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Before the Chinese courts: the story of a man and his ATM

March 1st, 2008 3 comments

The next time you get frustrated by the queues at your bank, or the high fees and charges on your account, spare a thought for Xu Ting (许霆), the Chinese man sentenced to life imprisonment because he used a malfunctioning ATM.

The story began in April 2006, when Xu Ting went to his bank’s ATM to withdraw 1000 yuan. Curiously, the balance docket showed that only 1 yuan had been deducted. Xu repeated the step and withdrew some 54,000 yuan. That night, he told his friend Guo Anshan, and the two of them went back and did it again. Xu withdrew a total of 175,000, while Guo took 18,000. Both then skipped town. However, a year later, Guo reported himself to the police and returned the money. The police caught Xu soon after, though his 175,000 yuan had been lost on bad investments.

Pausing the story for a moment, I should note that, initially, I had thought that this would not be a crime under Australian law, since this was not “taking and carrying away fraudulently”, as required by the crime of larceny. Upon further investigation, however, I discovered that (in NSW at least) the Crimes (Computer and Forgery) Amendment Act 1989 (NSW) amended the offence of “obtaining by deception” (see provision here) so that “deception” includes:

(b) an act or thing done or omitted to be done with the intention of causing:
(i) a computer system; or
(ii) a machine that is designed to operate by means of payment or identification,
to make a response that the person doing or omtiting to do the act or thing is not authorised to cause the computer system or machine to make

This appears to cover Xu’s case, and carries a maximum sentence of 5 years. Of course, the question of whether the criminal law should protect banks in such a case is controversial: see Davies JA in dissent in Mujunen (1993) 67 A crim R 350; King CJ in Kennison v Daire (1985) 38 SASR 404, and Smith, Criminal Exploitation of New Technologies AIC Trends and Issues in Crime and Criminal Justice No 93 (July 1998).

Let’s turn back to what happened in China. When Gao “gave himself up”, he was sentenced to one year in prison and a 1000 yuan fine for larceny. Xu was subsequently sentenced to life imprisonment by the Intermediate People’s Court of Guangzhou City for the crime of “larceny from financial institution – involving an extraordinarily large sum”, permanent loss of political rights, confiscation of all personal property, and repayment of all 175,000 to the bank.

That’s right, life imprisonment. News of the sentence was met with incredulity in China from legal experts and the online community. “A mistake by an ATM puts the customer in jail for life?” was a typical headline.

There were three lines of criticism. The first questioned whether the elements of the offence had been made out. It was questionable whether an ATM constituted a “financial institution”, and whether Xu’s actions constituted larceny, or illegally and secretly obtaining possession. Despite his apparent intention to obtain wrongful possession of the money, Xu simply walked into a bank branch as he was entitled to do, and using his real identity, withdrew money from an ATM, as he was entitled to do. Such a “larceny”, said Peking University professor of law He Weifang, would be an “incredible larceny”.

Secondly, many commentators pointed towards the actions of the bank. The bank did not realise anything had gone wrong for almost a day after the incident. Furthermore, the entire episode was due to the malfunctioning of the ATM. Tsinghua professor Xu Zhangrun commented that the bank should apologise to Xu, whatever happens. The bank failed to provide an adequate level of service. The primary relationship between the bank and Xu was a contractual one, and as creditor to a debtor, the bank should have sought civil remedies before involving instruments of state.

The third line, and the question no doubt in your mind right now, is how, as a matter of law, can a person who is given money by a bank – even if he had malicious intentions – possibly be sentenced to life imprisonment? The truth is, this was not entirely the result of a callous judge or an abusive court. The court’s hands, to an extent, were tied by the law and legal system. This analysis (in Chinese) from the People’s Court newspaper in 2003  sheds some light on the law behind the seemingly incredible result. The offence “larceny from financial institution”, under Art 264 of the Criminal Code (see an English translation of the provision here), has three levels:

  1. where the amount is “relatively large”: three years’ imprisonment, hard labour, or control surveillance
  2. where the amount is “very large”: three to ten years’ imprisonment
  3. where the amount is “extraordinarily large”: life imprisonment or death

While the provisions are fairly flexible, what sealed Xu’s fate – once the court accepted that he had committed larceny against a financial institution – was that the Supreme People’s Court had defined what each of these terms meant. According to its advisory opinion, more than “30,000 to 100,000” yuan [around A$4,500 to 16,000] was “extraordinarily large”. Once it had accepted that an ATM was a financial institution, and Xu’s “malicious withdrawal” constituted larceny, the Intermediate People’s Court was bound to find that the sum involved was “extraordinarily large”. Given the choice between life imprisonment or a death sentence, it chose the more lenient option.

This result illustrates three weaknesses in the Chinese legal system. One, the confusion between public morality and criminal justice. Fundamentally, the relationship was a contractual one. It is questioned whether this was a situation where the criminal court should have been involved. The reservations expressed about the current treatment in Australian criminal law of the same situation apply equally to the Chinese law.

Two, the protection of special interests. The provision relied upon here imposes especially harsh penalties for taking from a financial institution. In the days when the bank was an arm of the Chinese government, it would have been reasonable for the law to especially protect it from attack. Today, however, most if not all Chinese banks are commercial operations with little or no public policy role. The effect of the law – if it was correctly interpreted by the Intermediate Court – is to give special protection to the stronger party in an essentially commercial, contractual relationship by force of the criminal law.

Thirdly, what I see as the fundamental problem that caused this result is the fact that the intermediate court was bound in its sentencing by the Supreme People’s Court’s directive – a directive that was, in fact, 10 years old in 2007. During those ten years, China’s economy had grown at around 10% every year. While 100,000 may have been an “extraordinarily large” sum in 1997, it was not so to the same extent by 2007. The Supreme Court’s binding directive was effective legislation by stealth. While the legislature intended to leave flexibility in the law’s operations, the Supreme Court destroyed that flexibility. Whereas a superior court’s precedent in a common law system interprets the law and applies it to particular facts, the Supreme Court’s arbitrary figure setting has the effect of writing in statutory words where none existed before. Just like the National People’s Congress’s “explanation” of the Basic Law of Hong Kong, which sparked protests, this incident serves to highlight the continued struggle of China’s legal and political system as it grapples with the rule of law and a system of checks and balances.

Returning to Mr Xu – the news was not all bad. Upon appeal, the Superior Court of Guangdong handed the case back for retrial, on the grounds of “unclear facts, insufficient evidence”. Xu’s lawyer is currently arguing that the bank’s record keeping system was flawed, and thus there was insufficient evidence of the theft. One obstacle facing Xu, though, is that public opinion is now turning against him, after he gave evidence in court that his intention was to take the money “for safekeeping” on the bank’s behalf, words that his father denounced as “lies” on national television. The saga continues.

 Update: On March 31, 2008, the intermediate people’s court on retrial convicted Xu Ting as charged, and sentenced him to five years imprisonment and a fine of 10,000 yuan (about $1,500 Australian).  In court, when asked by the judge, Xu said he will not appeal. The court avoided the mandatory sentencing provisions of the Criminal Code using Art 63(2) of the Code, which gave courts a discretion to impose a sentence lower than the minimum, where approved by the Supreme People’s Court.

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