2007 at the rank of Associate Director of Investment Services. He was the person who handled the Lippo securities accounts that were held in the defendant’s name, as well as that of the defendant’s father. Mr. Pan then set up his own brokerage firm Astrum Capital Management and the defendant opened an account with his firm.

72.  Mr. Pan gave evidence as to how the defendant was a big speculator, how he had always received instructions directly from the defendant in the operation of his Lippo account, and how the defendant or his staff would bring along large amount of cash to be paid into the Lippo account.

73.  Although it is the evidence of the Lippo account executive that cash was the fastest way for his clients to settle and that there had never been cash deposits into either the defendant or Yeung Chung’s Lippo accounts where there was no apparent reason to do so, it remains the fact that he was not able to say where the cash that was deposited by the defendant or his staff had originated from.

74.  Furthermore, it is DW1’s evidence that according to the regulations in place at that time, i.e. the period when the defendant would deposit large amount of cash into his Lippo account, there was no obligation on a financial agent to report, although as a licensee if they found that a transaction is suspicious they would usually report it to their monitoring authority. When asked if he had any cause to so report against the defendant, he answered that “compliance section did not raise this query all along”.

75.  It is Mr. Pan’s evidence that “there were not too many times when the defendant withdrew money” from his Lippo account. The company would issue cash checks at the request of the defendant on condition that the defendant would collect the cash check in person.

76.  Although Mr. Pan said that the defendant must give reason for a third party or cash check to be issued, it remains a fact that he would not have any idea whether the reason given was the real reason or where the money eventually went.

77.  Both in evidence-in-chief and in cross-examination Mr. Pan was asked about a cash deposit of $6.3 million into the defendant’s Lippo account on 23^rd August 2001. It is Mr. Pan’s evidence that Lippo had a Citic Kawah bank account which had a branch in the same building as Lippo’s offices and that one of the reasons why the defendant made that deposit was to ensure that the money could be quickly utilized, either to settle a margin call, or for the settlement of stock transactions or depositing the money in advance to prepare for the transactions on the following day.

78.  It was then pointed out to Mr. Pan that on the day after the $6.3 million deposit, the defendant deposited another $6.774 million in cash into his Lippo account. Another $4.213 million odd and $7.5 million was deposited into the account via ‘CCASS TT' on the same day as the $6.774 million cash deposit. Mr. Pan had no idea why that was done or where the money for those cash deposits came from.

79.  It is Mr. Pan’s evidence-in-chief that the amount of profit the defendant derived from the trading with Lippo in 2001 was $70 to $80 million. It is however based on his ‘impression’ from a series of stock transactions.

80.  Mr. Pan was taken through the statements and various entries where shares were stated as ‘received free’ into the Lippo account. Mr. Pan confirmed that he would not know from where the defendant bought those shares, for how much, how they were paid for and where the defendant obtained the funds to pay for them.

81.  In his evidence-in-chief, Mr. Pan claimed that in relation to Yeung Chung’s Lippo account, no one can operate his account, not even his son the defendant, unless the person is authorized. Mr. Pan specifically said that the defendant was never authorized to operate Yeung Chung’s account. In cross-examination, Mr. Pan was referred to a witness statement he made in February 2002 when he gave evidence in a case where the defendant was prosecuted by the Securities and Futures Commission in relation to trading in shares of the company called Cedar Base.

82.  In that 2002 statement, Mr. Pan stated that not all of Yeung Chung’s orders were placed by him. Sometimes orders were placed by the defendant and a person named Tsang Kai Ming. Yeung Chung had signed an authorization form authorizing Tsang to place orders on his behalf. Yeung Chung had also given verbal authorization allowing the defendant to place trading orders on his behalf. All orders placed under Yeung Chung’s account name were placed by telephone. Mr. Pan confirmed that he was telling the truth when he made that statement.

83.  When asked why he told the court in evidence-in-chief that the defendant did not have the authority to operate Yeung Chung’s account, Mr. Pan gave a protracted answer without actually answering the question. Upon Mr. Reading’s insistence, Mr. Pan just said that it was because at that time his impression was that Yeung Chung did not so authorize.

84.  It also transpired that Mr. Pan had invested $2.15 million of his own money with the defendant in relation to a project in Inner Mongolia. This money was transferred from Mr. Pan’s bank account into account A. According to Mr. Pan, there are no documents relating to this investment with the defendant at all. It is Mr. Pan’s evidence that the investment was made in 2007 but he had yet to receive anything back from the defendant, and he did not dare to inquire with the defendant after the defendant’s arrest for the present case for fear of being mistakenly implicated as an accomplice.

DW2 Chow Cheuk Lap

85.  Mr. Chow was the solicitor who acted for the property developer Dragon Power Development Limited that was responsible for the development of residential units at an address in Fanling, known as Wealthy Villas.

86.  This is the property development that the defendant would later claim to have had made a huge profit.

87.  Pursuant to two agreements, if the defendant’s company Richfield (Asia Pacific) Limited was able to procure purchasers for the units of Wealthy Villas in excess of the sums stated in the agreements, which was $75,250,000 in total, Richfield would keep the excess.

88.  Security money required under the agreements were paid to Dragon by Richfield over 9 stages between February and July 1997. Richfield was also contractually responsible for all costs and expenses incurred in relation to advertisement and promotion material for the sale of the development.

89.  Mr. Chow had no idea where Richfield obtained the funds to pay the security money or the expenses and he did not have any direct personal knowledge as to how much profit the defendant had made in the transaction.

DW3 So Chi Ming

90.  Mr. So was a salesperson at Kingston from 2000 to 2004. He was the account executive handling the defendant’s account with Kingston. Although Mr. So also assisted Yeung Chung in opening his Kingston account, he can no longer remember the circumstances. He also cannot remember if Yeung Chung had authorized anyone to operate his Kingston account on his behalf or whether the defendant did in fact give instructions or place any orders through Yeung Chung’s account.

91.  Mr. So remembered that the defendant was a very active speculator trading almost everyday with a daily turnover of over $1 million. The defendant traded mainly in penny stocks and would only very rarely trade in blue chips stocks.

92.  It is Mr. So’s evidence that in his experience active speculators would operate or open different accounts with many different brokers and he knew that the defendant did so operate.

93.  Mr. So remembered that the defendant had traded heavily, frequently and successfully in the following stocks: Cedar Base, Gold Wo, Tomorrow International, China United and Prosper EVision.

94.  Just as DW1, Mr. So was also of the view that the quickest way to answer a margin call was by way of deposit of cash. Back in 2000, it was “quite usual” for clients to deposit cash into the securities firm’s bank account to answer a margin call.

95.  Mr. So confirmed that there had been occasions when cash checks were issued to the defendant. The defendant would have to visit their office in person to collect the cash check. Mr. So remembered that the defendant told him that the money from the cash checks would be for him to deposit into other brokerage firm for meeting their margin calls. This however did not happen frequently.

96.  As far as Mr. So could remember, the defendant had never failed to answer a margin call made by Kingston.

97.  It is Mr. So’s evidence that if there is a private off-market sale of shares, the proceeds of sale may or may not show in the monthly statements. Mr. So did not know whether off-market deals were made or not, but he remembered that very often the defendant would deposit shares into the Kingston account free of charge.

98.  Mr. So could not be sure what sort of profits the defendant made in terms of money in 2001, but he would say it was in the range of a few million dollars to 10 million dollars. He agreed however that it would be quite impossible to calculate profits unless one knew the cost price and the eventual sales price of a share.

99.  In cross-examination, Mr. So said that it should be less than 10 times that the defendant had collected cash checks from Kingston while Mr. So was the defendant’s account executive.

DW4 Mr. Lam Cheok Va

100.  Mr. Lam is a merchant and holder of a Macau SAR identity card. He is the chairman of Public Enterprise Limited involved in the gaming industry, as well as the Secretary General of the Macau Gaming Association.

101.  Back in 2000, Mr. Lam was the Executive Manager of New Century Hotel and had met the defendant at a social function and made his acquaintance. Mr. Lam would then from time to time see the defendant gamble in the VIP room of the casino inside New Century Hotel. The defendant would play the card game of Baccarat.

102.  Mr. Lam explained that the casino inside New Century Hotel was a casino undertaken by SJM as a sub-contractor and SJM had control of the operation of the casino.

103.  Mr. Lam went on to explain the difference between the two types of chips used in the VIP rooms. One was called Dead Chips (or mud chips) and they are non-negotiable, meaning that they cannot be converted into cash. The other is cash chips which can be converted to cash. If one places a bet with mud chips and won, he would be paid with cash chips. The cash chips can be used to get cash at the end of the day but not the mud chips. The mud chips can either be taken away or kept with the counter of the VIP room.

104.  If mud chips are used, there is a commission to the person who supplied the mud chips to the gambler. Also, if one gambles on credit, one will be given mud chips as well and the person who supplied the mud chips will also get a commission.

105.  A gambling VIP can bring cash or cashier orders to the VIP room and they will have to be changed into chips first before the person could gamble.

106.  Mr. Lam also explained the various people likely to be working in a VIP room.  There are the “junket collaborators” who will approach ‘high rollers’ at the establishment to help in gambling or provide service, and their only aim is for that person to convert mud chips with him. Usually when people had converted money into mud chips, he will not lose everything in one go, will win some and lose some and more mud chips may be converted and that is known as ‘rolling’. If he wins cash he will buy mud chips with the cash chips, and then win and buy some more mud chips, then commission will be payable to the junket collaborators.

107.  When a client has big winnings and wants to cash out, checks would be issued by the VIP room to the client. Whether they are crossed checks or bearer checks would depend on the request of the client. Before 2006 when the Macau government changed the rules, client could also request cash checks. The checks would be issued by SJM.

108.  In laying the foundation for the explanation of the check deposits from SJM, Mr. Harris sought confirmation from Mr. Lam that New Century Casino had a branch office in Hong Kong and that it was possible for the gambler to make arrangements for the pay checks to be delivered to Hong Kong, to be collected by the gambler at his convenience, even maybe 2 or 4 days later. Mr. Lam did so confirm.

109.  It is Mr. Lam’s evidence that if a person holds a VIP account with a casino VIP room and the account is substantially in credit, there was still no interest paid on the sum that is in credit in the account. This differs with the evidence that the defendant will later give where the defendant said that while it was normally the case, one can however come to an agreement with the casino so that interest is payable on condition that the money is left in the casino account for an agreed period of time, usually no shorter than 6 months.

110.  Mr. Harris then proceeded to ask Mr. Lam about the defendant’s gambling habit and how he did as a gambler. It is Mr. Lam’s evidence that based on what he was able to see, the defendant was happy most of the time and that his bets were $100,000 odd per game. Mr. Lam however do not have personal knowledge either as to the credit limit the defendant had or the extent of his winnings gambling at other casinos or VIP rooms.

111.  Most importantly, Mr. Lam was not directly involved in any request for cash checks that might have been made by the defendant during the time he was in charge of the relevant VIP room.

112.  In cross-examination, Mr. Lam was asked about the checks made by the VIP room should a client bring in large sum of cash to be converted into mud chips. He explained that the client will have to fill out a form which will be submitted to the Monetary Authority in Macau. As far as the VIP room itself is concerned, it was impossible for them to do any checking as to the source of the money.  

DW5 Chim Pui Chung

113.  The defendant called Mr. Chim to primarily give evidence as to a transaction between them in relation to a company called Siko Venture Limited.

114.  Siko was a private company operated by Mr. Chim’s second son. Siko was the majority shareholder of the shares in Kanstar Environmental Paper Product Holdings Limited, a company that was listed on the GEM board in Hong Kong.

115.  In around June 2007, the defendant became very interested in petroleum and regarded it as a good business and he wanted to invest in Kanstar, which was developing a petroleum business in Brunei. The defendant approached Mr. Chim about Kanstar and Mr. Chim considered it an advantage to the company’s stock if such a big speculator like the defendant got involved.

116.  As a result of the defendant’s interest, Mr. Chim allotted to the defendant shares in the off-market as agreed by his son. The defendant offered to buy 280 million shares in Kanstar. With the majority shareholder, i.e. Chim’s second son’s consent, Chim and the defendant agreed the price to be at around $0.10 per share. The then market price was $0.43 and so the defendant was getting the shares with a substantial discount, at a quarter of the market price.

117.  A set of Bought and Sold notes was shown to Mr. Chim and he confirmed that they were documents relating to the transaction. Mr. Chim confirmed that in fact the defendant was paying $0.10 per share and one would not know the transaction price of $0.10 per share from just looking at the Bought and Sold notes.

118.  Mr. Chim was then referred to an extract from the monthly statement of the defendant’s Lippo account where it was shown that 280 million shares of Kanstar was ‘received free’ on 8^th July 2007 and then the following day ‘delivered free’ under a Settlement Instruction. It was Mr. Chim’s view that by delivered free, it would mean that the following day the defendant had notified Lippo to deliver the shares to another broker without money to be received. This is in fact what was shown in the statements as the shares were then delivered free to the defendant’s Kingston account the following day.

119.  As for the actual payment of $28 million by the defendant for the purchase of the shares, Mr. Chim said that he thought that the money was paid to him through a casino in Macau 2 or 3 days later when the defendant deposited the money into Mr. Chim’s own account with the casino. In examination-in-chief, Mr. Chim was not asked about the name of the casino or other details in relation to the deposit of money by the defendant.

120.  Mr. Chim was then asked about a check in the amount $3,910,000 that was issued by his company Golden Mount Limited on 22^nd August 2007 to Yeung Chung as the payee, which was deposited into Yeung Chung’s Wing Lung Bank account on the same day.

121.  When asked if he could remember what the check was about and why he gave Yeung Chung the check for $3.19 million, Mr. Chim gave the following answer,

“There are 2 ways of issuing a check in Hong Kong. First, is writing down the payee’s name straight away. Secondly, the payees’ name is left blank for the relevant personnel to fill in himself. From what I recall, this issue was certainly given to the defendant, and he adopted the second way, i.e., he filled in the payee’s name himself. I can only confirm that this check was given by me to the defendant.”

122.  When Mr. Harris asked him if he remembered what the payment was about, Mr. Chim gave the following answer,

“An example given earlier, he owed me $28 million and he paid me through Macau, and we had some exchanges of payment and this might be my helping him by paying him but I cannot recall what it was about.”

123.  Mr. Harris then pointed out to him that this payment was not long after the off-market deal he had with the defendant and asked Mr. Chim to try to remember. Mr. Chim was however only able to say that he was certain that the check was given by him to the defendant, but as to under what circumstances, he really could not remember, because to him, $3 million odd is a small sum of money.

124.  In cross-examination, Mr. Chim was asked why his son would sell the shares at $0.10 to the defendant when he could have sold them on the market at $0.30 or more. Mr. Chim gave the following answer,

“There are 2 to 3 reasons. First, you people who earn high wages do not know the operation of the market. Secondly, because there was such a large quantity, you cannot sell such a large quantity without a big speculator, it would not be able to sell. Third, the timing must be right. The current market price is no more than $0.05, half a cent. Not even 1/20 of the price that I sold to him for. The simple answer to you is it was a commercial decision.”

125.  Mr. Chim was asked about the nature of the payment by the defendant into Mr. Chim’s Macau casino account but his evidence is that he had no idea whether it was in the form of a check or chips or dead chips, as long as he received it, it did not matter to him.

126.  Mr. Chim was then asked why the money was paid to him instead of to his son. Mr. Chim explained that it was because it was a deal struck between himself and the defendant and that his son owed him money, so whether the money was paid to him or his son was the same, and that it was a matter left for him and his son to settle.

127.  Mr. Reading continued to seek more details from Mr. Chim in relation to the sale of the 280 million shares and asked if a receipt was issued to the defendant for the $28 million payment. Mr. Chim said there was no receipt, and he added that there was also no receipt from the defendant acknowledging his receipt of the shares. It was a case of “he just received my shares and I received his money”. There was no document of sale, no agreement of sale and no documents evidencing the transaction other than the Bought and Sold notes.

128.  Mr. Chim did not know where the defendant obtained the $28 million to pay for the shares.

DW6 Yang Wu Jun

129.  Mr. Yang is a mainlander who lives in Guangzhou. He is the cousin of the defendant. Mr. Yang gave evidence as to being the general manager of a hotel in Dongguan back in June 1991, about 10 years before the beginning of the charge period of any of the 5 charges.

130.  To the best of the witnesses’ knowledge, Yeung Chung and the defendant were the bosses of the hotel, which employed some 156 employees. It is his evidence that his uncle Yeung Chung had told him that the hotel made an overall profit of RMB2 to 3 million in the few years that they were operating it.

131.  Mr. Yang somehow obtained through the Commercial and Industrial Bureau of Dongguan City an Article of Association of the hotel. It is stated on the document that the investment amount was RMB12 million and that the investors included Yeung Chung and the defendant. The document also states that the profits would be split between the parties, with Yeung Chung and the defendant getting the majority share of 90%. Mr. Yang had no idea where Yeung Chung or the defendant obtained the RMB12 million investment money.

132.  Mr. Yang worked there a few years until the hotel was sold in about 1994 and he left. He does not know to whom the hotel was sold.

DW7 Mr. Shrestha Basanta

133.  Mr. Shrestha was originally from Nepal and holds a Hong Kong identity card. He worked as the defendant’s bodyguard from March 2006 to March 2012.

134.  Mr. Shrestha was asked about certain donations made by the defendant to charitable organizations in China. What Mr. Shrestha was able to say as to the donations was all hearsay evidence and has no evidential value if used to prove that the defendant did make those donations.

135.  Mr. Shrestha did however accompany the defendant to various places in mainland China and had seen him taking photographs with lots of other people. What he did was circumstantial evidence to support the suggestion that the defendant had made donations and had visited the benefiting charity. Mr. Shrestha was also asked about the presence of safes in the defendant’s office. Mr. Shrestha was not cross-examined.

DW8 Ian Grant Robinson

136.  Mr. Robinson was the first defence expert witness. The prosecution did not challenge his expertise as an accountant but did establish that Mr. Robinson had never given evidence in any money laundering case as an expert witness. Having heard from Mr. Robinson and submissions from counsel, I ruled that Mr. Robinson can give evidence of opinion in the area of his expertise as a forensic accountant.

137.  Mr. Robinson gave evidence at a time when the defendant was still undecided as to whether he himself was going to give evidence in his own defence.

138.  Mr. Robinson prepared 2 reports, respectively IR-1 and IR-2. It is his evidence that based on the information he had seen, he did not detect anything that he would call special hallmarks of money laundering

139.  It is Mr. Robinson’s opinion that because of the strategy that the defendant engaged in of moving shares from one broker to another on a regular basis, shares which were received free and delivered free, even though the movement of the shares were recorded in the firms’ statements, without knowing the original cost of the acquisition of the shares and the eventual sale price, it would be difficult to get the true and complete picture of the defendant’s share trading.

140.  Mr. Robinson also repeated the complaint made by the defence in the stay proceedings of how missing documents made it impossible to get the full picture of the securities trading by the defendant, and because there had been a lot of money flowing to and from and in between brokers and moneys flowing out, without the securities documents it would be extremely difficult to understand the full picture of the 5 bank accounts, “quite difficult to assess really what has been happening”.

141.  In relation to the defendant and Yeung Chung’s tax documents showing that they only had a small income in the relevant period, Mr. Robinson explained that hypothetically if the defendant had income that was sourced from overseas like mainland China or elsewhere in the region, the overseas income would not be taxable nor reportable in Hong Kong. Mr. Robinson did qualify his answer with the premise that he was “not a tax person” and that counsel would have to ask “tax people” what to do and that he did so ask. So what Mr. Robinson essentially did was to relate what someone else had told him the situation was.

142.  Mr. Harris put another hypothetical question to Mr. Robinson, asking him what he would have done at the time of signing off of Mr. Sutton’s first report. Mr. Robinson replied that the first thing he would have done was to find out more about the defendant as a person, his background, his earnings, what happened and try to understand the background a lot more carefully. The second thing would be to request as much information as possible about the relevant period. The third thing would be to look for other relevant information which would assist him in the preparation of his report.

143.  As to the background information of the defendant that was set out in IR-2, it is Mr. Robinson’s evidence that he had conducted his own inquiries into the defendant’s background by way of internet searches as well as by way of asking the defendant’s lawyers ‘to provide him with as much information as possible they had on him’. It is also his evidence that he had asked to interview the defendant as to his background personally. Mr. Robinson said he had his own staff sat down with the defendant to go through step by step to try and find what they could find and that was what they did and it took a long time to try and piece everything together. Mr. Robinson even told of one occasion when he visited the defendant’s office and took a picture with his phone of a safe that he saw there.

144.  Mr. Robinson then used his own knowledge and his staff’s knowledge of business to estimate what a hairdresser would earn or make by way of profits and he believed the figures he came up with are reasonable.

145.  It is Mr. Robinson’s opinion that if full set of documents, in particular deposit slips, were available, the people who made the deposits could then be identified.

146.  Mr. Robinson went through the bullet points in his second report and confirmed his opinion that there was nothing to suggest that the defendant was taking part in any money laundering activities.

147.  In cross-examination, Mr. Robinson explained how he would confirm over the internet ‘some of the things that the defendant had been telling him and in addition to that, where the defendant indicated he had traded in real estate and shares’. He said he was able to confirm over the internet that they were true.

148.  In relation to the RMB12 million that allowed the defendant to buy the hotel in Dongguan, it is Mr. Robinson’s evidence that he did ask the defendant to show him where he got the money from, but the defendant said that he did not have the documents or information because it was so old.

149.  According to Mr. Robinson, the sale of the hotel brought in a profit of $3 million and this information was given to him by his instructing solicitors with no documentary support. In fact, all the information in paragraphs 4.5.8 to 4.5.14 came from the instructing solicitors.

150.  When Mr. Robinson was asked about the profits derived from the defendant’s Richfield company involvement in the Wealthy Villas project, he said he had checked the registration and information included in his report’s appendices, which included the identity of some of the purchasers of the units. Yet, when it was pointed out to Mr. Robinson that the defendant was a director of 4 of the buyer companies of 4 car park spaces, and that the purchases were subject to mortgages, he said that he was not aware of any of those facts.

151.  Mr. Robinson dealt with some specific deposits in his second report and gave his opinion based supposedly on instructions he received from the solicitors instructing him. Mr. Robinson’s findings were however later to be disputed by the defendant himself when he gave evidence that the deposits were not repayment of loans but connected to investments he had made in Massive Resources and Neptune VIP Club. This topic will be dealt with in more details later on in my findings.

DW9 Mr. Gurung Arjun Kumar

152.  Mr. Gurung was employed by the defendant as a bodyguard in April 2006. He worked in Hong Kong until June 2008 when he left Hong Kong and went to work for the defendant in the United Kingdom, taking care of staff and guests of Birmingham International Holding Limited and looking after the defendant’s property in London. He was still in the employ of the defendant at the time of his giving of evidence.

153.  Mr. Gurung remembered accompanying the defendant to gamble in Macau casinos. The defendant usually went to the casino in New Century Hotel and Wynn Hotel. Mr. Gurung remembered that there was a VIP table inside the casino called Neptune and the defendant gambled there. The defendant always gambled in a VIP room. Although he did not count the money, Mr. Gurung was able to testify that the defendant usually got chips of around $2 to $3 million. To the best of Mr. Gurung’s knowledge, the defendant won most of the time. The most he ever saw the defendant won was around $2 to $3 million.

154.  It is Mr. Gurung’s evidence that the defendant did not bring large amount of cash with him to Macau, nor out of the casino.

155.  Mr. Gurung, between 2006 and 2008 when he worked in Hong Kong, had seen the defendant either deposit or withdraw cash at the bank. He was not able to tell how much cash but would guess it was around $2 to $3 million. Mr. Gurung would carry the envelope with the cash inside on the way to the bank. At the bank, the staff would take the defendant to the VIP counter and then they did the deposit there. It took roughly 15 minutes to make the deposit.

156.  Mr. Gurung could not say how often the defendant made trips like that to the bank, nor did he have any idea where the cash came from. There were other occasions when he would accompany others who worked for the defendant to make deposits or withdrawals at the bank.

DW10 Ng Loi Ping

157.  Mr. Ng is a businessman who resides and works in the Republic of Kazakhstan and had known the defendant for about 27 years. Mr. Ng was a client of the defendant’s Vole Peninsula salon in 1989 and was asked by Mr. Harris to describe the premises that the salon was operating on. Mr. Ng described it as about 600-700 square feet with about 5 to 6 hairdressers working there, including the defendant. Mr. Ng had to book a day in advance and he paid a concessionary price of $500 for his haircuts. Mr. Ng said people from high society and movie stars would patronize the salon.

158.  After Vole Peninsula moved to Royal Pacific Hotel, Mr. Ng continued to go there for his haircut. The new place was over 2000 square feet with over 30 staff, over 10 of them were hairdressers. Again, business was very good, serving the same high society clients. It must be pointed out here that the defendant later on in his evidence said Vole Salon at Royal Pacific Hotel was the first salon he had set up in July 1989 and Vole Peninsula was set up in August 1989 with the two operating parallel to each other until February 1991.

159.  Mr. Ng said the defendant did invite him to invest in the Wealthy Villas project but he had declined because he was focusing on his business in Kazakhstan. Mr. Ng said he heard from an unidentified friend that the defendant made profits of $10 to $20 million on the project. This, of course, is hearsay evidence if used to prove the truth of its contents.

160.  Mr. Ng was also asked about the defendant’s $10 million donation to Tibet for local development and confirmed that the defendant had made many charitable donations over the years of tens of millions of dollars largely in mainland China.

161.  Mr. Ng was then asked what he knew about the defendant’s stock trading but he only heard about it from others and did not have any personal knowledge.

162.  Mr. Ng said the reason the defendant acquired Birmingham Football Club because he was very passionate about football and it was his intention to develop Chinese football.

163.  In cross-examination, Mr. Ng said the defendant had mentioned to him that the rental for Vole Peninsula was over $100,000 per month.

DW11 Chan Wei Kwun

164.  Ms. Chan is a stock broker by profession and the Vice President of Tanrich Securities. From 1999 to 2003 she worked as a stock broker with the company known as ASG. Ms. Chan was the person who approached the defendant in 2000 to open a margin securities account with ASG. A short while after the defendant opened his account, the defendant’s father Yeung Chung also opened a margin account with ASG. The defendant’s stated business at the time of the opening of the account was that of the Bull and Bear Investment Company.

165.  Statements for May, June and July 2001 for the defendant’s account were produced and shown to Ms. Chan and she confirmed that based on those statements, the volume of trading during those periods was quite considerable. Ms. Chan described the defendant as a very active trader with quite considerable trading volume, and was one of her top 5 major clients at the time.

166.  The defendant placed orders over the phone and had a preference for penny or small caps stocks. The defendant did not ask her for her opinion when placing his orders and he knew very well what he intended to trade. Ms. Chan was aware that the defendant had trading accounts with a lot of other brokers.

167.  Ms. Chan could not remember to what extent did ASG permitted clients to make cash deposits into their company bank account. She could remember there were occasions when she had to make a margin call in relation to the defendant’s account. She was not able to say how usually that situation would arise. Typically, the defendant would react promptly to her margin call by either depositing cash or transferring shares in by way of Settlement Instructions to settle the margin call.

168.  ASG viewed the defendant’s credit worthiness as very good because each time there was a margin call the defendant reacted promptly to settle it.

169.  Ms. Chan confirmed that there would have been various received free or delivered free references in relation to the defendant’s account. She however would not know how much the shares that were received into the ASG account from another brokerage had cost the defendant when he originally bought them.

170.  When it was pointed out to Ms. Chan that in the available statements, for the 3 month period, the volume of bought and sold transactions added up to $257,916,321.94’s worth of turnover, she remarked that all along the trading volume was very considerable, referring to the year 2001 and early 2002, with a typical daily trading volume of on average $4 to $6 million worth of shares.

