June 11 (Bloomberg) -- Thomas and Raymond Kwok, the billionaire brothers who run Hong Kong’s second-largest developer, used sham contracts to disguise millions of dollars of payments to the Chinese city’s former No. 2 official, the High Court was told.
The Kwoks gave HK$11.18 million ($1.44 million) to Thomas Chan, an executive director at their company Sun Hung Kai Properties Ltd., who set up an investment fund run by a friend of the official Rafael Hui in 2007, prosecutor David Perry said yesterday.
That money was part of a complicated scheme to hide the origins of payments to Hui, Hong Kong’s chief secretary from 2005 to 2007, revealed in diary entries, check stubs, and contracts discovered in the homes of the five defendants, Perry said. All five have pleaded not guilty to all the charges, including conspiracy to commit misconduct in public office and to offer an advantage to a public servant.
The 2007 payment was part of “a coherent and systematic plan to make sure the first defendant (Hui) is sweetened by the payment of the moneys which are part and parcel of the continuation of the scheme that began in 2005,” Perry told the nine-member jury who will decide on the case.
Hui, 66, received more than HK$35 million ($4.5 million) in the form of payments and unsecured loans from the billionaire co-chairmen of Sun Hung Kai, according to the Independent Commission Against Corruption. They came in two tranches, before and after Hui took office as chief secretary, Perry said on the final day of his opening statement.
The details of the 2007 payment were arranged even as Hui took part in discussions of major real estate projects where the Kwoks had an interest, Perry said.
In one instance, defendant Francis Kwan carried two cashiers checks worth HK$650,000 and another for $150,000 in cash from his bank to another bank two and half minutes away to deposit them in Hui’s account, Perry said. That was done to mask the origin of the payments, he said.
Raymond Kwok claimed he didn’t know about the payments, except for one for HK$4.1 million, made before Hui took office in 2005, which was a bonus for consultancy work before he was sworn in as chief secretary, Perry said. Hui was appointed to the role when it was vacated after the resignation of the city’s first post-colonial leader Tung Chee Hwa.
ICAC investigators found documents including one in Kwan’s home where he listed “source of funds, tracing, timing,” in a note that included the words “convicted years of penalty,” Perry said. They also found documents describing payments to Hui as loans. In Chan’s home they found the contract for the investment company.
“It is obvious these payments were made to him because he was something valuable” to Sun Hung Kai, Perry said of Hui. “He was their insider. It’s as simple as that. That’s what this case is all about -- it’s about business in politics.”
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.
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