HKSAR v. TABAGUA VALERIAN also known as TABAGUA VALERYAN

CACC 315/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 315 OF 2015

(ON APPEAL FROM DCCC NO. 130 OF 2014)

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J U D G M E N T

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Introduction

1. The applicant was convicted in the District Court on 7 September 2015 before HH Judge Johnny Chan of a single charge of attempting to deal with property known or believed to represent proceeds of an indictable offence, contrary to section 25(1) and (3) of the Organized and Serious Crimes Ordinance, Cap 455 and section 159G of the Crimes Ordinance, Cap 200.  On 10 September 2015, he was sentenced to 32 months’ imprisonment.  By way of Form XI filed on 18 September 2015, he has sought leave to appeal against both conviction and sentence.

The prosecution case

2. On 8 August 2013, one Mr Van Der Stel (“PW2”), a Dutch national and also the Financial Controller of a Dutch company called Safta BV, received a telephone call from a person posing as the president of a Hong Kong company called SpeedCast Limited (“SpeedCast”)[1]. The imposter claimed to be at the offices of some lawyers in the United Kingdom and about to close on the acquisition of a company.  He stressed that everything he said to PW2 was confidential.  There were further discussions which left PW2 in no doubt as to the truth of what he was being told.  By subsequent emails, PW2 was asked to transfer two separate sums totalling €349,966.40[2] (net of bank charges) into an account numbered 640-050118-838 held in the name of MN Technology Limited (“MNT”) (hereinafter referred to as “the Account”)[3] of which the applicant, a Russian businessman, was the sole signatory.  PW2 followed his instructions.

3. On 15 August 2013, the applicant went to a branch of HSBC in the Emperor Group Centre, Wanchai, where he submitted a Telegraphic Transfer Application Form[4] requesting a sum of €332,432 be remitted from the Account into an Estonian bank account[5]; with the assistance of one Mr Yang (“DW2”) acting as his interpreter[6].

4. On the following day (16 August 2013), the applicant and DW2 returned to the bank together and made enquiries as to the progress of the transfer, since the money had not been transferred.  Bank staff asked the applicant and DW2 to wait at the bank.  The police were duly informed and the applicant and DW2 were then arrested.

5. By reason of the above, the prosecution alleged that the applicant attempted to deal with the €349,966.40 with reasonable grounds to believe that the said sum, in whole or in part, directly or indirectly, represented the proceeds of an indictable offence.

The defence case

6. The applicant elected not to give evidence but called three witnesses.  The defence put forward at trial was that the applicant believed the €349,966.40 represented a legitimate business transaction involving Safta BV, MNT and Octans.  The background information pertaining to the alleged transaction may be summarised as follows:

(a)   By way of a Market Service Agreement[7], MNT engaged Mr Igor V. Kolupaev (“Igor”) as a self-employed person to sell bottling caps produced by its subsidiary company called Dalian Best Plastic Products Company Limited (“DBPP”);

(b)   By way of a Service Order Agreement[8] further issued pursuant to the Market Service Agreement, a 5% commission would be chargeable on the price of each contract secured by Igor;

(c)    On 8 August 2013, Igor presented to a Mr Palienko (“DW3”), who was the Legal Advisor of VIP-Pack Group (a company owned by the applicant), a contract dated 7 August 2013 (“Exh D1”)[9] entered into between MNT (through the applicant) and Safta BV. Pursuant to D1, MNT would sell and deliver to Safta BV 7.25 million capping devices for bottling (“the Goods”) before 4 December 2013 at €696,000;

(d)   At that time DW3 realised that DBPP lacked the required production capacity to perform the contract within the prescribed deadline; hence he addressed his concerns to the applicant, who asked DW3 to have the problem fixed for him;

(e)    DW3 therefore signed on behalf of MNT a Mutual Rescission and Release Agreement (“Exh D7”)[10]; Igor also signed it, not only in his own capacity, but also as a representative of Safta BV.  It was stipulated in Exh D7 that Exh D1 would be rendered null and void, and that Safta BV’s payments to MNT under Exh D1 would be transferred to the bank account of Octans (after deduction of the 5% commission payable to Igor and all other charges), with a penalty chargeable on late transfer;

(f)    On 12 August 2013, a Ms Elena (“DW1”), who was the Chief Financial Officer of VIP-Pack Group, received an email attaching (i) an invoice in the name of MNT dated 8 August 2013 directed to SpeedCast in respect of an “investment” in the sum of €696,000, (ii) a contract to purchase from Octans the Goods at €332,432 (“the Octans contract”)[11] and (iii) two written confirmations evidencing two sums of €200,000 and €150,000 having been paid into the Account by Safta BV[12];

(g)   These documents were presented to DW3 who, albeit finding the invoice doubtful[13] and noting that the Octans contract had yet to be signed by MNT, decided that €332,432 be transferred to Octans promptly lest the penalty clause under Exh D7 be invoked; and

(h)   Despite several attempts by DW1 and DW3, they (who were in Moscow at the relevant time) were unsuccessful in completing the transfer until 13 August 2013.  Accordingly, the applicant was asked to make the relevant transfer in Hong Kong himself, which he did.

