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State v Korei [2005] PGLawRp 39; [2005] PNGLR 456 (24 November 2005)

[NATIONAL COURT OF JUSTICE]

STATE

V

CHRISTIAN KOREI
LORENGAU: LAY J

9 & 24 NOVEMBER 2005

CRIMINAL LAW - Misappropriation-Criminal Code s 383A(1) - K82,529.68 - Plea of guilty - First offender - Donor funding - Money for village classroom - Restitution made of K65,000 - Ability to repay the balance - 4 years IHL all suspended to enable repayment - Recognizance to repay unrecovered balance of K17529 with interest within 1 year from sale of Port Moresby house.

Facts

The donor, in response to a request of a community concerning their needs, transmitted the sum of K82,202.73 to the account of the accused for the purpose of building a double classroom for the community. The accused surreptitiously and secretly banked it into his private account and put it to his own use. On the discovery of his fraudulent act, he made restitution of K65,000. He was convicted of one count of misappropriation. On sentencing him the Court took into consideration:

1. the prevalence in the country of "fraudulent theft and misappropriation of funds held in trust";

2. the guidelines set out in the Supreme Court decision in Wellington Belawa v the State [1988-89] PNGLR 496, and section 19 of the Criminal Code.

Held

The accused is sentenced to a term of 4 years in light labour. The entire sentence is, however, suspended subject to the accused fulfilling certain conditions that included the repayment within a period of 12 months of the sum outstanding, plus interest.

Papua New Guinea cases cited

State v Tony Baik N1930.

State v Tardew (1986) PNGLR 91.

State v Bygonnes Tuse Nae (1996) N1474.

The State v Vurmete (10/11/2000) N2008.

The State v Benson Likius (8/3/2004) N2518.

Wellington Belawa v. The State [1988-89] PNGLR 49.

Counsel

P. Kaluwin,
L. Siminji,

24 November 2005

Lay j. On a plea of guilty the defendant was convicted of one count of misappropriation contrary to s 383 of the Criminal Code.

The plea was entered after the following facts were put to the defendant. On 14 July 2001 a cheque of K82,529.68 was deposited by international money transfer to the defendant's bank account. The money was sent by Mr. Peter Builder, a World War II veteran. The purpose was to build a double classroom at Ponam Island where the donor had spent time during the war. After receipt of the money the defendant withdrew money from his account both at Lorengau and Port Moresby and applied those funds to his own use until the account was frozen by the bank. At the time of freezing of the account there was a balance of K51,493.46 remaining. The defendant later withdrew the sum of K50,000 from the account and deposited it to the account of Ponam Primary School.

On his allocutus the defendant said how sorry he was for the offence. He apologised to the people of Ponam for abusing their trust. He promised to pay back the money which he still owes.

Defence counsel submitted that the defendant is 56 years old, married with 3 children, the youngest a son doing grade 11 at high school. The defendant has 3 brothers and 2 sisters all adult and married. The defendant is the first born. He is himself from Ponam Island. He attends the Catholic Church. He was educated to grade 10 in 1968. He joined the Electricity Commission and worked initially as an electrician. After 28 years service he was retrenched in 1997 having reached the post of divisional project manager. The defendant was arrested on the present charge and released on K350 bail.

Counsel submitted in mitigation I should take into account:

· The guilty plea;

· That the plea is consistent with the record of interview, a statutory declaration and newspaper articles containing confessions;
· The effect on the victim who has lost his name;
· Defendant is a first offender;
· Served the country for 28 years;

· Amounts paid back were K15,000 20/1/03 and K50,000 10/7/03;

· The balance of K50,000 was immediately transferred when the account was frozen;

· A balance of only K17,529.68 ("the principle") is due to be paid;

· Defendant has a Port Moresby house valued at K120,000 from which he can repay the balance due.

