Integrity Focus

A director of a Small and Medium Enterprise (SME), charged by the ICAC, was today (August 20) sentenced to 30 months’ imprisonment at the District Court for his role in defrauding seven banks of 63 loans totalling over $82 million and banking facilities totalling $20.5 million, as well as deceiving the Trade and Industry Department (TID) and the Hong Kong Mortgage Corporation Limited (HKMC) into acting as guarantors for loans and facilities totalling $6.9 million granted by the banks.

Desmond Chan Chi-hung, 63, sole director and shareholder of now defunct Mondex International Industries Limited (MIIL), earlier pleaded guilty to 13 counts of conspiracy to defraud, contrary to Common Law.

In sentencing, Deputy Judge Ms May Chung Ming-sun remarked that the defendant played an important role in the scam as he had impersonated a company director upon the instruction by the mastermind of the scheme. She took a maximum starting point of four years’ imprisonment for the defendant’s 13 offences but reduced the jail term to 30 months, having considered his guilty plea and other mitigating factors.

The case arose from a corruption complaint. Subsequent ICAC enquiries revealed the above offences, which took place between March 2011 and June 2014.

The court heard that upon the request of the de facto owner of MIIL, which purportedly engaged in plastic material trading, the defendant became its sole director and shareholder in December 2010.

To finance business development of local SMEs, various banks have long offered different types of credit facilities to SMEs. Between 2008 and 2011, the TID and the HKMC respectively launched various schemes, including SME Loan Guarantee Scheme and SME Financing Guarantee Scheme to assist SMEs to obtain credit facilities from banks by providing guarantees to them.

The court heard that the defendant conspired with a clerk of MIIL, the aforesaid de facto owner of MIIL and a man employed by the de facto owner (the trio) to defraud Bank of China (Hong Kong) Limited, Citibank (Hong Kong) Limited, Dah Sing Bank Limited (Dah Sing Bank), DBS Bank (Hong Kong) Limited (DBSHK) and Industrial and Commercial Bank of China (Asia) Limited (ICBC Asia) by submitting to the aforesaid banks false supporting documents, including auditor’s reports and bank monthly statements, causing the five banks to grant banking facilities totalling $20.5 million to MIIL.

The defendant also conspired with the trio and other persons unknown to defraud Dah Sing Bank, DBSHK, The Hongkong and Shanghai Banking Corporation Limited and Wing Lung Bank Limited (now known as CMB Wing Lung Bank Limited) by dishonestly submitting supporting documents purportedly in relation to transactions between MIIL and its six suppliers, causing the four banks to grant 63 loans totalling over $82 million to MIIL and to release the sums directly to the six suppliers concerned.

In addition, the defendant also admitted having conspired with the trio to defraud the TID and the HKMC by dishonestly falsely representing that all the information contained in four application forms for the relevant guarantee schemes was true. As a result, the TID was caused to issue a guarantee in favour of Dah Sing Bank; and to act as the guarantor for a term loan totalling $500,000 granted by the bank to MIIL. The HKMC was thus caused to issue three guarantees in favour of Dah Sing Bank and ICBC Asia; and to act as the guarantor for various types of facilities totalling $6.4 million granted by the two banks to MIIL.

The TID, the HKMC and the seven banks concerned had rendered full assistance to the ICAC during its investigation into the case.

The prosecution was today represented by prosecuting counsel Susanna Ku and assisted by ICAC officers Benny Chang and Stanley Cheung.