Corruption cloud hangs over Hong
Kong By Kent Ewing
HONG
KONG - In the short term, the sensational arrests
last week on corruption allegations of two of this
city's richest tycoons and a former top government
official with close ties to Chief Executive Donald
Tsang Yam-kuen represent yet another damaging blow
to Hong Kong's reputation for clean business and
governance.
In the long term, however, it
may be exactly what the city needs.
For
years now, ordinary people have been angered by
the perception that there are two sets of laws in
Hong Kong - one, for them, that is tough, fair and
non-negotiable and another, for the tycoon class,
that is lax, skewed and eminently malleable
depending on who you
know and how much you are willing to pay. The
arrests on Thursday of former chief secretary
Rafael Hui Si-yan and of Thomas Kwok Ping-kwong
and Raymond Kwok Ping-luen - brothers who control
Sun Hung Kai Properties (SHKP), Hong Kong's
biggest real-estate empire - may well turn that
widespread perception into a damning, undeniable
reality.
They follow revelations in
February that Tsang himself had accepted favors
from Hong Kong tycoons - from a special seat on
their private yachts and jets to a discount price
on a lavish penthouse apartment across the border
in the mainland city of Shenzhen. Tsang has since
given up the penthouse and apologized to the
public for his poor judgment.
With what
Forbes magazine estimates to be a fortune of
US$18.3 billion, the Kwoks are Hong Kong's
second-richest family; only Li Ka-shing, whose net
worth of US$25.5 billion makes him the wealthiest
Chinese person in the world, surpasses them.
SHKP has built and manages a number of the
landmarks that contribute to Hong Kong's
world-renowned skyline, including the 88-story
International Finance Center, which stands 1,378
feet (420 meters) tall and contains 22 trading
floors.
Hui was the top strategist in
Tsang's 2005 election campaign for chief executive
before taking the post of chief secretary, the
second most powerful political position in Hong
Kong.
In the run-up to the March 25
election to choose Tsang's successor, Hui backed
loser Henry Tang Ying-yen - another former chief
secretary who, despite being heavily favored by
the business elite, was defeated by Leung
Chun-ying, a millionaire surveyor who promised a
fairer, more people-friendly government.
Leung's pre-election pledges included a
vow to make housing more affordable in a city
where, with SHKP leading the way, property prices
have become so high that owning a home is now a
lost dream for the average person in Hong Kong.
Leung won 689 of the 1,193 Election
Committee votes while the scandal-plagued Tang -
who confessed to marital infidelity during the
campaign and admitted to building a massive
illegal structure, dubbed an "underground palace",
beneath one of his homes - garnered only 285
votes; the token pan-democratic candidate, Albert
Ho Chun-yan, received 76 votes.
If last
week's arrests lead to formal charges and
convictions, Hui, 64, and the Kwoks - Thomas, 60,
and Raymond, 58 - will be by far the biggest fish
ever netted by the city's Independent Commission
Against Corruption (ICAC), which was established
in 1974 and immediately went about cleaning up a
police department then notorious for malfeasance.
The ICAC had an 88% conviction rate for
the 443 people it prosecuted in 2010, but recently
has been seen to lose its teeth due to staff
shortages and bungled investigations.
Details of the investigation that led to
the arrests of Hui and the Kwoks have not been
revealed. But the city's leading English-language
newspaper, the South China Morning Post, reported
that a luxurious 4,000-square-foot (371.6 square
meter) apartment that Hui rents from SHKP figures
prominently in the probe.
Hui also is
alleged to have accumulated debts of "more than
HK$100 million" (US$12.9 million), including a
unsecured loan of HK$50 million (US$6.4 million),
and to have been involved in illegal land deals
with SHKP.
The three men have been
released on bail, but they are expected to be
summoned again for further questioning.
Less than two weeks ago, ICAC agents
arrested long-serving SHKP executive director
Thomas Chan Kui-yuen and four others as part of
the same investigation.
Charges of
corruption at the very top of the SHKP hierarchy
prompted panicky investors to jump ship on Friday,
erasing HK$38 billion (US$4.9 billion) from the
company's market value - the biggest sell-off of
SHKP shares in 14 years.
After their bail
was granted, the Kwok brothers, whose family
controls 42% of SHKP, returned to work at the
company's headquarters, which had been raided
Thursday night by ICAC investigators. There they
issued a statement intended to reassure investors.
"Don't worry," their statement said,
"everything will be normal and fine ... we will
work together with our colleagues at SHKP, and the
company's growth will not be slowed because of
some temporary turmoil."
As the case
against them develops, the Kwoks will continue to
serve as joint chairmen and managing directors of
SHKP. A company statement said, however, that they
would abstain from voting on any matter related to
the charges against them.
Neither of these
statements dissuaded Moody's Investment Service
from downgrading from stable to negative the
outlook for SHKP's A1 rating. Meanwhile, Standard
& Poor's placed the company's A+ rating on its
negative watch list.
This is not the first
time questionable corporate governance has been
spotlighted at SHKP. In 2008, after a prolonged
and highly public family feud, Walter Kwok
Ping-sheung, 62, elder brother of Thomas and
Raymond, walked away from his position as SHKP
chairman and non-executive director, apparently
ousted by his brothers, and was replaced by his
then 79-year-old mother, Kwong Siu-hing, the
company's largest shareholder.
Kwong and
her younger sons were reportedly upset by Walter's
determination to bring his long-time mistress, Ida
Tong Kam-hing, into company affairs. Walter later
sued his brothers for libel, saying that they had
attempted to discredit him among investors with
claims that he had been diagnosed with bipolar
disorder.
Now speculation is rife that the
snubbed Walter, who has not been named as a target
of the ICAC probe, is a key source in the
allegations against Hui and his brothers.
Coming on the heels of a scandal-ridden
election campaign for chief executive and
revelations about Tsang's jet-setting and
shoulder-rubbing with tycoons, the case against
Hui and the Kwoks, no matter how it turns out, can
only further tarnish Hong Kong's image as an
international financial center where the rule of
law prevails.
There is hope, however, that
the case may signal the beginning of the end of a
privileged business class that lives and works
above that law.
Kent Ewing is a
Hong Kong-based teacher and writer. He can be
reached at kewing56@gmail.com Follow him on
Twitter: @KentEwing1
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