Stock Listings Scam

Former Chairman Convicted

The trial began on 3 September 1990 at Court No. 10 of the High Court. The original charge against the former SEHK Chairman concerned illegal acceptance of preferentially-allotted shares from a construction company. As there were difficulties in adequately presenting the evidence, the charge was replaced with two other charges that alleged that the defendant had “violated Section 9 of the Prevention of Bribery Ordinance (PBO) in that being an agent of the SEHK (that is, Chairman of SEHK and convenor of the Listing Committee at the time), he had, without reasonable excuse and authority, in 1986 and 1987 respectively, phoned the merchant banks that were assisting two companies to apply for listing, to solicit and accept preferentially-allotted shares from these two companies as a reward for giving permission to or not objecting to or not delaying the listing and trading of their new shares at the SEHK”.

	1st charge	2nd charge
Target of solicitation/acceptance	Airline company	Private enterprise
Preferential shares solicited /accepted	500,000 shares	300,000 shares
Price per share	$3.88	$2.00
Over-subscription from the public	56 times	23.2 times
Profits taken by the defendant from the sale of shares after listing	$794,619	$70,746

During the five-week trial, the court summoned 18 witnesses, including the former Listing Manager who served as a tainted witness. On 18 October 1990 (the eve of the third anniversary of the global stock market crash) the jury of four men and three women found the defendant guilty after a 10-hour deliberation. He was sentenced to four years in prison. His corrupt gains of $865,365 were confiscated and he was ordered to pay the court costs.

The defendant later appealed against the ruling and sentence. The Court of Appeal dismissed the appeal and upheld the original sentence after a three-day hearing.

To Peter Gregory, the investigation tested the professionalism and integrity of the ICAC - a test they passed with flying colours: “The evidence was hidden behind huge volumes of complicated documents. Investigators had to rack their brains to track every tiny detail, but were dauntless despite the possibility of confronting the rich and the powerful. The high social status of the suspects did nothing to dampen our commitment to see justice done. Our only concern at that time was impartiality and that abuse of authority for private gains should never be tolerated. I believe the judgment served as a powerful deterrent against corruption.”

Others Acquitted

The former Chairman, charged with a further six counts of soliciting and accepting illegal advantages, was originally scheduled to appear in the High Court in 1991 together with the seven other defendants. However, he pleaded guilty to two of the charges while serving his sentence. Due to his voluntary guilty plea and based on public interest, the Trial Judge consented to allow the other four charges to be left on file. Sentencing for his two admitted charges would be handed down at the end of the trial.

In October 1991, the High Court started an eight-month hearing on the charges against the seven other defendants. Finally, the Trial Judge directed the jury by drawing legal reference to a new decision made by the Court of Appeal in another case concerning the “burden of proof” in which the Hong Kong Bill of Rights Ordinance has applied. After a five-day deliberation, the jury found the seven defendants not guilty.

Following the acquittal of the seven defendants, the former Chairman successfully sought to reverse his previous guilty plea of two charges of acceptance of advantages. He therefore only needed to serve out his previous jail sentence. The whole case came to a close in June 1992 after four years of investigations and trial proceedings.

Although things didn’t quite turn out as expected, Gregory looked at it in a positive light. “It’s the ICAC’s responsibility to investigate suspected corruption cases and it’s also our job to bring the corrupt to justice,” he says. “The most important thing was to unveil the problems in the listing system and prevent the recurrence of similar incidents by plugging the loopholes.” It was a ‘perfectly conducted trial’ in which the prosecution and defence demonstrated professionalism and the jury performed in a responsible manner. Tsun adds that it was an invaluable experience to take part in the investigation.

Under the Hong Kong Bill of Rights Ordinance, anyone charged with a criminal offence shall be presumed innocent until proved guilty. The defendant does not need to prove the absence of a criminal intention on his part. The prosecution, however, has to provide sufficient evidence to prove that the defendant is guilty.

When the Bill of Rights Ordinance was enacted in June 1991, it stipulated a grace period of one year, during which the enforcement of the Prevention of Bribery Ordinance (PBO) would not be affected. Gregory explains: “The investigation and trial took place within the grace period, hence we took Section 24 of the PBO as the yardstick, meaning that the burden of proof rested with the defence but not the prosecution. In other words, the defence had to show permission was obtained to solicit and accept advantage. If they failed to produce relevant proof, the prosecution could presume their acceptance of advantages as a reward for approving the listing of companies a bribery act.”

Nevertheless, by the time the Trial Judge concluded the case, the grace period had expired. It happened that the Court of Appeal had just made a decision in another case by applying the new requirement of burden of proof according to the Bill of Rights Ordinance and that set a precedent. With reference to the new decision, the Trial Judge directed the jury that there had to be evidence from the prosecutor to show that the defendants had no permission to solicit and accept allocation of shares. As a result, the jury found the seven defendants not guilty.