Landmark corruption trial looms in
Hong Kong By Kent Ewing
HONG KONG - The battle is on: It's this
city's understaffed, underperforming Independent
Commission Against Corruption (ICAC) versus the
legendary Kwok family, with its vast real-estate
empire, its US$18.3 billion bankroll and
the best lawyers that billionaires can buy.
On the face of it, this contest is a
mismatch. But don't write off Hong Kong's
beleaguered graft-busters just yet.
They
may not have the Kwoks' deep pockets, but they
insist they have evidence of a nine-year trail of
corruption that starts in the boardroom of Sun
Hung Kai Properties (SHKP), the Kwok
flagship, and leads to
the office of the city's second-most-powerful
politician.
In an astonishing scene in a
Hong Kong courtroom on Friday, SHKP co-chairmen
and managing directors Thomas Kwok Ping-kwong, 60,
and Raymond Kwok Ping-luen, 58, were charged under
the bribery ordinance, as was the top official
they are accused of bribing, former chief
secretary Rafael Hui Si-yan, 64.
According
to ICAC investigators, from 2000 to 2009, the Kwok
brothers provided a rent-free luxury apartment and
nearly HK$35 million (US$4.5 million) in kickbacks
to Hui; meanwhile, SHKP-Hong Kong's (and perhaps
Asia's) biggest developer, which employs more than
27,000 people, was allegedly the beneficiary of
one sweet government favor after another.
Two others have also been charged in the
case: SHKP executive director Thomas Chan Kui-yuen
and Francis Kwan Hung-sang, former chief
operations officer for the Hong Kong Futures
Exchange, which has since merged with the city's
stock exchange to form Hong Kong Exchanges and
Clearing. While they, too, are big fish, Thomas
and Raymond Kwok qualify as whales in what will be
one of the biggest corruption trials in the city's
history.
The eldest Kwok brother - Walter
Kwok Ping-sheung, 62, who in 2008 was ousted as
SHKP chairman and chief executive in an ugly and
highly public family feud - was not charged,
although he, like his estranged brothers, had been
arrested and interrogated by ICAC officers.
The ICAC alleges that Thomas and Raymond
Kwok funneled the equivalent of nearly US$3.9
million in cash to Hui on top of more than
US$645,000 in loans and a rent-free luxurious
apartment of more than 4,000 square feet (about
370 square meters), where Hui continues to live,
in the city's upmarket Happy Valley area.
Hui was employed as a special adviser to
SHKP before assuming the role of chief strategist
in the successful 2005 election campaign of former
chief executive Donald Tsang Yam-kuen. After
Tsang's victory, Hui was appointed chief secretary
but stepped down in 2007 to serve the next two
years on the executive council that advises Hong
Kong's chief executive.
Also during this
time, Hui took on the chairmanship of the steering
committee planning the 40-hectare West Kowloon
Cultural District, a huge cash cow for developers
like SHKP estimated to cost at least HK$25 billion
to build.
So Hui's closeness to both the
Kwok family and the levers of official power have
long been known, but no one had publicly
questioned him over these associations. Now, in
one of the boldest moves since its inception in
1974, the ICAC is dragging two of Hong Kong's
richest tycoons to court on charges of bribery, as
well a widely admired elder among the political
elite who was recently the city's No 2 official.
The ICAC was originally created to clean
up Hong Kong's notoriously corrupt police
department in the 1970s and ultimately succeeded
in turning a city rife with graft into one of the
least corrupt places in the world. Lately,
however, the commission's reputation has suffered
as its conviction rate - 88% as of 2010 - dropped
amid staff shortages and bungled investigations.
Critics have even questioned whether,
since the ICAC boss - currently Simon Peh Yun-lu,
formerly the city's director of immigration and a
career bureaucrat - is appointed by the chief
executive, it is truly independent or just another
arm of the bureaucracy.
