By Ahn Jae Wook
In an ongoing scandal that has shaken the foundations of Hong Kong’s property development and construction industry, several people associated with Hong Kong’s second largest property development firm, including the company’s co-chairmen, have been charged with bribery-related offenses.
On Monday, the Independent Commission Against Corruption charged Thomas and Raymond Kwok, the co-chairmen of Sun Hung Kai Properties, with bribery and public misconduct. Ex-chief secretary Rafael Hui, Sun Hung Kai’s executive director Thomas Chan, and Francis Kwan, a former official of the Hong Kong stock exchange, have also been charged with graft-related offences.
The charges follow the April arrest of the aforementioned parties, along with the Kwoks’ elder brother Walter Kwok, who was not charged.
The charges relate to allegations that the Kwok brothers and two others paid more than $HK34 million between 2000 and 2009 to then-public sector official Rafael Hui in return for ‘favours’.
Though the precise nature of these favours has not yet been disclosed, it is believed that these related to government land tenders; during that period, Hui held the positions of executive chairman, chief secretary and chairman of the steering committee of the West Kowloon Cultural District Project during the period.
Not surprisingly, the latest developments have further eroded confidence in the company, which had already seen its share price slashed by around one quarter since the April arrests.
Along with the potentially significant fine the company may face, global investment research firm Barclays Equity Research believes the latest arrests will prove a significant distraction to the company’s operations and underscore serious concerns about corporate governance.
Given that the trial period will likely be lengthy, and that the co-chairmen will need to devote significant time to their defence, Barclays says the company’s two most important decision makers will have limited time to manage actual company business.
Meanwhile, a decision to appoint the co-chairmen’s sons as alternative directors ‘fails to sufficiently address the concerns of minority shareholders and misses the opportunity to address corporate governance issues at the board level.’
The fact that such serious charges have been laid against the city’s second largest developer, which dominates the home building and office development industries alongside rival company Cheung Kong (Holdings), has sent shockwaves throughout Hong Kong and served to some as a wake-up call as to how bad corruption really is in the city.
Emily Lau, a member of Hong Kong’s Legislative Council and vice-chair of the opposition Democratic Party, has told the ABC’s radio program that the latest scandal has been a shock to the city because it involves not just one of the biggest property developers but also a very senior government official.
“That is something that people have talked about for decades, and now there seems to be concrete evidence emerging and it is not only confined to the Hong Kong Government,” Lau told the program.
Lau says leaders in Beijing used to regularly invite handfuls of wealthy people, many of them property developers, to consult with them in Beijing or Shenzhen, and that patterns such as this have been evident for decades.
“I hope it [the charges] has fired a warning shot on all these people who keep on intending to be corrupt,” she says.