DCCC838/2008 HKSAR v. CHAN MAN SHUN, ALLAN - LawHero
DCCC838/2008
區域法院（刑事）H H Judge Browne11/6/2009
DCCC838/2008
A A
DCCC838/2008
B B
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
C CRIMINAL CASE NO. 838 OF 2008 C
D
---------------------- D
HKSAR
E E
v.
F Chan Man-shun, Allan (D1) F
Kwong Kin-yip, Sam (D2)
G Law Man-fai (D3) G
----------------------
H H
Before: H H Judge Browne
Date: 12 June 2009 at 10.08 am
I Present: Mr Shaun Kelly, Counsel on fiat, for HKSAR I
Mr Andrew Kan, instructed by Messrs Lo, Wong & Tsui,
J for all Defendants J
Offence: Conspiracy to defraud (串謀詐騙)
K ---------------------- K
L
Reasons for Sentence L
----------------------
M M
1. The defendants have pleaded guilty to a charge of
N N
conspiracy to defraud.
O O
2. The particulars of the offence allege that between May
P 2004 and August 2007 in Hong Kong they conspired together with P
others to defraud officers of the Hong Kong Customs & Excise
Q Department. The way in which they did that was to falsify Q
invoices of overseas wine suppliers with whom their company,
R R
HOTO, had placed wine orders. They had submitted those falsified
invoices to the Department in support of HOTO’s applications for
S S
permits. Those falsified invoices show lower prices than the
T genuine price of the wine. And they induced the customs officers T
to rely on those false invoices to assess duty, and this led to
U a loss of revenue. U
CRT37/12.6.2009/MC 1 DCCC838/2008/Sentence
V V
A A
3. The Summary of Facts admitted by all three defendants
B B
shows that HOTO Limited is a Hong Kong registered company and,
C for the duration of the conspiracy, its registered office was in C
Cheung Sha Wan Plaza in Cheung Sha Wan, Kowloon.
D D
4. The company was in the business of importing wines to
E E
Hong Kong. The wines were purchased by HOTO from overseas
suppliers and were alcoholic liquors on which duty was payable
F F
under the Dutiable Commodities Ordinance. The company had a
G licence to carry on that business. During the relevant period, G
the three defendants were directors and shareholders of the
H company. The three defendants worked full-time in the company H
and were responsible for its day-to-day operations.
I I
5. Now, to comply with the requirements of the Dutiable
J J
Commodities Ordinance, the company had to obtain from the
K
Customs & Excise Department a permit in respect of each shipment K
of alcoholic liquor imported into Hong Kong. The value of the
L wine had to be declared and duty was ultimately calculated on L
that basis. The company had to provide invoices and payment
M records in support of the declaration. M
N N
6. From the period, March 2002 until 28 February 2007,
the duty payable on wines imported was 80 per cent of the value
O O
of the wine. In February 2007, the duty payable was reduced to
P 40 per cent. In February 2008, the duty was abolished on all P
wines. During the relevant period, the fraud activities covered
Q a total of 187 permit applications in which HOTO under-declared Q
wine prices by $11 million. This evaded duty of almost
R R
$4 million. The fraud involved 152 shipments of wine imported
into Hong Kong from five overseas suppliers. During the relevant
S S
period, the company submitted 212 forged invoices in respect of
T the 187 permit applications. T
U U
CRT37/12.6.2009/MC 2 DCCC838/2008/Sentence
V V
A A
7. On the morning of 9 August 2007, customs officers in
possession of a search warrant entered the registered office of
B B
HOTO. The defendants and three employees were present. And the
C officers seized a large quantity of documents, 18 computers and C
a computer server. All the defendants were arrested.
D D
8. The Customs & Excise Department contacted the five
E E
overseas suppliers and obtained from them invoices and payment
records which show the actual value of the wines sold to HOTO.
F F
It also contacted them in respect of the corresponding records
G of actual payments received from HOTO. These overseas suppliers G
confirmed that the 212 invoices submitted by HOTO to the Customs
H & Excise Department relating to permit applications were not H
genuine.
