Hong Kong | Elite’s mistresses, gangsters unveiled in graft trial

Raymond Kwok, co-chairman of Sun Hung Kai Properties Ltd., center, leaves the High Court while surrounded by members of the media

Hong Kong’s highest-profile corruption trial opened the door on a world of fine wine, race horses and mistresses – exposing cozy ties between government and big business as protesters demanding free elections camped within view of the court.
Jurors heard a tale of family infighting for control of the USD41 billion Sun Hung Kai Properties Ltd., the world’s second- most valuable real estate empire, and secret payments to Hong Kong’s former No. 2 official, who bankrupted himself with his overspending.
Billionaire Thomas Kwok, 63, was remanded in custody on Friday in Hong Kong after being convicted of conspiring with the Chinese city’s then Chief Secretary Rafael Hui to commit misconduct in public office. He will appeal. Kwok was acquitted of two other charges while his younger brother Raymond, 61, was cleared on all counts. Hui was guilty of five charges after a 127-day trial. A sentencing hearing is scheduled for today.
Testimony in the case touched on the themes of business- government collusion and inequality that contributed to the city’s two-month old democracy protest camps cleared by police last week. Hui and the brothers served on the 1,200 member committee that chose the city’s leader in 2012 and which will vet candidates for its first popular vote, something the protesters pledge to continuing fighting.
The trial hinged on the relationship between Hui and the Kwoks, who first became friends in the 1980s as was common among government officials and the city’s tycoons, the lifelong civil servant testified. The Kwok brothers are devout Christians who built a church atop a landmark skyscraper and a theme park featuring a full-scale replica of Noah’s Ark.
While Hui appeared in court in rumpled over-sized suits, the 66-year-old was revealed to have tastes far beyond his income.
“The one thing you can be sure about Rafael Hui is that he is not who the people of Hong Kong thought he was,” said Clare Montgomery, a lawyer for Thomas Kwok. “Back then, he had a reputation as master strategist. We see a different side.”
Hui had helped orchestrate the government’s intervention in Hong Kong’s stock market that was widely credited with stemming the impact of the Asian financial crisis in 1998. He later ran the city’s compulsory pension fund, a tenant of Sun Hung Kai, and became chief secretary in 2005.
Hui said he traveled extensively, bought wine, spent HK$2 million (USD258,000) on classical music records over a few years, and another HK$1 million on a high-end stereo. His collection grew so large, he stored them in three converted bedrooms in his rent-free apartment provided by the Kwoks.
Hui testified he spent as much as HK$8 million buying properties, handbags and watches for a mistress, a young woman from Shanghai. He bet on horses and paid for their stabling at Hong Kong’s exclusive jockey club, where he was a member and would treat guests to lavish meals.
Hui supported his lifestyle with sweetheart loans from his friends, and only paid off the interest. He borrowed some HK$30 million from the Bank of East Asia Ltd., which sued and bankrupted him last year when he failed to repay. Over three years he ran through HK$22 million in cash.
Despite cheating “to save some tax payments,” he was HK$52 million in debt by 2010, he testified.
Hui said one of the secret payments at issue in the trial was from a Chinese official to encourage him to stay in his government post. Hui said he had told the official of his plans to join the private sector because of his financial problems.
The arrest of Thomas and Raymond Kwok on March 29, 2012, sparked the company’s biggest share plunge in 14 years. The stock tumbled 13 percent the next day to HK$96.50, erasing $4.9 billion in market value. The shares rose as much as 3 percent on Friday before being suspended. Thomas resigned his positions, with his son Adam succeeding him as an executive director, the company said after the verdicts.
Another billionaire friend Richard Li, son of Asia’s second-richest man Li Ka-shing, and Larry Yung, then chairman of Citic Pacific Ltd., also offered Hui jobs when he first retired in 2003, he testified.
Thomas Kwok said he paid Hui HK$15 million a year for what he said amounted to a few phone calls a week, because the civil servant had turned down the other offers on his request.
Kwok said he realized the importance of political affairs after Hong Kong was roiled by a protest march in 2003 that eventually led to the resignation of the then-chief executive and Hui’s appointment as chief secretary.
Hui’s payments had to be disguised to keep them from eldest brother and then Sun Hung Kai chief, Walter Kwok, who was convinced Hui was a spy sent by rival developers, Thomas said.
Sun Hung Kai, Hong Kong’s biggest developer by sales was founded by their father Kwok Tak-Seng, who arrived in the city from southern China in the 1950s and built his business after being the local agent for Japanese zipper company YKK Corp. It is now the world’s second-largest real estate company by market value after Simon Property Group Inc., the U.S. mall owner.
Walter Kwok took over leadership when their father died in 1990. The court heard his 1997 kidnapping by a gangster known as “Big Spender,” left him disturbed and paranoid after he was released for a HK$600 million ransom. “Big Spender” Cheung Tze-keung, who also kidnapped Li Ka-shing’s eldest son, was executed in 1998 in China.
“After the kidnapping my elder brother’s personality changed a lot,” Thomas Kwok told the court. “He became very suspicious, he was not decisive, he changed his mind.” He was especially suspicious against other companies, Thomas said.
Walter Kwok wrote that Li Ka-shing, whom he called “superman,” was plotting to destroy Sun Hung Kai by planting spies, the court heard. Youngest brother Raymond Kwok wrote in his diary, which had been seized by police, that Walter was “crazy.”
Eventually their mother intervened, calling on Walter to abandon his role at the firm or leave his mistress who they feared was trying to take over the business, Thomas Kwok testified.
Though Walter was forced out as chairman in 2008, the family’s troubles continued until his mother brokered an agreement in January this year that restored his shares in the family trust.
“Thomas Kwok said he had lost his father, lost his elder brother as an effective force,” Montgomery said. “He needed someone who could give reliable advice. That is what Rafael Hui appeared to be.”
Kwok, Hui and the two other men convicted face as long as seven years in jail on each charge. Kwok’s lawyer Colin Cohen didn’t immediately have a comment after the verdicts. No one answered a call to the office of Hui’s lawyer.
Hong Kong’s anti-graft agency said in a statement that the case demonstrates that it enforces the law regardless of the background, status or position of the persons involved.
The case is Hong Kong Special Administrative Region v Rafael Hui, Thomas Kwok, Raymond Kwok, Thomas Chan and Francis Kwan, HCCC98/2013, in Hong Kong’s High Court. Shai Oster and Michelle Yun, Bloomberg