Allegations of international bribery against former senior Hong Kong official
Hong Kong's former home affairs secretary, Patrick Ho Chi-ping, has been arrested in New York by US authorities in relation to bribery allegations. Senegal's former foreign minister, Cheikh Gadio, has also been arrested on related charges.
The accusations against Mr Ho include:
- US$2 million worth of bribes to the president of Chad, Idriss Déby, allegedly for obtaining an exclusive opportunity for a Chinese energy company, which Mr Ho represented, to purchase oil rights in Chad without facing competition;
- US$400,000 worth of bribes to the president of Chad through a bank in New York and into an account in Dubai designated by Mr Gadio who allegedly acted as a middleman; and
- US$500,000 worth of bribes to the Uganda's foreign minister (and then president of the UN's General Assembly) Sam Kutesa, wired through a New York bank.
The accused are being charged with violations of the Foreign Corrupt Practices Act and money laundering. They face possible jail sentences of up to 20 years. Bail has been denied to Mr Ho due to a high risk that he would attempt to flee the country. Partial bail has been granted to Mr Gadio, having been released from detention but placed under house arrest.
3.5 year sentence for former associate director of investment bank for accepting bribes
A former investment bank associate director has been convicted of accepting bribes (totaling around HK$1.46 million) in return for managing the investment portfolio of a client of the bank. The District Court has sentenced him to three and a half years' imprisonment.
It was found that in 2007, the defendant persuaded a client in Shenzhen to invest in Hong Kong stocks and told the client that it was trade practice for the client to pay him a "handling and intelligence fee" of 20% of any profits from the investments.
Later in 2007, the client gave cheques to the defendant (totaling around HK$1.46 million) in response to emails from the defendant advising him of profits made from the investments. These cheques were deposited in the account of the defendant's younger brother then subsequently transferred to the defendant. The case shows how the Prevention of Bribery Ordinance can be deployed in scenarios such as these, rather than relying on statutory or common law fraud and deception offences.
Continuing trend of small scale focus by the ICAC
In the last update, we noted an uptick in the enforcement of smaller-scale private sector cases. This has continued this month with charges being laid or convictions being entered in relation to:
- a fitness manager for a 'bogus' personal training agreement;
- an estate agent in relation to a property transaction;
- a bank manager for offering an illegal commission to his staff;
- a proprietor of a design company and a manager of its client for conspiracy to defraud the client of design service payments;
- senior staff members of a toy trading company for conspiracy to accept illegal commissions; and
- a proprietor of a construction company for bribing a clerk of works for "lax supervision" on renovation works of an industrial building in the New Territories.
Joint operation between the ICAC and SFC may 'set the scene' for future investigations
In a move that may be an indication of future collaboration and joint action by the Independent Commission Against Corruption ("ICAC") and the Securities and Futures Commission ("SFC"), these authorities have conducted a joint raid on a financial services firm. On 8 December, the ICAC announced that a total of eight premises were searched and three senior executives of 'a listed company' had been arrested for suspected corruption.
Significantly, the SFC chief executive, Ashley Alder noted that: "The ICAC has a different jurisdiction under a different set of laws, but obviously when there’s something in common we both are investigating ... we found that this time it has been extremely useful to combine forces…. The two agencies worked really, really well together, as different skill sets were contributed from both sides to deal with different objectives. This will set the scene for future investigations."
Registered institution fined HK$400 million and suspended for systemic failures in selling structured products
The Securities and Futures Appeals Tribunal ("SFAT") has fined a registered institution HK$400 million for material systemic failures in relation to the sale of derivative products, namely, Lehman Brothers-related notes (callable daily accrual notes and equity-linked notes) and leveraged forward accumulators. The SFAT has also suspended the institution's registration for type 4 regulated activity (advising on securities) for one year, and partially suspended its registration for type 1 regulated activity (dealing in securities) for one year. With regards to the partial suspension, the institution is only allowed to handle trading in listed securities for clients and provide advice to clients incidental to such trading.
Upon appeal by the institution, the SFAT confirmed the SFC's findings that between January 2003 and December 2008, the institution had breached various standards under the SFC's main code of conduct. The institution's internal processes were found to be materially flawed in relation to:
- understanding each client's true risk profile;
- ensuring the suitability of products for each client; and
- supervising and monitoring sales processes in order to detect and avoid risk mismatches.
As a result, the institution had caused many of its clients to suffer material losses. The SFAT had, however, reduced the SFC's sanction, which had consisted of a HK$605 million fine and a revocation of the institution's registration.
SFC fines former account executive HK$542,071 and bans him for life for dishonest conduct
Mr Danny Fung Kwong Shing, a former account executive of Fulbright Securities Limited, has received a life-time ban from re-entering the industry and has been fined HK$ 542,071. Between January 2013 to May 2014, Mr Fung had:
- dishonestly misused a friends account at Fulbright to conduct 772 unauthorised transactions;
- attempted to mislead Fulbright by fabricating telephone orders to show that the orders for the above transactions were placed by his friend; and
- impersonated a second friend to place orders in their account at Enhanced Securities Limited.
At least 53 of these unauthorised transactions were conducted by Mr Fung under a pre-meditated scheme to secure profits for the second friend at the detriment of the first. The first friend suffered a substantial loss of around HK$ 2.6 million as a result of the unauthorised transactions.