Co-founder of Hong Kong scrap metal firm gets seven years over scam that rocked stock exchange
- Judge calls crime worst of its kind in handing down sentences for China Metal Recycling co-founder and company’s administration manager
- Defendant’s husband and ‘mastermind’ of scheme fled to mainland in 2016 and remains a wanted man
China Metal Recycling (Holdings) co-founder Lai Wun-yin, convicted of one count of conspiracy to defraud by a jury in December, committed the worst crime of its kind, one that damaged the exchange’s credibility, Mr Justice Lee Wan-tang said as he passed sentence in the High Court.
The judge also handed an eight-year sentence to Lai’s co-defendant, company administration manager Choy Ling-ling, who was found guilty of the same charge.
The sentencing followed a 66-day trial that centred on a scheme to get the business listed on the main board of the Hong Kong stock exchange in 2009 by grossly inflating financial results via phoney transactions that saw money passed to wholly owned subsidiaries before being funnelled back to the parent company.
Prosecutors said the transactions, ostensibly worth more than HK$4.2 billion, spanned the three years before the company went public, and that Lai had personally directed more than 10 per cent of them.
Police found that of 647 purported transactions made by the company, only five were genuine. The company was delisted in 2016.
Lai and her husband, Chun Chi-wai, the company’s chairman and other co-founder, earned HK$600 million by getting their company listed. Choy had also earned HK$3 million by selling the company’s bloated shares.
Chun and the two defendants were arrested in 2013, and officially charged three years later. But Chun, who held a 53 per cent interest in the company, fled to mainland China two months before the first court hearing. Hong Kong has since issued a red notice for his arrest with Interpol.
The logistics of committing fraud on an industrial scale
Lee said in his ruling that he would have jailed Chun for no less than 12 years had he been tried, given his role as the “mastermind” of the conspiracy.
While the judge accepted that the defendants had acted under Chun’s influence, he found their participations extensive, significant and indispensable to the execution of the scheme.
“While Chun seems to be the mastermind, the scheme could not have been implemented by one human alone,” Lee said.
He said the offence was very serious in that it involved complex calculations, and the defendants succeeded in deceiving investors into buying hundreds of millions of shares of stock during the company’s initial public offering.
“It was meticulously planned and carefully executed over an extended period of time,” he said.
“The credibility of the Stock Exchange depends on the honesty of the listed companies. By the conspiracy, the defendants caused damage to the integrity of the Stock Exchange in Hong Kong.”
The judge set a starting point of 7½ years in jail for Lai and 8½ years for Choy. He reduced each of those terms by six months in light of delays to the trial and their personal circumstances.
Chief Inspector Chan Kwok-wai of the Commercial Crime Bureau welcomed the court’s judgment, saying the police force would continue to probe five other suspects involved in the crime.
The disgraced company claimed to be the largest recycler of scrap metal in mainland China, and successfully raised more than HK$1.78 billion when it went public. Its trading was suspended in January 2013, and the company was liquidated in February 2015 pursuant to a High Court order. Liquidation of the company is still ongoing.