I I
9. The invoices submitted were false invoices prepared by
J J
HOTO staff on the instructions of the defendants for the purpose
K
of defrauding the revenue. The Department obtained the relevant K
HOTO banking records. The contents of the computers and the
L server seized were examined by a computer expert for further L
analysis. An accounting system named “E5” and inventory record
M in Microsoft Excel format named “Cyberport Demo Information M
Stock in Import Worksheet” were among the contents located in
N N
the server.
O O
10. The Department retained the services of a forensic
P expert. The expert examined all the relevant records and drew P
certain conclusions. He concluded that the prices provided by
Q HOTO to the Customs & Excise Department for the determination of Q
duty were consistently lower than the actual prices of the wines
R R
purchased. The actual prices paid for the purchase of the wines
were greater than the prices declared to the C&E Department.
S S
T 11. The quantity of wine involved was 170,267 bottles of T
wine with undeclared value imported into Hong Kong by HOTO in
U the relevant period using the 212 forged invoices. Five thousand U
CRT37/12.6.2009/MC 3 DCCC838/2008/Sentence
V V
A A
one hundred and forty-two bottles were seized by the Customs &
Excise Department after the arrest of the defendant, and 165,125
B B
had already been sold to the market before 9 August 2007.
C C
12. Employees of HOTO admitted that they had prepared
D forged invoices showing lower value of the wines for submission D
to the Customs & Excise Department for the permit applications.
E E
They also admitted that they prepared false explanations
purportedly from the overseas suppliers for the purpose of
F F
answering queries from the Customs & Excise Department designed
G to elicit the value of the wines. This was done on the G
instructions of the defendants.
H H
13. The HOTO computer system, its computer server, HOTO
I I
maintained electronic accounting and inventory system, E5, which
included purchase entries, payment entries and stock and
J J
inventory entries. It also stored on the server a number of
K
electronic files in spreadsheet format. These files contained K
details of wines purchased, the name of supplier, arrival dates,
L currency exchange rate, wine description, quantity, unit prices, L
costs, delivery charges and Dutiable Commodities Ordinance
M permit application numbers. This was used by HOTO for recording M
and calculating the cost of alcoholic liquors purchased.
N N
14. The unit cost of each bottle of wine was calculated,
O O
taking into account the duty payable and the actual higher
P purchase price of wine payable to the suppliers. The accounting P
expert concluded that those who prepared the actual spreadsheets
Q must have been aware that the actual price of the wines was Q
higher than the alleged purchase price declared to the Customs &
R R
Excise Department to determine the duty payable. By accessing
these particular files, the defendants could determine the unit
S S
cost of any bottle of wine. And because the declared duty
T payable was lower than it should have been, HOTO had a potential T
market advantage by being able to market the wines at a lower
U U
CRT37/12.6.2009/MC 4 DCCC838/2008/Sentence
V V
A A
price, lower than would have been possible had the correct
amount of duty been paid.
B B
C 15. The forensic expert examined the banking transactions C
in relation to payments to the five suppliers. In the case of
D payment to four of the five suppliers, substantially all the D
invoices from these suppliers were paid by HOTO by two separate
E E
payments. When separate payments were made, some 90 per cent of
them contained one payment of the two equal to the false wine
F F
value submitted to the Customs & Excise Department. By splitting
G the payments in this way, HOTO would be able to show to the G
Customs & Excise Department documents with the payment amount
H that agreed with the false invoices already submitted to the H
Department.
I I
16. The defendants all have clear records. I was told in
J J
mitigation that the 1st defendant is 52 years of age; he is a
K
married man. He has an elder daughter who is aged 24, who works K
in the United Kingdom, and he supported his daughter through
L years of overseas study. He has a 21 year-old son who is at L
university in Hong Kong. His wife works as an office assistant
M earning some $10,000 per month, and he contributes to the M
parents’ livelihood.
N N
17. He started HOTO in 1996. And his counsel was quite
O O
frank in saying that the intention of perpetrating this
P conspiracy and the motive behind it was simply greed and the P
conspiracy also had enabled the company to maintain a
Q competitive edge. Defence counsel submitted generally that the Q
guilty plea saved enormous court time and costs. Had this case
R R
proceeded as a trial, there would have been a number of overseas
visitors; experts would have been called; digital bundles had
S S
been prepared.