171.  Ms. Chan was then asked as the defendant’s then account executive if she knew how successful the defendant was in trading shares and how profitable it was, she said that it was impossible for her to calculate without knowing the cost of the shares that went into the account by way of Settlement Instructions, but she thought it must have been profitable for the defendant to continue with the trading. She supposed that the defendant was making money.

172.  Ms. Chan was then asked about the accounts that the defendant and his father held with Tanrich. Ms. Chan was however not working at Tanrich at the material time and did not have personal knowledge of the matters she was being asked about, such as the credit limit for the accounts or who had set those limits and for what reason.

173.  In cross-examination, Ms. Chan was asked how much time was a client given to comply with a margin call and her answer is that there was ‘no time limit set’ for the response to margin calls. She would usually ask the client to response as soon as possible and usually the client would be able to manage it within the same day or the following day.

174.  In cross-examination, Ms. Chan equated the “S/I” transactions shown in the ASG statements as off-market transactions.

DW12 Mr. Mark Sebastian Pulvirenti

175.  Mr. Pulvirenti is an accountant and is the author of 2 reports dated 22^nd  August and 16^th  November 2011. Those 2 reports were prepared in response to the 2 reports of the prosecution expert accountant Mr. Sutton. The reports were however prepared solely for the purpose of the Miscellaneous Proceedings in the High Court in relation to a restraining order being sought against the defendant. 

176.  Mr. Pulvirenti had never testified in Hong Kong as an expert witness in a criminal case before. Having heard from Mr. Pulvirenti, I granted him permission to give opinion evidence in relation to his expertise as a forensic accountant.

177.  Mr. Pulvirenti adopted his reports and stated that having heard evidence given in court, there was nothing to cause him to change his mind or views as set out in his reports.

178.  Mr. Pulvirenti did however point out that at the time of the preparation of his report, he stated that the various payments to Prince Evans Lloyd Solicitors in the United Kingdom may have related to the defendant’s acquisition of Birmingham Football Club, but he had since learned that they were not related to that acquisition but in relation to the purchase of property in the UK. Other than that, his opinion remained the same.

179.  Mr. Pulvirenti stated that as an expert, the biggest problem he faced was the deficiency of evidence, of documentation. Without piecing together the relevant and complete totality of information and evidence, he was not able to draw conclusions in the way that the prosecution expert had done in the case.

180.  Mr. Pulvirenti very fairly accepted that his own reports were prepared at cross purpose to the present criminal proceedings against the defendant because they were prepared for the civil proceedings in the High Court. Nevertheless, he had difficulty understanding how it was that Mr. Sutton could reach the conclusions that he did in light of the paucity of information available to him.

181.  Mr. Pulvirenti pointed out that the readily traceable flow of funds through the 5 bank accounts did not accord with someone who was engaging in money laundering activities. He expected the person concerned would not have the account in his own name, might have used shell companies in foreign jurisdictions, would not have so easily traceable fund flows from deposits to integration into assets. He would have expected the money to leave the defendant and go back to whoever he was laundering money for, but he would not expect him to buy a house he lived in for a long time and for long term investment purpose.

182.  In cross-examination, Mr. Pulvirenti accepted that in relation to him expecting the money to go back to whoever the defendant was laundering money for, that would be the case unless the defendant was laundering money for himself.

183.  Mr. Pulvirenti accepted that so far as money laundering is concerned, as forensic accountant, one would look for evidence of placement, layering and integration. Since Mr. Pulvirenti in his evidence-in-chief mentioned that one needed to make inquiry of certain persons in investigating money laundering cases, he was asked in cross-examination about whom he had spoken to in making those enquiries. Mr. Pulvirenti answered that he did not speak to any of the individuals because he was not tasked with assessing whether hallmarks of money laundering existed. He was not provided with any materials from the defendant.

184.  Mr. Pulvirenti was then referred to his first report at paragraph 4.1.7 where he noted that “89 of the 205 sample deposits totalling $21,400,250 (43% of number and 6% of value) were made in cash and all by Unknown Parties.” It is his evidence that items such as deposit slips, copy of checks deposited into the account would allow him to see the drawer of the check and whether it was made out to cash or not. He however agreed that strictly speaking, in relation to cash deposits, anyone who had the defendant’s bank account number would be able to deposit money.

185.  Mr. Pulvirenti was then referred to paragraph 4.1.8 where he set out the 5 largest deposits into account A. He confirmed that he was not able to tell from where the $62.45 million from SJM, nor the $12 million odd deposits from Grandtop were sourced.

186.  In relation to paragraph 4.1.25 where he dealt with a bank transfer of $10 million from WinCon into account A on 10^th  October 2007, Mr. Pulvirenti accepted that there was no information other than the fact that the money came from WinCon and the source of that $10 million could not be decided.

187.  At paragraph 4.2.8, in relation to account B, Mr. Pulvirenti noted that “85 of the sample deposits totalling $42,158,949 (34% of number and 17% of value) were made in cash. Of which, 82 sample deposits amounting to $40,558,949 were made from Unknown Parties.” Mr. Pulvirenti accepted that there was no indication of the source of that cash, because the parties making those deposits could not be identified from the information available to him.

188.  Mr. Pulvirenti was then referred to his paragraph 4.2.9 where he identified the 5 largest parties depositing funds into account B. He confirmed that he had no idea the purpose of the deposits of $18 million by Cheung Chi Tai, the $10 million from Artune Limited, and the $3.3 million from Au Yeung Kai Chor. The deposit by Lippo was however proceeds of shares from the company.

189.  In relation to the $2 million from Abba Chan, Mr. Pulvirenti said that he had understood from the defendant that he was involved in funding a movie, but he did not ask the defendant why the $2 million was deposited into the account.

190.  As for the Prince Evans Lloyd money, it is Mr. Pulvirenti’s evidence that his change of view about the purpose of payment of the money from purchase of Birmingham Football Club to that of the defendant’s purchase of property in the UK was as a result of getting that information from the defendant. When asked what the defendant said, Mr. Pulvirenti said that the defendant simply said that it was in relation to a UK property and did not give him any details. Mr. Pulvirenti was not asked about when the defendant gave him that information.

191.  At paragraph 4.2.21, Mr. Pulvirenti stated that “There were no deposits identified as having been received from Kingston Securities into Account B during the Covered Period. I note, however, deposits were identified as having been made by Kingston Securities into Accounts A and E.”

192.  In relation to account C, Mr. Pulvirenti noted that this HSBC savings account was opened in May 2000 and that deposits into this account were usually transferred out of the account within several days. At paragraph 4.3.10, he noted that 15 deposits totalling $13.6 million were made in cash.

193.  When asked if he agreed with Mr. Sutton that cash is difficult to trace, Mr. Pulvirenti answered that it was potentially more difficult to trace, dependent on whether at the time of the deposit it contained the identity of the depositor.

194.  Mr. Pulvirenti identified the 5 largest depositors at paragraph 4.3.11, with Taiwan Securities the largest one at $13.773 million, and then 4 deposits of $2 million from unknown parties. Mr. Pulvirenti said he did not then have time to ask the defendant about the source of those unknown parties deposits, and later on was not instructed to ask the defendant about that.

195.  In relation to account D, at paragraph 4.4.6 Mr. Pulvirenti noted that 8 of the 12 sample deposits totalling $4.15 million (67% of number and 65% of value) were received from unknown third parties. 9 deposits totalling $4.25 million (75% of number and 66% of value) were made via cash from 8 unknown parties for $4.15 million and one identified third party for $100,000.

196.  In relation to account E, at paragraph 4.5.3, Mr. Pulvirenti noted that there were 80 sample deposit transactions amounting to total value of $80,326,483 (78% of number and 98% of value), and 104 sample withdrawal transactions amounting to $80,394,540 (76% of number and 98% of value). 47 of the sample deposits amounting to $7,173,000 (59% of number and 9% of value) were received via cash and all from unknown parties.

197.  Of the 5 largest external parties depositing funds in account E, which Mr. Pulvirenti identified as Chau Tak Shun & Leung Yim Fun; Hooray Securities; SJM; Up Sky Limited; and Au Yeung Kai Chor, Mr. Pulvirenti had no idea about the source of the funds for their deposits.

198.  At paragraph 4.5.18, he dealt with 2 cash checks totalling $10 million deposited from SJM into account E on 30^th March and 7^th April 2006. The apparent possible subsequent uses of the proceeds are set out in a table. From the table, it can be seen that $8.6 million of that money were transferred from Yeung Chung’s account E to the defendant’s bank accounts A or B as well as to Universal Management Consultancy Limited, of which the defendant was a director.  Just $1 million of the funds were transferred to one Chung Ming Chun by way of 2 transfers in May 2006.

199.  During cross-examination, Mr. Pulvirenti confirmed that he would not be able to assist in relation to the sources of the cash deposits into the subject bank accounts. He might be able to identify the depositors but not the purpose behind the deposits. The same applies to third party non-cash deposits into the accounts for the most part.

200.  Mr. Pulvirenti was then asked by the prosecution what business would generate such a large amount of cash, to which he answered that from the documents available he was not able to so identify. The large cash deposits identified by Mr. Sutton were heavily focused in 2001 and 2007 and Mr. Pulvirenti found that they are consistent with the heavy volume of trading of shares by the defendant.

201.  Mr. Pulvirenti confirmed that the evidence from the various stock brokers was that when money was paid to clients for the sale of shares out of share trading accounts, they never paid out folding cash. He also confirmed that property transactions are not a business that generated folding cash.

DW13 Ms. Yeung Tak Wai

202.  At this stage of the defendant’s case, Mr. Harris formally notified the court that the defendant had elected not to give evidence in his own defence. Mr. Harris then proceeded to call Ms. Yeung, the niece of the defendant.

203.  Ms. Yeung began working for the defendant in February 2007 when she joined Universal Management Consultancy Limited. Universal was closed at some point and Ms. Yeung moved across to another of the defendant’s company, Grandtop and continued to work for the defendant. Ms. Yeung said she was “not too sure” what business Universal was engaged in. When she was transferred to Grandtop, the company was involved with the acquisition of a football club.

204.  Ms. Yeung was an assistant to the defendant’s secretary, Cheng Lai Kei, when she first started. Ms. Yeung has since become the defendant’s personal assistant.

205.  Ms. Yeung recounted how there were occasions over the years when either the defendant or the secretary would instruct her and sometimes another staff to make visits to the bank, and she did from time to time go to Wing Lung Bank and HSBC. She deposited folding cash into the bank accounts on some occasions, sometimes 2 to 3 times per week, sometimes none for the whole week, it was not regular. She remembered that roughly $200,000 was deposited on each occasion. Ms. Yeung was not clear where the cash came from.

206.  Ms. Yeung would be given cash by the secretary who got the cash from the defendant. She knew that the cash were kept by the defendant in his safe in the office. Ms. Yeung recalls one time when the secretary was not in the office and the defendant asked her to take the money from his safe. Ms. Yeung took the key for the safe from the secretary’s drawer and opened the safe and saw there were banknotes inside. She did not count how much money was in the safe, she just saw stacks of $1,000 banknotes. The defendant told her to take out $200,000 and so she took out 2 stacks without counting them. On that occasion, the money was deposited into Wing Lung Bank. In cross-examination, Ms. Yeung said she could not remember when this happened except that it was after 2007.

207.  When she arrived with the money at the bank, it is Ms. Yeung’s evidence that she did not have to fill in any forms but she did have to show her identity card to the bank staff. It took roughly 10 minutes for the staff to count the money and then Ms. Yeung was given an acknowledgement of deposit, which she would then hand over to the secretary. After each deposit, the secretary would instruct her to issue checks for the settlement of the defendant’s credit card bills or his domestic expenses.

208.  Ms. Yeung had also been asked by the defendant to withdraw cash from banks, but that did not happen regularly. The withdrawals were usually in the region of $200,000 to $300,000, and she would be accompanied by other people such as the defendant’s bodyguards. The instructions to withdraw cash usually came from the secretary and the banks would be notified about the withdrawal in advance. It is Ms. Yeung’s evidence that having received the cash from the bank teller, there was no need for her to sign anything.

209.  The withdrawn money would then be taken back to the defendant’s office and handed over to the secretary who would then pass it on to the defendant. Ms. Yeung did not know what the cash withdrawals were for. These withdrawals Ms. Yeung was talking about took place after 2007.

210.  Between 2007 and 2011, when the defendant was out of town travelling, he would sign some blank checks in advance and leave them with the secretary for her safekeeping. There was only one occasion when the secretary was on leave and the defendant needed to issue a check and so instructed Ms. Yeung to get a blank check from the secretary’s drawer. She no longer remembers who the check was for nor what the amount was.

The defendant’s evidence

211.  After the evidence of Ms. Yeung, Mr. Harris informed the court that it was the end of the defence case and hearing was adjourned for parties to prepare for the closing submissions. Before the hearing date, the defence wrote in to seek to apply to re-open the defence case so that the defendant may give evidence in his own defence. The application was heard on 15^th October 2013 and was granted. The ruling is at the end of this Reasons for Verdict. The defendant gave evidence in his own defence.

212.  The defendant was born in 1960 and is 54 years old. He is educated up to Form 5 level in Hong Kong. He apprenticed for almost 3 years as a hairdresser at a salon in the Excelsior Hotel after leaving school. He began working at Le Salon in Central after his apprenticeship. He worked there for about 4 years and then went to London and Paris to undergo further training. It is the defendant’s evidence that he saw hairdressing as his future career at that time.

213.  If this part of the defendant’s evidence is accurate and assuming he did not have to repeat any year of his education, be would be around 23 years old when he left for London and Paris, and the year would be 1983.

214.  It is the defendant’s evidence that he returned to Hong Kong to start his own business in about 1988. Later on in his evidence, he disclosed that his training in London and Paris lasted only a few months. The prosecution did not question him on this.

215.  When the defendant was growing up, his father ran a vegetable stall in Lok Fu, Kowloon and was quite successful.  Documents were produced to show that by 1988 his father had assigned the vegetable stall business to a Mr. Cho, who subsequently assigned the business to another person. The defendant was asked if his father was able to accumulate anything whilst he was operating the vegetable business and the defendant answered that he should have been able to. The defendant was however not asked further as to the amount of such accumulation.

216.  By the defendant’s own evidence, when he started his own business in Hong Kong in 1988, his father had already ceased operating the vegetable stall.

217.  According to the defendant, after his father had assigned the business, he went to mainland China to invest in the hotel business. Mr. Harris did not ask the defendant to elaborate on the father’s investment in the hotel business at this stage of the defendant’s evidence.

218.  As far as the defendant was aware, starting in the early 1990s, his father also invested in stocks and shares. His father passed away in July 2012 while in Shenzhen.

219.  The defendant was then asked about a case where he was charged by way of summons by the Securities and Futures Commission in 2004 when the information against him was for the late disclosure of his interest in certain shares in relation to the company Cedar Base. The defendant was fined. Other than that, the defendant has no other criminal convictions in Hong Kong or anywhere else.

The Hair Salons

220.  The defendant opened a number of hair salons after his return to Hong Kong in 1988. There were a total of 5.

Vole Royal Pacific

221.  The first one was ‘Vole’ at the Royal Pacific Hotel in July 1989. It cost him around $4 million to set up the salon. The money came from his savings from his work as a hairdresser. The defendant did not say, nor was he asked if that included the period while he was an apprentice.

222.  Vole was according to the defendant “quite successful”. He estimated there was an income of approximately $3 million per year. The salon catered for those who are relatively well off.

223.  Apart from the Vole salon business, the defendant also derived income operating as a freelance stylist on the same premises. The $3 million yearly income for Vole included the profit from both the salon business and him working as a freelance stylist, at about 50% each.

224.  Vole Royal Pacific was sold for close to $4 million in March 1994.

Vole Peninsula

225.  Just one month after the defendant had opened Vole Royal Pacific, he also opened a Vole Hair Salon at the Peninsula Hotel. Vole Peninsula was “even more up market” than Vole Royal Pacific, catering for business people as well as people in the entertainment business.

226.  Vole Peninsula was opened with a partner named Alice Chan, each owning 50% of the business, with each putting in $1.5 million for the start up. The defendant’s half of the money also came from his personal savings.

227.  Therefore, as at August 1989, the defendant had put up a total of $5.5 million to open up two hair salons, with all the start up money coming from his personal savings.

228.  About 1 year later, the defendant bought out Alice Chan’s share for close to $1 million. This money also came from the defendant’s personal savings.

229.  Just as with Vole Royal Pacific, the defendant also worked as a freelance stylist at Vole Peninsula.

230.  Vole Peninsula was closed in February 1991, after operating for 18 months, because the hotel had to undergo renovation and the salon had to be moved.

231.  It is the defendant’s evidence that Vole Peninsula made close to $3 million in one year. This amount also included the defendant’s money earned as a freelance stylist.

Vanity Hair Salon (New World), Royal Garden Hotel

232.  8 months after the defendant had set up Vole Peninsula and while Vole Royal Pacific and Vole Peninsula were both still in operation, he opened Vanity Hair Salon in April 1990. This time, he partnered with one Dennis Shek, each putting up $1.75 million as 50% for the start up. The defendant’s share of the money came from his personal savings.

233.  The defendant bought out his partner’s share about 4 years later in March 1994. He did not say in examination-in-chief as to how much he bought the share for.

234.  From March 1994 to 1999, the defendant operated Vanity Royal Garden as the “sole beneficial owner of that business”.

235.  The annual income for Vanity Royal Garden was about $2.5 million in the first stage. In the later stage, the annual income was approximately $2 million. The defendant did not explain how the stages are defined.

236.  When asked if the defendant also operated as a freelance stylist at Vanity Royal Garden, his answer was “not much”.

Vole Salon Oriental, Sun Plaza

237.  In March 1993, while Vole Royal Pacific and Vanity Royal Garden were both still in operation, the defendant opened Vole Sun Plaza with a Simon Lai, with each contributing $1.75 million for the start up.

238.  The defendant sold his share of the business to Simon Lai in March 1996 for about $3 million.

239.  According to the defendant, Vole Sun Plaza was a bit less successful than the other salons. He did not do any freelance work at this salon. The defendant estimated that this salon had annual profit of approximately $2 million. Since the defendant had to share this profit with his partner, his share in the profits of Vole Sun Plaza would be around $1 million per year.

Vanity Hair Salon (New World), New World Hotel

240.  The defendant opened Vanity New World in June 1995. At this point in time, the defendant was also operating the Vanity Royal Garden and Vole Sun Plaza salons.

241.  According to the defendant, Vanity New World was opened with the profits he earned from his other salon businesses. It cost him approximately $3.5 million to set this salon up. There was an annual profit of close to $2.5 million as well.

242.  The defendant gave a ‘ballpark figure’ of $20 million as money he made in his years operating the various salons. This figure actually included money the defendant made as freelance hair stylist either at events or on movie sets in mainland China. It is the defendant’s evidence that he was ‘very famous’ in the 1990s in the business as well as in certain social circles as a fashionable hairdresser.

Investment with Yeung Chung in the Dongguan hotel

243.  In around 1990, the defendant and his father invested in a hotel in Dongguan in mainland China. Together they had invested in various stages a total of about RMB13 million or roughly HKD$8 million. The money was split between the defendant and his father in the ratio of 40% and 60% respectively (HK$3.2 and HK$4.8 million).

244.  The defendant’s money came from his personal savings and income. He believed that his father’s share of the money came from personal savings.

245.  The hotel was operated by Yeung Chung and his elder brother (DW6). It was eventually sold in 1994 for about RMB16 million, which was around $11.6 million Hong Kong dollar. The defendant made a profit of about $1 million odd from its sale.

246.  During the hotel’s operation, profits from the hotel business was shared between the defendant and his father on a 40/60 basis, with the defendant taking in about $1 million odd.

Richfield

247.  In 1994, around the time when the defendant was still operating Vole Royal Pacific, Vanity Royal Garden, Vole Sun Plaza, he set up the company Richfield (Asia Pacific) Limited with a partner. The company was incorporated in Hong Kong (it was later on disclosed that there was also a RichField International Corporation, a Thailand RichField Limited, a RichField Overseas (USA) Inc., and a RichField (China) Limited operated by the defendant).

248.  The capitalization came from the defendant alone, with 15% of the ‘dividend shares’ given to the partner who did not chip in any money. The company was set up for the purpose of taking up investment projects in South East Asia as an agent. The defendant estimated that it had cost him about $6 million for setting up the whole project.

249.  Richfield operated as an agent and introduced potential purchasers to various projects. Richfield would be required to pay a fee to the developers who in turn allowed them to mark up the price and to take commissions. Remuneration to the company was paid in Thailand.

250.  According to the defendant’s evidence, between 1994 and 1997, the venture made a profit of about $10 million. It is the defendant’s understanding from his then accountants that, because the income was generated in Thailand and Malaysia, Richfield was not accountable to the Hong Kong Inland Revenue Department in relation to those offshore income.

251.  It is the defendant’s evidence that he made a net personal gain of about $7 to $8 million from the operations in Thailand and Malaysia.

Wealthy Villas

252.  We then heard from the defendant how he made a successful investment in a property development project named Wealthy Villas in around 1997 through the same RichField company mentioned above.

253.  Wealthy Villas was a development of 16 apartments. Richfield was the ‘sub-seller’ of the units. By being the sub-seller, the developer allowed Richfield to sell the property after Richfield had put down a 20% down payment.  Since the total amount of all units was $75 million, Richfield had to pay 20% of that at close to $15 million.

254.  According to the defendant, that $15 million came from his own resources which included profits from other properties and his personal savings. The defendant also took out a second mortgage on the property that he owned on Breezy Path in order to make up the sum.

255.  In addition to the 16 apartments, there were also 24 car parking spaces which was included in the $75 million price.

256.  It is the defendant’s evidence that they were able to sell all the units and made a net profit of about $15 million. The defendant did not have to share that profit with anyone. The exact amount of the profit was calculated by the defendant’s expert Mr. Ian Robinson as $15,054,248 and presented in a chart in D-25.

257.  Exhibited as D-23 at Appendix 7 of Ian Robinson’s 2^nd report is an agreement dated 18 April 1997 between Dragon Power Development Limited and RichField (Asia Pacific) Limited in relation to the Wealthy Villas project.

The defendant’s share trading

258.  It is the defendant’s evidence that he first opened a share trading account with a stockbroker in 1978, when he was 18 years old and working as an apprentice hairstylist. It is not disputed that the then age of majority was 21.

259.  He at first traded in the modest range of $100,000 to $200,000. He doesn’t remember whether it was a cash or margin account. At that time, he was earning slightly more than $10,000 per month as a hairdresser, inclusive of tips.

260.  In around 1986, the defendant’s share trading picked up pace. His strategy was to sell the shares he had bought once there was a profit margin of 15%. His then average portfolio with Sun Hung Kei securities was in the range of $1 to $3 million worth of shares.

261.  Even at that time, the defendant was interested in small caps shares. The defendant would occasionally discuss share trading with his father who also traded in shares.

262.  By the time of the $15 million profit the defendant had made through Wealthy Villas, he estimated his net worth at close to $30 million, inclusive of his properties.

263.  The availability of funding allowed the defendant to change his pattern of share trading. He bought more and utilized margin facilities. The defendant estimated that, in 1997, he was granted a minimum $2 million margin on average from each of the 3 or 4 stockbrokers that he was using.

264.  Then came 1998 when the stock market crashed. The defendant said he suffered substantial loss of about 70% of his portfolio, about a sum close to $20 million. The loss was however on paper as he did not sell. When the defendant was asked if stockbroker firms were ‘chasing after him’ after the crash, he said that Sun Hun Kei was the one that chased after him, the others did not.

265.  The defendant however managed to weather the storm and recovered from the aftermath of the crash which lasted until mid-1999.

Bull and Bear Limited

266.  The defendant established a research company named Bull and Bear Limited in 1999 to study the operations and prospects of listed companies. The company employed about 8 staff members. Clients of the company were listed companies and the defendant participated in the research himself.

267.  According to Appendix 4 of defence expert Mr. Ian Robinson’s second report, in the years prior to 2001, the defendant might have had as many as 44 different stock broking accounts at one time. The defendant however disagreed with his own expert and said that there were probably not as many, and should be around 35. Some were cash and some were margin accounts.

268.  Mr. Harris then asked the defendant to explain why it was necessary or sensible to operate so many different share trading accounts. The defendant explained that it was to enable him to ‘get larger credit facility’.

269.  The margin limit granted by each broker firm differed, with the minimum at no less than $1 million. The highest limit would have been granted by Lippo Securities, at one time reaching over $50 million. The limit would depend on the value of his share portfolio at any given time.

270.  The defendant ceased working as a hairstylist in 1995 and by 1999 it is his evidence that he just focused on share dealing.

271.  Although the market crash in 1998 caused the defendant to suffer a 70% loss in the value of his overall portfolio, the defendant did not sell any of his assets or shares. By 1999 the market started to rebound, as the share values went back up, the margins were able to be covered. The defendant also started to buy some shares in 1999. At that time, he focused on high tech and internet stocks.

272.  From 1999 to 2000, his daily average share dealing was $2 million. He was successful in his dealings and in 2000, the net worth of his stock portfolio was in the range of $80 to $100 million.

273.  The defendant also held real property, including his then home at Breezy Path and one of the 16 units of Wealthy Villas. By the end of 2000, together with his property interest, he would say his net worth was roughly in the range of $80 to $100 million.

Charge period 2001 to 2007

274.  The defendant stated that he had never at any stage dealt in property or money that he believed or suspected or thought might be the proceeds of crime.

275.  Mr. Harris referred to the bank account statements of the charge accounts and the prosecution expert witness Mr. Sutton’s report and pointed out to the defendant that it can be seen from time to time cash deposits were made into the bank accounts.

276.  The defendant was asked what his understanding of ‘dp cash’ is in relation to the bank statement entries. The defendant then indicated that instead of folding cash as Mr. Sutton seemed to refer to in his report, there were a number of meanings. The defendant then told the court that he had checked with his bank manager at Wing Lung Bank just a week before he was giving evidence and was told that cash also represented cash checks.

277.  The defendant was then referred to the 7^th February 2001 entry in the monthly statement of account B to demonstrate how ‘DP CASH’ could not have meant just folding cash deposits.

278.  The 7^th February 2001 entry shows a ‘DP CASH’ of ‘548,949.32 CR’. Given that there was no denomination of currency in general circulation in units of 2 cents, it could not have been a folding cash deposit.

279.  The defendant stated that he accepts that there were occasions when he had dealings in folding cash between 2001 to 2007. He explained that they were usually for the purpose of meeting margin calls by the stockbrokers. The defendant said that sometimes action must be taken immediately to settle the margin and the advantage of cash was that ‘the situation could be dealt with more directly’.

280.  The defendant was asked by Mr. Harris about the largest margin call he ever received from his broker. The defendant recalled that the amount approached $10 million. He settled the call by way of stock deposits and cash deposits. The defendant is not certain which brokerage it was, but it might have been with Lippo Securities. No time frame was given, nor the proportion between the stock and cash deposits.

281.  The defendant confirmed the evidence of the staff of Lippo Securities who said that there were occasions when cash was deposited into Lippo’s bank account with the bank on the Mezzanine floor of Lippo Centre, where Lippo Securities’ office was. When such a margin call was settled and large sum of cash deposited, the defendant would either do it himself or he would ask his assistant to make the deposit.

282.  It is the defendant’s evidence that for such deposits, his personal signature was ‘absolutely required’. He also confirmed that there were occasions when the defendant would sign documents and then have his assistant take them on his behalf to various banks or securities companies.

283.  It is the defendant’s evidence that because he did not have the bank supporting documents nor the securities trading documents for the early period, he felt very seriously handicapped by their absence in the preparation for his trial.

284.  It was then pointed out to the defendant by Mr. Harris that a cynic might suggest that one of the reasons using cash might be to avoid records, to which the defendant answered, ‘if it was for cash, it could not be hidden, because whether for withdrawal or deposit, the bank must have records’. The defendant explained that he would expect the bank to have records of money deposits and withdrawals.

