ICAC Early Classic Cases - 26 Public Housing Blocks Case

Ducking Responsibility

During the late sixties and early seventies, small construction contractors' quick accent to prominence owed a great deal to the then housing policy to "build cheap and build quick". Putting up a large quantity of low cost estates for squatters was a top priority at that time. As such, quality control was less stringent than in other types of buildings. In order to secure contracts at a low price and still make a profit, some contractors resorted to the use of sub-standard building materials.

One of the contractors connected to the problem blocks was found to have secured a contract at an incredibly low price. The tender price for the contract was more than HK$1 million lower than its nearest rival. It was so low that responsible officials once queried how it could be done.

The contractor, however, managed to give a satisfactory explanation. But during the construction period, the contractor requested to inflat in the contract value by 30% to 50% within a year, citing rapidly rising building costs.

Contractors also adopted the practice of “sub-contracting”. Once a contract was secured, they would dish out work to subcontractors, including the mixing of concrete. Consequently, to save further on costs, sub-contractors turned to sub-standard construction materials. Moreover, sub-contractors could easily cover their misdeeds because of lax site supervision.

Tampering with concrete samples before they were delivered to government laboratories for testing was one of the means to cover the illicit track. The lack of proper supervision on the storage and delivery of the samples was easily abused and cheated on the compliance test requirement.

On-site checks to be carried out by government officials were not of much help either. Many officials who were supposed to monitor building quality on the construction sites claimed that they were desk-bound by paperwork. The task of supervision was hence delegated to the site foremen.

Some site foremen shirked their responsibility by claiming that they had to cope with an ever-growing amount of clerical work in addition to their own duties, and had no time for on-site supervision. Thus, the seeds were sown for corruption and sub-standard work in many of the public housing blocks.

Mission Impossible

When the ICAC first got mind of suspected corruption in the construction of the Kwai Fong Estate in January 1982, investigators knew the task would not be easy.

For a start, Phases I and II of the Kwai Fong Estate were built in 1971. As stipulated by the partial amensty announced in 1977, prior approval of the then Governor had to be obtained before an investigation could commence. An approval was eventually granted two years later in January 1984.

The investigation swung into action with old files being dug out, bank accounts of civil servants and non-civil servants related to the projects were traced and the accounts and records of the contractors examined. As some of the persons involved had migrated, investigators had to make overseas trips to collect evidence.

Daunting Challenges

The dangerous state of the public housing blocks prompted the Housing Department, following on the heel of the ICAC’s investigation into the Kwai Fong Estate, to inspect 900 public housing blocks which were of the same make and of more than five years old. As a result, 26 were found to have serious structural defects.

In January 1986, the then Governor once again exempted the ICAC from the restrictions of the 1977 partial amnesty and ordered that a thorough investigation be carried out into the 26 blocks. In light of the seriousness of the case, a nine-man ICAC task force was set up.

With the difficulties encountered during the investigation into the Kwai Fong Estate still fresh in their minds, the investigation team knew the challenges ahead were even more daunting now that the scope of investigation was so much wider.

One of the main obstacles facing the investigators was the fact that all the blocks were built between 1964 and 1973, some 13 years before the investigation commenced. A sea of change could have taken place in between. In fact, six out of the nine contractors connected to the construction of the 26 blocks had ceased operation by 1986. How and where the people involved could be located?

Were the documents related to the case still intact? Even if those involved could be located, could they recall what had transpired in sufficient details? Anthony Stevens, the former Chief Investigator of the nine-man team, described the case “a dead thing” at the time. Indeed, at the beginning of the investigation, members of the team were unsure that the case could be “revived”.

Then Senior Investigator Eric Fan Sai-chor, a member of the nine-man investigation team, recounted his first reaction in a sound recording when he was assigned the case.

(Caption: In 1986, Chief Secretary Sir Akers-Jones signed on a certificate approving the ICAC to commence investigation into the problem blocks.)

Fan’s Recording

Perseverance Pays Off

The complexity of the case did not put off the nine-man investigation team. They started off by concentrating on identifying all those involved in the construction work of the 26 blocks, including owners and staff of the construction companies, and the government officers supervising the projects. Checking files and tracing records were of paramount urgency. On one occasion the team removed and checked through 502 files and contracts from various departments. Some of the files were decades old with dead cockroaches on them. From them they found that 915 companies and persons might be involved.

And two officers were tasked to shift through the remuneration records and personal files of 503 persons in five weeks. The team tried not to miss out anything, not even a signature.

With clues affirmed, investigators then proceeded in earnest an extensive interviewing programme. Twice they ventured overseas and trekking across the United States, Canada, United Kindgom, Cyprus, Spain, New Zealand and Australia to interview those involved. However, the “satisfied customer” nature of corruption had sealed the lips of most of the suspects and witnesses contacted.

