Integrity Focus

A proprietor of a Small and Medium Enterprise (SME), charged by the ICAC, was today (December 3) sentenced to 38 months’ imprisonment at the District Court for deceiving a bank into approving a loan of over $3.8 million under the Special 100% Loan Guarantee (SLG) scheme by overstating the number of staff employed by the company and its payroll expenses.

Tony Fung Kam-fai, 45, proprietor of Dragon Win Motors China Company Limited (Dragon Win Motors), earlier pleaded guilty to one count of fraud, contrary to section 16A(1) of the Theft Ordinance.

In sentencing, Judge Mrs Adriana Noelle Tse Ching remarked that the present case was serious in nature, and reprimanded the defendant for committing a fraud offence involving a substantial amount of money premeditatedly. The scheme would have continued if the defendant’s misdeeds were not detected.

The court took a starting point of 45 months’ imprisonment. The defendant’s jail term was only reduced by 15 per cent as his guilty plea was entered after the trial commenced. Having considered other mitigating factors, the defendant was sentenced to 38 months’ imprisonment. The Judge added that the defendant had only himself to blame for his conviction and jail term received.

The ICAC investigation arose from a corruption complaint, which subsequently revealed the above illicit SLG loans fraud. A total of six SME proprietors were charged in separate cases involving loans totalling about $19 million. Apart from Fung, two other defendants were earlier sentenced to 24 months’ and 22 months’ imprisonment respectively, following their guilty pleas. Another three defendants had their cases adjourned to February to May next year for plea, trial and verdict.

The ICAC has been committed to maintaining a clean business environment in Hong Kong and providing integrity training for different industries. Business operators are reminded not to commit bribery or engage in illegal activities. For more information about the corruption prevention resources, please visit the webpage of "SMEs and Start-ups" under Hong Kong Business Ethics Development Centre.

The court heard that in April 2020, HKMC Insurance Limited (HKMCI) launched the SLG under the SME Financing Guarantee Scheme to ease SMEs’ cash flow pressure under the pandemic. Loans approved by lenders were fully guaranteed by the government, of which the maximum facility amount was an SME’s total amount of wages paid to employees and rental payments for six months, or $4 million, whichever was the lower. Applicants were required to provide the lenders with the relevant proofs.

Standard Chartered Bank (Hong Kong) Limited (Standard Chartered Bank) was one of the participating lenders under the scheme. After confirming an application received was legitimate, Standard Chartered Bank would forward the application to HKMCI for final review and approval to grant a guarantee.

In August 2020, the defendant submitted an SLG application to Standard Chartered Bank, supported by two Mandatory Provident Fund (MPF) statements and records of contributions showing that Dragon Win Motors had made MPF contributions for nine employees in July 2020. In various relevant documents, the defendant confirmed that all the information which he provided was true and correct. Standard Chartered Bank subsequently granted a loan of over $3.8 million, which was granted a guarantee by HKMCI, to Dragon Win Motors.

The ICAC investigation revealed that the defendant had made false representations about the salaries of himself and other employees in the two MPF statements submitted to Standard Chartered Bank. One of the employees concerned received a monthly salary of about $20,000, but the defendant falsely represented that the amount was $91,000.

The defendant also admitted that he was not acquainted with the persons claimed to be his employees in the statements. ICAC enquiries also revealed that two days before the loan application submission, the defendant prepared an MPF employee registration form claiming that the employees joined the company in either April or May 2020 so as to produce false records of MPF contributions.

After the loan was approved, the defendant reported to the MPF trustee that the employees concerned had resigned within the first 60 days of their employment. Dragon Win Motors was hence refunded all the relevant MPF contributions.

The HKMCI and Standard Chartered Bank rendered full assistance to the ICAC during its investigation into the cases.

The prosecution was today represented by Senior Public Prosecutor Ivan Shiu, assisted by ICAC officer Jasmine Chan.