T T
18. The 2nd defendant, I am told, is 49 years of age and,
U again, he is a married man. He has been married for many years U
CRT37/12.6.2009/MC 5 DCCC838/2008/Sentence
V V
A A
and has a daughter aged 18. His wife works part-time. Placed
before the court in support of the plea and mitigation by the
B B
2nd defendant, I have a number of letters. The first letter is
C from the defendant’s daughter. It is a touching and supportive C
letter and describes her father as being a responsible and
D caring father. D
E E
19. It also refers to his work in the Hong Kong Adventure
Corps, which he has been a volunteer since 2003. This is an
F F
organisation which helps youngsters gain insight into
G leadership. It develops leadership qualities and training. And G
for a number of years, the defendant has supported and assisted
H the group as a volunteer. I have a letter from the captain of H
that organisation. I have also a letter from a scout group
I I
leader. The letter from the defendant’s wife describes him as a
responsible and kind husband.
J J
K
20. The 3rd defendant, I am told, is 44 years of age. He K
is married, and he has been married for eight years, and he has
L two children, a daughter and a son. He supports his parents. He L
has donated to the Children’s Fund in Hong Kong since 2004. I
M have a letter from the defendant’s wife describing him as a M
responsible and caring husband. These letters make all the more
N N
tragic the defendant’s fall from grace and involvement in these
criminal activities.
O O
P 21. The conspiracy was an audacious scheme designed to P
cheat the Customs & Excise Department out of a substantial
Q amount of money. It had the added advantage that it would give Q
the company a market edge over its competitors. The offence
R R
involved considerable sophistication. It required the creation
of an elaborate accounting scheme whereby false invoices were
S S
created with false supporting documentation. An electronic
T accounting and inventory system was created and maintained in T
the company’s server to store the relevant data. Electronic
U files in the company’s computers have spreadsheets recording U
CRT37/12.6.2009/MC 6 DCCC838/2008/Sentence
V V
A A
data, including the genuine and false prices of the goods. Split
payments were made to suppliers so that the banking records
B B
would not readily show the true position.
C C
22. The conspiracy continued for a considerable period of
D time: over three years. The fraudulent activities covered a D
total of 187 permit applications, in which HOTO under-declared
E E
wine prices by $11 million. The company evaded duty of almost
$4 million. The fraud involved 152 shipments of wine imported
F F
into Hong Kong from five overseas suppliers. In respect of the
G 187 permits, 212 forged invoices were used. The detection and G
prosecution of this type of offence requires a huge commitment
H on the part of the relevant authorities in terms of time and H
expense, vast numbers of documents required to be examined,
I I
digested, classified and indexed. Banking records had to be
examined carefully. Inquiries had to be made abroad.
J J
K
23. The scheme inevitably involved company staff and K
especially the accounting staff of the company. One of the evils
L of this sort of scheme is that for no financial benefit, or for L
the financial benefit of the company, otherwise honest persons
M are drawn into a fraudulent scheme. Staff employees were M
required to prepare the false invoices and false explanations
N N
for the Customs & Excise Department. The computer and accounting
staff involved must have been aware of the fraud being
O O
perpetrated. The architects of this fraud must have proceeded on
P the cynical assumption that otherwise honest members of staff P
would go along with the fraud. What is even more depressing is
Q that this cynical assumption proves in cases such as this to be Q
correct.
R R
24. I am told that this is the first prosecution of its
S S
type in Hong Kong. Neither the prosecution or the defence
T counsel have been able to supply me with any authorities which T
might assist me in terms of deciding the appropriate sentence.
U U
CRT37/12.6.2009/MC 7 DCCC838/2008/Sentence
V V
A A
For the reasons I have set out, this is clearly a very serious
case.
B B
C 25. In respect of this offence, I took a starting point of C
three years imprisonment and reduced that by one-third to
D reflect the guilty plea, I sentenced the defendants to two years D
imprisonment.
