DCCC 1234/2004 (Part A)



CRIMINAL CASE NO. 1234 OF 2004 (Part A)


GONG BEIYING (F/30) 1st Defendant
TSOI HON CHUNG (M/54) 2nd Defendant


Coram : Deputy Judge W. Lam in Court

Date of Sentence: 18th January 2006

Offence : Conspiracy to default (串謀行騙)


1. As a result of commercial events occurring from the latter part of 2001 to May 2003, D1 and D2 were convicted after trial, as follows:

1st Charge (D1 and D2): Between the 1st October 2001 and 31st May 2003, of Conspiring with a Mr Chau, a Ms Mo and a Mr Cheung(PW1) to defraud the minority shareholders of Ying Wing Holdings Ltd (“Ying Wing”), the Hong Kong Stock Exchange (“SEHK”), the Securities and Futures Commission (“SFC”), and the members of Ying Wing’s Independent Board Committee, contraryto common law and s.159C(6) of the Crimes Ordinance Cap.200, and,

3rd Charge (D1 only): On the 4th April 2003, of False accounting, by falsifying an application from Shanghai Land Holding Ltdfor payment, by making a false entry showing that the $53M applied for was to be paid to Great Center Ltd to buy decorationmaterials in a project on Wu Zhong Road in Shanghai, contrary to s.19(1)(a) of the Theft Ordinance Cap.210.

2. Briefly, the facts were that D1, Chau and Mo were on Angel Field’s

side as buyer, while D2 and his financial controller PW1 were on Ying Wing’s side as vendor. They conspired in a scheme and succeeded,namely in hiding the asset value of Ying Wing’s fabric business from the “victims”, primarily the minority shareholders ofYing Wing, to whom Angel Field offered a price per share to “sell up” so that Angel Field could completely take over Ying Wing. The minority shareholders did not know the true position, sold up all their shares to Angel Field at undervalue, and suffered asa result.

The hidden asset value of the fabric business, on Ying Wing’s and Angel Field’s own version at the time Angel Field issued its Mandatory General Offer to the minority shareholders, was $45M pursuant to a report prepared by their own valuers. However, for the purpose of sentencing I am prepared to adopt the value provided by valuer Mr Lau (PW35) which was (about)RMB 30M, not only because I found him credible, but his evidence was also supported by DW2 for the Defence, who said land, buildings and plant and machinery, were together worth RMB 31M. The damage done to the minority shareholders was therefore in the order of HKD$30M because this value, which should have been paid by Angel Field for the complete takeover of Ying Wing, was hidden fromthe minority shareholders and all outsiders such as the SFC and the SEHK.

As to the facts of the 3rd Charge, what happened was, a year after Angel Field’s total acquisition of Ying Wing, D1 for Shanghai Land prepared a false application made to Eastar Ltd (also a company controlled by D1’s side) for $53.1M on the falsepurpose of paying Shanghai Land for decoration materials to be spent on a fake “Wu Zhong Road project”. The pre-plannedbank transfers of funds from one veil company to another veil company, including the $53.1M, were actually designed to makeoutsiders think that D2’s veil company had “bought” the fabric business from D1’s side.

3. Counsel for the Defendants urged me to have regard to a recent set of sentences imposed by another Judge upon D1’s co-directorMs Mo for Conspiracy, Mo being also a co-conspirator in our case today. While a number of the personalities in the other case andthose in our case overlapped, the subject matter of the Conspiracy in the other case was different from ours. Furthermore, the Court of Appeal has repeatedly said that unless thesentence itself is wrong, no complaint can be made merely because of a disparity where different Judges have imposed different sentences,even in the same case. And today we are speaking about different cases with different facts.

The Court of Appeal in CHAN Kai-chung CACC 12/2001 has said that the amount of money involved is one factor to be considered, and the starting points discussedin that case were not different from what the Court of Appeal has later said in CHAN Boon-ning CAAR 1/2002, where it approved a general guideline for sentencing in commercial crimes according to the amounts of moneyinvolved. For amounts of $3.5M to $14M the starting point is generally 5 to 9 years in gaol, while for over $14M the starting point can reach 10 years or more. Angel Field succeeded in defrauding the minority shareholders by $30M.