It was conceded that the following were aggravating factors:

· The amount taken was substantial;
· The amount was taken in breach of trust;

· The trust was a serious one involving a donor, the defendant's own people and the future of their children;

· The period over which the offence was committed was lengthy;

· Some of the money was used on payment of land rent and other outgoings, repairs and maintenance for the defendant's Port Moresby residence;

· The school still needs the balance of the money to build the classroom.

Unfortunately the fraudulent theft and misappropriation of funds held in trust is a prevalent offence in this country as observed in State v Tony Baik N1930 (Injia J as he then was). Defence Counsel referred me to the Supreme Court decision of Wellington Belawa v The State [1988-89] PNGLR 496 in which the Court said the following factors should be taken into account (from the head note):

"(1) the amount taken;

(2) the quality and degree of trust reposed in the offender including his rank;

(3) the period over which the fraud or the thefts have been perpetrated;

(4) the use to which the money or property dishonestly taken was put;

(5) the effect upon the victim;

(6) the impact of the offences on the public and public confidence;

(7) the effect on fellow-employees or partners;

(8) the effect on the offender himself;

(9) the offender's own history;

(10) restitution; and

(11) those matters of mitigation special to himself such as illness; being placed under great strain by excessive responsibility or the like; where, as sometimes happens, there has been a long delay, say over two years, between his being confronted with his dishonesty by his professional body or the police and the start of his trial; finally, any help given by him to the police."

In The State v Tardew (1986) PNGLR 91 (Kidu CJ, Bredmeyer & Barnett JJ), the Supreme Court said, the appropriate sentence, when there was repayment of the whole amount appropriated of K82,202.73, was five years. In that case Bredmeyer J at p.500 said that in respect of amounts involving between K40,000 — K150,000 a sentence of three to five years would be appropriate. In State v Bygonnes Tuse Nae (1996) N1474 (Sawong J) where there were 19 counts totaling over K103,000 an effective sentence of 4 years IHL was imposed. In The State v Vurmete (10/11/2000) N2008 (Gavera-Nanu J) K41,000 taken, none repaid, a sentence of 3 years 6 months imposed. In The State v Benson Likius (8/3/2004) N2518 (Lenalia J) a sum of K68,679 was misappropriated by a payroll clerk. There were assets from which substantial restitution could be made immediately. Sentence of 5 years IHL, 2 years suspended on probation and conditions of repayment. In State v Shirley Tainoli (24/11/2004) (Mogish J), unnumbered judgment, the offender had deposited a stolen cheque to the value of K185,000 into an account controlled by her and her husband. At time of sentence she had a 9 months old baby, the whole of the amount was recovered, she did not benefit from the fraud, there was no breach of trust and the offence was perpetrated only once. The offender was sentenced to 4 years light labour which was wholly suspended on probation conditions.

Pursuant to s 19 of the Criminal Code the Court may suspend part of a period of imprisonment upon the defendant entering into a recognizance (s 19(6)) in addition to any other punishment to which he is liable (s 19(1)(d)(i) and the recognizance may order the defendant to comply with such other orders as the court in its discretion may impose (s 19(1)(d)(ii). If the court is considering a period of suspended sentence for a person 19 years of age or greater, a pre sentence report should be obtained: Public Prosecutor v Don Hale [1998] SC 564.

This Case

The Amount Taken

The amount taken is substantial. No doubt on Ponam Island it is an amount no individual could hope to possess or any community organization raise.

Nature of the Trust

In this case it appears from the depositions that the commission of the offence had its genesis much earlier than the receipt and deposit of the funds in the defendant's personal bank account. Mr Builder, the donor, had fulfilled a lifetime dream to re-visit the scene of his war-time experiences as an airforce pilot at Ponam, and the people of Ponam Island of whom he had fond memories. He did so on a tour ship which called to Manus in mid 2000. On his visit he asked the people of Ponam to make a suggestion of something he could do for them. A committee was formed and the suggestion put forward of a double classroom and the cost was indicated. The defendant put himself forward as intermediary and was in correspondence with Mr. Builder. Thus he knew from that correspondence that the commitment to provide the money had been made and that it was being sent. He shared that information with no one. He kept it to himself.