E E
F F
G G
H H
Browne
District Judge
I I
J J
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
CRT37/12.6.2009/MC 8 DCCC838/2008/Sentence
V V
A A
DCCC838/2008
B B
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
C CRIMINAL CASE NO. 838 OF 2008 C
D
---------------------- D
HKSAR
E E
v.
F Chan Man-shun, Allan (D1) F
Kwong Kin-yip, Sam (D2)
G Law Man-fai (D3) G
----------------------
H H
Before: H H Judge Browne
Date: 12 June 2009 at 10.08 am
I Present: Mr Shaun Kelly, Counsel on fiat, for HKSAR I
Mr Andrew Kan, instructed by Messrs Lo, Wong & Tsui,
J for all Defendants J
Offence: Conspiracy to defraud (串謀詐騙)
K ---------------------- K
L
Reasons for Sentence L
----------------------
M M
1. The defendants have pleaded guilty to a charge of
N N
conspiracy to defraud.
O O
2. The particulars of the offence allege that between May
P 2004 and August 2007 in Hong Kong they conspired together with P
others to defraud officers of the Hong Kong Customs & Excise
Q Department. The way in which they did that was to falsify Q
invoices of overseas wine suppliers with whom their company,
R R
HOTO, had placed wine orders. They had submitted those falsified
invoices to the Department in support of HOTO’s applications for
S S
permits. Those falsified invoices show lower prices than the
T genuine price of the wine. And they induced the customs officers T
to rely on those false invoices to assess duty, and this led to
U a loss of revenue. U
CRT37/12.6.2009/MC 1 DCCC838/2008/Sentence
V V
A A
3. The Summary of Facts admitted by all three defendants
B B
shows that HOTO Limited is a Hong Kong registered company and,
C for the duration of the conspiracy, its registered office was in C
Cheung Sha Wan Plaza in Cheung Sha Wan, Kowloon.
D D
4. The company was in the business of importing wines to
E E
Hong Kong. The wines were purchased by HOTO from overseas
suppliers and were alcoholic liquors on which duty was payable
F F
under the Dutiable Commodities Ordinance. The company had a
G licence to carry on that business. During the relevant period, G
the three defendants were directors and shareholders of the
H company. The three defendants worked full-time in the company H
and were responsible for its day-to-day operations.
I I
5. Now, to comply with the requirements of the Dutiable
J J
Commodities Ordinance, the company had to obtain from the
K
Customs & Excise Department a permit in respect of each shipment K
of alcoholic liquor imported into Hong Kong. The value of the
L wine had to be declared and duty was ultimately calculated on L
that basis. The company had to provide invoices and payment
M records in support of the declaration. M
N N
6. From the period, March 2002 until 28 February 2007,
the duty payable on wines imported was 80 per cent of the value
O O
of the wine. In February 2007, the duty payable was reduced to
P 40 per cent. In February 2008, the duty was abolished on all P
wines. During the relevant period, the fraud activities covered
Q a total of 187 permit applications in which HOTO under-declared Q
wine prices by $11 million. This evaded duty of almost
R R
$4 million. The fraud involved 152 shipments of wine imported
into Hong Kong from five overseas suppliers. During the relevant
S S
period, the company submitted 212 forged invoices in respect of
T the 187 permit applications. T
U U
CRT37/12.6.2009/MC 2 DCCC838/2008/Sentence
V V
A A
7. On the morning of 9 August 2007, customs officers in
possession of a search warrant entered the registered office of
B B
HOTO. The defendants and three employees were present. And the
C officers seized a large quantity of documents, 18 computers and C
a computer server. All the defendants were arrested.
D D
8. The Customs & Excise Department contacted the five
E E
overseas suppliers and obtained from them invoices and payment
records which show the actual value of the wines sold to HOTO.
F F
It also contacted them in respect of the corresponding records
G of actual payments received from HOTO. These overseas suppliers G
confirmed that the 212 invoices submitted by HOTO to the Customs
H & Excise Department relating to permit applications were not H
genuine.