Putting Hui and
the Kwoks behind bars for corruption could go a
long way toward restoring the prestige enjoyed by
the ICAC in its glory days. If, on the other hand,
the case - which, given the immense financial
resources of the defendants, will undoubtedly drag
out for years of appeals even if the three men are
convicted - does not end in guilty verdicts, it is
hard to imagine the commission, or the city it
serves, ever fully recovering from such a fiasco.
And make no mistake about it, the joint
SHKP chairmen, whose family controls 42% of the
company, have shifted into high gear to defend
themselves against charges that they claim have no
substance. Their family wealth - second in Hong
Kong only to the US$25.5 billion fortune amassed
by Li Ka-shing, according to Forbes magazine -
will guarantee that they receive the best possible
legal counsel, and Hui will also be represented by
the best lawyers in the business.
In a
move to calm jittery investors, SHKP - shares in
which were suspended from trading on the Hong Kong
stock exchange on Friday morning before the ICAC
made its charges public - announced that the sons
of Thomas and Raymond Kwok had been appointed
alternative directors with immediate effect.
The move is an attempt to reassure
shareholders that if, in a worst-case scenario
that the two brothers go to jail, Adam Kwok
Kai-fai, 29, son of Thomas, and Edward Kwok
Ho-lai, 31, son of Raymond, will pick up where
their fathers left off.
That reassurance
seems unlikely to bring much relief. On Monday
morning, SHKP's share price opened slightly down
at HK$95.15 and then continued to go down, against
a rebound of the Hang Seng Index. Since Hui and
the Kwok brothers were arrested on March 29,
SHKP's share price has fallen 14% while the
company has suffered a 3.1% decline in the Hang
Seng Property Index.
The prospect of an
unprepared younger generation of Kwoks taking the
helm at the property giant can only further
unsettle investors, even if two new deputy
managing directors - Mike Wong Chik-wing and
Victor Lui Ting, each with more than 30 years of
experience at SHKP - were also appointed to
support them.
In the long term, however,
as the Kwoks have previously proved in spades,
chaos in the SHKP boardroom does not necessarily
point to any decline in profits or investor
confidence.
The 2008 ouster of Walter -
now, speculation has it, a possible ICAC source
for the charges leveled against Hui and his
brothers - followed his reported attempts to bring
his mistress, Ida Tong Kam-hing, into the company
hierarchy. Once the boardroom coup was done, the
then-79-year-old mother of the three brothers,
Kwong Siu-hing, the company's largest shareholder,
took over as company chairwoman for the next three
years.
Humiliated, Walter responded by
suing his younger brothers for libel, claiming
they told investors that he had been diagnosed
with bipolar disorder.
Throughout the
embarrassing revelations of the Walter Kwok
ordeal, however, SHKP kept making money - lots of
money - and attracting quality investors. Builder
of a number of the landmarks that create Hong
Kong's dazzling skyline - including the city's two
tallest skyscrapers, the 88-story International
Finance Center and the 118-story International
Commerce Center - the company simply holds too
many golden assets to be fatally damaged by
scandal, even by a corruption scandal that could
send its co-chairmen to prison.
But can
the same be said for Hong Kong?
The city's
reputation for honest business practices and clean
governance has been taking a beating lately - and
it is not just the Kwok family throwing punches.
Tsang, whose term as chief executive
expired on July 1, is also the subject of an ICAC
probe for accepting favors from tycoons, namely
free rides on their private yachts and jets and a
discount price on a penthouse apartment.
Tsang's successor, Leung Chun-ying, after
only two weeks on the job, is already caught up in
two scandals - one concerning illegal structures
at his luxurious home on Victoria Peak and the
other involving his former minister for
development, Mak Chai-kwong, who was forced to
resign last week after revelations that he had
possibly abused his rental allowance as a civil
servant.
Mak, too, has been arrested and
questioned at ICAC headquarters - clearly the
busiest office in town these days.
Kent Ewing is a Hong Kong-based
teacher and writer. He can be reached at
kewing56@gmail.com Follow him on Twitter:
@KentEwing1
(Copyright 2012 Asia Times
Online (Holdings) Ltd. All rights reserved. Please
contact us about sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
