Silence loud on police raids over PCCW’s failed privatisation
Strangely, there is no word on the swoop on the homes and offices of Richard Li and others connected with attempt to take company private
Barclay Crawford 11 March 2010
In the week before the Lunar New Year, police raided the home of Richard Li Tzar-kai and a number of other residences and businesses connected with the failed HK$15.93 billion attempt to privatise PCCW last year.
Yet three weeks since a number of warrants were executed across the city, police have not even confirmed that any criminal investigation is under way.
Police have declined to say how many raids, if any, were carried out, who was questioned, and the exact dates of any searches or interviews.
Even requests for off-the-record confirmations of whether an investigation is in progress have been met with either silence or the standard reply when police do not want to say anything: “Police will not comment on individual cases.”
A number of non-law-enforcement sources have said that police either raided or approached a number of companies suspected of being involved in the now-suspended privatisation.
The companies included Fortis Insurance Co (Asia), which was accused of distributing 500,000 shares of PCCW to agents and friends in the weeks leading up to the shareholders’ vote on February 4 last year in order to get enough votes to force the privatisation through.
High-profile businessman Francis Yuen Tin-fan, a deputy chairman of Li’s bidding vehicle, Pacific Century Regional Developments (PCRD), and a former Fortis senior executive, and former Fortis regional director Inneo Lam Hau-wah have also been asked by officers of the Commercial Crime Bureau to discuss matters surrounding the privatisation.
The silence surrounding the police’s investigation marks a departure from their attitude to other recent high-profile cases also handled by the Commercial Crime Bureau.
Take for example the arrest of Tony Chan Chun-chuen on February 3, the day after a judge ruled that the fung shui master had forged a will in an attempt to claim the multibillion-dollar fortune of Nina Wang Kung Yu-sum.
A police spokesman said a 50-year-old man surnamed Chan had been arrested on suspicion of forging a document.
And on September 29 last year, police confirmed that they had raided the home of Edmund Dang, one of the partners of accountancy giant Ernst & Young, as part of a fraud investigation linked to a court case into the collapse of Akai Holdings.
An officer also confirmed that there had been raids on the accountancy firm’s offices in Central and Quarry Bay and other raids on companies connected to the case.
A police spokesman confirmed that officers were investigating a forged-document case and that a 41-year-old man had been arrested.
Despite official silence surrounding the PCCW investigation, there is plenty of material which can be drawn from the written judgments in the initial High Court decision on April 6 to allow the privatisation and the Court of Appeal’s to overturn it 16 days later.
The privatisation can be traced back to May 2008, when PCCW launched a planned sale of a 45 per cent stake in its telecommunications subsidiary, HKT Group Holdings, with the company hopeful of raising US$2.5 billion.
But the plan was canned when disappointing bids from private equity funds including TPG, Bain Capital, Macquarie and Providence Equity Partners came in as low as US$450 million.
By October 13, PCCW shares had slumped to HK$2.75 - not far from the nine-year record low of HK$2.45 - and the company suspended trading with a view to announcing a privatisation proposal.
At 11am on October 13, Yuen received several telephone calls from the chairman of PCRD, Richard Li.
Li told the former stock exchange boss and long-time family business associate that he wanted to privatise the telecommunications company and he needed his help to set the price and work with the media.
Despite his role as vice-chairman, Yuen said he had not had any real responsibilities at PCRD up to that point. His life had been “quite leisurely”, involving little business and plenty of rounds of golf, the court heard.
However, one of his business ventures had been as a senior adviser to Fortis from May 2007 until March 2008. Yuen had long-standing ties with the company, having been the chairman when the company’s previous incarnation, Pacific Century Insurance Holdings, was bought by Fortis in 2007.
In November, Yuen had dinner with Fortis’ then regional director, Lam, and the regional executive director of Fortis Insurance, Paul Ng. The pair were old associates, having first met in 1994.
Yuen said they did not discuss the proposed privatisation of PCCW, with conversation instead focusing on Fortis’ business.
On December 30, PCCW’s shareholders met to vote on the proposed privatisation, with an offer of HK$4.50 per share for a total cost of HK$15.93 billion.
In the weeks leading to the vote, there were a number of companies and individuals who became big buyers of PCCW shares. Most were connected to each other in some way, either through family or friendship.
