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Sun Hung Kai Says Ex-Chairman Arrested in Widening Probe

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Sun Hung Kai Says Former Chairman Arrested in Widening Probe
Walter Kwok, former chairman of Sun Hung Kai Properties Ltd., center, is pictured in this 2007 photograph, with Raymond Kwok, left, and Thomas Kwok, who in 2007 were co-vice chairman and are now co-chairmen. Walter Kwok was ousted as chairman of Sun Hung Kai Properties in 2008. Photographer: David Paul Morris/Bloomberg

May 4 (Bloomberg) -- Sun Hung Kai Properties Ltd., Hong Kong’s biggest developer, said former chairman Walter Kwok was arrested by the anti-corruption commission, widening a probe that includes his brothers and a former government official.

The arrest of Kwok, 61, was for an investigation under the city’s anti-bribery law, Sun Hung Kai said in a statement today.

The Independent Commission Against Corruption in March arrested Thomas and Raymond Kwok, co-chairmen of Sun Hung Kai, and Rafael Hui, formerly the city’s No. 2 official, in one of the highest-level investigations in the body’s 38-year history. Walter Kwok, ousted as chairman in 2008, had applied to the High Court then to prevent the board from removing him, alleging that his brothers opposed inquiries into impropriety in the way the company awarded construction contracts.

“This will certainly add more speculation from investors as to what really went on in the company,” Alfred Lau, a Hong Kong-based analyst at Bocom International Holdings Co., said by phone today. “But this arrest alone won’t impact how we value the company’s assets.” Lau rates the share a buy.

Lucy Chan, an external spokeswoman hired by Walter Kwok, declined to comment beyond the content of the company’s statement. Walter, who is a non-executive director at the developer, was released on bail and his arrest won’t affect operations, Sun Hung Kai said.

Deny Wrongdoing

Sun Hung Kai shares, suspended earlier today, have fallen 17 percent in Hong Kong trading since the March 29 arrests, compared with a 2.1 percent decline in the Hang Seng Property Index. The stock, which resumed trading after the noon break, fell 1.8 percent to HK$92.60 at the 4 p.m. close.

The ICAC arrested a senior member of a Hong Kong listed company yesterday, the commission said in a statement today, without identify the person.

The probe has increased public concern about real estate policies implemented by the government as property price gains made Hong Kong the world’s most expensive place to own a home. Thomas and Raymond Kwok were arrested by the ICAC, as the commission is known, on March 29 and later released.

Raymond Kwok denied any wrongdoing at an April 4 press conference with Thomas at the company’s headquarters, his first and only comments since the arrest. As of yesterday, no charges had been laid by the ICAC.

Thomas and Raymond Kwok, sons of the developer’s late co-founder Kwok Tak Seng, took over running Sun Hung Kai, which has a market value of $32 billion, in May 2008 after ousting their older brother from the chairmanship following a court battle. They replaced him with mother Kwong Siu-hing, who in turn passed the title to them earlier last year.

In 2010, Kwong said through a statement issued by the company that Walter Kwok had been ousted from the family trust that controls Sun Hung Kai.

Family Trust

Walter Kwok said in a court filing in 2008 that his brothers tried to remove him by claiming he suffered from mental illness. He said he didn’t have any such disorder and was suing his siblings for libel.

The former chairman took over the company after the death of his father, who co-founded Sun Hung Kai with billionaire Lee Shau-kee, who now controls Henderson Land Development Co. and is the city’s second-richest man, and Fung King Hei in 1963.

Listed on the Hong Kong stock exchange in 1972, Sun Hung Kai benefited from a three-decade surge in home prices to become the city’s biggest developer. Under Walter Kwok, the company’s value had ballooned 10-fold, while assets rose to HK$264.5 billion ($34 billion) as of Dec. 31, 2007.

Taken Hostage

Sun Hung Kai co-owns the 118-floor International Commerce Center, which at 484 meters (1,588 feet) is Hong Kong’s tallest building. The developer also built luxury apartment projects such as the Arch in West Kowloon and the Larvotto in the Island South district.

Walter Kwok was taken hostage in the late 1990s and then freed after an undisclosed sum was paid to Hong Kong gang boss Cheung Tze-keung, nicknamed “Big Spender.” The Kwok family never reported the crime to Hong Kong police.

Cheung was sentenced to death by a Chinese court in November 1998 for his role in a string of kidnappings including that of the eldest Kwok brother, the state-run Xinhua News Agency reported at the time.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editors responsible for this story: Andreea Papuc at apapuc1@bloomberg.net; Hwee Ann Tan at hatan@bloomberg.net

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