Merchant gets 55 months for $265m L/C fraud
2008-12-8
A merchant, charged by the ICAC, was today (Monday) sentenced to 55 months’ imprisonment at the District Court for his role in a $265 million Letters of Credit (L/C) fraud based on non-existent commercial transactions.
Chen Xun, 75, was earlier found guilty of five counts of conspiracy to defraud.
Co-defendant Lau Ka-ping, 54, who earlier pleaded guilty to two similar conspiracy offences, was jailed for 32 months.
Deputy Judge Johnny Chan remarked that although the L/C loans were fully repaid, Chen’s offences nevertheless put the banks concerned at risk, causing fundamental damage to the banking system.
The judge said if the court passed a lenient sentence on Chen, it would send a wrong message to the public.
In sentencing Lau, the judge said although he was not the instigator, as a former bank officer, he should never have agreed to the L/C fraud.
The case arose from a corruption complaint. Subsequent ICAC enquiries revealed the above conspiracy offences.
The court heard that Chen and Lau were shareholders of Senox Investment Limited (Senox) and Go On Yue Fung Industry Limited (Go On). Chen was also a shareholder of another company - Group Yield Enterprises Limited (Group Yield).
Between August 1994 and March 1996, Chen and Lau conspired with other persons to defraud then Kincheng Banking Corporation Hong Kong Branch (Kincheng).
Chen and Lau dishonestly caused Senox and Go On to apply to Kincheng for the issue of a total of 24 L/Cs payable to Max Rise Industrial Limited (Max Rise).
In order to support the L/C applications, Chen and Lau submitted false documents to Kincheng, purporting to evidence genuine underlying commercial transactions of various goods between the two companies and Max Rise. In fact, there were no such transacti ons.
As a result, then Kwangtung Provincial Bank Hong Kong Branch (Kwangtung), the advising bank of Max Rise, was deceived into releasing a total of over $128 million to Max Rise under the L/Cs.
The court also heard that by means of similar fraudulent schemes, Chen caused Group Yield to apply to Kincheng, Kwangtung and Bank of China Hong Kong Branch (BOC Hong Kong) between September 1994 and June 1997 for the issue of 26 L/Cs payable to Max Rise.
Chen falsely represented to Kincheng, Kwangtung and BOC Hong Kong that there were genuine commercial transactions between Group Yield and Max Rise, thereby deceiving Kwangtung into releasing a total of more than $137 million to Max Rise under the L/Cs.
The L/C proceeds were subsequently reverted to the bank accounts of Senox, Go On and Group Yield, the court was told.
The prosecution was today represented by prosecuting counsel John Marray, assisted by ICAC officers Angel Ng and Chapman Cheng.
Chen Xun, 75, was earlier found guilty of five counts of conspiracy to defraud.
Co-defendant Lau Ka-ping, 54, who earlier pleaded guilty to two similar conspiracy offences, was jailed for 32 months.
Deputy Judge Johnny Chan remarked that although the L/C loans were fully repaid, Chen’s offences nevertheless put the banks concerned at risk, causing fundamental damage to the banking system.
The judge said if the court passed a lenient sentence on Chen, it would send a wrong message to the public.
In sentencing Lau, the judge said although he was not the instigator, as a former bank officer, he should never have agreed to the L/C fraud.
The case arose from a corruption complaint. Subsequent ICAC enquiries revealed the above conspiracy offences.
The court heard that Chen and Lau were shareholders of Senox Investment Limited (Senox) and Go On Yue Fung Industry Limited (Go On). Chen was also a shareholder of another company - Group Yield Enterprises Limited (Group Yield).
Between August 1994 and March 1996, Chen and Lau conspired with other persons to defraud then Kincheng Banking Corporation Hong Kong Branch (Kincheng).
Chen and Lau dishonestly caused Senox and Go On to apply to Kincheng for the issue of a total of 24 L/Cs payable to Max Rise Industrial Limited (Max Rise).
In order to support the L/C applications, Chen and Lau submitted false documents to Kincheng, purporting to evidence genuine underlying commercial transactions of various goods between the two companies and Max Rise. In fact, there were no such transacti ons.
As a result, then Kwangtung Provincial Bank Hong Kong Branch (Kwangtung), the advising bank of Max Rise, was deceived into releasing a total of over $128 million to Max Rise under the L/Cs.
The court also heard that by means of similar fraudulent schemes, Chen caused Group Yield to apply to Kincheng, Kwangtung and Bank of China Hong Kong Branch (BOC Hong Kong) between September 1994 and June 1997 for the issue of 26 L/Cs payable to Max Rise.
Chen falsely represented to Kincheng, Kwangtung and BOC Hong Kong that there were genuine commercial transactions between Group Yield and Max Rise, thereby deceiving Kwangtung into releasing a total of more than $137 million to Max Rise under the L/Cs.
The L/C proceeds were subsequently reverted to the bank accounts of Senox, Go On and Group Yield, the court was told.
The prosecution was today represented by prosecuting counsel John Marray, assisted by ICAC officers Angel Ng and Chapman Cheng.