Public Prosecutor v Kidd, David John and another matter [2020] SGHC 230

Introduction

Facts

The respondent admitted to the Statement of Facts (“SOF”) without qualification. At the material time, he was a 30-year old Singaporean permanent resident and a British citizen, employed as a fuel oil trader with Lukoil.

In or around March 2016, Lukoil entered into a contract with a buyer, Transocean, for the sale and purchase of high sulphur fuel oil. Under the contract, Transocean would order oil in tranches from Lukoil. To trigger the delivery of each tranche, Transocean would inform Lukoil of the quantity of oil it wanted to purchase for that order. The price of the oil purchased was based on the date on which the trigger (ie, purchase) was declared by Transocean.

The respondent was the sole trader in charge of the contract with Transocean. The respondent was tasked to contemporaneously enter the details of each trade into Lukoil’s internal record system, including the time, quantity, price and/or exposure for that trade. He also had to contemporaneously carry out back-to-back trades in order to hedge the trade and cover pricing exposure resulting from the trade on the same day, in order to prevent Lukoil from suffering huge losses. However, the respondent failed to contemporaneously hedge all the trades relating to the Transocean contract which were carried out between 6 April and 29 July 2016. Instead, he attempted to wait for a more favourable price to hedge the trades in order to gain a financial advantage for his fuel oil book. The respondent’s delayed entering of the trigger declarations received from Transocean and his consequent late hedging at a correspondingly higher price resulted in losses to Lukoil. Of the 18 irregular trades performed, 17 trades led to losses amounting to S$1,024,208 in total. This figure was based on further clarificatory evidence adduced by way of Criminal Motion 34 of 2020 brought by the appellant, which I had allowed.

Lukoil used daily mark-to-market updates to monitor its trading position and risk exposure. The mark-to-market updates were intended to provide Lukoil with a realistic appraisal of its financial situation based on prevailing market conditions. However, the respondent entered false mark-to-market updates projecting gains into Lukoil’s system, so as to negate or mitigate the losses caused by the irregular trades. These false updates therefore concealed the losses resulting from the late hedging. The respondent’s recording of false mark-to-market updates in Lukoil’s system was the subject of the charges under s 477A of the Penal Code. In respect of the five proceeded charges, the false entries were made from 17 May to 1 July 2016.

The respondent later cancelled the Transocean contract prematurely without the approval or knowledge of Lukoil’s management, and resigned from Lukoil a day after having done so, on 29 July 2016. These events led to internal investigations, which were carried out by Lukoil, and the subsequent discovery of the offences. A police report was lodged on 3 February 2017 with the Commercial Affairs Department, alleging that the respondent had backdated trades that resulted in losses for Lukoil.

As the respondent did not cooperate with police investigations, significant investigative resources had to be expended between March 2017 and April 2018. The respondent eventually admitted to the offences on 28 April 2018. The respondent also gave false information in his statements that his colleagues could have performed the irregular trades.

The decision below

The DJ held that the following sentencing considerations identified in Tan Puay Boon v Public Prosecutor [2003] 3 SLR(R) 390 (“Tan Puay Boon”) at [47] and [50] were applicable to the present case:

(a) whether there was deviousness or surreptitious planning;

(b) whether the falsifications were committed for one’s personal gain;

(c) whether there was abuse of trust; and

(d) the quantum of monies involved.

Applying these considerations, the DJ opined that while the respondent had repeatedly keyed in false updates and the offences were premeditated, his actions were not as “sophisticated, surreptitious or egregious” as the precedent cases cited by the appellant. As to whether the respondent had committed offences for personal gain, the DJ noted that the respondent did not receive any direct monetary benefit. While the respondent was entrusted with responsibility over the contract, he did not occupy a high position in Lukoil’s hierarchy, and he was also not employed for as long as the offenders in the cases cited by the appellant. The DJ noted that while the offences did not directly cause the losses to Lukoil, the concealment had allowed the irregular trades to continue since the false updates were made to conceal losses caused by the late hedging. In this regard, the DJ found that while the losses caused to Lukoil were significant, they were significantly less than the amounts involved in the precedent cases referenced to by the parties.