When it came time to have the money directed to an account in Papua New Guinea the defendant advised Mr. Builder to direct the money to the defendant's personal account. The defendant knew that the school had its own account. When the funds arrived and were deposited to the defendant's personal account he kept that to himself also. It was not until some months had passed and there had been no acknowledgement of the receipt of the funds, that Mr. Builder started making enquiries through other sources. Eventually a 'tok save' went out on the radio. That was the first knowledge the people of Ponam had of the existence of the money. The defendant says he kept quiet about the money because the issue of land for the classroom was not settled and the knowledge that there was money available would have made settling the land issue much more difficult. That is credible. Island dwellers in Manus do not have surplus land. Land is valuable and there is much pressure on it. Nevertheless, by keeping the information entirely to himself the defendant placed himself in a position of absolute control over the money and in a position of maximum temptation.

The defendant placed himself in the position of trustee for the school, the people of Ponam and especially the children now and in the future. It was a high trust but not one such as that of an office bearer or person employed in a position of trust. I distinguish this case from Tardrew's Case where the defendant was employed in a managerial role in a National computing facility processing millions of kina.

The Period over which the Misappropriation took Place

The deposit occurred in July 2001 and it was not until 2 years later on 10 July 2003 that the defendant finally relinquished the available balance. It was a lengthy period, even after the defendant's possession of the funds was discovered.

The Use to Which the Funds were Put

For the most part the money was spent on arrears of land rent, repairs and maintenance for the defendant's house in Port Moresby. They were useful purposes, securing and improving an asset from which repayment could be obtained.

Effect on the Victim

The school and the children are still waiting for their classroom. Inflation has taken its toll with the value of money and the cost of materials in the four years since the donation. I am not informed as to whether the principle amount and interest would still purchase a double classroom.

Impact on Public Confidence

Whilst there is no doubt that the defendant will not be trusted again with any position in the community, the breach of trust is not likely to shake faith in persons employed in public positions of trust.

The effect on fellow associates (employees and partners)

No doubt the defendant's fellow committee men at the school feel greatly deceived and let down by the defendant. There is no specific evidence before me. I comment further on this aspect under the comment on the Pre Sentence Report.

The Effect on the Defendant

I have no doubt that the effect on the defendant has been devastating. At the same time he is of an age and background where he could not realistically expect to find further employment; and the realities of close village communal life are that the community is fairly forgiving. The matter was given wide publicity in several articles in a national newspaper. The defendant's children must have suffered much when the crime was made public.

Restitution

It is of course a significant factor in mitigation that K65,000 of the amount misappropriated has been repaid. However there are aspects of aggravation surrounding that repayment which need to be mentioned. First, the first instalment of repayment was only K15,000, at a time when the bulk of the principle was still in the defendant's bank account. And that payment was not made until 18 months after the misappropriation. The second and final instalment of K50,000 was not paid over until the defendant's bank account was frozen. So the payment was not made voluntarily in the context of righting the wrong, but because the defendant could no longer access his bank account.

The defendant has said he will repay the balance of K17,529.68. He has a house in Port Moresby valued at K120,000 from which repayment can be made. It was submitted from the bar table that the defendant would need a year to arrange that repayment. I queried during submissions why this would be so when the defendant has already had four years to make restitution.

Other Mitigating Factors

Apart from the matters submitted by defence counsel, I take into account that it is two years since the defendant was charged and he has no doubt had some anxiety regarding his future since that time. However, he is no longer in the work place. He is not in the position of someone in a position of trust, who has to "put on a brave face" every day awaiting his trial.

The Pre Sentence Report

A very thorough pre sentence report was presented by the Community Correction Officer Mr. Awagalas, in which some 22 people had been interviewed. All were surprised that the defendant had committed the offence. He was perceived by all as a very good resource person in the community during his government employment, he has a good character and gives time to promoting peace and harmony in the community. There is a concern that if he is sent to prison the balance of the donor aid will not be repaid. Those interviewed, which include his family, Ponam Community Government leaders, Ponam Village Court officials, local church representative, 8 Ponam clan representatives and the Chairman of the Board of Management of Ponam Primary School, all suggest a long period of probation.

