HONG KONG (Reuters) - Thomas and Raymond Kwok, the billionaire co-chairmen of Sun Hung Kai Properties, and Rafael Hui, Hong Kong’s former No.2 public official, were charged Friday in a bribery investigation surrounding Asia’s largest developer.
The Sun Hung Kai probe, Hong Kong’s biggest corruption case since its anti-graft agency was formed nearly 40 years ago, involves one of Asia’s most powerful families and the world’s second-largest property company with a market capitalization of $32 billion.
The charges involve payments and unsecured loans of more than $4 million and come amid other investigations of government officials and a turbulent political transition that has set off waves of protests from Hong Kong citizens angry about a host of issues including cronyism and cozy ties between government officials and the city’s tycoons.
Friday’s charges came a day after the anti-graft agency arrested Hong Kong’s development secretary on suspicion of corruption, dealing a fresh blow to the city’s new leader, Leung Chun-ying.
Two others have also been charged in the Sun Hung Kai case. Thomas Chan, the Sun Hung Kai board member in charge of land purchases, and Francis Kwan, a former banker, were charged by the city’s Independent Commission Against Corruption. Kwan is a former chief operation officer of the Hong Kong Futures Exchange.
A total of eight charges were filed against the five men, who appeared before a Hong Kong judge on Friday and said they understood the charges, including conspiracy to offer advantages to a public servant and misconduct in public office.
Hui, who was calm throughout the half-hour proceeding, was named in each of the eight charges in connection with alleged payments and unsecured loans totaling about HK$34 million ($4.38 million).
Raymond Kwok delivered a statement on the courthouse steps, saying “I firmly believe I haven’t done anything wrong. The Hong Kong judicial system is very fair. I will do my best to defend myself against those accusations. My goal is to prove my innocence.”
Thomas Kwok declined to comment and Thomas Chan also declined comment.
The magistrate hearing the case ordered Hui and Kwan to surrender their travel documents and remain in Hong Kong. Public prosecutor Kevin Zervos said Kwan was “a flight risk.”
All five were released on bail and ordered not to contact a list of prosecution witnesses given to the court. The case was then adjourned until October 12.
The ICAC said the alleged offences took place between 2000 and 2009, with six linked to Hui’s tenure as Hong Kong’s chief secretary. Hui faces two misconduct charges alleging he accepted rent-free use of two flats while head of Hong Kong’s retirement authority and two unsecured loans.
He is also alleged to have accepted payments to “willfully misconduct himself” to be “favorably disposed” to Raymond and Thomas Kwok and their interests and to Thomas Chan, according to the charges.
Reuters reported in April the ICAC was investigating payments to Hui, before and after his official role, in relation to Sun Hung Kai [ID:nL3E8FP300].
Hui and Thomas Kwok face a joint charge of conspiracy to commit misconduct in public office, while Hui and Raymond Kwok faces a similar charge.
Hui, Thomas Kwok, Chan and Kwan are also charged with one count of conspiracy to commit misconduct in public office, alleging they conspired together for Hui to receive a series of payments from Thomas Kwok, Chan and Kwan.
Shares of Sun Hung Kai, Asia’s most widely held property stock, fell 0.7 percent at the open, but were up 0.5 percent when trading was suspended. The shares have slumped 14 percent since the March arrests. Trading in Sun Hung Kai units SmarTone Telecommunications Holdings Ltd and SUNeVision Holdings Ltd, was also suspended on Thursday.
Sun Hung Kai has applied for permission to restart trading on Monday.
The Kwoks have remained in their roles at Sun Hung Kai and have maintained their innocence since the case first came to light in March. The legal process in such a high-profile prosecution may take as long as seven years with appeals likely on either side.
The company has repeatedly said it has contingency plans in place should the co-chairmen be unable to continue with their duties.
The company said late on Friday that it has named its head of residential sales, Victor Lui, and its head of project management, Mike Wong, as deputy managing directors, to assist Raymond and Thomas Kwok in discharging their duties. It also named Thomas’s son, Adam, 29, and Raymond’s son Edward, 31, as alternate board members to their fathers.
The family-run company is governed by a trust that controls 43 percent of the company’s shares and which is overseen by the Kwoks’ 83-year-old mother, Kwong Siu-hing, who retired as chairwoman last December after brokering Thomas and Raymond’s ascent to the top of the company. They run day-to-day affairs and oversee a 12-man executive committee.
Also involved in the case but not charged on Friday is Walter Kwok, the family’s elder brother, who was ousted as chairman of Sun Hung Kai Properties in 2008 and is estranged from his brothers. He was arrested at the end of May.
Walter, kidnapped and held for ransom in the late 1990s, lost a power struggle to his brothers and had to cede control of the company’s top role. Sources close to the family say Walter’s return to the company is not an option and he rarely participates in board meetings.
The family-run company is unlikely to bring in outside top management to replace the Kwoks, although it brought in outsider Patrick Chan in 2009 from Hang Seng Bank as chief financial officer. The company is known for its deep bench of middle management.
“The market has gradually built up more confidence that it has priced in this issue,” said Alfred Lau, a property analyst at Bocom International. “This will remain an overhang for the company for the longer term until the case is settled.”
Sun Hung Kai is the world’s second-largest property company. It and rival Cheung Kong (Holdings) dominate Hong Kong’s home-building and office-development industries.
With revenue of HK$62.6 billion ($8.1 billion) in the fiscal year ended in June 2011, the property arm makes half its money from building new apartments, with the rest from renting office and retail property. It pays $1 million in tax to the Hong Kong government each year.
The Kwoks, valued by Forbes magazine at $18.3 billion before their arrests, rank locally in wealth only behind Asia’s richest man, Li Ka-shing, founder Cheung Kong.
Sun Hung Kai developed the city’s two tallest buildings, the International Finance Centre and the International Commerce Centre, which stand like sentinels on either side of Victoria Harbour. The conglomerate, founded by the Kwok brothers’ father, also has businesses in the city’s bus and waste disposal sectors.
Additional reporting by Venus Wu; Clarie Lee, Tan Ee Lyn; Editing by Matt Driskill, Michael Flaherty and Anne Marie Roantree