285.  Based on the defendant’s own experience in the past, it is his evidence that if money was being deposited into a bank account, the bank staff would require the identity card of the person making the cash deposit so that he could copy it down on the back of the pay-in slip.

286.  Similarly, if the defendant made out a cash check to someone and that person went to the bank to withdraw the cash, the bank staff would ask that person for his identity card and then copy down the name and identity card number on the back of the check for record. The defendant know this from his past experiences as well as from enquiries with the bank.

287.  When the defendant was asked if folding cash ever played a part in relation to his gambling in Macau, the defendant answered ‘not much’.

288.  Between 2001 and 2007, the defendant would frequently travel to mainland China for business and social purpose and he would take folding cash as spending money since according to the defendant credit card is not very popular in China. The defendant would take with him at least HK$100,000 to $200,000 each time.

289.  In the year 2001, the defendant would travel 4 to 8 times per month to mainland China. He would ask his staff to withdraw money for him. The defendant also had one safe at each of his offices and one at home where he kept cash. Depending on how much money was in the safes, his staff would either get the cash from the safes or from the defendant’s bank accounts.

Individual Securities Trading Companies and documents

290.  The defendant was then asked about various securities companies he had been dealing with over the years and whether he was able to obtain documents from them.

Kingston Securities

The defendant confirmed he had a margin account with Kingston but he was not able to get all the Settlement Instructions from them. Kingston was however not one of the main firms that the defendant used in 2001.

Lippo Securities

The defendant confirmed he had a margin account with Lippo Securities. He was able to obtain from them most of the documents except for records of cash withdrawals and check withdrawals.

Taiwan Securities

The defendant confirmed he had a margin account with Taiwan Securities but he was not able to obtain a full set of documents from them and they basically did not have the records prior to 2001.

Victorfield Securities Limited, BNP Paribas Peregrine Securities Limited, Core Pacific Yamaichi

The defendant had margin accounts with these companies but was not able to obtain any documents from them.

Everlong Securities Limited

The defendant had a margin account with Everlong and was able to obtain buy and sell records. He was however unable to obtain the Settlement Instructions records nor the records in relation to the defendant’s cash withdrawals and deposits with the account.

New Universe Securities Limited and Business Securities

The defendant can no longer remember whether he held an account with this two firms or not. He had made enquiries with the companies but they were also not able to confirm.

Sincere Securities Limited, SinoPac, Tanrich and South China

The defendant did have a margin account with these securities firms but was only able to recover from them the buy and sell records.

291.  The defendant then gave evidence of a number of securities companies that he had used or might have used over the years and told the court whether he was able to obtain documents from them. A complete listing of the companies together with the identifying documents are exhibited at Appendix 4 of Ian Robinson’s second report.

292.  The defendant was asked about 44 of those companies in examination-in-chief and he gave evidence as to whether he held a margin account with the various company and whether documents were able to be obtained from them. It is his evidence that save for Sun Hung Kei, Lippo, Kingston, Hooray, Guotai Junan, Emperor and Chung Nam where the defendant was able to recover most of the documents, he was not able to do so with the remaining companies.

The defendant’s father’s accounts with the securities firms

293.  The defendant knew that his father maintained accounts with some of the above mentioned brokerage firms.

Time spent dealing in shares from 1999 onwards

294.  From 1999 onwards, the defendant spent all his time dealing in shares. He placed instructions with his brokers over the phone.

Stock portfolio and Share trading profits

2001-2002 period

295.  The defendant dealt in approximately 40 stocks in this period, being 3^rd or 4^th liner high risk stocks and red chips.

296.  In 2001, the defendant’s whole stock portfolio was already over $200 million. When asked if he could calculate a rough profit he made in that period, the defendant said that the $200 million was the net profit for that period.

2006-2007 period

297.  As for 2006-2007 period, the defendant’s portfolio was worth around $300 million.

Off-market trading

298.  Mr. Harris then laid the foundation for questions concerning the defendant’s off-market trading by confirming with the defendant what on-market trading was. To engage in on-market trading, one would open an account, call the stock broker and place the order. The broker would then place the order into the stock exchange’s automated clearing system known as CCASS (Central Clearing And Settlement System) for the system to match the order with a seller for the right quantity and price. Once a match is found, ‘a deal is struck’ automatically by the system.

299.  The buyer will then have 2 days in which to pay for the shares bought. Assuming the buyer has a cash account, the broker would make sure there was sufficient credit to pay for the shares. It would then be the buyer’s broker’s responsibility to pay to the seller’s brokers the purchase price. Mr. Harris referred to a leeway which in the industry is known as the “T+2” settlement.

300.  On-market trading with a margin account is the same except that the transaction is paid for by the credit available within the limit of the margin account.

301.  It is the defendant’s evidence that in 2001, roughly 40% of his trading was off-market and 60% on-market. For on-market transactions, everyone can see on the Teletext screen the volume and price of a trade, as well as the cash flow in the transactions and the trading value. Off-market transactions are not through the Teletext system, neither the name of the stock nor the price are shown.

302.  The defendant then explained his perception of the 2 types of off-market transactions.

Settlement Instruction

303.  The first is between 2 different brokerage firms with the same account name. These type of transactions cannot be seen on the Teletext Screen. It is his evidence that they are called Settlement Instruction, ‘S/I’ in abbreviation.

304.  The defendant explained that S/I means that a transfer of shares will be made from one brokerage firm to another, dependent on the payment instruction.

305.  The shares can be ‘delivered/received free’ or ‘delivered/received against payment’.  The defendant explained that for shares ‘delivered/received free’, the party receiving the shares is not required to make monetary payment for the shares, whereas for the latter, it means that the brokerage firm receiving the shares would not have to make monetary payment to the delivering party. The brokerage firms would be acting upon instruction of the respective account holder.

Bought and Sold note transactions

306.  The second type of off-market transaction, according to the defendant, are ones done with bought and sold notes, which the buyer and seller would sign off the market. This kind of off-market transaction would be between different parties with different account name or person. The brokers’ involvement would be limited to making sure that the shares were there to be sold and that the transaction was sent for stamp duty.

307.  The price between the parties in this type of transaction would be agreed on by the parties and would not be influenced by the market price. Typically, according to the defendant, the agreed off-market transaction price would be lower than the market price, but it is ultimately for the parties to set the price.

308.  When being asked what is the advantage of off-market transactions, the defendant answered that “bought and sold note transactions can give the buyer some convenience”. Convenience such as discounts for the buyer and for the seller to be able to sell the shares. It is the defendant’s evidence that off-market transactions would have no impact on the market price. Of the roughly 40% of his share trading which was done off-market, the defendant said they were usually profitable.

The Gold Wo transactions

309.  The defendant was then asked about a series of shares transactions in relation to the shares in a company known as Gold Wo that took place in 2001.

310.  To the defendant’s recollection, Gold Wo was listed in the market for an Initial Public Offering (“IPO”) in April 2001. The IPO market price of Gold Wo was $0.40. Taiwan Securities was the firm sponsoring the listing and Ben Cheung was the defendant’s account executive there.

311.  In May 2001, Ben Cheung called to ask the defendant if he was interested in buying the shares which his other clients had subscribed to at the IPO. At that time the stock price had fallen below the IPO price and the defendant said he was not interested.

312.  Later on when the share price went back up Ben Cheung called the defendant again to see if he was interested and since the prices were higher, the defendant thought about it and decided that he would like to buy the batch of shares. That should have been in early May 2001.

313.  A price of around $0.42 or $0.43 per share was agreed and the defendant bought 28 million odd shares at a total cost of about $11.2 million. This was an off-market transaction. The defendant explained that it was his idea for it to be an off-market transaction because ‘it was more convenient’ for him. It was more convenient for him because if the shares were to be sold later on, he could save on stamp duty payment. When asked how he could avoid paying stamp duty, the defendant answered by saying that, “if it was done off-market and then I further transfer to another party, because at that time we could not have known at what price the shares would be sold later”.

314.  As far as I can understand, what the defendant meant was that, since the shares were bought off-market, and they were then sold on to another party, the transaction could be made to be between the original seller and the next purchaser and stamp duty would only be paid once by those parties.

315.  The defendant was then referred to documents at D-52 where the Bought and Sold notes for that transaction are exhibited and which were kept by the defendant. The Stamp Duty payable at that time was based on the then market price which was recorded as $2.80. The notes show that the batch of 27.9 million shares of Gold Wo were bought from 3 different sellers. The shares were recorded as delivered free of payment.

316.  It can be seen on the Bought and Sold notes that there is a CCASS number stated. The defendant explained that, even though it was an off-market transaction, the shares still had to be handled through the CCASS clearing system. The shares were initially with Taiwan Securities, and then through the CCASS matching system transferred to Lippo Securities.

317.  The defendant was then asked how he paid for the Gold Wo shares, and he answered that he “directly settled with the seller off the market”. He however can no longer remember how he did that since it was too long ago.

318.  The defendant kept the Gold Wo shares for approximately 4 to 5 months. At around that time, a friend of a friend Ms. Yu Xiao Mei asked the defendant if he was holding any Gold Wo shares. The defendant said yes and she said that she wanted them in large volumes.

319.  The market price at that time was $2.8 or $2.9 but Ms. Yu said that she was not able to offer such a high price. The defendant said in-chief that he understood what Ms. Yu wanted to do was to “do it as a confirmor in order to gain on the spread of the price difference”. The defendant eventually agreed to sell her about 30 million odd shares at a price of $1.20 per share.

320.  Mr. Harris then asked the defendant whether the sale to, or through Ms. Yu was on or off-market, the defendant answered that, “it was done on input”. When asked what that meant, the defendant said, “on board, trade”. Mr. Harris followed up with more questions, asking the defendant if that went through the market or not, followed by people watching the market or not. To that, the defendant answered, “Could see the transaction”. Mr. Harris then moved on to asking how much profit the defendant made in that transaction.

321.  The defendant said he should have made a profit of around $22 million.

The Kanstar deal with Chim Pui Chung

322.  The defendant recounted his encounter with Mr. Chim Pui Chung sometime in 2007 when Chim asked when the two of them were having dim sum together if the defendant was interested in buying the shares held by his son. Chim mentioned that it was around 300 million shares that were available at $0.10 per share. According to the Bought and Sold note for that transaction, the then market price was $0.43 per share and the defendant knew that it was a substantial discount that Chim was offering.

323.  It was agreed that they would conduct the sale by way of an off-market transaction. The relevant Bought and Sold notes are exhibited at D-26A, showing the company chop of Siko Venture Limited and the signature of Chim’s son. The notes were supplied by Lippo Securities.

324.  The 280 million Kanstar shares were recorded in the Lippo statement as being received free into the defendant’s Lippo account. When the defendant was asked if he could remember how he paid for the Kanstar shares, he answered that, “As far as I can remember, probably I paid Chim in Macau”. When asked if he remembered in what form in Macau, the defendant answered that he could not remember.

325.  The defendant eventually sold all the shares in on-market transactions and made a profit of about $56 million.

Share dealings involving Yeung Chung

326.  The defendant flatly denied that he was an authorized person to assist his father in operating his share trading accounts with the different brokers, or that he had ever placed instructions with his father’s brokers (according to defence witness Mr. Pan of Lippo, Yeung Chung did verbally authorize the defendant to place orders with Yeung Chung’s Lippo account[1]). There would have been occasions when the two of them would invest in a certain share, but buying through their respective accounts.

327.  Yeung Chung was also involved in the sale of Gold Wo shares to Ms. Yu mentioned above. It is the defendant’s evidence that since he did not have sufficient shares to sell to Ms. Yu, he discussed with his father and subsequently his father agreed to sell shares to Ms. Yu together. The defendant’s father also made a profit in that transaction.

Withdrawal of moneys from the defendant’s many share trading account with different brokers

328.  The defendant confirmed there were occasions when he withdrew funds from his share trading accounts.

329.  In relation to the cash checks that Mr. Pan of Lippo Securities said were issued at the defendant’s request, the defendant said that he would usually go downstairs of the office to withdraw cash from Citic Kawah Bank at Lippo Centre. It was necessary for him to go personally on those occasions.

330.  Mr. Harris then asked what the defendant then did with the cash. The defendant said he would then immediately proceed to meet the margin calls of other accounts and the remaining sum would be paid into his personal bank accounts or put into the safe in his office.  It is the defendant’s evidence that this kind of arrangement happened very frequently, and involved more than $5 million.

331.  Mr. Harris said some people would say the defendant was using his share account like a bank account and asked what the benefit to him was using his trading account that way. The defendant said it was more convenient and that it was “easier to make payments in that way”.

Relationship with account executives

332.  The defendant described his relationship with all his account executives of the various brokerage firms as very good. He also described his credit with the various account executives in 2001 as very good.

333.  It is the defendant’s evidence that he did credit one of the 3 Wing Lung Bank accounts in the present case with cash payments that he received from Lippo. Apart from Lippo, many of the other brokerage companies also permitted the defendant to receive money by way of cash checks, including Taiwan, Tanrich, Kingston, Kingsway and ASG.

334.  The defendant said he had on occasion deposited the proceeds of those cash checks into one of the 3 accounts he had with Wing Lung Bank.

335.  There were also occasions when the defendant had to answer margin calls by withdrawing cash from one of his 3 Wing Lung Bank accounts.

Gambling in casinos

336.  The defendant started gambling since 1997. At first he gambled at Macau, later on he gambled at Las Vegas and the United Kingdom as well. His typical stakes when he first started gambling in Macau was around $1 million.

337.  The defendant gambled in different VIP rooms and usually on credit. The person in charge of the casino or the VIP room would decide how much credit the defendant could have.

338.  The defendant’s first VIP room was ‘Neptune’. The bosses of this Neptune was one Lin Cheuk Fung and one Cheung Chi Tai. Neptune gave the defendant a credit of $10 million to start with. The defendant first met Cheung in around 2002 when Au Yeung Kai Chor introduced him to the defendant.

339.  It is the defendant’s evidence that if he was given credit and he won, the winnings would be credited into his account. He could withdraw the winnings at a later stage. If he chose not to withdraw the money, the money would sit in the casino’s account but it would not earn any interest.

340.  The defendant said it is impossible to walk into one of these casinos with a bucketful of cash, not gamble, and later that same evening walk out with a cash check.

341.  In order to become a member and get credits in the VIP room, the defendant said that the people in charge or the bosses must be ‘familiar’ with the gambler. The defendant himself was invited by the boss of the VIP room to become a VIP at first. Since it is the defendant’s earlier evidence that the first VIP room he gambled in was Neptune and that the bosses were Lin Cheuk Fung and Cheung Chi Tai, it must be inferred that they were the ones who invited the defendant to become a VIP of Neptune.

342.  If the defendant lost at gambling, he would settle his line of credit by way of checks issued to “them”. There were occasions when he used checks, cashier orders or other instruments to settle his credit with the VIP room.

343.  The defendant would be given mud chips if he’s gambling on credit, but if he won his hand in a game of baccarat, he would receive cash chips for his winnings part. At the end of the session, the defendant can either cash out those cash chips or ask for cash checks to be issued by the casino. The winnings can alternatively be kept in the defendant’s account with the casino.

344.  Despite what the defendant said earlier, it was possible for the defendant to earn interest on the money being kept in his casino account, provided that there was such an agreement between himself and the casino. The defendant did not have such an agreement with Neptune, but he did have such an agreement with some other VIP rooms where he could leave his winnings in an account and earned interest at 20% per annum, which was very attractive to the defendant when compared to what he would get from his banks in Hong Kong. This kind of arrangement however must be long term, roughly 6 months when the money must remain in the account.

The SJM cash checks of $62 million odd

345.  The defendant gave evidence about the $62 million odd deposited by way of cash checks into his account as “winnings from gambling”.

346.  As for a cashier order which was issued in January 2005 out of the defendant’s Wing Lung Bank account in the sum of $35 million but subsequently cancelled a day or so later, the defendant explained that he bought that cashier order originally to go gambling in Macau, perhaps to settle the amount that he had lost previously. That was in relation to one particular VIP room. The defendant was not able to give a specific reason why the cashier order was cancelled, he said “maybe at that time there were some winnings so it was no longer necessary”. When pressed by Mr. Harris about his use of the word ‘maybe’, the defendant said “It was so”.

347.  The defendant began gambling very frequently in Macau since 2004 and lasted until 2008. It is his evidence that over the years, he had overall winnings of about $20 to $30 million.

Share dealings in 2003

348.  When the defendant was asked what effect the SARS related stock crisis in 2003 had on the defendant, his answer is that it did not have a great impact on him because he had already sold most of his shares in 2001 and 2002.

The defendant’s share trading strategy

349.  The defendant explained in more details his share trading. He said he adopted the strategy of picking 4 types of shares: IPO new shares, because they have a small circulation, with the majority shareholder holding 75% of the shares and only 25% of shares in circulation in the market and the majority shareholder could not issue new shares in the first 6 months, “the share price could be easily speculated and manipulated upwards”.

350.  The 2^nd type was red chips shares, which had much upward potential in share price back in 2001, when there was a red chip fever.

351.  The 3^rd type was to focus on companies with insufficient cash flow. The defendant would pick companies with insufficient cash flow and where the shareholding of the majority shareholder is less than 20%. The defendant would “collect” this type of shares at low price slowly. When he had accumulated more than 10%, he would then ask to join the company’s board of directors. If the majority shareholder disagree and they did not have the money to issue new shares, and have no money for projects, then all they could do was to buy back the shares in the market, causing the share price to go up. Then the defendant would sell the shares back to them and make a profit.

352.  The 4^th type are companies which are undergoing transformation of business. As a result of transformation of business, the company’s business would be changed completely and this kind of stocks would have major upward potential in price. These were the defendant’s strategy in stock dealing.

353.  Mr. Harris pointed out that, according to the trading records available, there was relatively little share trading through the defendant’s accounts between 2003 and 2005. To this, the defendant explained that first of all the brokerage firms with records were not all the firms that he was associating with. Secondly, the market atmosphere during those years was not good and so the defendant had to hold back and stop trading.

354.  In 2006, the stock market began to pick up again and the defendant resumed trading in shares with the above mentioned strategies.

Charity Donations

355.  It is the defendant’s evidence that from 2001 to 2007, he had made various charitable donations to schools and foundations for the underprivileged and the physically disabled in the amount of over RMB50 million. During the same period, he also gave roughly HK$5 to $6 million to charities in Hong Kong.

Business projects in mainland China

356.  The defendant invested in various projects in mainland China, including coal mines, fertilizers and real estate. The defendant gave a ball park figure of his profits in mainland China as over $100 million.

357.  The defendant was the first Hongkonger to invest in Inner Mongolia and was conferred the title of honorary citizen of Ordos City in 2006.

Abba Chan

358.  The defendant was an investor with Abba Chan, a person connected to the movie making business and had invested a total of $14 million in one movie. The contract for the investment was dated March 2005. The defendant lost money in that investment because although the movie was very successful in Hong Kong, it was not permitted to be shown in mainland China. There was no mention about personal loans that the defendant had made to Abba Chan at this stage of the defendant’s evidence.

2 different sets of business dealings with Cheung Chi Tai or with person/companies associated with him

359.  The defendant was then asked about his dealings with one of the “bosses” of Neptune, Cheung Chi Tai.

360.  The defendant was first referred to a boat, CT Neptune ex Oliva that was operated by a company in which Cheung Chi Tai had interest. The defendant knew that the purpose of the boat was to sail to international waters for gaming and that it seemed quite successful. When asked what Cheung’s relationship with this boat was, the defendant answered that, “He should be the majority shareholder of it”.

361.  Documents related to the sale and purchase of the boat were referred to. The documents disclosed that after the completion of the sale and purchase agreement, Wide Asia, the title holder of the boat, will be held as to 40% Lin Cheuk Fung, 30% Lin Cheuk Ming, 2% by the Vendor and 28% by the Purchaser.

362.  The defendant was asked who Lin Cheuk Fung and Lin Cheuk Ming were and he answered that “Lin Cheuk Fung was the majority shareholder of Neptune, stock code 70”.

363.  Massive Resources International Corporation Limited acquired a substantial interest in a company known as Walden which was a company solely for the purpose of the owning of the boat, and the sole asset of Walden as at the date of the sale of the interest to Massive Resources. Lin Cheuk Fung was stated as the vendor in this agreement. The consideration for the acquisition was $68 million. Upon completion of the sale, consideration shares were allotted to Lin Cheuk Fung and $20 million was paid in cash. Based on the closing price of the shares on the last trading day of $0.038, the market value of the consideration shares were approximately $57 million.

364.  The defendant explained that in early 2005, Lin and Cheung invited him to join their listed company Massive Resources (stock code 070) because they knew that he understood the operation of a listed company. They asked him if he was interested in joining. The defendant knew that the company had sufficient cash flow and considered that the prospect of the company will be pretty good after transformation. After consideration, the defendant and his father joined to become shareholders of 20% of the shareholdings. It cost the defendant and his father “roughly $26 million”.

365.  When the defendant invested and acquired the 20% shareholding, the market price was roughly $0.03 odd.

366.  It is the defendant’s evidence that when he and his father bought the shares, it was a joint investment as far as the two of them were concerned.

367.  The defendant was then asked if he bought the shares through brokers across the stock exchange or was it an off-market transaction. The defendant answered, “No, it was private transaction”. Mr. Harris did not ask the defendant what he meant by ‘private transaction’.

368.  The money for the investment came from securities firm and the bank.

369.  The defendant explained that there were in fact 2 placements of shares in relation to Massive Resources, which managed to raise funds of $68 million and $64 million respectively. Of that, $20 million was spent on the purchase of the boat holding company Walden. The defendant and his father’s 20% investment was calculated on the total of the funds raised in the two placements, i.e., $132 million, which was $26.4 million.

370.  It is the defendant’s evidence that he and his father retained the shareholding in Massive Resources for 2 years. In 2007, the defendant brought up with Lin and Cheung about his intention to withdraw as shareholder. Subsequently they agreed. The defendant said, “After calculation, we sold to them”. It would appear that the shares were sold to Lin and Cheung. Mr. Harris then referred to public information at the share price of Massive Resources in early 2007 and pointed out to the defendant that the share price fluctuated a bit but went as high as $0.086 in March 2007. The defendant did not say what price he sold at, just that he made a profit.

371.  The defendant was then asked how the sale was processed and how he got the money. The defendant said he “withdrew from the shareholding” and “they paid me the money by instalments”.

372.  It is the defendant’s evidence that some of the money from the sale of those shares was invested into the defendant’s own listed company, and some was invested in the property in Britain. The defendant was not asked into which listed company.

373.  The defendant was asked who paid him the money. It is the defendant’s evidence that there were many people. They were all acquainted with him and were all “staff members of Neptune”, the same Neptune that Lin and Cheung were bosses of.

374.  The shares were sold in early 2007 and the defendant sold them at a profit of over $40 million odd.

375.  The defendant was then shown an agreement between Neptune Group Limited (stock code 070) and Up Sky Group Limited dated 18^th January 2008, whereby Neptune appointed Up Sky “for arranging the fund-raising in Neptune…for a period of one year”. Up Sky was to receive 9% of the total sum of funds raised by Neptune as commission. It is not stated in the agreement as to what “arranging the fund-raising” entailed.

376.  It is the defendant’s evidence that Up Sky was his company and the person who signed for the company was his staff member. Documents at D-67 show that Yeung Chung was the director of Up Sky at the time of the said agreement, while the defendant became the director in June 2011 upon his father’s resignation. The defendant agreed that at the time of the agreement, Up Sky was his father’s company, but it was the defendant himself who arranged for the agreement.

Cheung Chi Tai related investment in Neptune Club

377.  Separate and distinct to the defendant’s investment in Massive Resources (stock code 070), he also made investment in Neptune Club.

378.  Also in early 2005, Lin Cheuk Fung and Cheung Chi Tai asked the defendant if he was interested in investing in Neptune Club as “東息” (as referred to by people in the industry), meaning that dividends or interest will be paid out every month. By Neptune Club, the defendant meant VIP rooms in Macau.

379.  The defendant did agree to invest with his father for $20 million. This $20 million came from the sale of the defendant’s shareholding in another listed company (stock code 979) to one Tam Kam Wing of the Dongguan NanFung Group in an off-market transaction for a net profit of close to $50 million.

380.  Mr. Harris then asked the defendant what sort of return did he get from that investment, to which the defendant answered, “Yes, there was a return, it was in the form of interest 東息”. The defendant was then asked how frequently would he receive those payments, to which he answered, “When I needed the money or required the money, then checks will be issued to me and my father in Hong Kong.” The check payments were from staff members or directors of Neptune Group and companies associated with Neptune Group, as well as direct payments by Cheung Chi Tai. They included individuals Tang Wai Yee, Yu Sin Tung, Chan Chun Shing, Wong Kin Kwok, Lo Kwan and Amy Leung Yim Fun and companies LuckyTex, Asia Time, Up Sky, WinCon and Artune Group.

381.  It is the defendant’s evidence that he did not find it strange at all given that it was his understanding that those people were all known to Cheng Chi Tai and were in some way connected to the Neptune group of companies.

Birmingham City FC

382.  The defendant funded his purchase of the football club by way of a loan from Kingston Finance for $140 million, with the balance raised through the market. The defendant acquired a 29.9% stake in the club.

383.  When asked how the loan was repaid, the defendant answered, “Later, I sold my shares and managed to cover the loan extended from Kingston.”

384.  It is the defendant’s evidence that it would be impossible to use ‘dirty money’ to buy the club because in the acquisition exercise, the money was borrowed from Kingston their financial advisor. In the season of 2009, Birmingham was promoted to the Premier League. Seeing that, their company Grandtop (stock code 2309) proposed full acquisition and Kingston Finance gave them a $690 million loan.

Purchases of luxury goods and properties

385.  The defendant bought a Maybach brand motor car for close to $6 million, an 88 foot cruiser for about $49 million and he also bought his home on the Peak in January 2005. He initially bought the home together with a mainlander paying over $70 million each. The defendant was not asked who that partner was or how that purchase was funded.

386.  In 2007, the defendant bought a detached house in London for £5 million.

Closing questions in examination-in-chief

387.  At the end of his evidence in-chief, the defendant said that none of the dealings he had told the court represented proceeds of ill gotten gains. He admitted that the dealings through his bank accounts were his dealings and his money.

388.  As far as the defendant knew, his father’s dealings through account D and E were Yeung Chung’s dealings with Yeung Chung’s money. There were occasions when he and his father made the same or similar investment.

Cross-examination of the defendant

389.  It was first of all put to the defendant that he had grossly exaggerated the profits he made through his share trading, his gambling in Macau and his investment in the Wealthy Villas project. The defendant disagreed with the suggestions. The defendant however agreed that his father had authorized him to operate Yeung Chung’s Hooray securities account by way of a power of attorney.

390.  The defendant was then asked about the Gold Wo 22^nd August 2001 transactions in cross-examination. Documents show that a total of $64 million was paid by the defendant and his father to Ms. Yu in relation to the sale of Gold Wo shares to Ms. Yu. The defendant explained that the $37 odd million that he received and the $10 million odd that his father received were for the sale at $1.20 per Gold Wo share. Ms. Yu was just acting as a confirmor for the sale of the Gold Wo shares.

391.  The prosecution then referred to transactions recorded in the Hooray account and payments of money into Ms. Yu’s Hooray account and suggested that the truth was that the defendant did not sell any shares to Ms. Yu, that the defendant sold the shares himself and then paid Ms. Yu the cash. The defendant disagreed with this suggestion.

392.  Since the records showed that a total of $64,350,000 was paid to Ms. Yu as a result of the transactions relating to the sale of the Gold Wo shares by the defendant, the prosecution asked the defendant for an explanation. The defendant’s answer was this, “Both party had acquired agreement, meaning between my father and I and Yu Xiao Mei, both knew that we would collect $1.20, the rest will go to them.” Furthermore, because Ms. Yu managed to purchase such a large lot of shares from them, that was a business dealing and the defendant did a calculation himself and went ahead with the sale.