However the pre sentence report also reports, that in respect of the house in Port Moresby valued at K120,000 from which the defendant says restitution could be made, the defendant has already received K48,000 in installments payments from the purchaser, which have been applied to his own use and not to the repayment of the misappropriated sum. The purchaser of the house has ceased paying the agreed installment payments. The agreement was verbal and made in December 2000. The matter is now in litigation. Title to the house has not been produced, it is unknown whether there are still any issues or outstanding balance with the defendant's former employer from whom the house was purchased or whether title to the house is clear and in the defendant's name.

The defendant and his wife also have a disabled child who requires additional care the full burden of which would be thrown on his wife, no longer a young woman, if he is sent to prison.

The Sentence

The sentence in this case must recognise all of the significant mitigating factors mentioned by counsel but also the breach of trust, the prevalence of this type of offence and the amount which was misappropriated. It should also recognise that the first fruits of the sale of the house in Port Moresby have not been applied to restitution but to purchases for the defendant's own creature comforts. From the money he has had he now has a 4 bedroomed house in the village, a 19ft dinghy, a 40 hp and 9.9hp outboard motors, a generator and a solar panel. This confirms that from the outset this offence has been about the defendant putting his own interests before those of the community.

I consider that a wholly suspended sentence is rarely appropriate in cases involving large sums of money. It does not serve the people's perception that justice is being done when there is a large disparity between sentences, for example, between stealing or break enter and steal and the type of offence now before the Court. There are, as the legally trained knows, different consideration for each type of offence. But it does not serve the broad interests of justice if it appears that "white collar" crime is treated significantly differently and less seriously than other types of crime. In this circuit a young man was sentenced to 12 months imprisonment, 6 months suspended, for stealing a solar panel, probably worth K2,000, from a school. How can it appear just and equitable if a prison sentence is imposed for such an offence but the misappropriation of a large amount is punished by a suspended sentence?

It is frequently the case that in misappropriation offences the offender is better educated, better remunerated, and more mobile with a larger number of business and social contacts and consequently has a greater effect on a greater number of people in his working and social life. The offender is often in the position to marshal a good number of people in significant community rolls who will speak in his defence or support. Those people represent that part of the community who know the offender as a person, and those who will be detrimentally affected either financially or in the loss of some other form of assistance by his absence from the community.

The view of the wider community, which in some ways is more objective, is usually substantially less generous towards white collar crime offenders. Whilst the views of the immediate community are to be given significant weight, both their views and the views of the wider community need to be accommodated in sentencing.

In this case I consider that the proper sentence is one of four years in light labour.

The Supreme Court has spoken on a number of occasions regarding appropriate sentences for the offence of misappropriation where a large sum of money is taken, some of which have been referred to above. In Public Prosecutor v Tardrew the Court disapproved the suspension of 4½ years of a 5 year sentence because the trial judge had used the same reasons in mitigation of the sentence and for suspension of the sentence. The Court said:

"We consider that suspension under s.19 (6) of the Criminal Code is, or may be, appropriate in three broad categories. There may be other categories but these are the main ones:

(a) Where suspension will promote the personal deterrence, reformation and/or rehabilitation of the offender. The suspension or part of a sentence on the condition that the offender keep the peace and be of good behaviour for a specified period may deter him from committing further crimes in that period. If he has committed a number of offences beforehand, the suspension may reform his lifestyle. His early release from prison because of the suspension may assist his rehabilitation back into the community. It would enable him, for example, to get a job and support himself and his family earlier than would otherwise be the case.

(b) Where suspension will promote the repayment or restitution of stolen money or goods. Suspension is a useful device to secure this end.