Reasons for verdict

7. The judge found all of the prosecution witnesses to be honest and reliable.  He disbelieved the defence evidence surrounding Exh D1 and found that the applicant had no reason to sign Exh D1 under the circumstances described.  The judge further rejected the evidence of DW3, inter alia, as to the background leading to his preparation of Exh D7, the signing of Exh D7 and the intended use of Exh D7 as a solution to the impasse caused by Exh D1.  He also found that the applicant ought to have known that the invoice and the Octans contract (referred to in para 6(f) and (g) supra) contained several glaring mistakes, hence the applicant should have viewed any request to transfer with suspicion.

8. As to the law on money laundering, the judge referred himself to HKSAR v Pang Hung Fai (2014) 17 HKCFAR 77.  He noted, in particular, that the word “believe” in the context of section 25 of the Organized and Serious Crimes Ordinance was used in the sense of “know”; as such, the prosecution had to prove that the applicant knew or ought to have known that the money in question represented the proceeds of crime.

9. Having considered all the evidence before him, the judge was satisfied that the applicant knew that the €332,432 represented proceeds of an indictable offence.  Having said that, he did not consider that the applicant had attempted to deal with the remaining 5% in the Account.  As such, the applicant was convicted of the charge to the extent of attempting to dealing with €332,432 only.

Mitigation

10. In mitigation, counsel for the appellant submitted that:

(a)   the appellant was 54 years of age, a married man with three children; that he was educated to university level and suffered from chronic bronchitis;

(b)   the applicant had no knowledge of the fraud in question;

(c)    there was no evidence that the applicant had anything to do with the Estonian bank account;

(d)   there was no evidence that the applicant gained from the offence;

(e)    Safta BV suffered no loss as it recovered all the proceeds; and

(f)    the offence involved only one single attempt.

11. Mitigation letters from the applicant’s wife, business partners and associates were submitted to the judge, designed to show the applicant’s positive good character.

12. Counsel for the applicant also drew the judge’s attention to the sentencing considerations set out in HKSAR v Boma [2012] 2 HKLRD 33.  Counsel concluded by urging that the court pass a merciful sentence and, if appropriate, a suspended sentence.

Reasons for sentence

13. In sentencing the applicant, the judge noted that the amount of money that the applicant sought to transfer was substantial; an international element was present; the scheme to launder the proceeds was a sophisticated one; the applicant, who was the sole signatory to the Account, played a pivotal role in attempting to launder the proceeds; and the applicant was the one who appeared at the branch of HSBC on 15 August 2013.

14. Having had regard to these considerations, the judge adopted a starting point of 3 years’ imprisonment.  He then allowed a 4 months’ reduction for the applicant’s clear record and positive good character, resulting in a sentence of 32 months’ imprisonment.

15. By way of final remark, the judge stated that there existed no humanitarian ground or exceptional circumstances to justify the suspension of the imprisonment term.

Grounds of appeal against conviction and sentence

16. In his Form XI, the applicant did not advance any grounds of appeal against his conviction or sentence.  However, before me this morning, the applicant has made extensive oral submissions on both conviction and sentence.  Essentially, his submissions amount to an explanation as to why he is not guilty, which explanation must necessarily derive from the evidence of DW1 and DW3 in particular, the applicant not having given evidence himself.  He has explained that there was no reason for him to have believed that the documents concerned were false and that, as a businessman, he would have necessarily relied on documents prepared by his staff.

17. In furnishing his submissions, the applicant has effectively given the explanation which he did not give to the court below.  I have been prepared to receive everything he has said lest something should affect the issues which require to be addressed in this application.  However, I am bound to say that now is not the time to advance evidence which could have been given at trial.

18. There has also been some suggestion by the applicant that he was advised not to give evidence at his trial, although that matter was not developed very far.  However, such advice may have been perfectly properly given.  I note that the applicant’s trial was in fact a retrial and that he did not give evidence at his first trial either.

