Article

Note: Cheng Kwok Ki Tomy (Defendant) and his business partner, Liu Yiu-kwan, were both equal share holders in two related firms (Superior Companies) which were engaged in the leather business. The Superior Companies applied for 13 LCs worth HK$13,000,000 during an eighteen month period to finance the purchase of lamb skins from two beneficiary companies, Rich gold Limited and King Wing Trading Company, to be processed into leather.

The Prosecution described the scheme as follows,"13 L/Cs were applied for which were purportedly to finance the purchase of goods whereas, in reality, there were no goods in existence. In each case, the party which was supposedly the 'vendor'[(Beneficiary)], having received the purchase price, would then, within one or two days, repay the proceeds to the parties described as the 'purchasers' which had applied for the LCs." The chops of both Beneficiary companies were found on the Superior Companies' premises. In effect, the banks loaned money for goods without having security in any goods.

Defendant was charged with thirteen counts of making an entry into a bank record by deception in violation of the criminal ordinances. The District Court, Line, J., found him guilty of four charges. He sought leave to appeal. The High Court of the Hong Kong SAR Court of Appeal, Stuart-Moore VP, Stock and Yeung, JJA denied leave to appeal.

Defendant claimed not to have been active in the business at the time of the frauds and to have signed documents at the request of his partner.

The appellate court had quoted the trial judge to the effect that, "there was not a single document which supported the contention that HK$13,000,000 worth of leather... coming from overseas into Hong Kong before it was inspected and then taken over the Mainland border, ever existed." As to the Defendant's culpability, the trial judge, stated his judgment that "he deliberately sought to hide his true relationship with the Superior companies." Noting that during the eighteen month period, one fifth of the Superior Companies' business was bogus and that Defendant's property served as security for the Superior Companies' obligation, the trial judge concluded that while at the outset Defendant may not have known of the fraud, after a year and the end of the accounting year's close, "I was sure that the defendant knew the nature of the fraud."

The trial judge stated, "The central thrust of the defendant's case was that despite being a director, despite being a major shareholder, despite signing documents for the bank vouching for important matters, he had no interest in the company such that he could remain ignorant of the fraud and believe in the bona fides of the letters of credit and belief in the claimed set off. The claim to the lack of interest on the scale claimed was one I found to be unworthy of belief."

[JEB/tjb]

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