393.  According to documents, the defendant’s parcel of 30.5 million Gold Wo shares were sold through Hooray for a total of $87,906,917 on 6^th September 2001.

394.  Later on in cross-examination, the defendant further explained about the sale of the Gold Wo shares through Ms. Yu. He said that it was by way of a matched sale. The buy and sell orders were not put on the market through the automated CCASS matching system. Instead, both parties negotiated a price in private and then “it went on the Teletext terminal”. The 30.5 million shares the defendant said were sold to Ms. Yu in-chief was therefore actually duly sold on the market through on-market transactions, and the funds from the sales credited to the defendant’s Hooray trading account. Since before the sale of the shares the defendant and his father had already signed the respective documents for the transfer of a total of $64,350,000 from their Hooray accounts to Ms. Yu’s Hooray account, once the funds for the sale had arrived, the $64 million odd was transferred to Ms. Yu.

395.  When asked if this agreement with Ms. Yu was put in writing, the defendant said that the document he and his father signed authorizing Hooray for the transfer of the $64 million odd was the written agreement.

396.  It is the defendant’s evidence that Ms. Yu had said to him that she was the buyer. The actual buying price for the shares was the market price that the shares were bought at which was $2.90 less the $1.20 per share that was promised to the defendant and his father, which was $1.70.

397.  Mr. Reading asked the defendant about the seller of the Gold Wo shares introduced by Ben Cheung in 2001. It was pointed out to the defendant that one of the vendors of the Gold Wo shares was a Li Wing Kei, the Financial Controller of Gold Wo at the time. Mr. Reading told the defendant that Li Wing Kei is now serving a prison sentence for inflating the price of Gold Wo shares. The defendant said he did not know Li Wing Kei or that he was the Financial Controller of Gold Wo. The defendant also had no idea that he was in prison. There is no evidence to suggest that the defendant knew any of these facts at the time of his purchase of the shares and I now make it clear that I do not take the fact that Li was the Financial Controller of Gold Wo and that he is serving a prison sentence for inflating Gold Wo share prices as facts that were known to the defendant, and so those facts have not influenced in any way my arriving at the eventual verdict.

The Hairdressing business

398.  In cross-examination, the defendant supplemented his evidence in relation to his hairdressing business. After the defendant returned from training in London and Paris, he went to work at Kowloon Hotel, being a partner with a Anthony for about 6 months, and then in July 1989 he opened Vole Royal Pacific. In the 6 months as a shareholder of the Kowloon Hotel salon, the defendant said he was earning over $100,000 per month, sharing in the profits of the salon.

399.  As for the $4 million that the defendant said he put in for setting up his first salon in Vole Royal Pacific, he explained that about half of that came from his personal savings. This $2 million was accumulated from 1980.

400.  The defendant was then asked how he was able to be the sole owner of Vole Royal Pacific and at the same time did freelance hairstylist work. The defendant explained that by freelance he meant that he did not have to go back to work at regular hours, because he had many location jobs. The freelance work was outside the salon and not part of the salon.

401.  When Mr. Reading asked what the defendant’s income was in relation to Vole Peninsula, the defendant gave a ballpark figure of net profit of $1.2 to $1.5 million. Mr. Reading asked if this figure included his freelance work and the defendant said it did not. Mr. Reading then ask for the yearly income including his freelance work. The defendant gave the following answer, “Freelance jobs were mine, personal”. Mr. Reading repeated his question and the defendant repeated his answer.

402.  Mr. Reading then reminded the defendant of his evidence-in-chief where he said that his earnings were $3 million from Vole Royal Pacific and $3 million from Vole Peninsula, with both being inclusive of freelance work. The defendant responded as follows, “I’m talking about the overall income.”

403.  Mr. Reading tried again and asked if the total amount of freelance income at that time was $3 million or $1.5 million. This time the defendant gave the direct answer of “$1.5 million”. This figure, however, according to the defendant was not his total freelance income.

RichField dealings

404.  The defendant was cross-examined about his foreign property dealings through the use of RichField as a sales agent. It is his evidence that the company was paid in US dollars which would then be transferred back to Hong Kong, but not to one of the 5 subject accounts since they were not yet in existence at that time.

405.  As for the defendant’s investment in Inner Mongolia, he was paid in RMB and the income received would be paid into the company’s account in China and left in the local bank accounts.

Wealthy Villas

406.  The defendant confirmed that his profit in the project was $15,054,248. The $15 million that was required to be paid by the defendant to the developer came from the defendant’s savings, income from the salons and investments as well as a mortgage on one of his properties, Ying Biu Mansion on Breezy Path.

407.  It was pointed out by Mr. Reading that 4 of the purchaser companies for 3 of the units and 10 car parking spaces were through the defendant’s own private companies, and therefore the defendant himself contributed to the total selling price of $90,304,248 by $20,500,000. The defendant insisted that the total price they sold the units and car parks was $90,304,248 and the amount payable to the developer was $75,250,000 and so he made a profit of $15 million odd being the difference of the two.

408.  Although the land search documents show that in relation to the 3 units and 10 car parks where the purchasers were actually companies owned by the defendant himself, it is the defendant’s evidence that the purchase price of $20.5 million was not paid by his companies to RichField. Mortgages on those units were taken out and cash obtained. The defendant agreed that if one just refer to the documents, one would think that he made a loss, but that was not the case because his companies took out the mortgage and the defendant took the cash on behalf of the company, because the companies were his, and the defendant did have $15 million odd profit to take away from this investment.

Macau gambling

409.  The defendant confirmed that he first started to gamble in Macau in 1997. It was after 1997 that the stake was usually about $1 million. In more recent times he gambled in VIP rooms which were reserved for high rollers. It was Au Yeung Kai Chor who introduced the defendant to his first VIP room by inviting the defendant there. The defendant knew that Au Yeung Kai Chor had some dealings with the VIP rooms but he was not clear about what sort of business dealings he had.

410.  It was in 2004 that Au Yeung Kai Chor introduced the defendant to the bosses of Neptune VIP room, Lin Cheuk Fung and Cheung Chi Tai. Neptune VIP room was inside the old Lisboa casino at that time.

411.  Lin and Cheung arranged a credit line of $10 million for the defendant. The defendant did not have to provide any proof that he was worth the $10 million credit. The defendant would draw around $2 to $3 million to gamble each time. The money would be given to him by way of dead/mud chips. If the defendant lost, he had to repay the money by depositing money into the company by way of bank transfers. If the defendant won, the defendant could either get cash or ask for cash checks to be issued. The time required for the casino to prepare the checks would depend on whether SJM’s office was busy or not. This was the same with the other VIP rooms.

412.  It is the defendant’s evidence that he did have an arrangement with Neptune VIP room to leave his winnings with them in his account starting from 2004 and lasted up to 2008.

The SJM cash checks deposits

413.  Mr. Reading confirmed with the defendant that the $62 million odd received from SJM were his winnings and then asked the defendant why there were 4 cash checks issued by SJM to the defendant on 22^nd December 2004. The defendant explained it was possibly because at the time of gambling he had been served by different junkets and so he might have asked for cash checks from different chip rollers.

414.  Mr. Reading referred to the defendant’s movement records and suggested to the defendant that he was not present when the requests for the 4 cash checks were made. The defendant said there was no need for him to be present in Macau for requests to be made. The defendant then said that he made phone calls to 4 different junkets and made request for the checks. As it was so long ago, the defendant said he was not able to remember the details, but he thought that the gambling might have taken place earlier and he asked for the checks when he was in Hong Kong. If he was in Macau, he would have collected the checks in person. If the checks were issued when the defendant was in Macau, the accounts manager of New Century casino would have delivered the checks over.

415.  As to why there were 4 checks, the defendant explained that it might have been the case that it was for 4 different VIP rooms located at different places and with different junkets. According to the defendant’s understanding, a junket is the person who would arrange and handle things for the client, and should be a staff member of the relevant VIP room. A junket is the same as a chip roller. If the defendant gambled at a table in a VIP room and he won, he would pay commission to the junket or junkets who assisted him after he had collected his winnings checks. It would be the case that if the defendant received his winnings a month later then the junket would have to wait 1 month for his or her commission. The defendant would go to Macau or sometimes the junket would come to Hong Kong and the commission would be paid by the defendant.

416.  Mr. Reading asked the defendant why cash checks were used and he explained that the money from a cash check deposit would be available much quicker than from a crossed check in his name, 1 day for a cash check and about 1 week for a crossed check. Furthermore, with a cash check in hand, one could withdraw cash in Macau as well. It was just more convenient for the defendant to be issued cash checks by the casino.

417.  The defendant was also referred to another request the defendant made for another cash check to be issued by SJM one day earlier on 21^st December 2004. Movement records showed that the request was made when the defendant was in Hong Kong. The relevant request form showed that the request was handled by a different staff member but the same VIP room as the other 4 checks. The defendant said that he would usually make a phone call to the staff of the casino for them to deliver the checks to Hong Kong.

418.  The defendant was asked about the SJM issued cash checks deposits. The defendant’s evidence is that they were all his gambling winnings.

419.  It was pointed out to the defendant that although he claimed to be an avid and successful gambler from 2004 to 2008, these were the only cash checks from the casinos that were deposited into his bank account during that period, the defendant answered, “not just that”. Mr. Reading pointed out again that those cash checks in 2004 from SJM were the only ones that appeared in any of the defendant’s 3 bank accounts. To that, the defendant answered, “yes”. Mr. Reading did not pursue what the defendant meant by “not just that” and continued with his questioning by asking why the defendant needed the $60 million odd in the beginning of 2005. The defendant answered, “the money was the winnings from the casinos”. Mr. Reading explained to the defendant that he was not questioning him collecting his winnings, but why at that time. To that, the defendant gave the answer of “You can win or lose in gambling, you see me win, having the checks, if I lose, the casino will not give me records”.

420.  The defendant said between January 2005 and 2008, he had won a total of around $20 to $30 million. He did collect his winnings. The defendant was then asked how he collected his winnings. The defendant answered, “Usually there were checks or off-setting the sum with the casino”. When asked to explain the off-setting, the defendant said, “Sometimes, the casino would issue checks to us”. The defendant said that he would also deposit them into his bank account. Mr. Reading then pointed out to the defendant that there were no such check deposits into the bank accounts A, B and C in the charges, to which the defendant answered, “Yes there were, in matching or in off-setting, there were.” Mr. Reading asked the defendant what he meant by that, and the defendant answered, “Sometimes, deposits for interest were done in Macau, in Hong Kong when we all of a sudden needed the money, they would lend it back to us”.

421.  When asked how the defendant would obtain the money, the defendant answered, “checks”. Mr. Reading asked whether they were cash checks or what, but the defendant just repeated his one word answer, “checks”.

422.  Mr. Reading then asked the defendant on what account were the checks drawn, to which the defendant answered, “It was issued by the staff of the casino”, on their personal account. That took place in 2005 and 2006. Mr. Reading then asked who those staff of the casino were who effectively was paying the defendant his winnings. To which the defendant answered, “Staff members of Neptune Club, including Tang Wai Yee, Chan Chun Shing, Yu Sin Tung, Amy Leung Yim Fun, Lo Kwan, Wong Kin Kwok, Asia Time, Up Sky Group, Artune”.

423.  Mr. Reading immediately pointed out to the defendant that those names were mentioned in his evidence-in-chief as well, but at that time the defendant said that they were returning his investments in Neptune Club and not the defendant’s gambling winnings. To that the defendant replied, “Also investment in the casino or with the casino”.

424.  Mr. Reading repeated his question, asking the defendant how his winnings between 2005 and 2008 were repatriated to him. The defendant again gave a one word answer, “checks”. Some checks were in the name of the casinos and some were in the name of the staff members. The defendant was then asked if he would be able to show where the entries for such deposits would be in the statements of accounts A, B and C. The defendant answered, “Probably not, already said it”.

425.  When asked where those checks had gone, the defendant answered, “Into the account”. Mr. Reading asked the defendant to explain his answer and he said this, “What I earlier said was that, off-setting was done in the account after depositing into the account”.

426.  Mr. Reading asked the defendant to explain why there were no deposit records in his bank accounts between 2005 and 2007 from casino check deposits. The defendant answered, “No winnings” and that no winnings so no deposits. The reason why he said that some of the winnings were given to him in the name of the individuals and not the casino if there were winnings was because what he said earlier was about off-setting.

427.  The defendant was asked why it was necessary to go through this off-setting process in order to get his winnings and he explained that, “Because at that time I deposited money for interest. Therefore, my winnings would be kept in my account, that was the same as what happened in 2007 and 2008.” He further explained that because there was a change of the law in Macau when one could no longer get cash checks anymore, if he wanted to collect the winnings, he could only obtain a personal check, a check issued to him as the payee, that was why he had to get round the law using this off-setting arrangement.

428.  The defendant was asked about 2 cash checks each of $5 million issued by SJM on the same day, 23^rd March 2006, deposited into his father’s savings account. It is the defendant’s evidence that his father did not gamble in Macau. The checks were issued by SJM and were deposited into the defendant’s father’s account. The checks were issued via a casino and VIP room different to that of the defendant’s. When asked if the defendant knew what the money was for, the defendant said it was his winnings from gambling.

429.  When asked why the defendant’s winnings were deposited into his father’s account, the defendant explained that it should have been the case that the 2 sums of money were repayment of $10 million to his father, money that the defendant had borrowed in 2005.

430.  It was then pointed out to the defendant that, before the deposit of the first $5 million, Yeung Chung’s account had $24,088.35. After the $5 million deposit, there were 2 withdrawals of $1 million and $2 million respectively and this $3 million went to the defendant’s own bank account.

431.  Similarly, just a few days after the second $5 million deposit of the SJM cash check, 2 withdrawals of $2.5 million and $1.4 million respectively went to the defendant’s bank account. So a total of $6.9 million of the $10 million deposit from SJM which was supposed to be the defendant’s repayment to his father had gone to the defendant within a short time of the deposits.

432.  The defendant gave the following explanation, “It should be the case at that time, I wanted to use my account number 27542, the Wing Lung Savings Account, a transfer was made into account number 27542. At that time, Ms. Fong of Wing Lung Bank, she asked me to do a fixed deposit, she had asked me many times, it was embarrassing for me to decline her, so at that time, I asked my father to transfer $3M to me for the purpose of doing the fixed deposit.”

433.  It is the defendant’s evidence that he did not tell his forensic accountant expert Mr. Ian Robinson about this fixed deposit request from the lady of Wing Lung Bank although he had remembered about it a long time ago, and that was because Mr. Robinson did not ask.

434.  Mr. Reading referred to paragraph 6.1.10 of Mr. Robinson’s second report where Mr. Robinson stated that, “I have no information about the exact nature of these $72.5 million payments from SJM to D1 [the defendant] and his father respectively”. Mr. Reading then referred to Mr. Robinson’s evidence in cross-examination where he said that he was advised “by the lawyers and D1 [the defendant]” that the $72.5 million were his winnings. When Mr. Robinson was asked in cross-examination if any explanation was given to him as to why the 4 checks were issued on the same day within a couple of hours, he said he had not been given an explanation. Mr. Reading asked him if he asked anyone about that, to which Mr. Robinson answered, “Yes, I did. But the answer was I can’t remember the reasons but they were good reasons. I was told they were good reasons, but the defendant and his lawyers could not give me an explanation because they said they could not remember what those reasons were.”

435.  To that, the defendant answered in cross-examination that when he was asked by Mr. Robinson to explain the details of the deposits from SJM, he remembered the details but he did not “say to him as such”. The defendant also said that “maybe he [Mr. Robinson] misunderstood me.”

436.  Mr. Reading then asked the defendant if he had read Mr. Robinson’s 2 reports before they were produced to the court and the defendant said he did not read them[2]. The defendant said Mr. Robinson did not show him the reports. The defendant also said he did not read the reports before Mr. Robinson gave evidence, because the time was tight and he did not show them to him. Mr. Reading asked if the defendant asked Mr. Robinson to show him the reports and the defendant answered that at that time he did not know that he needed to read the reports.

437.  The defendant confirmed that Mr. Robinson had interviewed him and his solicitors on a couple of occasions, where Mr. Robinson’s colleagues were taking notes.

438.  The defendant said he did not ask to see the materials gathered by Mr. Robinson because Mr. Robinson said that it was independent. When asked again why the defendant did not ask to look at the reports, the defendant said at that time he thought Mr. Robinson was very busy.

Neptune Club investments

439.  The defendant clarified for Mr. Reading that his investment in Neptune was in multiple VIP rooms in casino Lisboa. There were 3 to 4 rooms with 3 tables in each room.

440.  In relation to the funding of the $20 million investment, the defendant confirmed that it was the shares in Prosper EVision that he sold to obtain the funds for the investment. It is his evidence that he held around 15% of the shares in that company at that time and he sold all 15% to Tam Kam Wing.

441.  In relation to the investment in Neptune, the defendant said that Lin Cheuk Fung was the majority shareholder of Neptune Club at that time, with Cheung Chi Tai as the second largest shareholder.

442.  The defendant explained that his investment was not to become a shareholder, “but to chip in money to do a deposit for interest”. Mr. Reading did not understand this answer and asked for clarification, to which the defendant said, “I became a shareholder with them in another business”. When asked what business was that, the defendant said, “At that time, they had acquired code 070 company, Lin Cheuk Fung and Cheung Chi Tai invited me at the same time to buy the shares of 070, that’s what I meant by joining to become a shareholder.”

443.  Mr. Reading reminded the defendant that he was asking about the defendant’s investment in Neptune Club and not in Massive Resources (stock code 070), although later on it did change its name to Neptune Group Limited.

444.  The defendant sold the shares in 979 and he and his father bought shares in 070. Mr. Reading asked the defendant whether the purchase was an on-market or off-market transaction, to which the defendant answered, “neither, he was my trustee”. This answer is different to the answer the defendant gave in examination-in-chief when he just said that the purchase was by way of a “private transaction”.

445.  Mr. Reading naturally asked what the defendant meant by Lin Cheuk Fung being his trustee in the purchase of the 070 shares. The defendant explained that, “at that time the majority shareholder was Lin Cheuk Fung, I was holding a percentage of the shareholding of Lin Cheuk Fung”, meaning that “in the total number of shares held by Lin Cheuk Fung, 20% was mine”.

446.  It is the defendant’s evidence that at that time there were documents in existence to show the defendant’s 20% ownership but the documents have since gone missing. It must be pointed out that it is the defendant’s evidence that he was invited to invest in stock code 070 in early 2005, which was less than 7 years from the defendant’s arrest for the present charges.

447.  Mr. Reading then asked the defendant what percentage of shares did Lin Cheuk Fung hold in Massive Resources, to which the defendant answered, “At that time we worked it out like this, at that time a company name Walden was acquired, at the consideration of $68M. $48M was through the issuance of shares at $0.032 per share. And then, $64M, was financed based on the price of $0.355 subscribed 1.8B shares. At that time $20M was given to Walden. $68M + $64M = $132M consideration, 20% was mine, so I paid $26.4M.” It must be noted that this was also the answer given by the defendant in-chief when he was explaining his and his father’s investment in Massive Resources.

448.  As for the off-market transaction for the sale of the 979 shares to Tam Kam Wing, the defendant’s evidence is that about $20 million odd of the sales proceeds were paid in mainland China. The payment was by way of transfer to the defendant by Tam Kam Wing in Dongguan where Tam had big business. The defendant received the money in RMB.

449.  As for the balance of the sales proceeds, the defendant remembered that Tam had transferred the money to one of the defendant’s brokerage firms in Hong Kong but he could no longer remember which one.

450.  The defendant paid part of the $26.4 million to Lin Cheuk Fung for his 20% shares in Hong Kong and part of the money in mainland China. The payments were by way of 3 instalments, at about $8 million odd each. 2 of the instalments were paid in mainland China and 1 in Hong Kong. The instalment payment in Hong Kong was by way of transfer via his brokerage firm account to Lin Cheuk Fung’s Bank of China account in Hong Kong. The defendant could not remember which brokerage firms he used.

451.  Mr. Reading asked the defendant why did he not just buy shares in Massive Resources on the Hong Kong Stock Exchange, to which the defendant answered, “At that time we had the following arrangement, he maintained his position as the majority shareholder, therefore we did not split the shares.” The defendant agreed that there was such a chance that the shares he bought from Lin, if done on the Stock Exchange, would have reduced Lin’s shareholding below that of a majority shareholder. The defendant agreed that with their arrangement, as far as the Hong Kong Stock Exchange was concerned, Lin was still the majority shareholder. The defendant said he was Lin’s “shareholder behind the scene”.

452.  The defendant was asked what benefit he derived from this investment and he said that he made a profit of slightly more than $56 million from his investment in stocks of 070. It would appear to be the defendant’s evidence that the defendant eventually sold out his shares in 070 to Lin Cheuk Fung for a  $56 million profit.

453.  It is the defendant’s evidence that his father and himself made the $56 million profit together in 2007. It was Lin Cheuk Fung who gave him the money in 2007 by way of many instalments. The payments were by way of checks and the defendant banked those checks into his and his father’s account.

454.  When asked if the checks were drawn by Lin Cheuk Fung on his own bank account, the defendant answered flatly that they were not. They were instead “checks of his staff”.

455.  Mr. Reading asked the defendant why it was necessary for Lin to issue the checks in the name of his staff member, to which the defendant replied, “It did not really matter”. He further explained that, “Because I knew all of them. Because in 2005, he was not very familiar with stocks nor the running of a listed company, therefore, at that time, everything about the operation of the listed company, including the arrangement of lawyer, accountant, company lawyers, it was I who was the one who dealt with those things. Also, I would frequently together with Lin and his 2 Executive Directors (Lau Kwok Hung and Chan Siu Kwong) regular meetings were held. Therefore at that time, the staff of the company, shareholders would meet together regularly.”

456.  Mr. Reading asked the defendant if he did ask Lin why all these other people were sending him checks drawn on their personal accounts. The defendant answered, “I did ask. But I also knew those people.” When asked what Lin said when the defendant asked him, the defendant said, “that was for him to give me or transfer me the money”. When Mr. Reading repeated his question, the defendant answered, “nothing to say”.

457.  The defendant confirmed that Cheung Chi Tai, Artune (a company owned by Lin Cheuk Fung) and Au Yeung Kai Chor were 3 of the entities that had paid him money as part of the $56 million profit he and his father made in the sale of the 070 shares back to Lin Cheuk Fung.

458.  Mr. Reading referred to the records of Mr. Robinson and Mr. Sutton showing a total of $20 million was paid by Cheung Chi Tai into the defendant’s bank account and the defendant confirmed that it was the case.

459.  It is the defendant’s evidence that this $20 million from Cheung Chi Tai included an $18 million repayment of the capital the defendant invested in 070. According to the defendant, this repayment of the capital is recorded in the statement of account B, when $18 million from Cheung Chi Tai was deposited into the account on 12^th September 2007.

460.  Mr. Reading then referred to the 2^nd report of Mr. Robinson at paragraph 6.3.29 where it is stated that,

“Cheung Chi Tai deposited HK$20 million in total to D1. According to my instructing solicitors, the amounts were borrowed from Cheung Chi Tai for the purpose of the purchase of the UK property. This amount was subsequently paid back in 2009 at 1% interest.”[3]

461.  Although the defendant agreed that the statement about Cheung having deposited $20 million in total to him is correct, as to the purpose of the deposits and the repayment of interest, it is the defendant’s evidence that Mr. Robinson had “misunderstood it”. The defendant further said the following, “As I go back I found many of the details, he got them from the internet and according to his feelings”.

462.  When it was pointed out to the defendant that it is Mr. Robinson’s evidence that he was given the information by the defendant’s solicitors and so it must follow that the solicitors got the information from the defendant, the defendant answered that, “should not be the case”. The defendant denied that he had made up the story of Cheung paying the money as part of the return for the defendant’s investment with Lin Cheuk Fung in 070.

463.  When Mr. Reading asked if the defendant knew that Cheung Chi Tai was believed by the Hong Kong Police to be a member of a triad society, the defendant said that he did not know, all he knew was that Cheung was a business associate of his in 2005 to 2007.

464.  It must be pointed out that there is no evidence to suggest that the defendant did know about the Police’s belief or that he had read any of the reportage in the newspaper about Cheung’s triad connection, despite the fact that the link provided by Mr. Robinson in his report at paragraph 6.3.29 actually specifically mentioned that Cheung Chi Tai was identified in court as leader of the Wo Hop To triad in March 2010. I did not rely on the possible fact that Cheung Chi Tai was regarded or reported to be connected to triad societies when deciding on my verdict.

465.  In relation to the 6^th January 2006 transfer of $1 million from Cheung Chi Tai to Yeung Chung’s account E the defendant explained that the money was “share capital arising out of deposits for interest”. It was transferred to the defendant’s father’s account because his father also “did the deposit for interest”. Most of the money the defendant’s father had invested were in fact chipped in by the defendant because the defendant had borrowed money from his father before.

466.  It was pointed out to the defendant that $1 million went back to the defendant’s account in 3 instalments and Mr. Reading asked why the money so went back if it belonged to his father. To this the defendant answered that maybe at that time he was off-setting with him and the transfer to his account was his father paying it back to him.

467.  The defendant was then referred to various deposits into account B, including the $18 million from Cheung Chi Tai, $3.3 million from Au Yeung Kai Chor, and the $10 million from Artune Company, leaving the account balance of account B at $31 million odd. Then there were a series of transfers between the defendant’s other accounts, leaving a total balance of $39.397 million in account B. The very next entry was the withdrawal of $36.422 million to Prince Evans Solicitors, via Barclays Bank in the U.K. According to Mr. Robinson’s report, this money to Prince Evans was for the purchase of a house in England.

468.  Mr. Reading then pointed out the strange situation that in the report of Mr. Pulvirenti, the defendant’s other expert witness, Mr. Pulvirenti suggested that the money to Prince Evans was for the purchase of Birmingham City FC and not for the purchase of a house. The defendant explained that he had met with Mr. Pulvirenti once and he had never asked him anything about the accounts and the defendant “had never told him”. The defendant added that Mr. Pulvirenti’s report “was also independent”.

469.  In relation to the $18 million check of Cheung Chi Tai that was deposited into the defendant’s account, the defendant explained that, at the time, he had a conversation with Cheung saying that the defendant needed money to buy a property in London and asked for the share capital for his investment in 070. It is the defendant’s evidence that in early 2007, Cheung and Lin already agreed to return to the defendant and his father the share capital and investment gradually. The defendant had no idea the origin of the $18 million that Cheung Chi Tai had paid him, and he did not ask Cheung about that because he had known Cheung for so many years and Cheung was the second largest shareholder of Neptune Group Macau. It was the defendant’s understanding that Neptune Club had to be validated and registered in Macau. At that time the defendant did not have any doubt in his mind regarding Cheung’s money. The defendant just wanted to get the money back for buying the property in London.

470.  The defendant was then asked if there was any paper work in support of the return of the share capital and profits for the 070 investment with Lin and Cheung, and his answer is that there were documents and the check documents can also support that. The documents however can no longer be located. The defendant did ask the staff members of Lin and Cheung if they had any documents but was told that “all had been lost”.

471.  It is the defendant’s evidence that the documents did specify an amount of interest that the defendant would be paid in return for his investment at a rate of 200% odd for the period from 2005 to early 2007. As far as he could remember, the sum was worked out based on the price of the share. Mr. Reading asked if that was specified in the documents in 2005 when he and his father entered the agreement with Lin and Cheung, but the defendant answered that “it was not specified in 2005”. It is the defendant’s evidence that when he invested the funds in 2005, there was no agreement as to what his return would be at that time.

