Taking a tough stance on corruption in building management

In Hong Kong, residential buildings aged 30 years or above are mandated to engage professionals to inspect their common areas, external walls, etc. and to carry out maintenance works to ensure safety of the buildings. Unlike minor repairs at home, building maintenance projects require the expertise of professional consultants and contractors and the project fees could range from several million to hundred million dollars.

Given the huge project sums and public safety involved, the building management subsector has always been one of ICAC’s work priorities. Corruption complaints relating to building maintenance took up about 150 on average each year and the subsector remained top of the list of corruption complaints concerning the private sector.

In January this year, the ICAC mounted its largest ever operation against building maintenance bribery, neutralising a sophisticated but unusual syndicate. A total of 49 people were arrested, including the mastermind of a sophisticated corruption syndicate.

Assistant Director Bryan Chong Ka-lok, who heads the investigation branch for private sector corruption, told a press conference that the largest operation ever concerning the building management subsector was triggered by a seemingly ordinary complaint from the public. Thorough inquiries by the ICAC revealed that the scam was of a much larger scale, involving 10 building maintenance projects with contract sums totalling over $500 million, and bribe payments for some projects amounted to over $1 million.

Explaining the modus operandi deployed by the syndicate, ICAC Principal Investigator Grace Yee Hin-lai told the media that the mastermind – a company proprietor controlling a number of construction and property management companies – had recruited various building maintenance-related key-players, including project consultants, building contractors and middlemen, through bribery.

The syndicate would then infiltrate targeted building maintenance projects and take up key roles in those projects to manipulate the tendering exercises involved, bribe relevant parties if required, and obtain maintenance contracts at exaggerated sums.

The corruption syndicate had its picks of projects, infiltrating private housing estates, commercial and industrial buildings across the territory, while maintenance projects involved ranged from lift enhancement works at a few million dollars to grand renovation works at over $100 million.

In addition, the syndicate offered bribes to players who could help influence flat owners’ decisions by recommending contractors related to the syndicate while smearing the syndicate’s competitors, Yee added.

In one of the cases, a $1.2 million bribe changed hands between the syndicate and three employees of a property management company. In return, the latter would convince flat owners of a private housing estate to pursue a $20 million contract even though the project was estimated to cost just $9 million by an independent surveyor.

In another case, the corruption syndicate secured a $200 million maintenance contract for another private housing estate and offered bribes totalling over $1.5 million to a number of property management company staff in exchange for lax supervision, ICAC Chief Investigator Bill Ng Siu-kei supplemented.

The ICAC operation had successfully neutralised the syndicate and prevented further corrupt and illegal activities. Eight out of the 10 projects involved have yet to commence, sparing property owners concerned any financial loss.

The ICAC will continue to adopt a two-pronged enforcement strategy tailor-made for the building management subsector, which combines the traditional approach of investigation and early intervention action so as to timely alert flat owners to potential corruption risks in building management.