The DJ disagreed with the appellant’s submission that the case of Sabastian s/o Anthony Samy v Public Prosecutor (Magistrate’s Appeal No 343 & 346 of 1985 (unreported)) (“Sabastian Anthony Samy”) supported the sentence of 18 months’ imprisonment. Sabastian Anthony Samy was an unreported decision and based on the facts that could be gathered about the case, the offences were significantly more aggravated than those in the present case. Therefore, the DJ did not find Sabastian Anthony Samy to be a particularly useful precedent.

The DJ also compared the facts in the present case to those of Public Prosecutor v Takahashi Masatsugu [2009] SGDC 265 (“Takahashi Masatsugu”), Public Prosecutor v Noriyuki Yamazaki [2009] SGDC 118 (“Noriyuki Yamazaki”) and Public Prosecutor v Takayoshi Wada [2009] SGDC 162 (“Takayoshi Wada”) (collectively, the “Mitsui oil cases”) in calibrating the appropriate global sentence. Finally, the DJ considered the case of Public Prosecutor v Lim Lee Eng Jansen [2001] SGDC 188 (“Jansen Lim”) where a sentence of 12 weeks’ imprisonment was imposed. The DJ held that, compared to the present case, the facts in Jansen Lim were less serious and there were stronger mitigating factors. The offender in Jansen Lim had also cooperated fully with the authorities, unlike the respondent. As such, the sentence imposed in Jansen Lim was not a suitable reference point.

Accordingly, the DJ found that an aggregate sentence of 36 weeks’ imprisonment was appropriate, taking into account the two weeks the respondent had spent in remand, and having regard to the sentences imposed in precedents including Jansen Lim and the Mitsui Oil cases.

Issues to be determined on appeal

The main grounds of appeal were first, that the DJ had failed to give due weight to the relevant aggravating factors; second, that the DJ had been overly influenced by the absence of direct pecuniary benefit to the respondent; and third, that the DJ had failed to appreciate and give due weight to the relevant sentencing precedents. I address each issue in turn.

Weight to be given to aggravating factors

The arguments on appeal

My decision

Absence of direct pecuniary benefit

The arguments on appeal

My decision

The sentencing precedents

The arguments on appeal

The appellant argued that the DJ had failed to give due weight to the sentencing precedents. In particular, it was submitted that the facts of Sabastian Anthony Samy were similar to the present case and hence the sentence imposed ought to have been adopted as the reference point. Both cases involved high levels of premeditation and concealment of losses, both offenders did not gain direct pecuniary benefit and huge losses were caused to both companies. The shorter duration of time over which the offences were committed in the present case had been taken into account by the appellant in the calibration of the proposed sentence. It was submitted that the DJ also erred in adopting the case of Jansen Lim as a reference point in determining the sentence, given that the DJ had found that there were material differences between Jansen Lim and the present case. Finally, the DJ erred in relying on the Mitsui oil cases (of which two sentences were reduced on appeal without grounds of decision rendered) when the DJ himself had cautioned against over-reliance on unreported cases.

The respondent argued that the DJ had rightly considered the Mitsui oil cases, where the offenders similarly did not receive any direct financial benefit. In particular, the respondent’s culpability was lower than that of the offender in Noriyuki Yamazaki. Further, the DJ had considered and given due weight to the case of Sabastian Anthony Samy. The appellant had overstated the similarities between the present case and Sabastian Anthony Samy. Even though both the respondent and the offender in Sabastian Anthony Samy did not gain direct pecuniary benefit, the latter would have been rewarded by his company for his efforts, and could not be said to have similar motivations as the respondent.