Buyers included horse-racing figure Eugene Chuang Yue-chien, his brother Henry Chuang Yue-heng, and a number of their friends.
These purchases were made largely through Chung Nam Securities, a stockbroker controlled by Eugene Chuang, and through Willie International Holdings, a property investment, securities, moneylending and energy company that has Henry Chuang as the main shareholder and chairman.
Chung Nam had come to the attention of the Securities and Futures Commission several times before, and was publicly reprimanded in 2000 for not giving clients the best execution price for their orders.
In November 2008, Henry Chuang was fined HK$350,000 for his involvement in the unauthorised withdrawal of more than HK$30 million in clients’ securities by Willie, all of which had been held by Chung Nam.
Henry Chuang used Smart Jump Corp, a subsidiary of Willie, to buy 14.04 million shares in PCCW from December 4 to 17.
Over the same period, another client of Chung Nam, Main Purpose Investments, a subsidiary of listed GR Vietnam Holdings, bought 27.3 million shares. Many of the company’s directors were friends of Eugene Chuang, the court said.
However, any visions the Chuangs and their associates had on making a quick buck from the buyout were foiled by the December 30 meeting.
Individual investors - some of whom had bought shares in the company for HK$131 each before PCCW took over the former Hong Kong Telecommunications in 2000 - were not happy at the share valuation, despite the offer price being increased from HK$4.20 to HK$4.50 per share.
Others were also disgruntled by the fact that PCRD and China Network Communications Group Corp, the other buyout vehicle, would receive a one-off dividend of up to HK$17.5 billion, largely drawn from the company’s cash reserves. This essentially meant the companies would not be paying for the buyout with their own money.
With no chance of the privatisation being passed, the meeting was adjourned at 12.45pm.
Three hours later that day, Yuen again called Lam, although what was said between the two was not revealed in later interviews with the securities regulator.
On Monday January 5, with the business world rolling again after the Christmas break, a PCCW share-buying spree began.
Again, Yuen was on the phone to Lam, calling three times.
Lam called back before lunch.
It was later that afternoon that Lam bought 500,000 shares in PCCW, saying later to SFC officers the plan was to give them out to his Fortis insurance agents as a bonus they would “remember and appreciate”, the court heard.
The shares were divided into 500 lots of 1,000 shares.
In a later interview with the SFC, Lam said he expected those who received the shares to know about the proposed privatisation and that they would receive HK$4,500 for each of their share lots later.
The shares were to be handed out to the five team heads under him, with his secretary and sister Lam Hau-yuk handling the distribution.
There were 335 Fortis insurance agents who became instant shareholders because of Lam’s purchase, along with nine secretaries, clerks or receptionists, 12 partners of the agents, and 37 friends and acquaintances including a tailor, a babysitter and a hairdresser.
The secretary might have been told to pass the shares on to agents, but she had no problem distributing them to random people who had more connection with her than Fortis, suggesting to the Court of Appeal’s judge Mr. Justice Anthony Rogers that the object seemed to be ensuring all the shares were distributed to different people.
The secretary left her office in Langham Place Mongkok and crossed town to the office of Lesley Wai, Yuen’s secretary, in Citibank Plaza in Central to collect the proxy voting forms, which she then distributed with the shares.
The judge said the journey to pick up the voting proxies for the upcoming privatisation meeting from the deputy chairman of the company instigating that very privatisation and advising on the privatisation price could only “raise the suspicion of complicity”.
In what the Rogers described as “no mean feat of organisation”, by January 19 she had distributed all the shares and proxy forms for the upcoming privatisation vote and had them all returned to her for individual registration.
Yuen denied having any knowledge that Wai had provided any proxy forms. However, at 6pm on January 5, Yuen again called Lam on his mobile telephone.
In a later SFC investigation, in which Lam was told he was being investigated for offences under the Securities and Futures Ordinance, he said he knew he could not influence how the shareholders would vote. Doing so was “sensitive” and would create a lot of trouble if there was a “high-profile investigation”.
On Saturday January 31, the Chinese-language newspaper Ming Pao published an article saying a report had been made to the Independent Commission Against Corruption and the SFC that Fortis agents had been given shares on the understanding that they voted for the privatisation.
The article mentioned Yuen, his position in the privatisation vehicle, and his former position with the insurance company.
Yuen called at 9.15pm, at first saying the conversation was about golf. Later, in an interview at his lawyer’s office, he said he had inquired about the fact the newspaper had been quite “noisy” about Fortis agents.
