Hefty Moulin sentences send the right message
Twelve years' jail is heavy punishment, reflecting a debt to society from which there is no swift rehabilitation. Most people would associate it with offences like serious violence, armed robbery and drug trafficking. That it should be handed down for a white-collar crime of fraud against banks and investors sends a strong signal. The courts are prepared to deal just as severely with those in the commercial world who abuse position and betray public trust for personal gain. This is welcome news for a city that stakes its future on its role as an international financial, services and logistics hub that upholds the rule of law.
The case in question involved the founder and former chairman of the bankrupt Moulin Global Eyecare Holdings, Ma Bo-kee, and also his son and former chief executive Cary Ma Lit-kin, and sister-in-law and former treasurer Michelle Lam Yuk-wah, who were sentenced to 10 years and 91/2 years respectively in the Court of First Instance. These are some of the longest jail sentences handed down for commercial crime in Hong Kong. Indeed - the prosecution said the elder Ma's 12-year term was the longest in the city's history for a crime of this kind. Three other defendants who played lesser roles in the conspiracy received sentences of up to two years.
Moulin made spectacles for leading brands and claimed to be the world's No 3 eyewear maker. But the trial revealed that it inflated sales with bogus customers, a deception that eventually cost banks and investors HK$4.45 billion when it went under in 2005. Mr Justice Peter Line's sentencing remarks quickly dispelled any expectation of sympathy or leniency for the once respected high-flyers. He said the cash inflow generated by fraud called for false accounting on a prodigious scale, involving a wholesale breach of public trust and commercial crime of the worst kind.
The sentences add to a pattern of stiff penalties for corporate and market offences recently, notably in insider dealing cases brought by the Securities and Futures Commission. Even after it was made a criminal offence seven years ago to trade in stocks with inside information not yet available to the public, the perception that this was an acceptable way to make money has persisted. But the SFC has shed its image as a toothless tiger with a number of people being put behind bars for insider trading since last April.
The crackdown on insider trading and market manipulation has given rise to some criticism of the SFC for pursuing smaller, local cases of wrongdoing when the bigger issue for investors is timely disclosure of market sensitive information material to price. Some argue that insider trading is a victimless crime and a matter of caveat emptor, or buyer beware, yet it delivers a financial advantage to the few at the expense of the many.
Hong Kong is currently the IPO capital of the world, thanks partly to being in the right place at the right time in the wake of a global financial crisis that battered rival financial capitals. Companies and investors are attracted by the depth and freedom of our markets under the rule of law. If the city is to consolidate its position as a financial hub in the face of growing competition, it must be seen to strive for a level playing field, with zero tolerance for insider trading, market rigging and lack of transparency. Heavy penalties for wrongdoers help send the right message.
The government has missed a chance to underline it by watering down market reforms that would have made failure by directors to disclose price sensitive information a criminal offence - like the use of it by insider traders.
