(Corrects number of loans in second paragraph.)
July 13 (Bloomberg) -- The billionaire co-chairmen of Hong Kong’s biggest developer Sun Hung Kai Properties Ltd. and the city’s former No.2 government official were charged with bribery and public misconduct by the city’s anti-graft agency.
Thomas and Raymond Kwok and two other men conspired to provide Rafael Hui with free use of two apartments and three unsecured loans for unspecified favors involving Hui’s role as the government’s then chief secretary, the Independent Commission Against Corruption said in a statement today. Sun Hung Kai promoted two executives to deputy managing directors to assist the co-chairmen, who will retain their current roles at the company, the developer said in a separate statement.
Hong Kong’s highest profile graft case adds to pressure on the city’s Chief Executive Leung Chun-ying, who took office July 1, to address public concern over the conduct of government officials. His development secretary resigned yesterday after the Apple Daily reported he had misused housing allowances. Leung himself has been accused of misleading the public about illegal structures built at his home.
“This reminds the public about the problem of collusion between business and government,” said James Sung, a political scientist at the City University of Hong Kong. “The lack of trust in the government will threaten Leung’s governance. The public fear that his cabinet may also have the same misconduct.”
Magistrate David Dufton today allowed bail for the Kwoks, Hui and two other men charged in the case: Sun Hung Kai’s executive director Thomas Chan and Francis Kwan. Hui, 64, and Kwan were ordered not to leave Hong Kong.
No pleas were entered in the hearing, which lasted about 30 minutes, at Hong Kong’s Eastern Magistrates Court today. Dufton adjourned the hearing until Oct. 12.
Colin Cohen, a lawyer for Thomas Kwok, 60, declined to comment before the hearing. A lawyer for Raymond Kwok, 59, didn’t immediately return an e-mail requesting comment. Hui declined to comment to reporters after the hearing.
The Kwoks have previously denied wrongdoing and Sun Hung Kai spokeswoman Margaret Ng didn’t return calls from Bloomberg News seeking comments. The company’s shares will resume trading in Hong Kong on July 16 after being suspended today, it said in a Hong Kong stock exchange filing today.
“The fundamentals of the company probably won’t be affected by this,” said Adrian Ngan, a Hong Kong-based analyst at Citic Securities Co. “Investors who are concerned about the probe would have sold their holdings already so I don’t see the actual charging could drag down the share price that much further.”
Sun Hung Kai, Hong Kong’s biggest developer by value, has fallen 14 percent since the March 29 arrests, compared with a 3.1 percent decline in the Hang Seng Property Index. Brokerages including Citigroup Inc. and Barclays Plc have cut their recommendations on Sun Hung Kai’s stock since the Kwoks’ arrest. Goldman Sachs Group Inc. suspended its rating.
Moody’s Investors Service maintained a negative outlook on Sun Hung Kai today, saying “the latest development is credit negative for SHKP, as its reputation is now further at risk,” according to a statement.
Sun Hung Kai built and runs the 118-floor International Commerce Centre, which at 484 meters (1,588 feet) is Hong Kong’s tallest building, as well as the International Finance Centre complexes in Hong Kong and Shanghai.
Sun Hung Kai has been run by Thomas and Raymond Kwok since the ouster as chairman in 2008 of their elder brother Walter. Walter is still a non-executive director.
Thomas and Raymond Kwok will continue to discharge their duties with the assistance of new deputy managing directors Mike Wong and Victor Lui, Sun Hung Kai said in the stock exchange filing today. Wong and Lui are both executive directors at present. In addition, Adam Kwok, a son of Thomas, and Edward Kwok, a son of Raymond, were named as alternative directors to their fathers, the developer said.
Wong will assist in land development, planning and construction, he said at a press conference broadcast on television today. Lui said he will assist in property sales, land acquisition and the disposal of non-core assets.
Walter Kwok applied to the High Court in 2008 to prevent the board from removing him from office, alleging that his brothers opposed his inquiries into impropriety in the way the company awarded construction contracts, and other corporate governance issues.
He was arrested in May as part of the probe. Walter Kwok wasn’t seen at the ICAC today. Adrian Cheung, a spokesman hired by him, declined to comment.
Chan, an executive director in charge of land acquisitions and project planning at Sun Hung Kai, was the first among the five defendants to be arrested by the ICAC. Chan has been an executive director of the company since 1987.
Kwan worked at the Hong Kong Exchanges and Clearing Ltd. for nearly 10 years before resigning in 2004. He last served as senior vice-president of the company and was chief operating officer of the Hong Kong Futures Exchange Ltd.
After 30 years in government, Hui set up a consulting firm in 2003, offering advice to Sun Hung Kai. Less than a year later, he became a director of Kowloon Motor Bus Holdings Ltd., a unit of the developer.
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