(c) Where imprisonment would cause an excessive degree of suffering to the particular offender, for example, because of his bad physical or mental health. Some general discussion of additional hardships which a particular offender may face in prison as a mitigating factor — not particularly in relation to suspension of part of a sentence — is found in D A Thomas, Principles of Sentencing (2nd ed 1979), at 215-216."

I do not consider there is any prospect of the defendant re-offending, and very little prospect of him obtaining further employment. Therefore category (a) is inapplicable. The defendant's health is good and although he is now 56 years of age I do not consider imprisonment would cause an excessive degree of suffering to him so category (c) is inapplicable.

However, it is urged upon me by both counsel and the community representatives of Ponam Island that a suspended sentence is the communities only hope of recovery of the stolen funds. Reluctantly I have to agree that appears to be the case and that category (b) in Tardrews Case is applicable.

The Port Moresby house is the only substantial source of funds available to the defendant. Now that the informal sale has turned litigious the defendant will most likely have to give evidence in a Court case if the part performed oral contract is to be enforced. If it is to be terminated there may be an issue of refund of part of the amount already paid, and litigation over that. In any event there appears to be no avoiding some months of litigation which realistically cannot be conducted from prison.

If it was open to me, I would suspend 1 year of the sentence now to allow recovery of the stolen money, followed by three years imprisonment. However I do not consider that course is available to me pursuant to the provisions of s 19 of the Criminal Code as s 19(6) clearly contemplates that any sentence of imprisonment will be effected immediately followed by the period of suspension which may be revoked and replaced by imprisonment for cause.

I can see no way of sentencing the defendant to the sentence I consider he so richly deserves without punishing the community further by removing its prospects of recovery of the stolen balance with interest.

In the circumstances I will suspend the whole of the 4 years sentence, and I order that the defendant enter into his own recognizance to:

A. keep the peace and be of good behaviour for a period of four years;

B. within 3 months of today give to Ponam Community School or its trustees a registered mortgage or registered charge over allotment 30 section 82 Mabata Street Gordons ("the property") to secure the repayment of the sums mentioned in "E" below and provide a copy thereof to the Lorengau Probation Service and a copy to the Court;

C. if it is not possible to provide the registered security required by "B" above provide the best security available and a lawyer's written opinion as to why the registered security is not available;

D. not otherwise to encumber the property;

E. repay to Ponam Primary School the sum of K17,529.68 plus all of the interest earned by the defendant on the principle sum, which I calculate from the Bank Statements to be K2402.66; plus 8% per annum on K17,529.68 from 10 July 2003 until payment of the amounts required by this order. That is a total of K23,328.78 plus K3.84 per day from 25 November 2005 until payment. Payment to be made within 12 months; that is by 24 November 2006. Payment must be by bank cheque and witnessed by a Probation Officer.

F. to reside at Ponam Island and to report to the Probation Service at Lorengau every three months for the period of his suspended sentence. This may be done in writing if there is financial hardship in attending to Lorengau;

G. To render 6 hours service to Ponam Community School each week, as decided by the Board of Management, during the period of the suspended sentence, when the defendant is in Ponam Island;

A. If the defendant is able to obtain employment at some place outside Ponam Island to report to the Probation Service at that place and inform them and the Probation Service at Lorengau of his residential address;

B. The defendant may travel to Port Moresby for the purpose of advancing the sale of the property provided that the Probation Service is advised in advance in writing with all contact particulars of his Port Moresby address;

C. If called on, he shall appear and receive judgment in respect of his service of the portion of the sentence suspended.

The defendant is sentenced to a term of 4 years in light labour less pre trial custody. The entire sentence is suspended upon the defendant entering into his recognizance in the terms ordered. If the money is not repaid in accordance with the terms of the recognizance the 4 years suspended shall be served in light labour. In addition the defendant is fined K350. Bail of K350 is forfeit to the State in payment of the fine. The Probation Office Lorengau is to advise me in writing by 30 November 2006 whether or not the repayment to Ponam Primary School ordered has been made.

Lawyers for the State: Public Prosecutor.
Lawyer for the defendant: Public Solicitor