My decision

The Mitsui Oil cases

In Noriyuki Yamazaki, the offender was convicted of 10 charges under s 477A of the Penal Code. The 99 remaining charges, also under s 477A, were taken into consideration for sentencing. The offender was the main naphtha trading manager in Mitsui Oil (Asia) Pte Ltd (“MOA”). MOA was required to send a daily mark-to-market (“MTM”) report to Mitsui Tokyo to provide the latter with a summary of the realised and unrealised profits and losses made by MOA. Between April and October 2006, the offender falsified the prices of naphtha swaps that he was responsible for keying into an Excel spreadsheet, knowing that the middle office staff in MOA would rely on these prices in their preparation of the daily MTM reports. By entering false swap prices, he concealed losses of about US$5 million to US$12 million on each occasion in respect of the proceeded charges. The concealment of these losses allowed the offender to continue to trade beyond the loss limits set by Mitsui Tokyo. The losses eventually snowballed to a significant amount, amounting to at least US$71 million. The offender was sentenced to one year’s imprisonment per charge. On appeal, the individual sentences were upheld, but the global sentence was reduced from five years’ imprisonment to two years.

In Takahashi Masatsugu, the offender was convicted of 20 charges under s 477A of the Penal Code. 110 charges under s 477A were taken into consideration for sentencing. He was the Executive Vice President of MOA and was in charge of the middle office. The offender’s role was to approve the daily MTM reports to be sent to Mitsui Tokyo, and to give an explanation should the daily fluctuations of the daily MTM profit and loss figures exceed a certain quantum. The offender directed his assistant, one Thoh, to alter the profit and loss figures to reflect lower MTM losses than actually sustained, so as to avoid large fluctuations in the profit and loss figures. As a result, Mitsui Tokyo did not have an accurate picture of MOA’s performance. In respect of the 20 proceeded charges, the offender falsified the profit and loss figures from April to October 2006, and under-reported losses totalling US$73.6 million. He was sentenced to nine months’ imprisonment per charge. On appeal, the individual sentences were upheld, but the global sentence of 36 months’ imprisonment was reduced to 18 months.

In Takayoshi Wada, the offender was convicted of three charges of abetting the making of false entries under s 477A read with s 109 of the Penal Code. 14 similar charges were taken into consideration for sentencing. The offender was the general manager of trading, and he abetted Noriyuki Yamazaki by conspiring with him in the making of false entries in respect of the naphtha swaps’ prices. Yamazaki reported to him at the material time. In September 2006, the offender came to know that Yamazaki was falsifying information entered into the Excel spreadsheets, but agreed not to disclose the matter to Mitsui Tokyo. In respect of the three proceeded charges, the offender had abetted the concealment of losses between about US$10 to 12 million for each charge in October 2006. The offender was sentenced to ten weeks’ imprisonment for each charge, and a global sentence of 20 weeks’ imprisonment.

Sabastian Anthony Samy

Jansen Lim

In Jansen Lim, the offender was convicted before me in a District Court in 2001 of four charges under s 477A of the Penal Code, and 21 similar charges were taken into consideration for sentencing. The offender was a senior manager of a bank, and he had instructed his subordinates to suppress or delay data entry relating to credit lines, in order to allow credit in excess of limits to be granted to a client. The client had been introduced by the offender to the bank. For the four proceeded charges, US$1.8 million additional credit was extended as a result; and for the 25 charges, the aggregate loss caused by the offender’s conduct was in excess of US$5 million. The offender was sentenced to 12 weeks’ imprisonment, taking into account the two months which he had spent in remand. In reaching this sentence, I had noted that the offender had given instructions to his subordinates openly, and there was no evidence of surreptitiousness. This was in contrast to cases such as Sabastian Anthony Samy, where the offender engaged in falsification of documents to recoup significant losses already incurred, and had abused the trust reposed in him to make unauthorised fund transfers. I had also held in Jansen Lim that an important distinguishing factor was that the offences were only indirectly connected with the offender’s own interests, and there was no evidence that he stood to obtain any pecuniary gain from the offences.

Relevance of other sentencing precedents

The appellant also sought to rely on Public Prosecutor v Alex Ng Soon Heng [2010] SGDC 242 (“Alex Ng”) and Public Prosecutor v Tan Liang Chye [2006] SGDC 109 (“Tan Liang Chye”) and submitted that the DJ failed to take these precedents into consideration. According to the appellant, these cases showed that substantial imprisonment terms were imposed even in cases where direct financial benefits were not gained by the offenders. However, these cases are clearly dissimilar on their facts.