472.  Mr. Reading then pointed out that if there was a 100% per annum interest, Lin and Cheung should just have gone to the bank to borrow the money. The defendant responded by saying that, “Because they were not in shortage of money. He wanted me to help him to take care of the listed company, that’s why he invited or let me to become a shareholder.” The defendant claimed that his investment did not help the company much, Lin just wanted the defendant to help them by way of adopting his management of a listed company, to use his experience.  

473.  Mr. Reading asked the defendant if the documents the defendant said came into existence when he agreed with Lin and Cheung to invest in the listed company 070 were required to be registered anywhere. The defendant answered, “no need”. Mr. Reading followed up with the question “Even though the transaction related to a publicly listed company?” The defendant answered there was no need, “because it was a private deal”.

474.  Mr. Reading referred to the defendant’s earlier answer that the deal with Lin was structured that way was so that Lin could remain the majority shareholder of 070, with the defendant being the shareholder behind Lin, and asked if the defendant saw anything wrong with that arrangement given his experience in publicly listed company. The defendant answered that there was nothing wrong.

475.  At this point, with the agreement of both the prosecution and the defence, the defendant was reminded of his privilege against self-incrimination. The defendant did not give up his privilege when certain questions were asked and nothing is to be inferred from the defendant exercising his rights.

476.  Mr. Reading moved on to try to confirm with the defendant that, based on his earlier answer, he did read Mr. Pulvirenti’s report. It is the defendant’s evidence that he did not read Mr. Pulvirenti’s reports either.

477.  The defendant explained what his “東息” investment in the Neptune Club of $20 million was, saying that “東息 is a kind of interest. We deposit money into the casino’s Neptune Club, after the deposit, interest would be generated monthly.” When asked if was were any paper work in relation to this Neptune Club investment, the defendant said that there was paper work but that it was too long ago and had been lost. The defendant no longer remembers how the $20 million for the Neptune Club investment was paid, whether it was in China or Hong Kong or how he had physically gotten the money to the Club.

478.  The paper work the defendant said existed also included information about the rate of interest that he would be receiving for the investment, which was at 20% per annum.

479.  The defendant was referred to a deposit by LuckyTex Limited of $3.3 million into the defendant’s father’s bank account E on 18^th April 2005. Since it is the defendant’s earlier evidence that this deposit was a return of their investment in Neptune Club, Mr. Reading pointed out to the defendant that this quick repayment of $3.3 million just a few months after they had invested the $20 million indicated an interest rate a lot more than 20% per annum. The defendant explained by saying this, “Not that, no, at that time it was like that, both the share capital and the Dung Sick were returned to us.” The defendant was then asked what proportion of the $3.3 million was share capital and what proportion was interest, to which he answered that he need to refer to the paper work to work it out. The defendant also could not remember if that was the first interest payment in 2005 or what the position was.

480.  Mr. Reading asked if it was correct to say that in order to draw interest, the defendant would have to leave some capital in this ‘東息dong sik’ account with Neptune Club. The defendant gave a one word answer, “no”.

481.  Mr. Reading then returned to the question of what proportion of the $3.3 million paid by Cheung Chi Tai into the defendant father’s account E comprised interest and what proportion capital. This time, the defendant gave the following answer, “Well it should not be worked out this way. Usually it was the case that, deducting the sum withdrawn from the capital and the interest.”

482.  When reminded that according to Mr. Harris’ calculation, the interest accrual rate was about 20%, the defendant claimed that the interest of 20% was a monthly interest rate. This differed with the defendant’s earlier answer given in cross-examination, which was that the rate of interest he would be receiving for the Neptune Club investment was stated in the documents at “20% per annum”.

483.  The defendant was then referred to a payment 15 days later of $2 million into the defendant’s account A on 3^rd May 2005 and asked what it was for. The defendant answered that it was also payment of interest and return of share capital for the Neptune Club investment. He was not able to work out how much was each.

484.  Mr. Reading then questioned the defendant again as to the proposition that as capital was returned to the defendant and his father, they would be earning less interest. To that, the defendant said, “Well it is worked out this way, yes, but at that time, I also went to gamble in Macau, if I won, I would make a deposit of the winnings into the share capital, so the formula would be different, so it is difficult for me to tell the proportion of capital and interest separately.”

485.  Mr. Reading asked the defendant if that was something the defendant just thought of, to which the defendant answered, “This is the policy all along. Because at that time, Macau’s VIP room competition was very keen among the VIP rooms in Macau, at that time Neptune Club wanted to offer many good terms to the customers, wanting to retain the customers, therefore it would not be a problem to withdraw money even in Hong Kong at that time. Those money was provided to this company by the majority shareholder Lin Cheuk Fung and Cheung Chi Tai.”

486.  The defendant was then asked about various payments into his and his father’s accounts by individuals or companies which the defendant said in his evidence were paying him and his father the share capital and interest for their investments of $20 million in Neptune Club. It is the defendant’s evidence that by the end of 2006 he had received all of his capital for that investment back.

487.  It was then pointed out to the defendant that one of the payments by Up Sky Limited, the BVI company with Yeung Chung as director and who was later replaced by the defendant, was much later than in 2005 and 2006, the time that the defendant said all the money for the $20 million Neptune Club investment had been received. The defendant first pointed out that to his recollection, Up Sky refunded to him his investment in stock code 070. This differed with the defendant’s evidence-in-chief when he listed out Up Sky as one of the entities that made check payments to him and his father as return for their investment of $20 million in Neptune Club.

488.  Mr. Reading sought confirmation from the defendant that Up Sky was not involved in the refund of the interest and share capital with the $20 million, but the other investment of $26.4 million in relation to stock code 070, and the defendant did so confirm. Mr. Reading asked the defendant if he had made a mistake when he said that Up Sky was one of the companies paying him his return in relation to the $20 million investment. The defendant answered, “At that time it was my understanding that, Mr. Harris asked me to tell what I could remember so I told as far as I could remember.” Mr. Reading repeated his question and the defendant then agreed that he made a mistake in his evidence-in-chief.

489.  Just as with Up Sky, the defendant also made a similar mistake with WinCon. The $10 million deposit by WinCon into the defendant’s account A on 10^th October 2007 was payment of interest and share capital for his investment in stock code 070 and not related to the $20 million Neptune Club investment. The defendant this time added the explanation that he should have heard Mr. Harris’ question wrongly.

490.  Just as with Up Sky and WinCon, despite the defendant mentioning in his evidence-in-chief that Artune Group was one of the entities paying him return for his $20 million investment in Neptune Club, the defendant had in fact heard wrongly and those payments from Artune Group in fact had nothing to do with that $20 million investment.

Eugene Chuang

491.  The defendant was asked about a series of deposits from Eugene Chuang’s personal account into the defendant’s account in 2004. Sums of $940,000, $500,000, $500,000 and $750,000 (total of $2.69 million) were deposited into the defendant’s account A on 6^th, 11^th, 17^th August and 23^rd September 2004. It is the defendant’s evidence that they were all related to the “matching or off-setting of the sums with respect of the shares”, that they might have won in shares together. The moneys were paid out of Eugene Chuang’s personal account because the defendant and him made “personal investment”, that was why he paid the defendant the money in a personal capacity.

492.  The defendant was then referred to paragraph 6.3.30 of Mr. Robinson’s 2^nd report,

“Eugene Chuang was the Managing Director of Allied Weli Development Limited, which is the parent company of Chung Nam Securities Limited, during 1997 to 2009. I understand that the deposit from Eugene Chuang was a loan arrangement between D1 [the defendant] and Eugene Chuang.”

493.  There are two internet links in the paragraph but, if the links are correct, the data being linked to are just some basic information on Eugene Chuang and Allied Weli, and do not contain any information about the deposit from Eugene Chuang being a loan arrangement between the defendant and Chuang.

494.  Mr. Reading therefore asked the defendant what Mr. Robinson understood came from the defendant or the defendant’s solicitors, to which the defendant just answered, “disagree”. When asked if the defendant meant that Mr. Robinson had got it wrong again, the defendant answered that, “Ian Robinson compiled this report independently, he did not consult us. Did not ask me.”

495.  Mr. Reading asked if the defendant meant that Mr. Robinson never spoke to him about the contents of the reports. The defendant answered, “I had not talked to him about the contents of the report”.

496.  Mr. Reading asked if it was the case that the defendant had not read either of Mr. Robinson’s 2 reports, to which the defendant answered, “After the reports were done, he did show them to me, he did not show them to me before they were done. After he had finished compiling the 2^nd report, he showed it to me and I read it, but I had never read it before it was compiled.” This answer differed with the defendant’s earlier answer in cross-examination when he said that he had never read either of Mr. Robinson’s reports[4].

497.  Mr. Reading pointed out this difference in the defendant’s testimony but the defendant replied that there was “no difference”, because he “only read this report after he had completed it and I had not read it before his completion. And also I was not involved in the interviews with the witnesses”. When Mr. Reading insisted that there was a difference in that the defendant told the court earlier that he had not read the reports at all, the defendant answered, “That’s not what I said”.

498.  There was then a lunch break. Upon resumption, the defendant was asked if what he said before lunch that he did read Mr. Robinson’s reports was correct. The defendant answered that before the reports were filed into court, the defendant had never seen them, before that Mr. Robinson just asked the defendant for supporting documents, but after the reports were filed into court, the defendant did read them. Yet, when Mr. Reading asked the defendant when he read the reports, the defendant said he did not read Mr. Robinson’s 1^st report.

499.  On the basis that the defendant did read the 2^nd report, Mr. Reading asked the defendant if he did at any time tell Mr. Robinson that there were things in his report that were wrong. The defendant answered that he did not because “he said he was an independent person”.

500.  The defendant was asked about his evidence that Lin Cheuk Fung was the majority shareholder of Neptune Club as well as Massive Resources 070 (later Neptune Group Limited) at the time when the defendant had an agreement with Lin to invest $26.4 million in 070, taking up 20% of Lin’s shares in 070, as the “shareholder behind Lin”.

501.  After some probing by Mr. Reading, the defendant said that at the time, someone else had had a higher shareholding than Lin. The defendant said he could remember all along that there was such someone. The defendant said at that time there should be a company named Golden Merry[5] which held more shares than Lin did.

502.  The defendant was then shown a page from the Annual Report of Neptune Group Limited for the year 2005, where it listed Chim Pui Chung under the heading of having substantial interests in the Share Capital of the company with 1.835 billion shares, being 14.81% of the company, whereas Lin Cheuk Fung held 1.5 billion shares, being 12.10% of the company. Mr. Reading fairly pointed out that Chim Pui Chung held the shares through 2 wholly owned companies and held 2.94 million shares in his own name, so technically Lin was the single substantial shareholder.

Abba Chan Tat Chee

503.  The defendant was asked about the $14 million he invested in Abba Chan’s movie. The money was paid on 22^nd March 2005 and that money “should have been” money the defendant won in Macau, money that he had won on several occasions, as well as “accumulation of those SJM checks” that were deposited into his account in December 2004 and January 2005.

504.  It is the defendant’s evidence that a payment of $2 million from Chan Tat Chee on 2^nd September 2005 was a “refund” of his $14 million investment. It was the defendant who asked Abba Chan to refund him the investment money because it had been quite a long time since the defendant made the investment. Chan Tat Chee told the defendant that the $2 million was from Chan’s investments in movies and concerts by his company. The defendant cannot remember why the $2 million was deposited into his check account B while most of the deposits went to his savings account A.

505.  The defendant said that the check deposits of $1 million into account A by Abba Entertainment on 6^th December, 26^th September, 7^th March, 3^rd April, 12^th April 2005 and $1,260,870 on 8^th May 2006 were all refunds for his investment. Likewise the $1 million, $500,000, $500,000 deposits by Abba Movie into Account A on 26^th July, 26^th September, 6^th November 2006. The last deposit was a check for $5 million drawn on Chan Tat Chee’s personal account on 6^th December 2006, but which was dishonoured. The defendant did not take legal action against Chan for that because he felt that Abba Chan did not have any money.

Au Yeung Kai Chor

506.  The defendant was specifically asked about a deposit of $1,260,000 into the defendant’s father’s account E on 10^th October 2005 by Au Yeung Kai Chor. It is the defendant’s evidence that the deposit was the return of capital and interest for their $20 million Neptune VIP room investment.

507.  Mr. Reading proceeded to ask what Au Yeung Kai Chor had to do with that investment. The defendant’s first answer was, “Yes”. The question was repeated and the defendant answered, “Au Yeung Kai Chor was retuning the capital and interest to me on behalf of Neptune Club, to me and my father. ” Mr. Reading asked again why Au Yeung did that and the defendant answered, “He returned the capital and interest to me and my father.” Mr. Reading rephrased his question and asked why was it Au Yeung who was paying the money to the defendant and not one of the people to whom the defendant had paid the money when he made the investment. The defendant answered “This was their financial arrangement.” It is the defendant’s evidence that they did tell the defendant about this financial arrangement and he was aware of it.

508.  It was pointed out to the defendant that there were 3 different depositors for 3 different sums to account E and the defendant was asked why it was necessary for those Neptune Club investment returns to be paid like that. The defendant explained that it was because they were all staff members of Neptune Club or its shareholder. The reason why they were paid into his father’s account was because he and his father “both invested in the capital and interest in Neptune Club, that’s why this sum of money was the return” of his own capital and interest. Mr. Reading pointed out that the defendant was a signatory to account E and so would have been able to withdraw money from that account at any time he wanted to. The defendant responded by saying, “No, on each and every occasion and in relation to each and every sum of money I asked my father about it.”

509.  The defendant was asked about one of the 3 depositors Chan Chun Shing who deposited $1.26 million on 10^th October 2005 into the defendant’s father’s account E and the defendant said that he should be one of the shareholders of Neptune Club. The defendant was then referred to paragraph 6.3.26 of Mr. Robinson’s 2^nd report where in relation to Chan Chun Shing, it was stated that he was a responsible officer of HSBC Securities (Asia) Limited up to 2006 and became a responsible officer of Triskele Capital Management Limited in 2007, with no mention of him being a shareholder of Neptune Club. To that, the defendant gave the following answer, “At that time it was like this. I did not read his 2^nd report, therefore many of the details were found by him on the internet, e.g., my staff member, Chung Ho Yan, he made a mistake about it. But he was independent, I did not want to interfere him in his preparation. Therefore, I had read the 3 reports of theirs, all of them contained errors, that’s why I decided to come to court and tell the court, to defend for myself, because there were errors in their materials, after I had obtained legal advice from Mr. Egan, I decided to testify in my own defence.”

510.  Mr. Reading asked if the Chan Chun Shing who made the deposit was the same person that Mr. Robinson was dealing with at paragraph 6.3.26, to which the defendant answered that, “To my knowledge, Chan Chun Shing should be a shareholder of Neptune Club, however Mr. Robinson made a mistake.”  The defendant’s final answer was that he did not know if Chan Chun Shing the shareholder was the HSBC Securities responsible officer that Mr. Robinson was talking about.

511.  The defendant was asked about the combined total deposit of $15,260,870 by Abba Entertainment, Abba Movie and Chan Tat Chee as at 6^th December 2006. It was suggested to the defendant that but for a check for $5 million of that combined sum, the defendant would have made a tidy profit for his $14 million movie investment. The defendant disagreed and explained that of the $10 odd million received, some of that money was repayment by Abba Chan for personal loans that the defendant had made to him. The defendant cannot remember how much the personal loans were but they started from 2005. Later on, documents from another case involving Abba Chan were retrieved and a page of handwritten ledger was produced into evidence, showing an entry of repayment of a loan of $1.5 million to the defendant by Abba Chan. The note would be hearsay evidence if used to prove the truth of its contents.

512.  The defendant gave evidence about some of the companies that made deposits into his or his father’s accounts as payment of their $20 million investment in Neptune Club and explained that those companies were subsidiaries of a company of Lin Cheuk Fung and Cheung Chi Tai.

513.  Later on in cross-examination, the defendant was able to explain in more details the constitution of Neptune Club. The defendant said that “Neptune Club was actually registered in Macau with the approval of the gambling authority of Macau. The Club should have many shareholders. In 2005 and 2007, they were very successful and the annual turnover was over $10 billion, which constituted 10% of the VIP rooms in Macau. Interest in investment of VIP rooms was very popular, almost each VIP room had such an interest [東息] system. Because competition was very keen in Macau, everybody was grabbing customers in order to increase their business turnover.”

514.  Mr. Reading asked the defendant about some other individuals who made deposits into his or his father’s account and in relation to one Chau Lan Yan who deposited $1 million in the defendant’s father’s Account E, the defendant said that the money “should be a refund of the capital investment  by my father and I in stock code 070”, and Chau was a clerk of Neptune Club. When asked why a clerk of Neptune Club would be depositing $1 million into his father’s account, the defendant said that it was Lin Cheuk Fung and Cheung Chi Tai’s arrangement and that the money was “paid by Neptune Club”.

515.  Mr. Reading then pointed out the defendant’s own evidence which is that the defendant invested in 070 only through paying money to Lin to become a shareholder behind Lin. The transaction was neither on nor off-market, but a private transaction between himself and Lin for the defendant to pay Lin $26.4 million in instalments to obtain 20% of Lin’s shareholding in 070 without actual transfer of shares into the defendant’s name. The defendant disagreed and said that he “became a shareholder”, that they “had agreement of buying off-market”. The defendant further disagreed with Mr. Reading’s suggestion that for the $26.4 million investment, neither the defendant nor his father acquired any 070 shares in their names. The defendant explained that it was an agreement between himself and Lin and Cheung that the defendant “had shareholdings”. The shares were held on trust by Lin on behalf of the defendant.

516.  Mr. Reading then asked how the defendant derived the profit from the $26.4 million investment if he was merely a beneficial owner of the 20% shares that was in Lin’s name. The defendant explained like this, “In early 2007, I and Lin Cheuk Fung and Cheung Chi Tai agreed at close to $0.08 which included about 2.5 times the price of the shares to return to me the share capital and profit to be refunded to me and my father.” The defendant agreed that 2.5 times of their investment was $66 million, which included their capital. The repayment of that $66 million commenced by way of instalments in early 2007.

517.  When asked if that agreement was committed to writing, the defendant answered, “We had agreed, nothing in writing. I can’t remember.”

518.  The defendant had previously said that he knew that the payment by the different entities into his and his father’s bank accounts were ‘financial arrangements’ between Lin Cheuk Fung, Cheung Chi Tai and those who made the deposits. Mr. Reading asked if the defendant had at any time asked for details of the financial arrangement. The defendant answered, “I asked. Because all knew each other and all of them had addresses in Hong Kong, identity card number and bank records, that’s why my mind was at ease when collecting the checks. Also, at that time, my feeling of the then circumstances was that, those moneys were the capital of my investment that’s why I dared to collect their checks. If I wanted to conceal it, I could ask them to pay me in cash.” When asked by the court if the defendant was saying that paying in cash could help to conceal, the defendant answered, “If paying in cash could conceal, because by checks you can trace it at any time for checks, you can chase it. But at that time, I had an investment agreement with them, the group of people, that’s why I dared to collect the checks. At the same time, after I had collected the money from them, all the money was spent on myself and my father, we did not even return a single dime to them.” So the fact that payment in cash can conceal the source of funds is a fact known to the defendant.

519.  In relation to a deposit by Golden Mount of $3.91 million on 22^nd August 2007, the defendant confirmed that the company is wholly owned by Chim Pui Chung. The defendant can only recall that it should have been some kind of commercial off-setting, but not the details. It is the defendant’s evidence that there were no documents in relation to the off-setting.

Deposits from Lawrence Lok Yuen Ming

520.  The defendant was then asked about deposits made by the defendant’s then accountant Mr. Lok. The defendant said earlier that a $500,000 should have been an investment and Lok managed to “get back the investment sum for me”. The defendant said he could not remember what the investment was in. It was then pointed out that Lok also deposited $430,000 into the defendant’s father’s bank account on 1^st February 2007, but the defendant said he could not remember the circumstances relating to his father’s account.

521.  Another $700,000 was deposited into the defendant’s father’s account by Lok on 12^th February 2007, but the defendant could not remember what that was for.

Artune Limited

522.  The defendant was asked about a $10 million deposit from Artune Limited on 12^th September 2007, and he said this, “This should have been refund of my share capital and payment of profits in my investment in 070. Also, Artune was a subsidiary of Neptune Club, at that time, Lin Cheuk Fung mentioned this company to me. He told me that the sum of money came from Neptune Club to him and paid me by check. Therefore, I had come to know that group of people for many years, that’s why I had faith and received this check. ”

523.  There was an exchange of what amounted to a cash deposit between Mr. Reading and the defendant. It is the prosecution’s case that deposits entered as “DP CHEQUE” in the Wing Lung Bank statements, e.g. the one dated 11^th February 2004 means that the deposit was by way of a check, even if the check was a cash check. It is however the defendant’s case that it was only the case when different banks were involved and agreed that such a cash check deposit would be entered and recorded as a check deposit. If a cash check was issued by the same bank and deposited into the same bank then it would be regarded as a CASH deposit. It is therefore the defendant’s case that when Mr. Sutton set out in his reports that there were cash deposits, they were not always folding cash deposits but would have included cash check deposits.

524.  It is the defendant’s case that he disagreed with the entries stated as cash deposit in Mr. Sutton’s reports. The defendant claimed that the accountant did not prepare them according to the guidelines set down by Wing Lung Bank. He also pointed out that Mr. Sutton in his reports had used materials supplied to him by Johnny Kwan, a Police officer and not an accountant, and the materials supplied to Mr. Sutton may not be sufficient for him to prepare his reports, and that is why the defendant disagreed with the sum of cash deposits from unexplained sources for year 2001 that are set out in table marked P-211. It is the defendant’s position that the Police also “messed it up with the definition of cash deposit”.

525.  Mr. Reading referred to page 58 of the 2^nd report of defence expert Mr. Robinson where Mr. Robinson set out the summary of deposits and withdrawals by accounts by way of a table in paragraph 5.3.1. Mr. Robinson stated in the table that in the year 2001 there was a total cash deposit of $60,322,317. Although this figure is $2 million more than the figure stated by Mr. Sutton in his P-211 chart, this was due to a later adjustment not disputed by the parties and $2 million was agreed to be deducted from the cash deposit amount. The defendant was asked if Mr. Robinson was also wrong in his report about the 2001 cash deposits, and the defendant answered that he might also be wrong.

526.  The defendant referred to an entry where it was stated that there was a cash deposit of $548,949.32 and pointed out that it was impossible to make a cash deposit of $0.32 and therefore cash deposit does not necessarily mean folding cash deposit.

527.  In the witness statement of Liu Man Hoi, an officer of Wing Lung Bank Limited, Mr. Liu states at paragraph 4 that “The meaning of the Cash Deposit is a deposit transaction in the form of folding money only. Besides folding money, no deposit transaction by other kinds of monetary instrument is categorized as DP CASH/DPCS.”

528.  Mr. Liu also states at paragraph 5 that “The meaning of DP CHEQUE is a deposit transaction in the form of all kind of checks including Cash Cheque, Uncrossed Cheque, Crossed Cheque and Cashier Order. Any customer can cash a Cash Cheque or Uncrossed Cheque immediately upon presenting cash check or uncrossed check to the bank which is same as the issuing bank of the check.”

529.  Mr. Liu then dealt with 2 entries with code DPCS and DP CASH with amounts of $15,734.87 and $548,949.32 and explained how it was possible to have $0.87 and $0.32 cash deposits. “The customer may honour a cash/uncrossed check over the counter at the same bank as the check issuing bank and request the teller to cash the check and instantly deposit the cash into the designated bank account. Because the check is honoured as cash, the deposit was made by cash. The bank would record the deposit transactions as DP CASH/DPCS on the bank statement.”

530.  It is also Mr. Liu’s evidence in his statement that no record of the honouring of the check would be shown on the bank statement of the designated bank account and the check concerned, unlike those checks (including uncrossed checks, crossed checks and cashier orders) which were directly deposited into the designated account, will not be kept under the record of the designated bank account.

531.  So the situation was that if someone brought along a cash or uncrossed check to the bank, asked to cash it over the counter and then immediately deposited the cash into a bank account, that deposit would still be entered as a CASH DEPOSIT while the honoured check would not be kept, thus eliminating one step of the track of the money. When asked why the $548,949.32 was deposited that way, the defendant said that he no longer remembered the transactions in 2001.

532.  The defendant was referred to his earlier answer in cross-examination when he said that if he wanted to conceal the payments from various entities on behalf of Lin Cheuk Fung in relation to his investments with him, the defendant could ask them to pay him in cash and where the defendant confirmed that paying in cash could conceal the source of the funds. The defendant claimed that he was merely talking about ‘withdrawal of cash, not deposit of checks’ and flatly denied that he had said that he agreed with that proposition in his evidence.

533.  It was put to the defendant that all the large cash deposits over the 7 year charge period were deposited in that form in order for the defendant to conceal the source of those funds. The defendant disagreed and said, “Because all the money was earned by me”.

534.  Mr. Reading then pointed out to the defendant that none of the IRD documents in relation to the defendant’s hair salon businesses support the defendant’s evidence that he was making some $3 million per year in relation to Vole Royal Pacific or Vole Peninsula. The defendant’s response to that is that all the figures in the tax returns were prepared by his accountant for him and that the accountant had told him at that time that the figures in the returns included capital depreciation, “etc.” When it was pointed out to the defendant in relation to the 1997/1998 assessment, there was no mention of depreciation, the defendant said he had no idea how his accountant worked it out.

535.  The defendant was asked about how after the market crash in 1998 did he meet the margin calls. The defendant said there were margin calls and he tried his best and negotiated with the brokers. Since it was the defendant’s evidence that even after the crash he did not sell most of his shares, Mr. Reading asked how the defendant was able to meet the margin calls without selling the shares. The defendant answered, “meet less and just tried my best. So once I got money, I would go ahead to meet the margin calls”.

536.  Mr. Reading then pointed out that it was the defendant’s evidence that margin calls generally had to be met immediately. The defendant in reply said, “Because at that time it was like this, because of the financial turmoil, shares of many stocks could not be sold, even if the brokers said that they wanted to sell your shares, they could not manage to. Under such circumstances, I had negotiations and discussions with them. If you fail to sell them and even if you manage to sell them you still get negative figure and if really incurred a loss, if I am an irresponsible person, the brokerage firm would then chase after the broker. That’s why the brokers worked out with me to get over the storm. As I have mentioned earlier, that the 2^nd and 3^rd liner stocks are very risky, when financial turmoil comes, nobody will buy those stocks.”

537.  Although it is the defendant’s evidence that if the defendant did not meet his margin calls the brokers will sue him, the defendant said that during the 1998 market crash, none of his brokers sued him.

538.  Towards the end of his cross-examination, the defendant was referred to the Financial Statement of Neptune Group Limited for year ending 30^th June 2006 and 2007 and it was pointed out that none of the companies that the defendant said had paid him money as return for his $26.4 million investment in 070 are listed as a subsidiary company of Neptune Group Limited.

539.  The defendant agreed that they did not so appear and explained that he did not deal with the listed company. He dealt with the majority shareholder Lin Cheuk Fung and Cheung Chi Tai. By subsidiary, he was talking about the subsidiary under the 2 majority shareholders, which were unrelated to the listed company.

540.  Mr. Reading then inquired with the defendant whether the Neptune Club that the defendant invested $20 million in was an incorporated company, a subsidiary of an incorporated company or what. The defendant answered as follows, “I invested into the group. E.g. say there was a group, they had the one at Lisboa, at Wynn, Sands, Venetian and MGM” and that they invested in the one at Lisboa.

541.  The defendant was then referred to an announcement issued through the Hong Kong Stock Exchange by China United company in relation to a possible acquisition of the Neptune Syndicate. Neptune VIP Club is mentioned in the announcement and it is defined as “the gaming facilities at a venue known as the Neptune VIP Club located at the Lisboa Casino in Macau”. The defendant confirmed that this was the Neptune VIP Club that he had invested in.

