During the investigation, the ICAC interviewed more than 95 witnesses, taken 79 court statements and subsequently submitted 504 documentary exhibits in court. The ICAC revealed that from 1951 to 15 May 1971 (the effective date of the PBO), the bank savings and assets, including company shares, land and estates, held by DS, his wife, his daughter and the two children he had had with his girlfriend might run up to over $5 million.
DS was arrested by the ICAC on 5 January 1977. He was asked to explain the source of his assets under Section 10 of the PBO and was restrained from selling assets in his ownership under Section 14 (1) of the PBO*. He was also required to surrender his travel documents under Section 17 A of the PBO.
As an experienced police officer who understood the many intricacies of legal proceedings, DS was certainly not going to take this lying down, especially when faced with the prospect of trial. In May 1977, his lawyer applied for the withdrawal of the injunctions against him, stating that he was not governed by Section 10 of the PBO as he had already retired by the time it became effective. He claimed that there was no need for him to surrender his travel documents to the Commissioner of the ICAC and that his assets should not have been frozen. His application was rejected by the High Court in July the same year, however.
*This section was repealed in a legislation amendment exercise conducted in 1996.
During interrogation by the ICAC, DS had never once provided a detailed account of his assets. So on 19 August 1977, the ICAC handed him a checklist listing item by item the assets which required an explanation of their source. Between 17 October 1977 and 11 January 1978, he provided three explanatory documents through his lawyer. His explanations, however, were basically the same as those he had given the Anti-corruption Branch years earlier.
DS insisted that apart from earnings from the police force, his wealth consisted mainly of proceeds from his wartime Mainland businesses. He claimed that he had made a profit of 6 million silver dollars from his transportation business in the Mainland some time around 1941, and had obtained 7 million silver dollars by selling two trucks as well as 400,000 silver dollars from property sales on his return to Hong Kong in September 1945. Totalled up, that was 13.4 million silver dollars.
After the war, DS claimed he had converted the 13.4 million silver dollars to HK$2.68 million at an exchange rate of 5:1. In April 1949, he bought a plot of land in Guangdong for 50 million Gold Yuan. He said that this sum was equivalent to HK$500,000 after conversion, and that he had sold the land for about HK$300,000 three months later in view of the region’s unfavourable investment environment. In 1949, after deducting this loss, his assets were worth about HK$2.48 million.
| 1940 | Proceeds from Mainland business | +6,000,000 silver dollars | |
| 1945 | Sale of vehicles | +7,000,000 silver dollars | |
| Sale of properties and land | +400,000 silver dollars | ||
| Total: | =13,400,000 silver dollars | HK$2,680,000 (converted into HK$ at an exchange rate of 5:1) |
|
| 1949 | Land purchase | 50,000,000 Gold Yuan |
|
| Land sale after three months | Loss:-1,000,000 silver dollars | ||
| Grand Total (as at 1949) | 13,400,000 silver dollars - 1,000,000 silver dollars = 12,400,000 silver dollars |
HK$2,480,000 (converted into HK$ at an exchange rate of 5:1) |
The ICAC officers found many aspects of this explanation suspicious. For instance, if he already held some HK$2 million worth of assets when he returned to Hong Kong after the war, why didn’t he simply buy a house instead of renting one? In fact, he did not purchase a property for residence for a whole year and it was a further six years before he bought any other properties. Finally, if these properties were simply standard investment vehicles, why did he proceed to purchase them using other names in disguise?
His response was to claim that did not at first deposit his Mainland earnings with a bank. Instead he kept them in a suitcase, later storing them in a safe at his home. To the ICAC it seemed the height of folly that he should keep such a large sum of money in his house and equally illogical to forgo interest.
Despite the clear absurdities in this story, the ICAC however still had a duty to verify the information DS had provided. “The crux of the matter,” ICAC investigators, “was that we were obliged to ascertain if he had really made a profit from his transportation business and his property transactions during the war. Proof or disproof alike would depend on both witness statements and exhibits.”
Add the investigators, “Was the conversion rate really 5:1 as claimed by our quarry? War was raging, Hong Kong was occupied by the Japanese, society was in turmoil, and there was much confusion surrounding the various currencies and exchange rates being used in both the Mainland and Hong Kong. So searching for truly relevant information was like looking for a needle in a haystack.”