Justice Denied in Hong Kong

It has been nearly three years since Akai Holdings Ltd. collapsed in Hong Kong's largest-ever bankruptcy case, a major part of an international failure that saw tycoon James Ting's once-vast empire disintegrate. In Hong Kong alone, nearly $2 billion in assets vaporized, a large part of that fortune written off in a series of questionable accounting transactions that have never been satisfactorily explained--or even investigated.

However, in Ting's former base of Hong Kong, the wheels of justice are grinding all too slowly. Although the city's financial regulators pay lip service to concern about the case, they've washed their hands of the affair by turning over what little they've done to police, who are looking for evidence of criminal activity. For their part, private creditors cannot sue for their money because of Hong Kong's prohibition on all privately initiated lawsuits--let alone class actions--in securities cases.

The result of this system is a litany of buck-passing and inaction in the Ting case. No civil or criminal charges have been filed in Hong Kong against Ting, who is believed to be in mainland China, or anyone else in the case. If this is Hong Kong's Enron, as creditors call it, then the Hong Kong government's effort appears pitifully inadequate. Rather than seeking to make an example out of a high-profile case, many officials seem to wish that the case simply would fade from public memory.

By comparison, in the U.S., the jewel of Ting's erstwhile empire, Singer Sewing Machine Co., emerged from bankruptcy after just a year and is being run as a going concern. Bondholders are suing Ting, his former accountants Ernst & Young, and his investment banker Bankers Trust in U.S. court. For all the considerable faults of the American justice system, it does respond quickly. And it permits parties who feel they have been wronged to have their day in court.

Hong Kong loudly proclaims its ambitions to become Asia's leading finance center. But being a financial center means more than capturing a few minnows gone bad in an effort to uphold regulatory standards. It means snaring some big fish. If the evidence on the Ting case is anything to measure by, Hong Kong is unwilling or unable to go after the deadliest sharks in the sea. That laissez-faire attitude will guarantee Hong Kong a meager role in the pantheon of international markets.

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