The Stock Exchange of Hong Kong Limited (SEHK) is established and is the only authorised body in Hong Kong to vet company listing applications. Before this, stock transactions and listing applications were handled by four stock exchanges.
ICAC Director of Operations G.E.Stockwell gets wind of alleged corruption among senior SEHK executives, and assigns Chief Investigator Peter Gregory to conduct a preliminary investigation into the matter.
Gregory’s initial probe reveals loopholes in the listing application system, and that several SEHK senior executives may have illegally accepted advantages in the course of vetting listing applications. The Director of Operations appoints Assistant Director of Operations Roger Batty to set up a special task force to conduct a full investigation.
In the wake of the global stock market crash, the Hang Seng Index falls 420 points and the SEHK suspends trading for the four subsequent days. The ICAC task force is ordered to expedite the investigation to minimise further uncertainty in an already volatile market.
The task force makes its first contact with the SEHK Listing Manager hoping to turn him into a tainted witness against others involved in the scam. The Chairman steps down in December when his term of office expires.
The ICAC arrests the now former SEHK Chairman, the Listing Manager and another suspect on suspicion of having accepted preferential allocations of shares from companies seeking listings. The trio is released on bail. On the same day, other SEHK committee members are asked to distance themselves from the Exchange’s work while the investigation is under way.
At the first hearing, the former Chairman is charged with illegally accepting 1,100,000 shares from a construction company as a reward for approving the latter’s issuance of 67,000,000 new shares, contrary to Section 9 of the Prevention of Bribery Ordinance (PBO).
Another seven suspects are respectively arrested and charged with accepting bribes or aiding and abetting others to accept bribes.
The first phase of the trial starts with the former Chairman being charged with breaching Section 9 of the PBO by soliciting and accepting a preferential allocation of 800,000 shares totalling $2,500,000 from an airline company and another company in return for approving the listing and trading of the companies’ new shares on the SEHK. The charge relating to a construction company is dropped as there were difficulties in adequately presenting the evidence.
The former Chairman is convicted of both charges and is jailed for four years. Corrupt gains of $865,365 are forfeited and he is ordered to pay the court’s costs.
While serving his sentence, the former Chairman, charged with six more counts of accepting and soliciting illegal advantages, pleads guilty to two of the charges while in jail and gains the court’s consent to leave the other four charges on the court file.
The Trial Judge rules that the charges against the other seven defendants are unsubstantiated based on legal consideration of the Bill of Rights Ordinance. The seven are acquitted.
The court accepts the former Chairman’s reversal of his previous guilty plea to two charges made after the acquittal of the seven defendants. It brings the case to an end.