Article

Note: In this action, Mr. Patrick Leo Yee Sang (Appellant) appeals his sentence in a fraud case involving LCs and false documents against purchase financing (D/P). Appellant's crimes occurred while he was employed as financial manager of Firstone International Holdings Ltd (Company).

Company's fraudulent practices began when Company encountered cash flow problems. Company resolved its financial difficulties by applying for LCs and D/P collections in support of fictitious transactions between subsidiary companies. Company obtained HK$100,000,000 from its banks through these fraudulent transactions. Ultimately, there was no financial loss, as a buyer took over Company and injected capital into it.

Appellant joined Company as a financial manager after the fraud had begun. He was recruited for his experience in banking. Appellant worked out Company's cash shortage and drew fraudulent LCs on a number of banks to cover the shortage. Appellant also introduced D/P fraud to the company as an alternative to LC fraud.

Appellant did not personally gain from the fraudulent transactions, however, the High Court of the Hong Kong Special Administrative Region Court of Appeal, Cheung and Lugar-Mawson, J., noted that Appellant was an active participant in the fraud and benefited personally since his employment could end if Company did not remain financially healthy.

When contesting his sentence, Appellant argued that since the LCs were local, rather than international, the length of the sentence should be reduced. However, the court ruled that "there is no valid distinction to be made between 'local' LC fraud and 'international' LC fraud. The fraudulent misuse of the documentary credit system within Hong Kong could lead to a worldwide loss of confidence in Hong Kong's banking system as a whole."

[JEB/rlf]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.