BOC Hong Kong Manager Warned Lehman Product Buyers of Risks, Court Told
A BOC Hong Kong (Holdings) Ltd. manager facing criminal charges for selling structured products linked to Lehman Brothers Holdings Inc. warned customers they could lose their money, her lawyer said.
Cheung Kwai-kwai took her customers through sales leaflets for the products, including the part showing that they weren’t principal protected, her lawyer Peter Duncan said in his closing submission today in Hong Kong District Court.
Cheung, 48, pleaded not guilty to seven counts of fraudulently or recklessly inducing customers, including retirees and investors who hadn’t completed primary school, to invest a total of about $770,164 in minibonds and Constellation notes, between 2005 and 2008. Judge Garry Tallentire said today the verdict would be delivered on Feb. 18.
Cheung made statements to customers that the structured products were safe, principal-protected, and failed to disclose that the risk level designated by the bank was “high,” Senior public prosecutor Jonathan Man said today.
Duncan argued the verbal nature of the alleged statements and the lack of notes taken from the meetings meant the prosecution couldn’t prove “beyond a reasonable doubt” that the statements were made.
The Hong Kong unit of Bank of China Ltd. was the biggest seller of so-called Lehman minibonds, $1.8 billion of which had been bought by retail investors in Hong Kong since 2003, according to the Hong Kong Monetary Authority.
‘Less Than Ideal’
Cheung earlier testified that she hadn’t read the product prospectuses and wasn’t aware of the consequences of Lehman’s collapse. Duncan said Cheung’s failure to do so doesn’t constitute fraudulent or reckless behavior.
“She is not facing charges of conducting a less-than-ideal system,” Duncan said today. “She is not charged with how well she did her job.”
Angel Yip, a spokeswoman for BOC Hong Kong didn’t immediately respond to an e-mailed 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 wouldn’t have a material impact on its operations. A hearing in Tai’s case will be held on Feb. 1.
Richard Turnbull, a prosecutor for the Department of Justice, said in November 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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