BOC Hong Kong's Cheung Misled Uneducated Buyers on Minibonds, Court Told
BOC Hong Kong (Holdings) Ltd. manager Cheung Kwai-kwai told a customer who bought structured products linked to Lehman Brothers Holdings Inc. that he would get back the principal, a prosecutor said.
Cheung sold the products, which lost their value after Lehman’s 2008 bankruptcy, to retirees and investors who hadn’t completed primary school, Jonathan Man told Hong Kong’s District Court on the first day of Cheung’s trial today.
The 47-year-old banker had pleaded not guilty to nine counts of fraudulently or recklessly inducing others to invest a total of about $787,776 in the securities between 2005 and 2008. The Hong Kong unit of Bank of China Ltd. was the biggest seller of so-called Lehman minibonds, $1.8 billion of which were bought by retail investors in Hong Kong since 2003, according to the Hong Kong Monetary Authority.
Cheung told Fong Kwuk-tong, a part-time security guard, the minibonds were a "very secure" investment and that he would "definitely receive" the principal amount back in six-and-a-half years, said Man, a lawyer for the prosecution.
Cheung’s lawyer Peter Duncan declined to comment.
BOC Hong Kong didn’t respond to a request for comment today. It was one of 16 banks that agreed to a settlement to buy back the products for at least 60 cents on the dollar. The bank said in April that Cheung and fellow employee Tai Ching had been placed on compulsory leave, and that the matter would not have a material impact on its operations.
Prosecution witness Siu So-chun, a 62-year-old retiree who couldn’t read all the words on the standard oath to be recited by witnesses before giving testimony, said she couldn’t remember whether Cheung had shown her any documents when she bought the minibonds.
“She probably showed me something, but I said ‘I don’t need to look at that because I trust you,’” Siu testified. “I have known her for so many years.”
Tai’s trial on the same charge is scheduled to begin on March 11.
Richard Turnbull, a prosecutor for the Department of Justice, said a conviction would carry a maximum fine of HK$1 million ($128,882) and seven years imprisonment.
The case is Hong Kong SAR v. Cheung Kwai Kwai, DCCC526/2010, in Hong Kong District Court.
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