HOW SOO FENG v PUBLIC PROSECUTOR

Facts

Iseli Rudolf James Maitland ("James") and How Soo Feng ("Sue") were directors and majority shareholders of The Gold Label Pte Ltd ("TGL PL"), incorporated in Singapore on 28 April 2009. From 16 December 2009, TGL PL sold gold bars under a buyback scheme: clients paid a marked-up price, received periodic pay-outs, and at the end of a 3-month or 6-month term could require TGL PL to buy the bars back at that marked-up price. The company's own sales material posed the question "Is this a Ponzi?". It took in more than $120 million in revenue over 10 months, and by the time the appellants started its winding up on 7 October 2010 it owed clients more than $76 million in unfulfilled contracts.

A third director, Wong Kwan Sing ("Gary"), absconded before trial, later pleaded guilty and received two years and 10 months' imprisonment. James and Sue claimed trial in the District Court on a charge of being knowingly parties to carrying on TGL PL's business for a fraudulent purpose under s 340(5) read with s 340(1) of the Companies Act (Cap 50, 2006 Rev Ed). They were convicted and each sentenced to three years and 10 months' imprisonment. They appealed against conviction and sentence in Magistrates' Appeals Nos 9173 and 9189 of 2022. Before the hearing James also filed HC/CM 33/2023, seeking disclosure and admission of a lawyer's statements to the Commercial Affairs Department, and HC/CM 34/2023, to amend his petition of appeal.

Issues

1. Whether TGL PL's business was carried on for the fraudulent purpose stated in the charges.
2. Whether the appellants were knowingly parties to carrying on the business for that purpose.
3. Whether the sentences breached the parity principle when compared with Gary's sentence.
4. Whether Sue should have received credit for strictly complying with her bail conditions.

Holding

The High Court dismissed the appeals against conviction and sentence. Earlier, on 4 May 2023, it had dismissed CM 33 because the lawyer was not a material witness, and it had allowed CM 34 for reasons given in a separate judgment.

Reasoning

On the first issue, the appellants did not seriously dispute the point on appeal. Both had conceded at trial that the scheme was inherently unprofitable, and an unopposed expert report confirmed that every contract lost money once clients exercised the buyback option. The court examined each possible route to profit and found none: gold prices would have had to rise far faster than they did, TGL PL bought gold at retail rather than wholesale prices, its only external investment was a $1.9 million time deposit withdrawn early, and the so-called Formula was only a series of internal transfers between its own bank accounts. Payouts could only be funded from new sales, which made it in effect a money circulation scheme.

On knowledge, the court held that a genuine belief in the business required the appellants to have in mind at least one plausible way it could make a profit. They had reason for doubt from the start: the Malaysian business on which the model was based had been raided by Bank Negara, and a manager of a related Malaysian company had told them its scheme could not pay clients in the long run. Their statements to investigators described the business as using money from new contracts to buy more gold to sell to new clients. They knew each contract lost money if the client sold the gold back, and they had no reason to think clients would not do so. They received Daily Reports showing that the only money coming in was from new contracts. Their inquiries to the authorities through WongPartnership concerned licensing only and, the court agreed, gave the company a veneer of legitimacy. Buying out Gary's company's shares and then winding up the company was more consistent with concealment than with an honest belief. At the least, the appellants had turned a blind eye to the obvious.

On parity, the District Judge was entitled to find the appellants more culpable than Gary: they drove sales, had overriding control, offended for longer and gained more. Gary's guilty plea had also saved significant resources, including a retrial of the appellants' case, which justified an uplift for the appellants.

On bail, the court accepted that Sue deserved some credit for staying in Singapore for the proceedings without being allowed to work. Her deeper roots in Singapore distinguished Public Prosecutor v BWJ [2023] SGCA 2, and given her larger role in sales her sentence was not manifestly excessive.

From the judgment