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Note: In 1988, Chan Ka Hung, Defendant, entered a scheme to defraud several banks by obtaining LCs on the basis of non-existent underlying transactions. In order to relieve its debts and falsify profits, Shun Wing Trading Limited, a subsidiary of Mainland company Guangnan Holdings Limited, caused Guangnan to apply for four LCs in favor of Defendant's company, Connection Investments Limited. Defendant then returned the proceeds of the LCs to Shun Wing after submitting false documents to the issuing bank purporting to show commercial transactions between Connection Investments and Shun Wing. The LCs were issued by Hang Seng Bank Limited for US$2.52 million, by American Express Bank for US$3.04 million, by Societe Generale Bank for US$2.97 million, and by an unnamed bank for US$3.3 million.

In his defense, Defendant offered that there was no dishonesty on his part, and that he was merely facilitating a trade between Guangnan and Shun Wing that was made difficult by trade regulations.

Defendant was convicted of four counts of conspiracy to defraud and sentenced to eight years' imprisonment.

Defendant applied for leave to appeal against conviction chiefly on the ground that the issuing banks were not defrauded and would have issued the LCs even had they known that there were no underlying transactions. Defendant argued that Issuers relied on Applicant's good financial standing as security for advancing the LCs, and that this commercial arrangement would have been made regardless of actual commercial transactions. The High Court of the Hong Kong Special Administrative Region Court of Appeal, Stock, JA., dismissed the application as to the conviction, citing trial evidence from the banks stating that no LCs would have been approved based on bogus underlying transactions and that if the banks sought to enter into some other type of credit arrangement with Guangnan, they would have done so directly.

Defendant also applied for leave to appeal against sentence on the grounds that some debts owed to issuing banks unpaid at time of trial had since been paid, and that the sentence was inconsistent with other recent sentences. Defendant refers to the Hong Kong v. Cheng Sui Wa criminal appeal, in which similar amounts were involved, but where the judge imposed a sentence of only four years' imprisonment on a business owner involved in a similar operation involving Guangnan (the defendant in Hong Kong v. Cheng Sui Wa was sentenced to an additional 5 years' imprisonment for a separate scheme). See Hong Kong v. Cheng Sui Wa, 2003 HKCU LEXIS 1106, supra at 290. The appellate court noted that the sentence in Hong Kong v. Cheng Sui Wa was light, but nonetheless granted the leave to appeal the sentence as the cases were quite similar. The appellate court treated the hearing of the application as the appeal and reduced Defendant's sentence to imprisonment for six years and six months.

[JEB/ees]

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