542.  Lastly, it was pointed out to the defendant that the evidence suggested that over the period 2001 to 2007, something in the region of $90 million in folding cash was deposited into accounts in the defendant and his father’s name and according to Mr. Sutton that was a hallmark of money laundering. The defendant explained that most of the deposits were ‘revolving’ and not deposit of a large sum of money.

543.  It was also pointed out that there were deposits of a lot of cash checks and which Mr. Sutton also opined were questionable because they are negotiable instruments that anyone can deposit into his or her account. The defendant disagreed and said that the cash or cash checks deposits into his accounts were either his staff or the securities firms and they all can be traced.

544.  It was suggested to the defendant that for the hallmarks of money laundering set out in paragraph 6.2 of Mr. Sutton’s 1^st report, there were indeed reasonable grounds for the defendant to believe that large proportion of the deposits into the bank accounts were proceeds of crime. The defendant disagreed and said that “because such a large amount of cash deposits and also a large sum went to the security firms and also came back out from the firms, maybe the result of the revolving of a small sum of money, not as large” as Mr. Sutton had suggested.

545.  Mr. Reading suggested that whilst there maybe explanation for small portion of the charge total amount of $720 million being dealt with, the greater part has not been explained. The defendant disagreed.

546.  Subsequent to the end of the defendant’s evidence, documents were provided by the defendant in relation to 4 limited companies that are registered in Macau SAR. The companies are Hoi Fong Entertainment Company Limited, Ocean Star Entertainment Company Limited, King Ocean Entertainment Company Limited and Golden Neptune VIP Club Entertainment Company Limited. It would appear that the defence wishes to use these documents to show that the Neptune Club that the defendant was investing in was a company incorporated in Macau and therefore capable of having subsidiary companies. It is however noted that none of the 4 companies bear the same name to the Neptune VIP Club which the defendant had specifically agreed was the Neptune Club he had invested in.

Findings

547.  It is for the prosecution to prove beyond reasonable doubt all the elements of the individual charges.

548.  I find the prosecution witnesses honest and reliable. I find the breakdown and analysis of the raw data performed by Sergeant Johnny Kwan correct and accurate.

549.  I find Mr. Sutton’s collation and analysis of the data as supplied to him by Sergeant Johnny Kwan and those instructing him correct and accurate. I accept his analysis of the data as presented in his reports, witness statement and evidence in court.

550.  Other than the defendant whose evidence will be dealt with separately below, I find that, to the extent that the defence witnesses were able to speak to a fact with direct first hand knowledge, they were also telling the truth. I find that, based on the evidence of the defence witnesses, the defendant must have been a very active shares speculator in the charge periods. I find that I am not able to see whether the defendant was making a profit, and if he was, how much profit he had been making in his share dealings just from the evidence of the defence witnesses because they were not able to say with direct first hand knowledge on those facts.

551.  I find that the defendant was an avid gambler of Baccarat in the Macau casinos. I am not able to find whether he was always winning or as to how much his winnings amounted to based on the evidence of the defence witnesses because they were not able to say with direct first hand knowledge on those facts.

The use of the experts’ evidence

552.  The evidence of Mr. Sutton is relied upon by the prosecution to prove that money laundering had taken place. I find however that the main use that can be made of Mr. Sutton’s, and indeed Mr. Robinson and Mr. Pulvirenti’s evidence is their collation of data. It does not matter whether they conclude that the movement of the funds as they see it amounted to money laundering or not, because that is a matter for the court to decide by applying the applicable test. The applicable test is the two stage test of making a finding on what facts were known to the defendant and then making a finding on whether knowing those facts, a reasonable right thinking member of the community would consider that there were reasonable grounds to believe that the money represented, wholly or in part, directly or indirectly, proceeds of an indictable offence.

553.  In the case of HKSAR v Tam Lap Shek and another, CACC199A/2012, the court was also asked to consider the opinion of the forensic accountant,

“7. In his report Mr. Lees analysed the movements of monies into and out of all of the 10 accounts stipulated in the Particulars of Offence of the ten charges and expressed his opinion as to whether or not the operation of the various accounts evidenced characteristics of money-laundering…….

10. Overall, Mr. Lees expressed the opinion that the patterns of transactions in three of the accounts in the name of each of the respective applicants displayed the characteristics of money-laundering. In the case of the 1st applicant those accounts were the subject of Charges 1, 2 and 6, whereas in the case of the 2nd applicant those accounts were the subject of Charges 7, 8 and 9.”

554.  The trial judge found that he accepted Mr. Lee’s “…firm conclusion that the transaction size and nature of activities in the 10 accounts display characteristics of money laundering.”

555.  The trial judge also found that the 1^st applicant had reasonable grounds to believe that the money he received in his 6 accounts must be wholly or partly proceeds of an indictable offence. The trial judge in coming to this finding applied the following legal principle discerned by the Court of Appeal in the case of Li Defan, namely:

“In the absence of explanation from the defendant, the court is perfectly entitled to regard the failure of the accused to give any explanation on oath as strengthening the inference to be drawn from Prosecution case.”

556.  The Court of Appeal however found that there was before the trial judge ample material to provide a reason for the 1^st applicant not to testify and considered that there was material irregularity in the trial judge’s failure to consider that alternative explanation. The Court of Appeal went on to consider whether or not a miscarriage of justice actually occurred in the context of all the evidence in that case.

557.  In relation to charges 1, 2 and 6 in that case, the Court referred to the opinions of Mr. Lee and concluded that despite the material irregularity, based on the evidence available, the judge ‘would have been led by the strength of the evidence to have convicted the 1^st applicant on those charges.’

558.  One of the grounds of appeal against conviction by the 2^nd applicant was that the judge erred in accepting the expert evidence of Mr. Lees. There the report was admitted into evidence pursuant to s.65B of the Criminal Procedure Ordinance, and there was no objection to the report being adduced into evidence.

559.  The Court of Appeal found first of all that, in relation to the considerable body of the work in the report that related to collating information as to the transactions in the various accounts from the primary material contained in the bankers’ affirmations and their presentation in schedules annexed to the report, they enabled the trial court to have before it a convenient distillation of information as to activity in the various accounts and there was nothing objectionable about that.

560.  However, in relation to the parts of the report where Mr. Lees expressed his opinion as to whether or not the activities or transactions that occurred in the various accounts had the characteristics of money laundering, the Court ‘doubt very much whether the expression of those opinions…was of any assistance to the judge.’

561.  The Court was of the view that the activities identified by Mr. Lees “spoke obviously and by itself to the resulting difficulties in tracing an audit trail and establishing the ownership of funds. The Court also identified the receipt of monies, particularly as cash deposits, without any obvious pattern suggestive of business or employment raised questions by itself. Similarly, a pattern of withdrawal of large sums of money in cash raised its own obvious questions.”

562.  In relation to gaming chips in casinos, the Court found that it is common knowledge that gaming chips can be acquired by payment in cash and that cheques drawn on casinos, on their face suggesting payments by the casino to a successful gambler, prevent any further fruitful enquiry as to the provenance of funds used initially in the gaming. In that respect, Mr. Lees’ opinion ‘stated no more than the obvious’.

563.  Therefore, the Court of Appeal was satisfied that “the judge was entitled to have regard to the opinions expressed by Mr. John Lees as to the presence or absence of the characteristics of money-laundering in the transactions he discerned in the various accounts.  Indeed, he stated that he accepted those opinions.  But, as observed earlier, those opinions did no more than state the obvious as to the use made of a particular account.  Needless to say, acceptance of those opinions was in no way determinative of the real issue in the trial in respect of the 2nd applicant, namely whether on the facts and circumstances known to her there were reasonable grounds to believe that the monies in which she dealt in the various accounts the subject of the charges were the proceeds of an indictment offence. We are satisfied that it was to that issue that the judge had regard in convicting the 2nd applicant.”

564.  I will therefore only rely on the expert evidence for the collation of information while taking into consideration the experts’ opinion on whether there were hallmarks of money laundering, and apply the relevant test to the facts in order to come to a verdict.

The defendant’s own evidence

565.  I find the defendant not a witness of truth. I find that he is someone who is prepared to, and did try to, lie whenever he saw the need to do so.

Salon profits

566.  In relation to the defendant’s evidence about his income earned through his various hair salon businesses and freelance hairstyling businesses, I find that he exaggerated his income. The answers he gave in cross-examination were equivocal and he was self-contradictory about how much he was making in his freelance work.

567.  In-chief, the defendant gave evidence that his net profit from Vole Peninsula was $3 million per year, but in cross-examination, he changed his story and said that the $3 million was turnover, with just $100,000 net profit per year. The defendant is a smart person who is obviously extremely good with figures and familiar with how companies are run, there is no reason that he would mix up net profit and turnover. I find the defendant to be lying about the profit he was deriving from his salon businesses. He was just making it up as he went along.

568.  This finding is supported by the evidence in his tax records where his declared income was nowhere near the millions of dollars that he was earning in that period. According to the available records, the defendant had a total taxable income of $445,229 for the financial year 1997, which included income from his salon and rental income from property. According to documents, the defendant’s salon suffered a loss in 1998. No income was reported between 1999 and 2003.

569.  There is of course the possibility that the defendant was lying to the Inland Revenue Department about his real earnings.

570.  I find the defendant’s answers evasive when he was asked why his tax documents did not show his exaggerated income. The defendant merely said that it was his accountant who prepared the tax return for him. I find this excuse incredible. The defendant started working at an early age and was able to trade in shares even when he was under the then age of majority, it was not the case that he was someone who just entered society and had no idea what was going on in relation to the operation of businesses. I find that it is an irresistible inference that he must have been aware of the contents of those returns. My finding is that the defendant is not a credible witness in this regard.

The Gold Wo share transactions

571.  I find that the defendant did not tell the whole truth about his arrangement with Ben Cheung and the sellers in relation to his own purchase of the 4 lots of Gold Wo shares. The defendant also did not tell the whole truth about his arrangement with Ms. Yu Xiao Mei for the sale of 30 million odd shares of Gold Wo shares through her.

572.  The off-market purchase of the 27.9 million Gold Wo shares at a big discount off the market price and the subsequent sale of the shares through Ms. Yu Xiao Mei to various purchasers demonstrated one of the defendant’s methods of share dealings. He was somehow able to secure an off-market purchase price of $0.42 odd per Gold Wo shares and then sold them at $1.2 per share, which was lower than the then market price of $2.8 or $2.9, but almost 3 times the price he bought the shares for. According to the defendant, the money for the purchase of the shares were paid to the seller ‘directly’ and off-market.

573.  Later on, the defendant and his father paid some $64 million odd to Ms. Yu as the middle person for the sale of 30 million odd Gold Wo shares through her. Ms. Yu did nothing except to connect the defendant with the purchasers of the shares. It was a huge sum of money to pay to someone for doing so little.

574.  When asked if there were documents in relation to the arrangement with Ms. Yu, the defendant’s evidence is that the arrangement was evidenced in the transfer authorization given to Hooray and nowhere else. The documents however do not even hint at the existence of such an arrangement. There was also no mention of the purpose of the payment authorization of the $64 million odd from the defendant and his father’s Hooray account to Ms. Yu’s Hooray account. I find this extremely strange. The sum of money involved was huge by any account. Yet the defendant and his father chose not to have a written agreement recording their arrangement. Even if Ms. Yu was acting as a confirmor as the defendant said he suspected, there would have been no harm to have something written down to protect their interest.

575.  I find that the irresistible inference from the parties’ choice to not have any written agreement is that they did not want Ms. Yu’s involvement to be known. I do not know why the concealment was necessary and cannot speculate, but I do find that any right thinking member of the community looking at this dealing between the defendant, his father and Ms. Yu would have reasonable grounds to believe that the money involved in the transactions represented wholly or in part directly or indirectly proceeds of an indictable offence.

The SJM deposits

576.  In relation to the SJM cash checks deposited into the defendant and his father’s accounts, I find that the defendant was lying when he said that they were all moneys from his gambling winnings.

577.  It is the defendant’s evidence that he gambled frequently between 2004 and 2008 and yet the only cash checks deposits from casinos disclosed in the bank statements are the 10 cash checks deposits from cash checks issued by SJM. If the defendant was always happy and won most of the time, as DW4 Mr. Lam and DW9 Mr. Gurung testified, he must have been winning a lot. Why then would there be only 10 cash checks and within such a narrow period of time? If they were really winnings, and since they were the only cash checks issued by SJM, it must have been a memorable win for the defendant. Yet he claimed he was not able to remember any details of how he requested the money or the circumstances that he had won so much money.

578.  I find that the only reason why those were the only checks from SJM despite the defendant’s alleged frequent gambling and winning and why the defendant was not able to remember any details from the win is because the defendant is not telling the truth about the circumstances surrounding the cash checks from SJM.

579.  I find the defendant’s answers in relation to why there were no other casino cash check deposits other than the 10 from SJM evasive. During cross-examination on this topic, the defendant for the first time explained that some of the deposits received from individuals who were repaying his Neptune Club or Stock Code 070 returns also included his gambling winnings and so the 10 cash checks were not the only payments of his winnings.

580.  It is his evidence that because the law in Macau in relation to casinos issuing cash checks had changed and he had to circumvent the new law by having those individuals to issue personal checks to the defendant and then “doing the off-setting” after the checks were deposited into his account, whatever off-setting meant.

581.  I find the defendant not telling the truth about how the deposits from individuals included gambling winnings. I do not see why there was any need for off-setting the deposits from the individuals. If the defendant lost and had to pay money to the casino, but at the same time there were returns to his investments and other winnings, all that was needed to be done was a simple calculation and it would only be when the defendant’s winnings or returns are bigger than his losses that money would be payable by the casinos to him, and there would be no need to do any off-setting after the money was deposited. It just doesn’t make sense for the off-setting to be done after money was deposited by those individuals because the defendant would then be required to pay the money back to the casinos, incurring further charges. This would not be what an acute businessman like the defendant would do.

582.  Based on my observations above and the fact that the defendant had never mentioned in his examination-in-chief that the payments by the individuals on behalf of Neptune or Stock Code 070 company or Lin Cheuk Fung or Cheung Chi Tai included his gambling winnings, I find that the only irresistible inference is that the defendant is lying about the SJM deposits being his gambling winnings. I do not know what the real reason for those deposits are for and cannot speculate.

The Neptune Club $20 million and the Stock Code 070 $26.4 million investments

583.  In relation to the Stock Code 070 investment, the story given by the defendant in the witness box was that he had acquired 20% of the shares in Massive Resources by investing $26.4 million with Lin Cheuk Fung and Cheung Chi Tai who were respectively the majority shareholder and second largest shareholder. It was an off-market transaction and the documents for that transaction can no longer be found. For some reason, even though the defendant had invested the money to acquire 20% of the shares, he was not the registered holder of the shares, he just held the beneficial interest in the shares, and Lin Cheuk Fung continued to appear as the majority shareholder on paper.

584.  The fact is that at the material time of the defendant’s alleged investment, it was Chim Pui Chung and not Lin Cheuk Fung who was the majority shareholder of Massive Resources. Cheung Chi Tai only became vested in the shares of Massive Resources in July 2007 when Cheung’s company Jumbo Boom acquired 14.39% of Massive Resources as the underwriter of an open offer. The defendant explained his answer by pointing out that Lin was the single largest individual shareholder while Chim held some of the shares through Chim’s companies.

585.  Nevertheless, it is my finding that the defendant, someone who had been trading in shares since he was 18 years old and who had established a stock research company and participated in the analysis of stock investment in companies in Hong Kong, must have known that such behind the scene transactions without disclosure about his interest was inappropriate at least and illegal at worst. It does not matter whether the defendant knew it was illegal or whether it was in fact illegal, the test is the right thinking member of the community, knowing those facts that the defendant knew, would consider the arrangement between the defendant and Lin Cheuk Fung as reasonable grounds to believe that the money that was being deposited into the defendant’s account supposedly as return for that investment represented proceeds of an indictable offence. I find that there can be no question about that.

586.  I find that the right thinking member of the community would consider both the money that was paid to Lin Cheuk Fung and Cheung Chi Tai, and the money that was received from Lin Cheuk Fung or Cheung Chi Tai or any of the persons supposedly paying the defendant on behalf of them represented proceeds of an indictable offence.

587.  I find the defendant’s explanation of how he was receiving 100% per annum interest from his investment with Lin in Stock Code 070 ludicrous. The defendant is just making it up to cover up whatever the real reason behind the payment of money by Cheung Chi Tai into his account.

588.  I find the defendant’s explanation about how the payment of $3.3 million to his father in April 2005 and $2 million to the defendant in May 2005 were payment of their share capital and interest for their investment in Neptune Club bordered on the nonsensical. The defendant was evasive in his answer and there was a serious discrepancy in the rate of interest he said he had agreed with Lin Cheuk Fung. The investment was supposed to have been made in ‘early 2005’ yet by April and May the defendant and his father were already being repaid $5 million. The defendant was also not able to explain how much of that was repayment of share capital and how much was payment of interest. The defendant, unable to give a clear answer, then came up with the story of how he would gamble and from time to time deposit more capital into the account, making it difficult to calculate. I find that the defendant was lying.

589.  The defendant is obviously not telling the whole truth about his dealings with Lin Cheuk Fung and Cheung Chi Tai as well as those who made those deposits into his and his father’s account supposedly on Lin Cheuk Fung’s behalf. I do not know the real reason and it is not for the court to speculate.

590.  I find further that, even if it is accepted that the defendant was telling the truth about how the payments were return for his investment in Neptune Club or in Stock Code 070, and even if he was telling the truth about how he himself did not consider there was any problem with the payments being made by the staff members or companies connected to Lin Cheuk Fung instead of by Lin’s company or Lin himself, given that the defendant was dealing with a boss of a casino in Macau, any right thinking member of the community would consider such method of payment to be reasonable ground to believe that those money represented proceeds of an indictable offence.

591.  I further find that even if the individuals were depositing money for Lin, in the case of the supposed investment in Stock Code 070, any right thinking person would pause and wonder why that was the case. The deposits were not small amounts and why would the majority shareholder of a listed company be repaying investment returns in the listed company by way of personal checks drawn on his staff member’s personal account? Or on a company with the staff member as directors or shareholders? I find that the same right thinking person would immediately have decided that there were reasonable grounds to believe that the money so deposited into the defendant’s and his father’s bank account represented wholly or in part, directly or indirectly proceeds of an indictable offence.

592.  During the defendant’s giving of evidence, the question as to whether Neptune Club was a limited company or not and therefore whether it was capable of having subsidiary companies arose. This is relevant because it is the defendant’s evidence that he understood Neptune Club to be a corporation in Macau and capable of having subsidiaries. That was why when he was told that the return from his $20 million investment in Neptune Club was to be paid to him by various people who were staff member of Neptune or Lin, he felt reassured and never doubted the propriety of the money so received.

593.  It is my finding that the defendant is not telling the truth about whether he did ask Lin or those who made the deposits about why they were making the deposits. I also find that, even if the defendant did ask and was told that the money was clean and it was fine for the defendant to accept, a right thinking member of the community would immediately question the truth of the explanations, because if the investment was with Lin in Neptune Club, the boss of the VIP room, why would the money be coming back from all those individuals and entities who are connected to Lin. Given the circumstances of the so called $20 million investment in Neptune Club, a right thinking person would have reasonable grounds to believe that the money so paid represented wholly or in part, directly or indirectly proceeds from an indictable offence.

The agreement with Lin to buy back the 20% Stock Code 070 shares

594.  In relation to the agreement for Lin to buy back the 20% 070 shares from the defendant in early 2007, I find that it is inherently improbable that the defendant would not remember whether the agreement was committed to writing. It was not a small sum of money and the defendant was dealing in the sale of his beneficial interest in the shares of a listed company. I find it inconceivable for the defendant, being a very successful business person, to take part in such a large dealing without use of lawyers or more importantly documentation. Unless, of course, those engaged in such a transaction would rather there not be records. 

595.  It is the defendant’s evidence that there were never any documents created in relation to the subsequent sale of the 20% shares in 070 back to Lin and Cheung. The only documents evidencing that there was ever such a transaction are the records of the cash checks being deposited into the defendant and Yeung Chung’s bank accounts. I find it extremely strange that someone of the defendant’s standing with such business acumen and being so experienced in share dealings would take part in such a massive transaction just on a verbal basis with no documents. I find that the only irresistible inference why the dealings were conducted on a verbal basis was so that there were no records kept and the dealings could be concealed.

596.  I do not know the reason behind the concealment and it is not for the court to speculate. The relevance of this concealment for present purpose is that, for the right thinking member of the community, knowing what the defendant knew, that is to say, a $26.4 million investment in a listed company without the use of any documents with the bosses of a VIP room in a casino in Macau, the subsequent selling back of the shares to those 2 people and the payment of the sales proceeds from that sales by different people who just appeared to have some connection with the VIP room owned by the 2 people, that right thinking member of the community must have reasonable grounds to believe that the money involved in the transactions must represent, wholly or in part, directly or indirectly proceeds of an indictable offence.

Neptune VIP Room a subsidiary company?

597.  The defendant’s evidence is that at the time of the checks being paid to him, he did inquire with Cheung Chi Tai why the checks were drawn in the name of various people and companies and the defendant was reassured and felt that there was no problem with receiving the money from those people in relation to the money that was supposed to be paid to him by Neptune Club. The defendant talked about how the companies were subsidiaries of Lin Cheuk Fung or Cheung Chi Tai. Questions were asked as to the defendant’s understanding of what a subsidiary was but he did not give any useful answer.

598.  At the end of trial documents were produced by the defence in relation to 4 companies that are incorporated in Macau. None of the 4 companies has the same name of ‘Neptune VIP Room’, the entity that the defendant confirmed he had invested in through Lin Cheuk Fung. The defendant’s evidence as to what he meant by the subsidiaries of Lin Cheuk Fung or Neptune VIP Room is therefore still unclear. I find that the reason the defendant was not clear is that he did not care where the money came from and did not bother to ask why the money was coming from those people.

599.  Furthermore, the material time to consider was when the money was being deposited into the defendant’s bank account. It is for the court to consider whether a right thinking member of the community, even after being told that it was okay to receive the money would still consider that there was reasonable grounds to believe that the money represented proceeds from an indictable offence.

The rejection of the defendant’s evidence

600.  It is the defendant’s evidence that the deposits by various individuals and entities were either return of capital and interest for his and his father’s $20 million investment in Neptune Club or return of capital and interest for his and his father’s $26.4 million purchase of 20% of Lin Cheuk Fung’s 070 shares. For reasons given above I find that the defendant is not telling the truth about those investments and I reject his evidence.

601.  It is however not the case that the defendant must be guilty if he lied about the circumstances of his dealings with Lin and Cheung and those who made the deposits. The issue is whether a right thinking member of the community, knowing what the defendant knew, would have reasonable grounds to believe that those deposits represented proceeds of an indictable offence.

The defendant’s general share dealings

602.  In relation to the defendant’s share dealings, he seeks to make out the scenario that because he was operating so many brokerage accounts, he would need to settle the margin calls quickly so as not to incur any losses from forced sale of his shares. The quickest way to so settle was to deposit cash directly into the brokerage firms’ bank accounts. That was why he would withdraw large amount of cash from his own bank accounts from time to time. It does not however explain why third parties would make cash deposits into his own bank account.

603.  According to Mr. Pan of Lippo, it was not frequent that the defendant had used cash checks to settle his margins, and according to Mr. So of Kingston, the defendant had used cash checks to settle his margins on less than 10 occasions between 2000 and 2004 when he was the account executive handling the defendant’s account.

604.  According to Mr. Robinson, over the years there is only one documentary record of him not able to meet a margin call and that was with Chung Nam Securities.

605.  It is also the defendant’s own evidence that because he was such a big client to most of the companies, they would usually grant him leeway and allowed him some time to settle the margins.

606.  According to the evidence of the various securities firm employees, a deposit in cash would at most be just half a day or a day faster than a bank transfer. If the defendant was in such good standing, and if he is telling the truth that the securities firms would grant him leeway, there was no good reason for him to use cash to settle the margins.

607.  I find that the collective effect of those circumstantial evidence is to show that the defendant is lying when he said that the only reason he used cash to deal with the securities companies was to urgently settle the margin calls. The defendant knew cash transactions are more difficult to be traced and I find that it must be one of the reasons that he had chosen to deal with the securities companies on the occasions that he did.

Deposit by Au Yeung Kai Chor into the defendant’s father’s account E

608.  I find that it is obvious that the defendant was stalling and evasive when he was answering questions in cross-examination about deposits from Au Yeung Kai Chor being the purported return for the $20 million Neptune Club investment. It was not until the defendant was asked the third time why Au Yeung was the person who was paying that return to them that the defendant came up with the answer of there being a financial arrangement between Au Yeung Kai Chor and Lin Cheuk Fung. I find that he is not telling the truth and is obviously concealing something about the deposits by Au Yeung.

609.  I find also that the defendant had given unclear answers in relation to the deposits allegedly received as repayments, for example, when telling the court about how Chau Lan Yan was repaying them for the $26.4 million 070 investment, the defendant somehow said it was Neptune Club that was paying him the money. If that was the real reason, it shows that the defendant’s so called investment in the 2 entities were very muddled and mixed up. One was investment behind the scene in a listed company in a ‘private transaction’, the other was investment in a casino VIP room in Macau.

610.  I find that the reason why the defendant was giving such unclear evidence is because he is not telling the truth or the whole truth about his dealings with Lin Cheuk Fung and Cheung Chi Tai. The defendant is merely trying to come up with a legitimate answer to explain  all the funds that was moving into his accounts from all those individuals who did not have any apparent business connection to the defendant or his father.

Wealthy Villas

611.  Having heard the evidence in relation to the Wealthy Villas project, I find that I cannot be certain as to whether the defendant did make $15 million odd profits or not. I agree with the prosecution’s position that on paper the defendant appeared not to have made such a huge profits. This proposition was also agreed to by the defendant in cross-examination. I find that the only inference that can be drawn from the Wealthy Villas project is that the defendant was not telling the whole truth about the circumstances of the sale and purchase of the units.

Abba Chan

612.  In relation to the defendant’s explanation of his dealings with Abba Chan, I find that there is nothing to suggest that he is not telling the truth about the movement of money between himself and Abba Chan and his companies. I find that it may very well be the case that the deposits from Abba Chan were related to the defendant’s investment in movies and also repayment of loans from the defendant to Abba Chan.

Specific findings in relation to some defence witnesses

Jackie Pan

613.  I find Mr. Pan not an honest witness as to whether the transaction orders in relation to Yeung Chung’s Lippo securities account were always placed by Yeung Chung himself or whether the defendant or anyone else was authorized to place orders. Mr. Pan’s original evidence was that all of Yeung Chung’s orders were placed by him, yet in a 2002 witness statement, Mr. Pan stated that some orders were placed by the defendant as well as a Tsang Kai Ming, and that Yeung Chung had given verbal authorization allowing the defendant to place trading orders on his behalf. Mr. Pan now say that he was telling the truth in that statement. I find that was indeed the truth and so the witness was lying in the witness box when he said without hesitation or qualification that no one could operate Yeung Chung’s Lippo account, not even his son the defendant.

614.  I also find that Mr. Pan is not an independent witness. He had invested $2.15 million of his own money with the defendant in a Inner Mongolia project without any documentary records. Mr. Pan is either a very trusting person, or there are other reasons where he and the defendant would prefer not to have any written evidence about the reason for the transfer of money from him to the defendant. Any reasonable person would expect there to be some form of written confirmation in relation to such a sizable transfer of money by way of investment in a project that was not even located in Hong Kong.

Mr. Chim Pui Chung

615.  I find Mr. Chim telling the truth when he said that he had a personal agreement with the defendant for the sale of 280 million shares of his son’s company Kanstar to the defendant for a big discount. I find that he is telling the truth when he said that the $28 million for the sale of the shares were paid to him “through a casino in Macau” when the defendant deposited the money into Mr. Chim’s own account with the casino.

