Introduction

In a recent matter, HKSAR v Tu Bing (DCCC 295/2017, unreported, 27 October and 16 November 2017), a former associate director of UBS AG Hong Kong Branch (“UBS Hong Kong”) received three and a half years’ imprisonment for HK$1.46 million bribery. Decided after the prolonged “Be My Guest Saga”, the decision shows the determination of ICAC, Hong Kong’s corruption watchdog, to spare no effort in fighting corruption and bribery.

Background

The defendant, Tu Bing, was an associate director of Global Wealth Management and Business Banking of UBS Hong Kong from January 2006 to November 2011. He was responsible for managing clients’ investment portfolios. In around May 2006, the defendant convinced a client of UBS Hong Kong, Mr. Zhang, to invest in Hong Kong stocks. Mr. Zhang is a Mainlander living in Shenzhen. He relied entirely on the defendant to manage his investments, which turned out to be quite successful.

At a meeting in Shenzhen, the defendant told Mr. Zhang that it was a trade practice for the latter to pay him 20 per cent of the realized profits from investments, which was “handling and intelligence fees”. The client acceded to the defendant’s request. It was undisputed that the client issued two cheques in the total amount of approximately HK$1.46 million. The two cheques were both deposited into the bank account of the defendant’s younger brother. In December 2007, two sums of money, namely HK$1 million and HK$400,000 were transferred from the bank account of the defendant’s younger brother to that of the defendant. At all material times, it was the policy of UBS Hong Kong that its employees must not, with regard to the affairs of UBS Hong Kong, demand and/or accept secret commissions from the clients of UBS Hong Kong.

In June 2014, Mr. Zhang made a complaint to the Hong Kong Monetary Authority against the defendant, which brought the matter to light. The ICAC subsequently pressed a charge against the defendant for conspiracy for an agent to accept advantages, contrary to section 9 of the Prevention of Bribery Ordinance (Cap 201) (“POBO”).

Decision

Earlier this year, the Court of Final Appeal handed down its judgment in Secretary for Justice v Chan Chi Wan Stephen (2017) 20 HKCFAR 98. The judgment clarified that section 9 of the POBO does not criminalise any and all payments of money by a third party to an agent made without the principal’s knowledge and consent. Rather, on a proper construction of section 9 of the POBO, the induced or rewarded conduct “aimed at the principal’s business” has to be a conduct which is likely to involve some deviation from the agent’s normal duties and “subverts the integrity of the agency relationship to the detriment of the principal’s interests.”

The defence contended that it was within the normal duties of the defendant to manage the investment portfolios of Mr. Zhang. Thus, there has been no deviation from his normal duties. Further, the acceptance of the “handling and intelligence fees” does not in any way subvert the integrity of the agency relationship to the detriment of the UBS Hong Kong’s interests. These contentions were rejected by the Court outright.

The Court held that the present case is to be distinguished from Chan Chi Wan. Here, it is the defendant’s responsibility to manage clients’ investment portfolios. In performing these duties, the defendant ought to be paid by his employer, i.e. UBS Hong Kong, in accordance with his employment contract. Except with the consent of his employer, he ought not to be paid by persons dealing with his employers. The defendant is not allowed to demand and/or accept any form of reward from the clients. By requesting Mr. Zhang to pay him 20 per cent of the realized profits from the investments clearly constituted deviation from his normal duties, because the normal duties of the defendant was to manage the investment portfolios without being paid separately by the clients.

Further, the Court agreed with the Hon. Justice Ribeiro’s judgment in Chan Chi Wan that the prejudice to the principal’s interests does not need to involve immediate or tangible economic loss to the principal or benefit to the agent at the principal’s expense. Here, the defendant’s conduct was clearly prejudicial to the business of UBS Hong Kong. The complaint filed with the Hong Kong Monetary Authority would inevitably cause damage to UBS Hong Kong’s reputation.

The Court concluded that the manifest intention of section 9 of the POBO was to proscribe the offering, demanding, giving and receiving of what may generically be secret commissions, which is exactly what the defendant has done here. Accordingly, the defendant was found guilty of one count of conspiracy for an agent to accept advantages, contrary to section 9 of the POBO. In relation to sentencing, the Court held that that the starting point for the bribery offence was three and a half years’ imprisonment and there were no exceptional circumstances that warranted any reduction.

Conclusion

After the CFA decision in Chan Chi Wan, the prosecutor must prove beyond reasonable doubt that the relevant transaction undermined the integrity of the agency relationship and injured the relationship of trust and loyalty that a principal is entitled to expect from his agent. A mere payment to an agent (employee) would no longer be sufficient to establish liability. Notwithstanding the stricter interpretation of section 9 of POBO, this recent decision shows that the ICAC will not relent in their crackdown on corruption and bribery offences. Agent accepting secret commissions for performing their normal duties is exactly what the law aims to proscribe.