$500 Million Plantation Project Scam
(Listed Company Corruption & Fraud Case)

In 2009, the Independent Commission Against Corruption (ICAC) received a corruption complaint about the acceptance of bribes by an incumbent Chairman A of Listed Company X, an act contrary to Section 9 of the Prevention of Bribery Ordinance (POBO). A normal corruption report as it might seem, the case was indeed about a well-orchestrated corruption-facilitated fraud scheme with bribes amounting to $200 million.

A probe initiated by a team of investigators based on the email records provided by the complainant revealed that the information in question was different from the company's record disclosed to the public. However, the investigation has met with obstacles as the complainant declined to offer further assistance and the investigation team could not reach the persons concerned due to confidentiality reasons. It was not until 2010 when the investigation team, with the assistance from computer experts, successfully obtained email records of a person involved in the case, enabling them to learn more about the specific details of the scam and that Company X was under HKEX's investigation for suspected breaches of the Listing Rules.

Despite the important clues, the investigation progress was still hampered by the high complexity of the case. Investigators had to dig out useful evidence from a sea of information about the enterprise merger and acquisition, a variety of financial tools such as shares, promissory notes and convertible notes and a number of off-shore, British Virgin Islands (BVI) and local companies.

After careful examination of all the email correspondence among persons involving in the discussion of acquisition, the web of relationships among over 20 persons could finally be sorted out, and remittance transactions made to the Mainland accounts in a circuitous manner could also be unravelled and identified. With the professional support from the ICAC's Computer Forensics Section and Forensic Accounting Group, investigators were able to examine and analyse loads of specialised documents including company registration records, books of account, stock transaction documents and notices of the listed company, etc. Statistics regarding the investigation are shown as follows:

After two years of investigation, the ICAC finally took action in 2011. Director B and the accountant of Listed Company X admitted to the relevant allegations, thus enabling the investigation team to confirm their preliminary assumption. Tracing back to 2008 when Listed Company X engaging in the garment industry was affected by the business downturn, the Chairman decided to discontinue and wind up its business by sale of a shell company. Chairman A then appointed an investment banker to privately approach potential investors. Eventually BVI Company Y was willing to buy 32% of the listed company's shares secretly held by Chairman A, and therefore an agreement was signed between the two parties. In the meantime, Listed Company X announced the acquisition of a Mainland plantation project from Company Z, a wholly-owned subsidiary of Company Y, at a consideration of $500 million, i.e. $400 million of convertible notes and $100 million of promissory notes. Due to the substantial amount involved, the acquisition constituted a Very Substantial Acquisition which required approval from shareholders and disclosure to the board of directors and shareholders about the agreement. On the face of it, the transaction seemed to be normal and legitimate, actually it was a corrupt scam of illegal practices.

Director B falsely represented to the board of directors and the shareholders of Listed Company X that the acquisition deal at a consideration of HK$500 million had been struck between Company X and Company Y through fair negotiation. Besides, he made no mention of the secret deal about the HK$100 million payment to Chairman A by Company Y's owner and his subsequent purchase of 32% of the listed company's shares from the latter. He also falsely claimed that there would be no changes made to the right of control of the Listed Company X nor to its board of directors following the acquisition. Through the fraudulent means and false representations which were contrary to the Listing Rules, Director B and the other persons involved in the case deceived the HKEX, Listed Company X and the then shareholders and potential investors by concealing the corrupt transactions made with Chairman A in written agreement, and also induced and caused Listed Company X to approve the acquisition of the plantation project.

The trial of the case was concluded in 2014. Director B (D1) of Listed Company X, the owner of Company Y (D2) and a registered accountant involved in the case (D3) were sentenced at the Court of First Instance to three to five years' imprisonment. D2 and D3 were found guilty by the jury of one count of conspiracy to offer advantages to an agent, contrary to Section 9(2)(a) of the POBO and Section 159A of the Crimes Ordinance; while D1 and D2 were further convicted of one count of conspiracy to defraud, contrary to Common Law. The judge also disqualified the three defendants from being company directors for 10 years. In sentencing, the judge said corruption was a serious offence and the defendants' acts had undermined the reputation of Hong Kong's financial industry and its honest business environment. The Department of Justice (DoJ) subsequently made an application for a review of the sentences imposed on the defendants. In 2015, the Court of Appeal (CA) allowed the application and ruled that the jail sentences imposed on the defendants were manifestly inadequate. The CA increased their jail terms by one to three years according to their roles in the commission of the offences.

The key figures in the case, i.e., Chairman A and another executive director of Listed Company X, remain at large and are still on the ICAC's wanted list.

Direct Delivery of Illegal Cigarette
(Cigarette Smuggling Case)

An investigation that had been running for several years involving the smuggling of cigarettes came to fruition in 1994.

The investigation uncovered bribes of over HK$33 million having been paid to a director of a tobacco company in Hong Kong. There was a large element of triad involvement in this case.

When the case turned overt in 1994, one of the syndicate members decided to give evidence for the prosecution. Having declined to go into a witness protection programme, he was murdered in Singapore in 1995 after having been brutally beaten and his body dumped in the harbor. The cigarette smuggling syndicate was subsequently smashed by the ICAC.

Empty Wagons
(Luxury Vehicles Smuggling Case)

Modernisation in the Mainland in the 1990s led to a surge in demand for luxury vehicles. In February 1993, an investigation caught the public eye when a large scale operation was mounted near the border at Lok Ma Chau in the New Territories.

A total of 24 persons, including a Senior Inspector and other Customs Officers of the Customs and Excise Department, were arrested with six containers holding 20 stolen luxury vehicles valued at HK$17 million being seized along with 684 video cassette players. These goods were being smuggled into the Mainland with the assistance of the corrupt customs officers.

The Senior Inspector and a Customs Officer were sentenced to two and four years' imprisonment for corruption. In later trials, the syndicate head, two drivers and four Customs Officers were convicted of offences including conspiracy to pay and receive bribes and smuggling stolen goods.

The success of this case had a direct and major impact on smuggling of luxury cars into the Mainland at the time and reduced this type of smuggling activity thereafter.

*	The address of the ICAC listed in the e-version of ICAC publications is changed to 303 Java Road, North Point, Hong Kong.
**	For the latest contact details of the ICAC Regional Offices listed in the e-version of ICAC publications, please refer to ICAC Regional Offices.
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