616.  I find however that this deal between Mr. Chim and the defendant full of anomalies. First, it is Mr. Chim’s evidence that he did not hold the shares that he was selling to the defendant. If the shares belonged to Mr. Chim’s second son, why was Mr. Chim selling them and why did Mr. Chim pocket all the sales proceeds. Secondly, Mr. Chim said there were no receipts for the money, no receipts for the shares, no document of sale, no agreement of sale and no documents evidencing the transaction other than the Bought and Sold notes. Why would 2 seemingly very successful businessman conduct dealings in a listed company this way? Thirdly and most suspiciously, the money for the sale was settled through Mr. Chim’s account with a Macau casino. $28 million is a lot of money, and again, why would 2 successful businessman choose to deal with this amount of money in relation to the sale and purchase of shares in a Hong Kong listed company through their accounts with a Macau casino? The deal was shrouded in secrecy. The only irresistible inference must be that the parties involved were seeking to conceal the transaction.

617.  It is the defendant’s evidence that it was not possible to just bring in cash to the casino to exchange for a cash check. Yet, if the defendant really did pay Chim Pui Chung the money for the purchase of the Kanstar shares by depositing money into Chim’s account with a Macau casino, it must be the case that it was either possible for a third party to deposit large amount of money into someone else’s account with the casino, or large amount of money could be transferred from one account to another. More importantly, it proves that the defendant knew how to do that or had ways to arrange for that kind of deposits or transfers.

Mr. Ian Robinson’s evidence

618.  I find that the fact that it is Mr. Robinson’s evidence that he did not detect anything in the movement of money in the 5 accounts that he would call a special hallmark of money laundering is neither here nor there. Just as the case when Mr. Sutton said he had seen the hallmarks of money laundering, this is a finding of fact for the tribunal of fact. It is more so the case given the second limb of the applicable 2 stage test in dealing with proceeds cases, that is to say, whether a right thinking member of the community would have reasonable grounds to believe that the money represented proceeds of an indictable offence. The test is not whether an expert would so consider.

619.  In relation to Mr. Robinson’s opinion that without knowing the original cost of the acquisition of the shares and the eventual sale price, it would be difficult to get the true and complete picture of the defendant’s share trading, I find that although I can accept that the defendant’s share trading had been a source of income, the allegation in the 5 charges is for the money deposited into the bank accounts. According to statements of the bank accounts as collated and analysed by Sergeant Johnny Kwan and Mr. Sutton, which the defendant had never complained were missing, deposits from securities companies accounted for only a portion of the deposits. Even if the defendant was in fact trading so heavily and making so much money, not all the money found its way into the 5 bank accounts. It is not for the court in this case to try to find out where all that money went, it is for the court to decide whether the facts of the movements of the deposits into the 5 accounts were known to the defendant and then whether a reasonable person knowing those facts would conclude that there are reasonable grounds to believe that the money represented proceeds of an indictable offence.

620.  In relation to Mr. Robinson, and indeed the defendant’s complaint about not having a full set of documents such as deposit slips so that the depositors could not be identified, I find that it may be the case that if complete documentation were available for all the deposits into the bank accounts, individuals who made the deposits can be identified. The documents however will not say the reason behind the deposits. It remains a fact that large amount of cash was being deposited into the bank accounts, in which there was no correlating cash generating business that either the defendant or Yeung Chung were involved. This fact of large cash deposits were known to the defendant.

621.  In relation to the defendant and his father’s investment in the Dongguan hotel, it is Mr. Robinson’s evidence that he did ask the defendant to show where the money came from but the defendant said that he did not have the information, I find it very strange that the defendant would not have been able to remember where the money came from. First, it was a large sum of money. Secondly, it was the first significant investment by the defendant and his father together in mainland China and as such would have made it even more memorable. Thirdly, the defendant must have taken a strong interest in the business because he took the time to go up there to conduct the opening ceremony, and he and his father had their cousin running the business.

622.  According to the defendant’s cousin, the hotel was set up in 1991, which was just 2 years after the defendant had put up $4 million of his savings to set up his first hair salon and 1 year after putting up $1.5 million to set up Vole Peninsula with a partner and another $1.75 million to set up Vanity Royal Garden with another partner, as well as just after he had bought a property in Hong Kong. Yet, the defendant still managed to put up RMB12 million for the investment. It must have been a very sizable investment even for the then defendant. I find that the only irresistible inference must be that the defendant was lying when he told Mr. Robinson he forgot where the RMB12 million for the Dongguan hotel investment came from.

Discrepancies between the defendant and his experts

623.  In relation to the discrepancies between Mr. Robinson and the defendant’s evidence on the various deposits, I find the defendant’s version of fact as to how he had never read the report and had never communicated to anyone about the contents that was put into Mr. Robinson’s reports not the truth. If the defendant is telling the truth, then either Mr. Robinson was lying when he said that he was told by his instructing solicitors and the defendant, or the instructing solicitors were making up the facts to feed to Mr. Robinson for him to be put into the report. I find that there is no reason for either the solicitors or Mr. Robinson to do so, and having had the opportunity to observe Mr. Robinson in the witness box, I find that he is telling the truth.

624.  The defendant changed his story of whether he had read the expert reports during the course of his giving of evidence. He is obviously lying about it, trying to wriggle his way out of the situation where he had told his solicitors and his expert something that was different to what he now wanted to say in the witness box.

625.  One example is the use of the $36.422 million which was paid to Prince Evans Solicitors in the UK. Mr. Pulvirenti stated in his report that the money was for the purchase of Birmingham City FC while the defendant said it was for the purchase of a property in London. The defendant’s evidence was that he had never told Mr. Pulvirenti about the use of the money. Given that one of the grounds put forward by the defence as to the unlikelihood that the defendant would be doing such a high profile purchase of an English premiere league football club if he was engaged in money laundering, the purchase of the football club must have been one of the main concerns of the defendant’s expert and it is inconceivable that he did not ask the defendant about it. It is even more inconceivable that Mr. Pulvirenti would make up the fact that the money to the solicitors was for the purchase of the football club without anyone instructing him that it was so.

626.  The defendant was asked about an individual Chan Chun Shing who had made a deposit into the defendant’s father’s account of $1.26 million,  and whether this Chan Chun Shing was the same one in the defendant’s testimony about being one of the depositors as a Neptune Club shareholder and Mr. Robinson’s report at paragraph 6.3.26 who was a responsible officer for HSBC Securities. I note that Mr. Robinson had set out in a table listing out various depositors into the bank accounts at paragraph 6.3.1. Chan Chun Shing appears only once for the deposit of $1.26 million and is listed under the heading “depositors with reputable/notable background”, with 6.3.26 being listed as for reference. It therefore must be the case that the defendant and Mr. Robinson were talking about the same person who made that $1.26 million deposit. That being the case, I find it strange that the defendant would not have noticed Mr. Robinson’s mistake or omission of stating Chan as a shareholder of Neptune Club.

627.  As it was the defendant who gave the two different versions of facts, the first finding that I will have to make is that the defendant was a dishonest witness in this regard, and I do so find. Having found that the defendant is a dishonest witness, I find that I cannot accept either of the versions as the truth. That being the case, it would mean that any opinion Mr. Robinson and Mr. Pulvirenti expressed in their reports that was based on information they said they had obtained from the defendant or his instructing solicitors are not to be relied on.

628.  Another example of discrepancy lies in the 4 deposits of a total of $2.69 million from Eugene Chuang’s personal account into account A. According to the defendant’s evidence in court, they were money relating to the “matching or off-setting of the sums with respect of the shares”, that they might have won in shares together and that they were personal investments. Yet according to Mr. Robinson in IR-2, Chuang was the managing director of Allied Weli which was the parent company of Chung Nam Securities, one of the securities companies used by the defendant, and the deposits from him “was a loan arrangement between the defendant and Eugene Chuang”. Again, I find it impossible that Mr. Robinson would make up such a fact on his own. The only irresistible inference is that he was told either by the defendant or his instructing solicitors. Applying the same logic from above, I find that the defendant was lying about the true nature of the deposits from Eugene Chuang as well.

Verdicts

629.  Based on the above findings, I proceed to decide on the verdict on the individual charges. Although the prosecution has chosen to charge the defendant with 5 separate charges, the movements of funds in the accounts do not stand entirely isolated from each other. I must also take into consideration the fact that the defendant was a signatory of all 5 accounts and therefore had control over their usage.

630.  It is a fact that each of the 5 accounts has opening and closing balances that are relatively similar. I find this a fact known to the defendant. Mr. Sutton referred to this fact as an indication that the accounts had been used as a repository of funds. I find that regardless of what this fact is labelled, any reasonable person seeing how huge amount of money had gone through the accounts the way they had over the years would find the fact that in each of the account the ending balance always almost matches the opening balance extremely strange, and would conclude that it was one of the reasonable grounds to believe that the funds that had been dealt with by the defendant in the account over the years represented wholly or in part, directly or indirectly proceeds of an indictable offence.

Charge 1, Account A

631.  There were a total of 406 deposits totaling $347,310,098 into account A between 3^rd January 2001 and 29^th December 2007. 196 of those were cash deposits totalling $27,903,851. There were 479 cash withdrawals totalling $55,696,871 in the same period. The total amount of withdrawals over the same period is $347,212,574, just a difference of $97,000 less than the total deposited.

632.  The 406 deposits included the above discussed 10 cash checks from SJM totalling $62,450,000 and the $37,529,524 from Hooray Securities which was the money from the above discussed sale of Gold Wo Shares that the defendant had sold through Yu Xiao Mei.

633.  There are 9 bank transfers for a total of $7,450,000 from account E to account A.

634.  The named depositors of money into account A included Au Yeung Kai Chor, Cheung Chi Tai, WinCon, Asian Time, LuckyTex, So Wai Chi, Tang Wai Yi, being the individuals or companies that the defendant claimed to have been repaying money as return and share capital for his and his father’s investments in Neptune Club or stock code 070. The defendant’s evidence in relation to these entities have been dealt with above.

635.  I find that the defendant was aware of all the transactions in relation to account A. I find that the defendant himself knew that dealings in cash transactions would be more difficult to trace than those by way of checks. I find that there were no cash generating business that would generate the kind of cash that was deposited into account A. I find that the overall almost identical amount of deposits and withdrawals in the account shows that the account had been used as a repository of funds. I find that for the reasons already given above, the deposits from SJM were not the defendant’s gambling winnings. I find that the dealings in the Gold Wo shares, for reasons given above was arranged so as to conceal the involvement of Ms. Yu Xiao Mei. These are all facts known to the defendant at the material times.

636.  I find that a right thinking member of the community when looking at the movement of funds in account A and all the surrounding circumstances mentioned above would have reasonable grounds to believe that the money being dealt with through the account represented wholly or in part, directly or indirectly proceeds of an indictable offence. I therefore find that the defendant had reasonable grounds also to so believe and I convict him of charge 1 accordingly.

Charge 2, account B

637.  There were 384 deposits totalling $254,303,959 and 2276 withdrawals totalling $254,371,080 in the period between 2^nd January 2001 and 31^st December 2007, with just a difference of around $67,000 between the 2 figures.

638.  Of those deposits, 162 totalling $4,724,016 were by way of cash, while there were 120 cash withdrawals totalling $2,276,600. All the cash deposits were by third parties.

639.  Of the check deposits, 15 were from third parties with the total of $34,946,261. There were 116 bank transfers from Account A totalling $116,900,700; 49 from account E totalling $30,320,000 and 26 from third parties totalling $5,153,971.

640.  One check in the amount of $18 million was deposited by Cheung Chi Tai, representing 53.3% of the total check deposits from third parties. It is the defendant’s evidence that this $18 million was part of the payment of the $56 million profits from his and his father’s $26.4 million investment in the purchase of 20% of Lin Cheuk Fung’s shareholding in Massive Resources (070). This $18 million was also part of the money that Mr. Robinson said in his report was borrowed by the defendant from Cheung Chi Tai for the purchase of a London property. As discussed above, I find the defendant not telling the truth about the real nature of the deposit of this $18 million into account B.

641.  Another depositor of check into account B is Artune Limited, a company connected to Lin Cheuk Fung. The check was in the amount of $10 million, representing 29.6% of the value of total check deposits. It is the defendant’s evidence that Artune was one of the entities that repaid him and his father the 070 investment profits. The defendant’s investment in the 20% shares were discussed above and I found that the defendant was not telling the truth about the nature of the various transactions of money between himself, his father and the entities who were paying him and his father money, including Artune.

642.  I find that the amount of cash transactions, the unexplained deposits from Cheung Chi Tai and Artune Limited which made up 82.9% of the check deposit into account B in the relevant period are transactions known to the defendant at the time of his dealing with the money. I find that the overall almost identical amount of deposits and withdrawals in the account shows that the account had been used as a repository of funds. I find that any right thinking member of the community, knowing the connection between Cheung Chi Tai and Artune and Lin Cheuk Fung and the casino in Macau would have reasonable grounds to believe that the money deposited and dealt with in the account represented wholly or in part, directly or indirectly proceeds of an indictable offence. I find therefore the defendant had such reasonable grounds to so believe and I convict the defendant of charge 2 accordingly.

Charge 3, account C

643.  There were 53 deposits totalling $31,188,121 and 89 withdrawals totalling $31,191,047 in the period between 2^nd February 2001 and 6^th July 2007, a difference of just $2,926 between the 2 figures.

644.  Of the deposits, 18 were by way of cash totalling $13,305,000 being 42.7% in value of all deposits. Of the withdrawals, 64 were by way of cash totalling $25,949,162 being 83.2% in value of all withdrawals.

645.  Of the bank transfer deposits from third parties, 10 were from Taiwan Securities totaling $13,773,369. According to the available account statements for the defendant’s Taiwan account, $11,473,369 of that total originated from disposals of shares in the defendant’s Taiwan account. The source of the funds used to acquire the shares so disposed cannot be determined. Those funds came in the form of cash, check deposits and transfers from other securities accounts. In 2001, the defendant deposited $14,261,696 in cash into his Taiwan Securities account.

646.  Of the 89 withdrawals, 26 cash withdrawals totalling $7,770,400 was to the defendant and 38 cash withdrawals totalling $18,178,762 were to third parties. They represented 24.9% and 58.3% of the total withdrawals.

647.  I find that the transactions in relation to account C were all known to the defendant. I find that there were no reasons why there should be so many cash transactions in relation to account C given there being no corresponding cash generating business that the defendant was engaged in. I find that the overall almost identical amount of deposits and withdrawals in the account shows that the account had been used as a repository of funds. I find that a right thinking member of the community would have reasonable grounds to believe that the money being dealt with in account C represented wholly or in part, directly or indirectly proceeds of an indictable offence. I find therefore the defendant had such reasonable grounds to so believe and I convict the defendant of charge 3 accordingly.

The defendant dealing with the money in his father’s accounts

648.  Account D and E in charge 4 and 5 are bank accounts opened and held in the name of Yeung Chung with the defendant as the only other signatory. I must decide whether the defendant dealt with the money in his father’s accounts.

649.  The prosecution’s evidence as to the defendant’s dealing with the money in account D and E is circumstantial. The defendant was the only other signatory with full power to operate the account. Yeung Chung used to operate a vegetable stall and there is no evidence that he had the same abilities and prowess as the defendant does in share dealings and yet time and again the defendant said the investments he made were together with his father. I find this is not the truth. The truth is the defendant was just using his father’s name to open the accounts and then to use the accounts as if they were his own. I find that the reason he chose to do so must be for concealment of the source of the funds or his involvement in the dealing of the funds. There were a lot of transfers between the defendant’s accounts and Yeung Chung’s accounts. Yet some of the transfers served no purpose other than to divert attention from the source of the original deposits (e.g., the $1 million deposit from Cheung Chi Tai into account E on 6^th January 2006 that was later transferred into the defendant’s account by 3 instalments). The ending balance of account D and E are both low despite the large amount of money going through the account. There were multiple cash deposits and check deposits from third parties both to Account D and Account E, just as with the defendant’s own accounts. It is defence witness Mr. Jackie Pan’s evidence (referred to above at paragraphs 81 & 82) that the defendant was authorized to, and did, place orders with Yeung Chung’s Lippo securities account. This suggest that the defendant was capable of using accounts that were in his father’s name.

650.  The defendant’s then accountant Lawrence Lok Yuen Ming made deposits into both the defendant and his father’s account in around the same period of time. According to the defendant the payment into his own account were because Mr. Lok managed to “get back the investment sum for me”, but he was not able to remember the circumstances relating to Lok’s deposits into his father’s account. I find the defendant was lying about not remembering the circumstances in relation to his father’s account, he was just trying to conceal the fact that he was also using his father’s account for depositing funds that were his and that the defendant chose to do so to conceal his involvement or the source of the funds. Mr. Chim Pui Chung gave a check for $3.19 million to the defendant who filled in the payee name with his father’s name and the check was deposited into account E. There is no evidence that Mr. Chim had any dealings with Yeung Chung and Mr. Chim’s evidence suggest that the payment was supposed to be made to the defendant.

651.  Based on the above circumstantial evidence, I find that the only irresistible inference is that the defendant did also deal with the money in his father’s bank accounts.

Charge 4, account D

652.  A total of $6,659,000 was deposited into the account between 7^th September 2001 and 17^th December 2007 by way of 17 transactions. A total of $6,522,280 was withdrawn by way of 39 transactions in the same period. The difference between the opening and the ending balance is $136,720.

653.  Of the deposits, $4,251,000 were by way of cash deposits and $2,408,000 by way of bank transfers. Of the withdrawals, $6,521,969 were check withdrawals.

654.  6 of those deposits were from account E, totalling $2,368,000. All the cash deposits were from third parties.

655.  One of the withdrawals was to the defendant’s account A for $800,000. 31 of the check withdrawals were to third parties and 2 were by way of cash checks to third parties.

656.  Yeung Chung’s income and profits derived from his sole proprietorship business “Yeung Kee Vegetable Stall” for the years of assessment from 2004 to 2007 showed profits of $4,060, $1,600 and $1,220 for the 3 year period.  Yet in that 3 year tax assessment period, there were 5 deposits totalling $840,000 from third parties with no apparent explanation. They are not securities companies and so should not be related to his purported share dealings. It is not known why those deposits were made into account D.

657.  I find that the fact of Yeung Chung’s background at that time, that there were no apparent reason for the deposits into account D, that 2 of the deposits were in cash and with total amount of $2,700,000, that the overall almost identical amount of deposits and withdrawals in the account shows that the account had been used as a repository of funds are facts that were known to the defendant, any right thinking member of the community would find that there were reasonable grounds to believe that the money being dealt with in account D represented wholly or in part, directly or indirectly proceeds of an indictable offence. I find therefore the defendant had such reasonable grounds to so believe and convict him of charge 4 accordingly.

Charge 5, Account E

658.  A total of $7,334,500 had been deposited by way of cash into account E between 7^th September 2001 and 29^th December 2007. There were also check deposits amounting to $73,614,868.96 by way of 40 transactions into the account in the same period. The total amount deposited in this period including cash, check, transfers and bank interest in a total of 103 transactions is $81,826,428.36.

659.  During the same period, there were 41 cash withdrawals totalling $16,830,500, 93 bank transfers totalling $64,905,209.30, with the total amount of withdrawal being $81,735,829.30, which is just around $90,599 short of the total deposits over the same period.

660.  Bearing in mind the tax records of Yeung Chung in the period that are available and the fact that he used to run a vegetable stall as his business with only a small taxable income, the amounts of money going through this account are staggering. On average, $1 million was being deposited each month into account E either by way of cash, check deposits, or transfers. At the same time, an average of $1 million was also withdrawn each month.

661.  According to Mr. Sutton’s report, one of the check deposits was for $10,459,048 by Hooray Securities. We have heard evidence from the defendant about how he and his father’s Hooray accounts were set up specifically for the purpose of dealing with the Gold Wo Shares with Ms. Yu Xiao Mei and how he and Ms. Yu had agreed for her to be the buyer. This $10 million odd was for the sale of part of the Gold Wo shares.

662.  I have found above that the defendant was lying about the true nature of his dealings with Ms. Yu and the circumstances surrounding the sale of the Gold Wo shares through her. Given the huge amount of money involved and the fact that both the defendant and his father opened the Hooray Securities at around the same time to deal with this particular transaction, I find that it is an irresistible inference that the defendant had a hand in the whole transaction and must have dealt with the money paid into account E.

663.  The defendant also gave evidence referred to above as to payments into account E by various people connected to Lin Cheuk Fung. It is his evidence that one such deposit into his father’s account was for capital and investment return in the 070 shares that were supposed to be the defendant’s money. The defendant explained that the money was his and that he was repaying his father for money the defendant had borrowed from his father. Yet bank records indicate that part of that money was returned by way of transfer into the defendant’s own bank account shortly afterwards. As I found above, the defendant was lying about the real reason the money was deposited into his father’s account and why the money was then transferred into his own account instead of just asking those who made the deposit in the first place to deposit the money into the defendant’s own account.

664.  In relation to a check deposit of $3,910,000 into account E by Golden Mount Limited on 22^nd August 2007, it is defence witness Mr. Chim Pui Chung’s evidence that Golden Mount was his company and that the check was given by him to the defendant and the defendant had filled in the payee’s name himself. This is cogent evidence to show that the defendant had dealt with the money in account E.

665.  According to Mr. Sutton, there were 9 bank transfers totaling $7,450,000 from account E to account A; and 49 transfers totalling $30,320,000 to account B, which represented 37.1% of the value of total withdrawals. This is a very high percentage and there are no apparent reason why those money were being transferred into the defendant’s accounts.

666.  Of the cash withdrawals, 10 of them were to identified third parties and 20 to unknown parties, representing 11.3% of the value of total withdrawals. I agree with Mr. Sutton’s observation that cash transactions of large amount of money are suspicious on their own. I find that it is obvious to any reasonable person that cash deposits and withdrawals are harder to trace than check deposits or withdrawals.

667.  According to tax records, for the tax period from 2004 to 2007, Yeung Chung made just a few thousand dollars’ profits from his vegetable stall. Yet from 1^st April 2004 to 31 March 2007, a total of $43,726,674 had been deposited into account E by third parties alone.

668.  Among the depositors were Asian Time (HK) Limited, Au Yeung Kai Chor, Chau Tuk Shun, Leung Yim Fun, Cheung Chi Tai, LuckyTex, SJM, Tang Wai Yi and Wong Chung Ling, with $7 million odd from un-identified third parties. In relation to the named parties, we have heard evidence from the defendant about how they were repaying money for the defendant and his father’s investments in Neptune Club or the Stock Code 070 company. There is also the $10 million deposit from SJM, the casino operator in Macau by way of 2 transactions. As found above, the defendant did not tell the whole truth about the nature of the deposits.

669.  I find that the defendant must be aware of the deposits and the various transactions in account E. I find that any right thinking member of the community, knowing that Yeung Chung had no apparent reason to be receiving those money into account E, as well as Yeung Chung’s background and the defendant’s connection with some of the depositors of money into account E, the fact that the overall almost identical amount of deposits and withdrawals in the account shows that the account had been used as a repository of funds, must find that there are reasonable grounds to believe that the money being dealt with represented wholly or in part, directly or indirectly proceeds of an indictable offence. I find therefore the defendant also had reasonable grounds to so believe and convict him of charge 5 accordingly.

Ruling on the defendant’s 1^st stay application

1) This is the defendant’s application to stay proceedings on the ground that the defendant will not be able to have a fair trial as a result of documentary records that are no longer available due to lapse of time and the failure to properly investigate the case by the Police. It is for the defendant to prove on the balance of probabilities that the grounds he is complaining of have been made out and that the only remedy is to stay the present proceedings.

2) There is no dispute as to the applicable legal principles. The only issues are whether without the documents the defendant will be deprived of a fair trial and whether the actions of the Police amounted to an abuse of process.

The complaints

3) The defendant’s complaint has been narrowed down to missing documentary records in relation to 7 (originally 8 but had since been updated) securities companies between the period 2001 and 2004, as well as those before 2001.

4) I was told by the prosecution that these securities accounts appeared in the statements of the bank accounts that the Police was investigating. There were only relatively small sums of money going in and mostly out of the securities companies account into the bank accounts. The transactions that showed up in the statements were either by way of checks or direct transfers. The Police did not deem it necessary to conduct further investigations to see if the defendant had dealings with those securities companies other than as stated in the bank statements.

5) It is the defence’s submission that between 2001 and 2007, the defendant had conducted a large number of cash transactions with the 7 securities companies. I am told that the amount of money involved was in the region of tens of millions of dollars and on occasions even a hundred million dollars. Since the transactions were in cash, there were no bank records and only the securities companies would have records of those transactions. The defendant holds no such records. I was not told whether he used to have them but had since lost or disposed of them or he never had them in the first place.

6) I was informed that the defendant is not complaining about any missing bank accounts records. The securities companies documents are the only missing documents. I was also informed that apart from these 7 securities companies, there were other securities companies that the defendant had used over the years to trade in securities, but the lack of documents in relation to those companies would not put the defendant in as disadvantageous a position as he has been in relation to the 7 stated securities companies, and so the defendant has not mentioned any of those other securities companies in support of his present application.

7) It is the defendant’s case that since he had made most of his money through trading in securities, the lack of the documents in relation to the 7 securities companies has prejudiced his defence so much that to continue with his trial would be unfair and would amount to an abuse of process.

8) The defendant also complained about the failure of the Police to cause the 7 securities companies to retain any documents they may have in relation to the defendant when they first began to investigate the defendant. It is the defendant’s case that the Police ought to have gone on to investigate with the 7 securities companies once they saw their existence in the bank account statements. Had the Police done so, the documentary records in relation to the defendant’s cash dealings with the securities companies would likely have been disclosed and retained and the defendant would not be in the position he is in now. This failure by the Police to properly investigate the 7 securities companies amounted to an abuse of process by the Police and the result of this abuse is that the defendant will not be able to have a fair trial and the court should stop all proceedings against the defendant.

Ruling

9) I find that the defendant has failed to prove on the balance of probabilities that the missing documents from the 7 securities companies would result in him not having a fair trial.

10) There has been no mention by the defence as to whether there had been approaches made to specific witnesses who might be able to give evidence on the defendant’s large scale cash dealings in securities. One would expect that cash transactions involving tens of millions of dollars should be relatively hard to forget, especially when the defendant seems to be suggesting that there had been copious amount of trading resulting in his not insignificant accumulation of wealth.

11) Furthermore, even if such records had been kept and made available, there would still be, as Mr. Harris puts it, a “tactical burden” on the defendant to prove where those cash had originated from.

12) As for the Police’s manner of investigation, I find that there is nothing much that the Police could have done. The reasons are as follows.

13) I was told by the defence that there are no missing bank documents involved in the 7 securities companies accounts that would hinder the defendant’s defence. Given the submitted fact that most of the trading by the defendant was in cash, and that no other bank documents would assist the defendant, the only inference must be that the defendant had access to large amount of cash which did not involve the use of any bank accounts that was known to the Police. Given the circumstances, I find that it was entirely reasonable for those investigating the 5 bank accounts to maintain their focus on the larger sums of money going in and out of the bank accounts and not with the evidently relatively small sums between the banks and the 7 securities companies.

14) Despite talk about any kind of burden there may be on the defendant to prove the source of his wealth, it will still be for the prosecution to prove beyond reasonable doubt that based on the facts then known to the defendant, a right-thinking member of the community would have reasonable grounds to believe that the money in each of the 5 bank accounts that had been dealt with represented proceeds of an indictable offence.

15) I find that the defendant has failed to prove on the balance of probabilities that the Police has been guilty of any abuse of process. I find that the defendant has failed to prove on the balance of probabilities that as a result of the missing documents and the purported abuse of process by the Police he will not be able to have a fair trial. The defendant’s application to stay proceedings is therefore dismissed.