4. Neither defendant has any previous criminal record. I have heard mitigation from Counsel, and have read the letters written by friendsof the defendants and by D1’s family, together with certificates and testimonials showing the generous side of both defendantswith their charity donations. I accept D1 was not a mastermind like her co-conspirators Chau and Mo. However D1 was clearly well-qualifiedand experienced, and a capable financial planner in corporate affairs, who had willingly and actively taken part in the present offences. She was sent by Chau to Hong Kong to help the latter acquire Hong Kong assets such as publicly listed companies, but her side didnot want to pay the full price while wanting the company name and its listing status. This practice of “backdoor listing” damagesthe corporate financial system of Hong Kong, in addition to exposing the uninformed general public into buying shares in a listedcompany which possesses no business to conduct, having only a bare name. D1 was a university graduate from Shanghai majoring incommerce and international finance, and was director of several companies as related to this case. Her role was significant, asfor example in directing PW8 to issue shares to Angel Field (on her own side) so that Shanghai Merchants would be paid $50M and beable to “sell back” the fabric business at less than the statutory 15% of company net asset value, a piece of ingenious veiledtransaction requiring considerable pre-meditation, and she requested for, and then signed, the minutes of a bogus telephone conferencein order to “put the records straight” the sham sale of the fabric business to D2. And her such conduct was especially culpablein circumstances where independent non-executive director and solicitor Mr Ng, charged with the responsibility to protect minorityshareholders, had already protested about the irregularity of devaluation which itself was also a sham, but D1 via her above conductsuccessfully bypassed Mr Ng’s efforts. In addition, D1 participated in asking puppets like PW26 to sign blank forms which weresubsequently used for the veiled transfer of funds in furtherance of the conspiracy. In addition, the amount of money involved intoday’s case was well above the top band under CHAN Boon-ning’s case, and I have seen no evidence of remorse by either defendant. Furthermore, the events extended over a lengthy period of17 months, which points to careful pre-meditation and a high degree of intricate planning. The gravemen of the 1st Charge is twofold:(1) general members of the public as shareholders, not usually or necessarily specialist accountants or auditors, were entitled torely on official company documents like Annual Reports and Board Committee recommendations, to represent the truth. As ample evidenceshows, the SFC and SEHK cannot be expected to investigate into the financial state of every company in the market, and they are entitledto trust company directors and their agents to be honest and to inform them of the truth, and (2) Money has been transferred outof Shanghai Land to fund Shanghai Merchants as if it was D1, Chau and Mo’s private money, but Shanghai Land was a public listedcompany with shareholders being members of the public, and these shareholders are entitled to safeguards rather than having theirmoney transferred away “under the table” for Chau or anybody else’ own purposes.

As to whether there should be a difference in sentence between D1 and D2, I note that D2, unlike D1, was a mastermind (on the vendor’s side). Theoretically therefore, D2 should merit a higher sentence than D1, but I also note that the “savings”of $30M did not directly benefit D2, as it was savings for D1’s side. Whether D1 et al had paid $30M more to acquire Ying Wing, or not, the money was only a saving and not a payout, and there is no evidenceto say D2 had received any part of the savings, and so I do not consider it fair to impose a heavier sentence on D2 ascompared to D1.

5. Having taken all the relevant factors into account, I sentence as follows:

1st Charge: I sentence both Defendants the same. I adopt a starting point of 24 months in gaol. As neither Deft has pleaded guilty, I will not reduce the sentence.

3rd Charge (D1): I adopt a starting point of 12 months in gaol. As D1 has not pleaded guilty I will not reduce the sentence, but as this offence was part of the overall crime, I make the sentenceconcurrent with the 1st Charge.


( William Lam )
Deputy District Judge

Mr. John DUNN, Counsel on Fiat, for Prosecution.

Mr. Kevin B. EGAN instructed by Messrs. Andrew Lam & Co. assigned by D.L.A. for the 1st Defendant.

Mr. Andrew BRUCE, S.C. leading Ms. Vivian CHIH instructed by Messrs. Ng & Shum for the 2nd Defendant.