Inside Story

While most connected to the case insisted that they had not offered or received any bribes or advantages, the ICAC team’s persistence paid off and confessions were eventually obtained from some of them. A government project supervisor claimed while he did not know who was paying him, every time he was paid, a construction worker would inform him in advance where in the construction site he could pick up the bundle of cash. He admitted that the money he received each month amounted to his monthly salary. This was commonly known in the construction industry then as “one payment made overtly and the other covertly”.

Statements taken from others also revealed that in certain construction sites, money equivalent to a month’s salary was given to every foreman on a monthly basis. Money was usually doled out each time in small sums of HK$200 or HK$300. Occasionally, up to HK$20,000 changed hand in one transaction. However, most of those involved denied having given any favours to the contractors and sub-contractors with regard to their official duties despite accepting the payments. They insisted they still upheld their integrity and fairness in performing their charge.

Though bribery was a common place those days, there existed government officers of integrity and refused corrupt payments. A senior government officer who assisted with the investigation recalled that on one occasion after he had finished an on-site inspection, a contractor offered to give him a lift and gave him a cash-loaded envelope during the ride. He turned it down. He believed the money was intended as a Christmas gift. Another senior officer said a contractor attempted to offer him money shortly he had taken up supervision duty for project. He refused and rebuked the contractor. Later, he received gifts on the birth of his daughter, but he returned them all.

Turning Point

The other end of the tunnel was no where in sight after a full year of investigation and more than 3,000 persons and companies examined. It was not until early 1987 that the first breakthrough dawned when an employee of a contractor and a retired government project supervisor (hereinafter respectively referred to as "Ho Pak (Uncle Ho)" and "Ah Suen (Suen)" finally agreed to testify.

Statements from the two disclosed that contractors would offer substantial bribes to site supervisory staff in return for their turning a blind eye to sub-standard work.

Sub-standard cement and steel reinforcement work were common place but contractors were able to escape detection, with the connivance of government officers, by tampering with cement samples submitted to government laboratory tests. The witnesses also confirmed that bribes received by government officers each month were equivalent to their monthly salary, and that the contractors usually offered advantages through their employees and associates.

The Prosecution

With the co-operation of the two, the ICAC investigation finally came to a conclusion and the case was referred to the Legal Department for further action. On November 2 1987, the Legal Department instituted prosecution against the alleged offenders. Three contractors and seven serving or former civil servants were among the accused and charged with a total of 46 corruption-related offences under the Prevention of Corruption Ordinance and Prevention of Bribery Ordinance.

On March 11 1988, one of the contractors was found guilty and sentenced to 33 months’ imprisionment and fined HK$325,000 by a District Court judge, who asserted that corruption needed to be seriously addressed. He rebuked the defendant saying that he, as a contractor, should be keenly that substandard concrete would pose grave potential danger to the public and the residents.

Another contractor, charged with two offences under the Prevention of Corruption Ordinance, was sentenced to three months’ imprisonment, suspended for one year, and fined a HK$2,000 after taking his guilty plea into consideration.

The trial of the last contractor had to be deferred due to health reasons. The others were acquitted. The investigation exposed that, apart from corruption, certain government officers had willfully neglected their site supervision duties or abused their powers during the construction of public housing estates between 1964 and 1973. The ICAC therefore forwarded the list of the government officers concerned to the Civil Service Bureau for follow-up action.

The 26 problem blocks were built between 1964 and 1973. The case in principle should have been regarded as cases in which “no action will be taken” under the 1977 partial amnesty. In promulgating the amnesty, however, the Government had also issued a supplementary directive which empowered the revocation of the restriction under special circumstances.

According to Section 18A (2) of the ICAC Ordinance, for offences considered to be sufficiently serious to warrant action, investigations could only proceed if authorised by the then Chief Secretary.

The earlier case of Block 6 at Kwai Fong Estate and the subsequent 26 housing block case are the only two for which Section 18A of the ICAC Ordinance was evoked.

In the case, one contractor was prosecuted for offences under the Prevention of Corruption Ordinance as well as the Prevention of Bribery Ordinance as the offences committed by him straddled periods covered by both ordinances.

The defendant offered bribes during the construction of the 26 blocks from 1964 to 1973 in which period the Prevention of Corruption Ordinance, passed in 1948, was replaced by the Prevention of Bribery Ordinance on 14 May 1971. Therefore, the prosecution had to press charges under both ordinances.

As an effective deterrent against corruption, the Prevention of Bribery Ordinance carries a heavier penalty than its former version, the Prevention of Corruption Ordinance.