(3 May 2013)

Ruling on admissibility of the prosecution’s expert reports

1) I find the prosecution expert reports relevant and necessary. I find that as far as any prejudicial effect that might be perceived to exist in Mr. Sutton’s drawing of conclusions set out in the report, it can be effectively remedied by me giving a direction to myself at the appropriate time that the ultimate question of whether the defendant is guilty of the so called money laundering offence is for me and me alone to decide. Furthermore, the elements of the offence are that it is for the prosecution to prove beyond reasonable doubt what facts were known to the defendant at the material times and whether a common sense, right-thinking member of the community knowing those facts would find that there were reasonable grounds to believe that the money being dealt with were proceeds of an indictable offence.

2) The defendant’s application is therefore refused.

(7^th May 2013)

Ruling on the defendant’s application for the prosecution to tender two witnesses

1) The defence wants to cross-examine Senior Inspector Lam and Stephen Lau about whether there are documents in the possession of the Police or the prosecution that have not been provided to the defence. Those documents may include trading instruments such as voucher and blotters and bought and sold notes. They are relevant to the calculation of the profitability of the defendant’s trading in shares in the various securities accounts. The defence say that if they are not allowed to cross-examine those 2 witnesses, it will be a matter of injustice.

2) It must be pointed out that, it was never directly and explicitly put to any of the witnesses, including those from the securities companies that the documents they provided to the prosecution had not been made available to the defence. There is no evidence that the analysis done by Mr. Sutton was based on material that he had seen but not available to the defence. There is no such indication in any of the defence experts’ reports. There is no evidence that there are any documents in the possession of the Police or the prosecution relevant to the case that have not been provided to the defence.

3) As for the legal principles, it is clear that the prosecution has a discretion to decide whether to call or tender a witness. That is not unfettered and must be exercised in the interest of justice.

4) There is also a discretion in this court to call any witnesses if the prosecution refuses to do so and the interest of justice demands it.

5) Having heard from both sides, I find that Mr. Reading has properly exercised his discretion and I find that there is no reason for me to call the witnesses myself even when taking into account the interest of justice. I accept Mr. Reading’s explanation in full about the witnesses and refer also the observations I made above.

6) The defendant’s application for the prosecution to tender the 2 witnesses are refused. As is their application for the court to direct the prosecution to tender the 2 witnesses.

(10^th June 2013)

Ruling on the defendant’s application to reserve his decision to give evidence

until after calling his defence witnesses

1) This is the defendant’s application to reserve his decision of whether to give evidence until after the calling of other defence witnesses.

2) The prosecution objects to this application saying that it is a rule of practice in Hong Kong that the defendant, if he chooses to give evidence in his own defence, he must be the first one in the defence case to enter the witness box.

3) The prosecution rely on the case of R v Joan Smith [1968] 1 WLR 636 as the common law position in relation to the sequence of defence witnesses. The ‘rule’ in Smith says that,

“It must be regarded as the accepted rule of practice that, where a defendant is called to give evidence, he must give evidence before any other witness to fact is called on his behalf. In special circumstances a formal witness or a witness about whose evidence there is no controversy may be called before the defendant, by leave of the court.”

4) This rule of practice was subsequently enacted into law by way of s.79 of the Police and Criminal Evidence Act 1984 in England. It is not disputed that there is no such provision in Hong Kong codifying the rule in Smith. It is therefore the prosecution’s submission that common law applies and Smith represents the common law position.

5) The defence argues that the so called rule in Smith is merely a rule of practice and not a rule of law. The District Court being a creature of statute does not possess any inherent jurisdiction to dictate to the defence their order of calling of witnesses in the absence of any statutory provisions. The defence is therefore entitled to call their witnesses in whatever order they see fit.

6) Theoretically, there is nothing to stop Mr. Harris from proceeding to call his defence witnesses first and then only raise this issue when he decided to call the defendant as witness. But Mr. Harris, being his usual reasonable and courteous self, decided to raise the issue beforehand so that the court can give a clear ruling before him moving on with his case. I find this a very sensible approach.

Line of Cases

7) The common law position in relation to criminal trials before the enacting of s.79 of PACE is found along the line of cases beginning, apparently, with the English Court of Appeal case of Morrison (1911) 6 Cr App R 159.

Morrison (1911) 6 Cr App R 159

8) In Morrison, the appellant was convicted of murder and was sentenced to death. During submissions on appeal, counsel for the appellant raised the complaint that the trial judge ought to have laid greater stress on the evidence of the appellant and his witnesses, which showed where the appellant was on the night of the murder and afterwards.

9) There was then at this point an exchange between the Lord Chief Justice and counsel as to how it was that the defence witnesses were called before the appellant at the trial. It was submitted that counsel for the defence can call his witnesses in any order he prefers, and that counsel wished to know himself what those witnesses had to say.

10) The LCJ replied as follows, at p.165:

“In all cases I consider it most important for the prisoner to be called before any of his witnesses. He ought to give his evidence before he has heard the evidence and cross-examination of any witness he is going to call.”

11) This passage was the only place in the LCJ’s judgment that touched on the matter. The appeal was dismissed on totally unrelated grounds and the statement was obiter dictum.

R v Richards and others [1918] SALR 315

12) This is a rather short judgment from South Australia. As gleaned from one line in the report the trial was for conspiracy. Buchanan J ruled that “there is no rule of law that prevents the accused from giving evidence in the box even after he has called other witnesses for the defence. It is desirable that he should be the first witness called particularly where witnesses are ordered out of Court.”

13) Buchanan J then referred to the above cited passage from Morrison to support the desirability of “the practice of calling the accused persons first”. As a matter of law, however, the judge found that the accused persons’ evidence at a later stage cannot be excluded, although it would then be for the jury to take into consideration what weight can be given to the evidence so given.

R v Smith [1968] 1 WLR 636

14) In R v Smith, the appellant was convicted of driving while unfit to drive through drink. The ground of appeal against her conviction was that at trial the presiding Deputy Chairman wrongly refused to allow defending counsel “to call what witnesses he chose in what sequence he chose”; and the Deputy Chairman also wrongly “insisted that the accused should be called first.”

15) It would appear to be the case that the accused did, pursuant to the insistence of the Deputy Chairman, give evidence first as directed. It is however unclear what would have happened had defence counsel refused to follow the direction and called the accused last.

16) Nevertheless, the appeal against conviction was dismissed, and so it was that 50 years after Morrison, the Court of Appeal in R v Joan Smith reiterated the above cited dictum of the Lord Chief Justice and endorsed it as correctly stating the law and “setting out the correct procedure which ought to be followed in future cases.”

17) Cusack J did however anticipate when this procedure might be altered, which was “such as when a formal witness or a witness about whom there is no controversy, is interposed before the accused person with the consent of the court in the special circumstances prevailing”, thus suggesting a discretionary power for the court to decide when a defendant can give evidence out of sequence.

R v Smuk (1971) 3 C.C.C. (2d) 457

18) In the Canadian case of R v Smuk, the appellant had been convicted of unlawfully assaulting a peace officer. At trial, rather like our present case, the defence announced their intention to call witnesses other than the accused prior to calling the accused.

19) Also like our present case, the prosecution relied on the case of R v Smith and requested the trial judge to rule that the defence should call the accused first before calling any other witness. The trial judge refused to do so and did not make any ruling as to the order in which witnesses for the defence should be called. The Canadian Court of Appeal approved of that refusal and McFarlane J.A. stated that “there is no rule of law or of practice in this province which required him to do so.”

20) It is McFarlane J.A.’s view that the fact that the evidence of the accused was given after his own witnesses had given evidence on the same subject-matter becomes one of the factors to be considered by the tribunal of fact when considering the weight to give to such evidence.

21) The trial judge in Smuk had directed himself in advance that “if the accused were not called first he would not consider his evidence ‘too strongly’”. The appellant decided not to give evidence and the Court of Appeal found it impossible to know to what extent that decision was due to the trial judge’s announced self-direction.

22) For the reason that the advanced announcement constituted an improper judging the weight of evidence before all the evidence is produced, and for the reason that the announcement might have placed an improper restriction on the right of the appellant to make full answer and defence, the appeal was allowed, conviction was quashed and a new trial ordered.

23) Having acknowledged the English practice of calling the accused first as confirmed in R v Smith, Branca J.A. went on to state that such was not the practice in British Columbia nor other Provinces of Canada, that he had never even heard of the existence of such a rule and would deeply deplore that such might become the practice in their Courts. Branca J.A. explained his stance as follows:

“The accused, or counsel for the accused, is totally and completely free to decide whether or not the accused will or will not testify and if he does in what order or sequence he will be called to testify either before or after the witnesses who are called to testify for and on his behalf. The Court cannot under any circumstances insist that an accused should testify first no more than the Court can order the accused to testify. It is to be remembered that until the accused is found guilty at the conclusion of the trial by the jury there is a presumption in our law that he is innocent and when he testifies presumably he testifies as a witness of truth and his evidence like that of any other witness must be carefully weighed and considered after the evidence has been given in court. His evidence cannot be prejudged and no advantage or disadvantage is to be attributed to his evidence in advance because he testifies after defence witnesses have testified for and on his behalf.”

R v Lister [1981] 1 NSWLR 110

24) 10 years after Smuk, the issue arose again in an Australian case and came to be considered by the New South Wales Court of Criminal Appeal in the case of R v Lister.

25) In Lister, the appellant faced a charge in relation to fraud before a jury. After the conclusion of the Crown case the appellant made a statement and called evidence on his behalf both as to character and as to an issue at trial. After that evidence had been called but before the appellant had closed his case, the jury asked a question, namely, “Is Mr. Lister going to be cross-examined?” Thereupon counsel for the appellant applied to the trial judge to call the appellant as a witness.

26) The trial judge then indicated, that by reason of the provisions of a section of the Crimes Act it was not open to counsel to call the accused after he had called evidence in his case. After discussion with the judge, counsel agreed with him that it was what appeared to be what the section provided and his application was taken as withdrawn.

27) On appeal, the Court of Appeal examined the provisions of the Crimes Act and concluded that “there was no statutory provision regarding the time at which during the course of his case an accused person may give, or is to be restricted to giving, evidence”.

28) The Court went on further to confirm the decision of Buchanan J. in the case of R v Richards (which was decided 63 years before Lister), which is that there is no rule of law in the relevant provisions of the Crimes Act of New South Wales that would preclude counsel to call the accused after he had called evidence in his case. Street CJ however did also confirm the desirability of the practice of calling the accused before his other witnesses.

29) Samuels JA agreed with Street CJ’s decisions but emphasized the desirability of an accused being called to give evidence before any other witnesses are called. Samuels JA is of the view that the case of Lister arose in rather special circumstances and ought not to be regarded as authority for any different practice.

30) Hunt J in his judgment agreed with both Street CJ and Samuels JA. He added that “if an accused person initially elects not to give evidence but is permitted to do so after he has heard the evidence of other witnesses as to the facts of the case called on his behalf, he should in most cases find that his evidence will be subjected to the strong comment that it has been tailored to fit in with that given by those other witnesses.”

31) The appeal was allowed, conviction quashed and verdict and judgment of acquittal entered.

R v “A”, unreported, BC200662108

32) The prosecution referred me to the New Zealand case of R v “A”. There the defence called 2 witnesses before indicating to the court that they will be calling the defendant. The prosecution raised their concern of the defence “breaching a well known convention in criminal trials, that the accused should give evidence first.”

33) The English cases of Morrison and Smith as well as the learned opinions of the editors of authoritative textbooks were referred to and considered by the trial judge, who at paragraph 18 came to the conclusion that in terms of his own view of the normal practice, “the position as referred to in both Morrison and Smith…is the practice which is invariably followed in all criminal trials in New Zealand. In other words, except in exceptional circumstances, the accused should give evidence first. Even in the case of the exceptions, opposing counsel and the Court should be informed and the leave of the Court obtained before that course is followed.”

34) In coming to his decision to allow the trial to continue, Stevens J said that he was “influenced significantly by the limits which Mr. Hart (counsel for the defence) has intimated” to him will apply to the proposed evidence. He had “accepted and rely upon Mr. Hart’s assurance that the evidence of the accused will not touch or concern, or be influenced by, the evidence of the two witnesses who have given evidence before the accused.”

35) Stevens J then recognized that the assurance, although given in good faith, cannot bind the way in which the defence evidence develops, and said he would “reserve all rights to the Crown to apply later in the trial should any matter arise which counsel believes has the potential to or actually does prejudice the position of the Crown”. He then also reserved his right to comment in the summing-up on the order of evidence of the defence witnesses and, if appropriate, to make observations on the effect that this may have had on the credibility and reliability of the evidence of the accused.

R v David John Sutton [2008] EWCA Crim 3129

36) This is a case referred to by the prosecution where the issue was not so much when the accused gave evidence but more when the expert psychiatrist was forced to give evidence before the accused had done so resulting in the accused being deprived of a fair trial.

The legislative position in Hong Kong

37) As pointed out in the beginning of this ruling, there are no similar statutory provisions in Hong Kong to s.79 of PACE.

38) According to the learned editors of Archbold Hong Kong, it is an “established practice for the accused to be called before the other witnesses”, citing R v Smith in support of this proposition.

39) The learned author of Criminal Procedure Trial on Indictment, Andrew Bruce went slightly further and state clearly that this rule “is one of practice only. The fact that the accused does not give evidence first does not render his evidence inadmissible.” The cases of Morrison, Richards, Lister, Smith and Smuk are all referred to in the footnote, as well as Griew ‘The Order of Defence Evidence’ [1969] Crim LR 347 and the fact that the matter is governed by s.79 of PACE in England.

Griew ‘The Order of Defence Evidence’ [1969] Crim LR 347

40) In an article by Senior Lecturer Edward Griew (as he then was), he looked specifically at the order of defence evidence and focused on the decision in R v Smith.

41) He also considered two other earlier English cases which was directly on the point and were considered in Smith. The cases are Olsen (1898) 62 J.P. 777 and Briscoe v Briscoe [1968] P. 501, [1966] 1 All ER 465.

42) Olsen was a case that was heard in the same year shortly after the Criminal Evidence Act 1898 had granted accused persons generally the right to give evidence. The trial was for manslaughter arising out of a collision between two vessels in Yarmouth Roads. After a witness had been called for the defence, prosecuting counsel contended that Olsen was precluded from giving evidence, saying that he ought to have been called immediately after the close of the prosecution evidence. Hawkins J overruled this objection.

43) Olsen was only briefly dealt with in R v Smith on two grounds. First, that “the facts were different”. The only discernible difference that Griew could find was that in Smith the question of the sequence of the accused giving evidence was raised before the calling of witnesses whereas in Olsen the question did not arise until the defence witness had given evidence.

44) Secondly, Cusack J. observed in Smith that the Act of 1898 “had then only recently come in force”. Cusack J. did not explain why that was relevant, nor the effect that fact had on the decision of Hawkins J. in Olsen.

45) In Briscoe v Briscoe, Karminski and Lane JJ ordered a re-hearing of a wife’s complaint of desertion after the magistrate had compelled counsel for the husband to call his client before calling a witness. Counsel had wished to postpone the decision whether to call the husband at all.

46) Lane J regarded the magistrate’s conduct as constituting “a fundamental interference with the right of counsel to conduct his case”; it was “a matter of quite fundamental importance that counsel should retain the right….to choose what witnesses to call and in what order.”

47) As for Briscoe v Briscoe, again Cusack J. briefly dealt with that case in observing that Karminski J expressly stated that he was not dealing with the practice in criminal cases.

48) It is Griew’s view that both Olsen and Briscoe v Briscoe were perhaps too summarily disposed of in Smith. He then proceeded to examine the rule in Smith and came to the conclusion that it is not necessary to assert that there is in the accused a right to give evidence in the order he likes so that if the judge required that he be called first would amount to a material irregularity. On the other hand there is also no need for a principle that the accused must give evidence first in any particular class of cases.

49) Griew proposed two solutions. First is to require the accused to leave the courtroom should he chooses to give evidence later or to reserve his decision until his counsel had heard the defence witness. This would appear to not work if the accused is appearing in person since there would be no one left to conduct the examination in chief of the defence witness.

50) Secondly, the jury’s attention may be drawn to any advantage that the accused may have secured in being in court to hear the other witnesses first before giving his own evidence. This is in line with the view of the courts in the cases of Richards, Smuk and Lister.

Criminal Law Revision Committee Eleventh Report Evidence (General)

51) In this paper dated June 1972, the English CLRC considered s.79 of PACE prior to its enactment. The Committee discussed the cases of Morrison and Smith and found that the rule is in general right. They however considered the restrictions placed by Smith on the rule too narrow and think that the court should be given a wider discretion. Hence the eventual wordings of s.79 of “unless the court in its discretion otherwise directs.”

Ruling

52) There being no statutory provisions similar to s.79 of PACE in Hong Kong, the order of the calling of defence witnesses is governed by common law.

53) As rightly pointed out by the defence in their written submission, the decision in Smith is not binding on this court. It may be persuasive but not binding. The case must be considered alongside the later cases in other common law jurisdictions referred to above, namely Smuk and Lister.

54) The rationale behind the rule of practice as suggested in Smith is that the accused may tailor his defence if he is allowed to hear the evidence of his witness first. This must be balanced against the freedom for the defence to decide how best to present their case, which include his decision whether to give evidence in his own defence and when to do so in the course of his own case.

55) I find that the concern of the accused tailoring his evidence can be addressed either by the accused voluntarily excusing himself during the evidence of his witness or, should for whatever reason that was not or cannot be done, by the tribunal of fact directing itself on what proper weight to give to evidence from a witness who had been present in court during the giving of evidence by other witnesses. This may or may not result in less weight being given depending on the facts in each case, but whether this is a risk the accused is willing to take should be a matter for the accused to decide and not for the court.

56) I am persuaded by the line of cases of Olsen, Richards, Briscoe, Smuk and Lister and find that the common law rule is that a defendant is allowed to give evidence after his own witnesses, but such a departure from the conventional order may attract comments from the judge in his verdict when considering the weight of that defendant’s evidence in certain cases, given the fact that the defendant was present when his witnesses were giving evidence on subject-matters that he also gave evidence on later.

57) It follows from my finding of the state of the common law that the court does not have the power to order the defendant to give evidence first, although if the defendant chooses to do so he is taken to be aware that such a change of order may become a factor to be considered when deciding on the weight of the defendant’s evidence.

58) As such, I rule that the defendant may reserve his decision of whether to give evidence in his own defence or not until after calling his other defence witnesses.

(14 June 2013)

Ruling on the defendant’s application to re-open defence case

1) This is an application by the defendant to re-open his case in order for him to give evidence in his own defence.

2) This application is opposed by the prosecution. The grounds are set out in Mr. Reading’s written submissions.

3) It is common ground that I have a discretion to re-open.

4) It is the prosecution’s submission that the tests that the court should apply when exercising the discretion are as suggested in the Canadian case of R v Hayward (Ont. CA) (1993) 86 C.C.C. (3d) 193, as well as the Australian case of Mahmood v Western Australia [2007] WASCA 101.

5) The factors to be considered as suggested in the Hayward case are set out at paragraph 14, and those suggested in the Mahmood case are at paragraph 19 of Mr. Reading’s submissions.

6) It is not necessary for me to repeat the chronology of events here since it is clearly set out in Mr. Harris’s written submissions. All possible excuses aside, this basically is a simple change of mind on the defendant’s part as to whether to give evidence in his own defence.

7) Applying the suggested considerations in Hayward, I find that the proposed evidence to be given by the defendant must be relevant to the material issues in the case, I find that there is no prejudice to the prosecution, I find that there is some effect on the conduct of the trial but given that it will only be the defendant himself giving evidence, proceedings should be orderly and relatively expeditious. I find however that there is no dramatic change in circumstances from the time the defendant elected to close his case to the time of this application.

8) As to the Mahmood test, the central question is whether the interests of justice and fairness to the accused required the re-opening of the defence case. The assessment will be affected by the issues in the case and the substance of the proposed evidence.

9) If the defendant is allowed to re-open his case in order to give evidence, he will give first hand evidence on the issues in the case, and his evidence, whether for or against the defendant, will be relevant and substantial.

10) I find that, balancing all the factors, it is in the interest of justice and fairness to the defendant that he be allowed to re-open his case in order to give evidence in his own defence.

11) The defendant’s application is granted and I do exercise my discretion to allow the defence to re-open its case in order for the defendant to give evidence in his own defence. For the sake of clarity, the extent of this order to re-open is limited to the defendant himself giving evidence and not for him to call any other witnesses.

(October 2013)

Ruling on whether the defendant had waived his privilege over communications between himself

or his lawyers and the defence expert witness disclosed in the expert witness’s reports

1) First of all, it is not contended by the prosecution that privilege does not apply to the communications between the defendant and his expert Mr. Robinson. Support can be found for the existence of such privilege at paragraph 12-57 of Archbold Hong Kong 2013:

“Materials protected from disclosure

(2) Communications between…[a professional legal] adviser or his client and any other person made in connection with or in contemplation of legal proceedings and for the purposes of such proceedings”

2) This privilege can be referred to as “litigation privilege” or “third party privilege”.

3) The privilege can only be excluded by implied or express waiver by the client. There is no express waiver in the present situation. The only issue is whether the defendant had impliedly waived his privilege when he chose to allow Mr. Robinson to include in his reports what the defendant (or the defendant’s lawyers) had disclosed to him.

4) I find that it is not the case that as soon as the expert is called as a defence witness the defendant is taken to have waived the privilege over their communications. The extent of the defendant’s waiver, if any, must be within the scope of the expert’s statements or reports.

5) A fair reading of the reports of Mr. Robinson would lead one to conclude that the defendant was engaging Mr. Robinson as an expert to put forward his defence of how be had accumulated his wealth over the years. That would be at least one of the purposes.

6) The defendant did so by telling Mr. Robinson what the defendant himself knew (either directly or through the defendant’s solicitors).

7) I find that it cannot possibly be argued that when the defendant told Mr. Robinson those facts the defendant did not contemplate them to be used by Mr. Robinson to form his expert opinion.

8) I find that it cannot possibly be argued that the defendant did not know that the eventual reports to be prepared will include at least some of their communications.

9) I find that it cannot possibly be argued that the defendant did not know the reports will have to be made available to the prosecution and will eventually be produced as evidence in court.

10) The defendant was well aware of all the above factual situations when he instructed his counsel to proceed with the production of the reports in support of his own case.

11) In the reports, I find that Mr. Robinson had done more than ‘merely summarizing the effect of the instructions’.

12) I find that when it is Mr. Robinson’s evidence that because of what the defendant (or his solicitors) had told him, he was able to come to a certain conclusion, it must only be fair to allow him to be cross-examined by the prosecution on what actually was being told to him, either to seek to verify or to challenge the veracity of what Mr. Robinson was told.

13) It seems absurd if the expert can say that “because of what the defendant had told me I am able to say this, but I am not going to tell you what he told me because it is privileged material, you will just have to accept that something was said.”

14) I find therefore that, by the production of the reports or statements of his expert witness, the defendant had impliedly waived any privilege that he might have had over the communications between himself (or his lawyers) and the expert in the communications that are referred to directly or indirectly in the expert’s report(s).

Fairness or prejudice

15) The prosecution will not be able to rely on the hearsay evidence of Mr. Robinson of what the defendant had told him to prove the truth of the contents of that communication. The only use that this piece of hearsay evidence I can see might be of is to challenge the credibility of either Mr. Robinson or the defendant (should the defendant eventually chooses to give evidence). There is no unfairness or prejudice to the defendant in this regard.

16) I rule that the expert witness can be asked about what the communication was between himself and the defendant or the defendant’s legal representatives, but only in relation to references that have already been made in the expert witness’s reports by the expert himself.

Ruling on the defendant’s 3 applications

[The defendant made 3 applications after DW11 gave evidence and subsequent to further documents received from securities companies: the applications are for the recalling of compliance officers of 2 securities companies; for the calling of Police officers to ascertain the course of the compliance of the Production Orders; and for the Police to be excluded from hearing from the witnesses in order to safeguard this part of the proceedings. Below is the ruling given in court.]

1) It is not the prosecution’s position that there are no missing documents at all. Their position is that whatever documents they have been provided under any of the production orders, they have all been supplied to the defence. It is the prosecution witness’s evidence that he believed that the Production Orders had been complied with.

2) I was told by Mr. Harris that the defence had been in possession of the new Lippo documents since late afternoon on 13 June 2013. There would have been plenty of time for them to inquire with Lippo as to whether the same materials had been given to the Police before. Mr. Harris did not tell me if they had so asked or what their reply might be, although I think if the answer was that they had, Mr. Harris would definitely have informed the court in his submissions.

3) When I made the ruling on the defence’s stay application, missing documents was never taken as a mere possibility but a fact, either because of destruction of documents after the lapse of the 7 year period or any other failure to locate the documents. The fact that there are new documents appearing does not alter the position and would not have made a difference in my ruling on the stay application.

4) It was one of the complaints made by the defendant in the stay application that as a result of the Police’s failure to properly investigate the securities companies, the relevant documents prior to 2004 were lost and the defendant was prejudiced to the extent that he would not be able to have a fair trial. The recent appearance of the Lippo and Kingston documents obtained by the defence would only serve to improve the defendant’s position.

5) In my 3^rd May 2013 Stay Application ruling, I said the following:

“10. There has been no mention by the defence as to whether there had been approaches made to specific witnesses who might be able to give evidence on the defendant’s large scale cash dealings in securities. One would expect that cash transactions involving tens of millions of dollars should be relatively hard to forget, especially when the defendant seems to be suggesting that there had been copious amount of trading resulting in his not insignificant accumulation of wealth.”

6) This is exactly what the defendant has been able to do, to put forward his case by the calling of the various defence witnesses.

7) The court is not an investigative body and the judge should not be tasked with investigating a case. This is exactly what the defendant is asking me to do, to set up an “inquiry” to investigate into who failed to comply with the various production orders.

8) Putting aside the fact that this court does not have the necessary manpower or resources to hold an “inquiry”, even if the ultimate person who was tasked with the handing over of the documents pursuant to the production orders is found and ordered into the witness box, given that as Mr. Harris time and again pointed out yesterday that non-compliance with a production order is a criminal offence, that witness “will not be required to answer any question or produce any document which would, in the opinion of the court, tend to expose the witness to a criminal charge, penalty or forfeiture…”, this of course is the privilege against self-incrimination. The court will be bound to make sure the witnesses’ interest is protected and it is more than likely that such an “inquiry” would result in futility and ultimately a waste of time.

9) Even if the witness chooses to confess there and then in the witness box, what difference would that make to the case? I would say none. It would merely confirm the already accepted fact that certain documents are missing. The correct question to ask is what effect those missing documents have on the defence or prosecution case and not who caused the documents to be missing.

10) I agree entirely with Mr. Harris that the court is master of its own process and for the reasons above I refuse the 3 applications set out in paragraph 2.8 of the defence’s submissions regarding documents obtained under the production orders.

(10^th July 2013, 2:30pm)

Ruling on the defendant’s 8^th November 2013 application to

stay proceedings on the basis of non-disclosure and failure to investigate

1) As agreed by both Mr. Reading and Mr. Harris, given the stage of the proceedings and to avoid giving any impression that I might have pre-judged the defendant’s evidence, I will make a simple ruling without giving reasons at this stage.

2) To the question that Mr. Harris posed, my answer is that I am not satisfied, on the balance of probabilities, that the trial has become so tainted with unfairness such that it should be stayed. The defendant’s application to stay is therefore refused.

(12 November 2013)

[1] See paragraphs 81 and 82 above.

[2] The defendant later on changed his evidence said that he did read the reports.

[3] An internet link was included in paragraph 6.3.29 but the article, if correctly linked, in no way supports the existence or purpose of the loan or the repayment at 1% interest.

[4] See paragraph 436 above

[5] Later confirmed by documentary evidence to be Golden Mount