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Strenuous denials

In September 1976, the ICAC began its investigation of the Telephone Company, concentrating on its property department and its staff canteen in one of the exchange buildings.

The property department was some 200 strong and was mainly responsible for the repair, maintenance and security work of all offices, some 50 telephone exchange buildings, and staff quarters for some 500 personnel, all of which were company owned.

With the rapid growth of the Telephone Company, the number of properties managed by its property department and the funding resources involved shot up.

The property department was headed by a property manager, who reported directly to the assistant general manager (administration), as shown by the company’s organisation chart.The property manager was a British citizen who had previously served in the Royal Hong Kong Police.

On 3 September 1976, the ICAC received intelligence alleging that the operator of the Telephone Company’s staff canteen in an exchange building had lost the canteen’s operating contract because he had failed to offer advantages to the company’s management personnel. What is more, the new operating contract had been awarded to a chief clerk in the property department in his private capacity.

The ICAC quickly contacted the assistant general manager, who was responsible for internal day-to-day operations, hoping to learn more about how the staff canteens operated. The assistant general manager told the ICAC investigator that he was aware of the incident as some staff had lodged a complaint with him direct. He claimed that he had already settled the matter, saying that he had immediately looked into the issue without finding anything suspicious.

The assistant general manager further explained that the contract of the current operator of that staff canteen had not been renewed because of the poor hygiene and upkeep of the premises-and the boss had gone bankrupt. He stated that there was absolutely no corruption or other improper act involved.

He did say, however, that he had just learned that the contract had been awarded to a chief clerk of the property department in his private capacity. Nevertheless, said the assistant general manager, he felt that the canteen was not a profitable business and that the clerk had taken it on solely to benefit the Telephone Company and its staff.

The Telephone Company had staff canteens in a number of telephone exchange buildings. Information revealed that these outlets enjoyed an average monthly turnover of around $20,000. Operators were not required to pay rent, electricity charges or fuel costs, shouldering only staff wages and the cost of foodstuffs. Running a staff canteen was thus a lucrative business which attracted fierce competition.

Thus far, the ICAC investigation seemed to have only succeeded in alerting people who had important evidence to hide, but the investigators were quite prepared to sit things out patiently and wait for the right moment to strike.

Birth of the Stock Exchange of Hong Kong

“On Hold!”

Then, on 8 October 1976, a month or so after matters first came to light, the ICAC received an anonymous call. The caller alleged that the Telephone Company’s property manager and some of his subordinates were corrupt; soliciting private gain when recruiting security guards; approving staff quarters; arranging quarters for expatriates; awarding cleaning contracts; and procuring office furniture. This information was just what was needed to revive the investigation, and Investigation Group A was assigned to carry matters forward.

The ICAC visited the Telephone Company again, this time requesting the assistant general manager to provide information relating to the type of activities and operations mentioned by the caller. The assistant general manager claimed that all such details were in the hands of his subordinate, i.e. the property manager.

Why should all of the information relating to such a wide range of daily operations be under the sole and total control of a property manager? This was in itself an intriguing matter, but the investigators decided that if this particular individual was questioned directly, it might start the hares without offering any real chance of catching them.

So they quickly changed their tactics. Instead of acting against the most likely targets within the company, they began to investigate others who might have a connection with the case, including the managers of the cleaning contractor, the furniture company and the staff canteens. All of them kept their mouths tight shut, though, resolutely denying having offered any advantages to the property manager or his subordinates in return for contracts or favours.

The ICAC thus were left with no choice but to invite the property manager and his subordinate, the chief clerk, to assist them in their investigations and provide information relating to the corrupt allegations against them. The property manager was interviewed by the ICAC on 18 March 1977 (well before the 1977 amnesty was announced).

The two employees denied the allegations and claimed they had not abused their official capacity by accepting advantages. Accompanied by his solicitor throughout, the property manager gave a brusque “no comment” to every question the ICAC raised. He nevertheless contrived to express outrage against those who had made what he called untrue and malicious allegations against him. He even expressed the desire to sue them if he ever found out who they were!

As the ICAC had suspected would happen, once its investigations had become common knowledge at the Telephone Company, everyone put their carefully laid plans into action. Relevant evidence and pertinent documents became even harder to locate. The operation had ground to a halt. What would the ICAC’s next step be?

An Investigator says

Persistence Pays Off

Ms Wan was convinced that the suspects must have left at least some clues or traces behind them. She realised though the investigation team were going to have to make really strenuous efforts to check every detail including the business registration records of every company involved, as well as every suspect’s bank statements and receipts, regardless of amount. Some connections or relationships could surely be established.

After ten months of patient scrutiny of records, the first real clue did indeed appear, in the form of a particular travel agency’s client list.

While studying batches of bank statements and receipts, the ICAC had earlier discovered that the chief clerk had run up a lot of travel expenses. Since he did not earn very much, how could he afford to go on holiday trips so often? Where did he usually go? And who did he go with?

Investigators visited the travel agency concerned. Its records showed that the chief clerk often went travelling with his girlfriend.

She was immediately invited to the ICAC to assist in their investigations. When asked about the operations of the cleaning company, she seemed to know nothing at all. She had simply been instructed by the chief clerk to become a director of the company.

The issue was becoming a little clearer. But how had the chief clerk been able to obtain the cleaning contract for the Telephone Company despite the fact that it gone through a tendering procedure? Was the property manager, who was responsible for the administration of the cleaning contract, aware of this possible irregularity? Was the property manager indeed directly involved?

The investigators were now hot on the scent, and ready to mount a large scale operation.

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