Tuesday 12 May 2009

Vote-rigging controversy: two courts, two judges and two starkly different verdicts

The PCCW bid saga can be distilled into a tale of two judges.

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Vote-rigging controversy: two courts, two judges and two starkly different verdicts

Naomi Rovnick
12 May 2009

The PCCW bid saga can be distilled into a tale of two judges.

Mr. Justice Anthony Rogers, who quashed Richard Li Tzar-kai’s HK$15.93 billion buyout in the Court of Appeal, characterised the deal as an unfair coercion of minority shareholders sullied by “dishonest” vote rigging.

The judgment was a sharp departure from last month, when the High Court’s Madam Justice Susan Kwan Shuk-hing ruled the privatisation was fair, legal and above board.

The Securities and Futures Commission derailed the takeover in February. It claimed Fortis regional director Inneo Lam Hau-wah had bought 500,000 PCCW shares before the takeover vote and doled them out to associates to try to force the buyout through.

Madam Justice Kwan slammed the regulator’s arguments, ruling share splitting was perfectly legal. She suggested that if the SFC wanted the law changed, it should pressure legislators, not judges.

But in Mr. Justice Rogers’ 74-page ruling, he heartily validated the watchdog’s case. He found that Mr. Lam split the shares among 494 people, including Fortis agents, a tailor and a hairdresser, to secure the vote.

“Because he gave the shares away and even paid the costs of the transfer, he was in effect buying the votes,” Mr. Justice Rogers said. “There was a clear manipulation of the vote. The court cannot sanction dishonesty.”

The two judges also disagreed on the role of Francis Yuen Tin-fan, the deputy chairman of Mr. Li’s bidding vehicle, Pacific Century Regional Developments, and Mr. Lam’s former colleague at Fortis.

Mr. Yuen spoke on the telephone with Mr. Lam several times just before Mr. Lam bought his PCCW shares.

Madam Justice Kwan said there was no evidence the conversations had anything to do with the vote splitting. She also characterised Mr. Yuen, former chief executive of the Hong Kong Stock Exchange, as an upstanding member of the financial community who “knows very well the regulatory requirements of Hong Kong”.

The appeal court was less flattering. It did not find that Mr. Yuen helped rig the vote but raised “suspicion of complicity” between himand Mr. Lam.

After Mr. Lam bought the PCCW shares, his secretary obtained proxy forms for the new shareholders to vote on the deal from Mr. Yuen’s personal assistant. This “multiple series of coincidences” cast “a shadow of doubt” over Mr. Yuen, Mr. Justice Rogers said.

Both Mr. Lam and Mr. Yuen have denied vote rigging.