In Alex Ng, the offender was convicted of seven charges of entering into a conspiracy to falsify accounts under s 477A read with s 109 of the Penal Code and one charge under the Securities and Futures Act (Cap 289, Rev Ed 2006) (“SFA”). 61 similar charges under s 477A and one charge under the SFA were taken into consideration for sentencing. The offender was the Group Financial Controller of the company. Under instructions from his superiors, he instructed his staff to inflate and fabricate invoices to raise the financial standing of the company to make it an attractive investment for investors. The company’s actual profit was $1.61 million, which was inflated to $8.033 million in its unaudited full-year financial statement released via SGXNET. The offender was sentenced to two to four months’ imprisonment for each charge under s 477A of the Penal Code, and six months’ imprisonment for the charge under the SFA. He was sentenced to a global sentence of ten months’ imprisonment, with sentences for one charge under s 477A of the Penal Code and one charge under the SFA running consecutively. The sentences were upheld on appeal.

Even though the offender was sentenced to a global sentence of ten months’ imprisonment, I note that the lengthiest sentence was imposed for the offence under the SFA. The considerations of the court in determining the appropriate sentences for the offence under the SFA, as well as for the offences under s 477A of the Penal Code, were also specific to the facts of that case. In respect of the offence under the SFA, the court noted the importance of truthful disclosure of information under the regime regulated by the Singapore Exchange, and the impact that false disclosure could have on investor confidence. In respect of the s 477A offences, the court considered that the false accounts would deceive investors and expose them to financial risk. In contrast, there was no evidence that the falsehoods made by the respondent in the present case had any impact on the general public or on third parties. Different sentencing considerations would therefore apply in these two cases with vastly different facts, and comparisons between them would have limited value.

In Tan Liang Chye, the offender was convicted of seven charges of entering into a conspiracy to falsify accounts under s 477A read with s 109 of the Penal Code, and consented to 46 other similar offences under s 477A read with s 109 and two other offences to be taken into consideration for sentencing. Pursuant to a conspiracy, the offender had either created or caused others to create fictitious sale invoices and delivery orders in order to trigger false sales entries in the sales accounts of three companies. The court considered that the offender was part of a “syndicate that managed an extensive and elaborate scam” and was an essential part of a “sophisticated scheme involving the use of false documents between several companies to perpetrate fraud”. In respect of the proceeded charges, the quantum involved in the falsified invoices and delivery orders was about $22 million; and the figure was about $42 million for the charges taken into consideration. Although the offender did not himself benefit from his offences, the court noted that this factor had little mitigating weight as “it was not in dispute that [his] criminal acts did cause harm and loss to others and to the [company] and enable[d] his accomplices to reap benefits of their nefarious trade on a large scale” (at [12]). He was sentenced to a global sentence of 45 months’ imprisonment.

Again, the facts in Tan Liang Chye differ vastly from the facts in the present case. The appellant sought to argue that a substantial imprisonment term was imposed on the offender in Tan Liang Chye despite the fact that he did not personally obtain financial benefit from his offences. However, it is clear that the offender was an important player in a scheme to perpetrate fraud. His actions caused loss to the company and third parties, and also benefited his accomplices. The aggravating factors present in that case were egregious and justified the long imprisonment term. Those factors are not present in this case.

For completeness, I should add that in the proceedings below, apart from Sabastian Anthony Samy, the appellant had relied on Tan Puay Boon, Chew Soo Chun v Public Prosecutor [2016] 2 SLR 78 and Public Prosecutor v Gene Chong Soon Hui [2018] SGDC 117 as sentencing precedents in support of the 18-month imprisonment term it sought. It was not contended on appeal that the DJ had erred in distinguishing these three cases on various grounds, primarily because they involved much more aggravated facts and many more charges.

Conclusion

I dismissed the appeal as I was not persuaded that there were compelling reasons to differ from the DJ’s considered assessment of the appropriate sentence. The aggregate sentence of 36 weeks’ imprisonment is not manifestly inadequate. It is fair and commensurate with the gravity of the offences and the respondent’s culpability.