Respondent’s submissions (on conviction)

19. Mr Matthew Leung, for the respondent, submits that the judge in his Reasons for Verdict correctly applied the legal principles in relation to the offence of money laundering to the facts of the present case; he carefully analysed the evidence of the prosecution and the defence witnesses; and his findings as to “reasonable grounds to believe” were supported by detailed reasoning.  Mr Leung argues that the judge gave proper and detailed analysis as to why the prosecution evidence was accepted and the defence evidence, in particular that of DW1 and DW3, was rejected.  Of DW1, the judge held that her evidence was “neither credible nor reliable”[14], while of DW3, he said his evidence was “contrived”[15].

20. Mr Leung contended that there existed no reasonably arguable grounds of appeal in the present case and that the verdict was neither unsafe nor unsatisfactory.

Respondent’s submissions (on sentence)

21. Mr Leung submitted that, in the light of all considerations taken into by the judge, the starting point of 3 years’ imprisonment was appropriate.  In support of his proposition, he referred me to HKSAR v Chow Ying Ki (unrep., CACC 378/2004), where the Court of Appeal considered that a starting point of 4 years’ imprisonment was appropriate for a money laundering offence involving $2.9 million.  As such, he submitted that the sentence of 32 months’ imprisonment in the present case could not be said to be wrong in principle or manifestly excessive.

Consideration

22. As Mr Leung has submitted, the judge in convicting the applicant gave proper and detailed reasons why he accepted the evidence of the prosecution witnesses, and why he disbelieved the evidence of DW1 and DW3 in particular, culminating in his findings that DW1 was “neither credible nor reliable”, while DW3’s evidence was “contrived”.  The judge heard and saw the witnesses and was in the best position to evaluate their evidence: that is an advantage which the appellate court does not have.  I can see no reasonable argument at this stage as to why this Court should intervene and upset such findings on the basis that the judge has ignored vital evidence or come to a conclusion in spite of evidence which he has plainly misunderstood.  Nor can it be said that the judge came to conclusions to which he could not reasonably have come, had he properly understood the evidence.

23. Furthermore, I can see no error in law on the part of the trial judge.  He correctly summarised the law, as it has now been established by the Court of Final Appeal in HKSAR v Pang Hung Fai (supra), at para’s 144 to 149 of his Reasons for Verdict.  And he has, it seems to me at this stage, correctly applied the law to the facts of this case.

24. As for sentence, the applicant has emphasised the financial hardship and problems for his companies which he has had to endure as a result of these proceedings and his incarceration.  However, the judge properly directed his mind to the relevant sentencing considerations in cases of money laundering as set out in HKSAR v Boma (supra), bearing in mind that the maximum penalty is one of 14 years’ imprisonment.  He gave the applicant a generous discount of 4 months in respect of his good character.  I can see no reasonably arguable ground of appeal that he failed properly to consider certain matters or took into account other matters which he should not have considered.  At this stage, I cannot see any arguable ground of appeal that the sentence is either manifestly excessive or wrong in principle.

25. The applications for leave to appeal against conviction and sentence are therefore refused.  The applicant is duly advised of his right to renew his application for leave to appeal against either conviction or sentence or both to the Court of Appeal and the consequences of doing so, which may include a direction for any loss of time spent in custody pending his appeal, if the Court of Appeal were to come to the view that there was no justification for the renewal of the application.

[1] At all relevant times, Mr Pierre Jean Joseph Andre Beylier (“PW1”), a French national, and Mr Mark Ellison (“PW3”), a UK national, were the Chief Executive Officer and the Chief Financial Officer of SpeedCast respectively.  According to the prosecution evidence, PW2 contacted them after having received the suspicious telephone call yet they were unable to withhold the subsequent telegraphic transfer made by PW2

[2] One in the sum of €149,983.20 and the other €199,983.20

[3] This account was opened on 29 October 2009 with the Hongkong and Shanghai Banking Corporation (“HSBC”); the applicant was the sole director of MNT

[4] Exhibit P11, Appeal Bundle pp 82-83

[5] A bank account of one Octans Industries Limited (“Octans”) with Versobank in Tallin, Estonia

[6] Putonghua to Russian

[7] Exhibit D3, Appeal Bundle, pp 88-102

[8] Exhibit D4, clause 2(d). See Appeal Bundle, pp 103-104

[9] Appeal Bundle pp 84-87

[10] Exhibit D7, Appeal Bundle pp 108-112

[11] There was an obvious mistake on the price per unit which should be €0.0459 instead of €0.0888

[12] Exhibit D8 for items (i) to (iii), Appeal Bundle pp 113-122

[13] Judging from its layout, currency of the transaction, that it was unsigned and SpeedCast was a company unheard of before

[14] Reasons for Verdict, Appeal Bundle, p 44, para 111

[15] Reasons for Verdict, Appeal Bundle, p 44, para 112