I I
9. The invoices submitted were false invoices prepared by
J J
HOTO staff on the instructions of the defendants for the purpose
K
of defrauding the revenue. The Department obtained the relevant K
HOTO banking records. The contents of the computers and the
L server seized were examined by a computer expert for further L
analysis. An accounting system named “E5” and inventory record
M in Microsoft Excel format named “Cyberport Demo Information M
Stock in Import Worksheet” were among the contents located in
N N
the server.
O O
10. The Department retained the services of a forensic
P expert. The expert examined all the relevant records and drew P
certain conclusions. He concluded that the prices provided by
Q HOTO to the Customs & Excise Department for the determination of Q
duty were consistently lower than the actual prices of the wines
R R
purchased. The actual prices paid for the purchase of the wines
were greater than the prices declared to the C&E Department.
S S
T 11. The quantity of wine involved was 170,267 bottles of T
wine with undeclared value imported into Hong Kong by HOTO in
U the relevant period using the 212 forged invoices. Five thousand U
CRT37/12.6.2009/MC 3 DCCC838/2008/Sentence
V V
A A
one hundred and forty-two bottles were seized by the Customs &
Excise Department after the arrest of the defendant, and 165,125
B B
had already been sold to the market before 9 August 2007.
C C
12. Employees of HOTO admitted that they had prepared
D forged invoices showing lower value of the wines for submission D
to the Customs & Excise Department for the permit applications.
E E
They also admitted that they prepared false explanations
purportedly from the overseas suppliers for the purpose of
F F
answering queries from the Customs & Excise Department designed
G to elicit the value of the wines. This was done on the G
instructions of the defendants.
H H
13. The HOTO computer system, its computer server, HOTO
I I
maintained electronic accounting and inventory system, E5, which
included purchase entries, payment entries and stock and
J J
inventory entries. It also stored on the server a number of
K
electronic files in spreadsheet format. These files contained K
details of wines purchased, the name of supplier, arrival dates,
L currency exchange rate, wine description, quantity, unit prices, L
costs, delivery charges and Dutiable Commodities Ordinance
M permit application numbers. This was used by HOTO for recording M
and calculating the cost of alcoholic liquors purchased.
N N
14. The unit cost of each bottle of wine was calculated,
O O
taking into account the duty payable and the actual higher
P purchase price of wine payable to the suppliers. The accounting P
expert concluded that those who prepared the actual spreadsheets
Q must have been aware that the actual price of the wines was Q
higher than the alleged purchase price declared to the Customs &
R R
Excise Department to determine the duty payable. By accessing
these particular files, the defendants could determine the unit
S S
cost of any bottle of wine. And because the declared duty
T payable was lower than it should have been, HOTO had a potential T
market advantage by being able to market the wines at a lower
U U
CRT37/12.6.2009/MC 4 DCCC838/2008/Sentence
V V
A A
price, lower than would have been possible had the correct
amount of duty been paid.
B B
C 15. The forensic expert examined the banking transactions C
in relation to payments to the five suppliers. In the case of
D payment to four of the five suppliers, substantially all the D
invoices from these suppliers were paid by HOTO by two separate
E E
payments. When separate payments were made, some 90 per cent of
them contained one payment of the two equal to the false wine
F F
value submitted to the Customs & Excise Department. By splitting
G the payments in this way, HOTO would be able to show to the G
Customs & Excise Department documents with the payment amount
H that agreed with the false invoices already submitted to the H
Department.
I I
16. The defendants all have clear records. I was told in
J J
mitigation that the 1st defendant is 52 years of age; he is a
K
married man. He has an elder daughter who is aged 24, who works K
in the United Kingdom, and he supported his daughter through
L years of overseas study. He has a 21 year-old son who is at L
university in Hong Kong. His wife works as an office assistant
M earning some $10,000 per month, and he contributes to the M
parents’ livelihood.
N N
17. He started HOTO in 1996. And his counsel was quite
O O
frank in saying that the intention of perpetrating this
P conspiracy and the motive behind it was simply greed and the P
conspiracy also had enabled the company to maintain a
Q competitive edge. Defence counsel submitted generally that the Q
guilty plea saved enormous court time and costs. Had this case
R R
proceeded as a trial, there would have been a number of overseas
visitors; experts would have been called; digital bundles had
S S
been prepared.
T T
18. The 2nd defendant, I am told, is 49 years of age and,
U again, he is a married man. He has been married for many years U
CRT37/12.6.2009/MC 5 DCCC838/2008/Sentence
V V
A A
and has a daughter aged 18. His wife works part-time. Placed
before the court in support of the plea and mitigation by the
B B
2nd defendant, I have a number of letters. The first letter is
C from the defendant’s daughter. It is a touching and supportive C
letter and describes her father as being a responsible and
D caring father. D
E E
19. It also refers to his work in the Hong Kong Adventure
Corps, which he has been a volunteer since 2003. This is an
F F
organisation which helps youngsters gain insight into
G leadership. It develops leadership qualities and training. And G
for a number of years, the defendant has supported and assisted
H the group as a volunteer. I have a letter from the captain of H
that organisation. I have also a letter from a scout group
I I
leader. The letter from the defendant’s wife describes him as a
responsible and kind husband.
J J
K
20. The 3rd defendant, I am told, is 44 years of age. He K
is married, and he has been married for eight years, and he has
L two children, a daughter and a son. He supports his parents. He L
has donated to the Children’s Fund in Hong Kong since 2004. I
M have a letter from the defendant’s wife describing him as a M
responsible and caring husband. These letters make all the more
N N
tragic the defendant’s fall from grace and involvement in these
criminal activities.
O O
P 21. The conspiracy was an audacious scheme designed to P
cheat the Customs & Excise Department out of a substantial
Q amount of money. It had the added advantage that it would give Q
the company a market edge over its competitors. The offence
R R
involved considerable sophistication. It required the creation
of an elaborate accounting scheme whereby false invoices were
S S
created with false supporting documentation. An electronic
T accounting and inventory system was created and maintained in T
the company’s server to store the relevant data. Electronic
U files in the company’s computers have spreadsheets recording U
CRT37/12.6.2009/MC 6 DCCC838/2008/Sentence
V V
A A
data, including the genuine and false prices of the goods. Split
payments were made to suppliers so that the banking records
B B
would not readily show the true position.
C C
22. The conspiracy continued for a considerable period of
D time: over three years. The fraudulent activities covered a D
total of 187 permit applications, in which HOTO under-declared
E E
wine prices by $11 million. The company evaded duty of almost
$4 million. The fraud involved 152 shipments of wine imported
F F
into Hong Kong from five overseas suppliers. In respect of the
G 187 permits, 212 forged invoices were used. The detection and G
prosecution of this type of offence requires a huge commitment
H on the part of the relevant authorities in terms of time and H
expense, vast numbers of documents required to be examined,
I I
digested, classified and indexed. Banking records had to be
examined carefully. Inquiries had to be made abroad.
J J
K
23. The scheme inevitably involved company staff and K
especially the accounting staff of the company. One of the evils
L of this sort of scheme is that for no financial benefit, or for L
the financial benefit of the company, otherwise honest persons
M are drawn into a fraudulent scheme. Staff employees were M
required to prepare the false invoices and false explanations
N N
for the Customs & Excise Department. The computer and accounting
staff involved must have been aware of the fraud being
O O
perpetrated. The architects of this fraud must have proceeded on
P the cynical assumption that otherwise honest members of staff P
would go along with the fraud. What is even more depressing is
Q that this cynical assumption proves in cases such as this to be Q
correct.
R R
24. I am told that this is the first prosecution of its
S S
type in Hong Kong. Neither the prosecution or the defence
T counsel have been able to supply me with any authorities which T
might assist me in terms of deciding the appropriate sentence.
U U
CRT37/12.6.2009/MC 7 DCCC838/2008/Sentence
V V
A A
For the reasons I have set out, this is clearly a very serious
case.
B B
C 25. In respect of this offence, I took a starting point of C
three years imprisonment and reduced that by one-third to
D reflect the guilty plea, I sentenced the defendants to two years D
imprisonment.
E E
F F
G G
H H
Browne
District Judge
I I
J J
K K
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
CRT37/12.6.2009/MC 8 DCCC838/2008/Sentence
V V