“So he just said, well, he’s not aware of any improper activities ... so I just take it that there’s sort of improper activity in their part on that.”
Rogers said it “strained the imagination too much” that someone who had been accused of taking part in something that was underhand or illegal would be satisfied with the statement that there were “no sort of improper activities”.
At the very least, he would have requested Lam find out more and get back to him on Monday.
For this reason, he said he did not believe Yuen’s statement that until he made his second affidavit on March 17 he had no idea about Lam’s actions.
“I find it impossible to say that Mr. Yuen’s statement ... has the ring of truth,” the judge said.
On February 4, as PCCW shareholders approved the HK$15.93 billion privatisation deal in a heated meeting dominated by the vote-buying allegations, Yuen sent two texts to Lam. He said these were only to find out the time of a lunch meeting.
The Court of Appeal found the timing of telephone calls and the collection of the proxy forms “cast a shadow of doubt over whether and to what extent Yuen had influenced or was involved in” the alleged vote-rigging scheme.
“Because he gave the shares away and even paid the costs of the transfer, he was in effect buying the votes,” Rogers said of Lam.
“There was a clear manipulation of the vote. The court cannot sanction dishonesty.”
Along with the Lam’s big purchase of shares, Eugene Chuang bought 132 board lots of shares through Chung Nam from January 13 to 21, and encouraged his employees, friends and clients to do the same so they could vote in the upcoming privatisation.
The company’s records showed that 125 of the 132 lots of 1,000 shares each were settled by cash orders of exactly HK$4,000, an increase on the actual price of between HK$3,840 and HK$3,910.
The alleged cash payments were set apart from Chung Nam’s normal cash deposits. Chuang personally withdrew HK$500,000 in cash on January 15.
He also bought 18 lots through another company he controlled, Radland.
Just as had happened with the Fortis purchase, each of the 132 lots was registered in the names of different clients and employees, with Chung Nam assisting in the supply and transfer of the proxy forms as well as collecting them and holding on to them.
Madam Justice Susan Kwan Shuk-ying noted in her High Court judgment that a fair number of those who bought the single board lots were inexperienced investors with little or no understanding of what they were buying.
Wong Sau-Chun, an elderly and illiterate woman who signed a proxy form, did not even know she had an account with Chung Nam.
Over the same period - on January 13, 14, 22 and 22 - Pollyanna Chu Yuet-wah bought 2.3 million shares in PCCW through two companies, Kingston Securities and Macau casino operator Golden Resorts Group.
Chu and her mother own Kingston, which was the financial underwriter and adviser to hairstylist-turned-businessman Carson Yeung Ka-shing’s purchase of English Premier League team Birmingham City.
In 2007, Yeung bought and sold a stake of more than 5 per cent in Golden Resorts.
Close to 200 employees of Kingston and Golden Resorts and their family members also bought shares in PCCW. These included 11 from Macau, with an executive of Kingston going there to open accounts for them.
An SFC informant, Witness B, who had been employed by Golden Resorts, said she had been instructed to buy shares in PCCW and pass the voting rights back to the company
“Witness B was told that buying one lot was a show of support for the boss but buying three lots would earn the purchaser more money,” the court heard.
When she refused because she did not have enough money, her superior offered to pay for the shares. Witness B still refused, and afterwards her job performance became an issue and she was asked to leave.
Chu denied her former employee’s allegations and claimed the purchases made by Kingston’s clients were their own investments and had nothing to do with her.
However, the court said this denial lacked credibility and said Chu would have collected a HK$1.5 million profit if the privatisation had been passed.
There were also strong grounds to infer that she had established a plan to get employees, clients, friends and relatives to buy shares in PCCW.
Another account executive, Chu Kong-wing, who bought 1,000 shares, recommended the stock to his family and friends as he thought they could make a profit, and 14 of his clients bought one lot each. His wife and son received gifts of single board lots from Ma Kam-wah, a manager and account executive at Success Securities, another company with connection to Kingston involved in buying shares and doling them out to family, friends and colleagues.
Ma bought 50,000 shares on December 29, just before the court meeting. He bought a further 15,000 shares on January 12, dividing them into 15 lots and handing out 14 to family members and friends and keeping one for himself.
He said he did this because he wanted to cheer them up as the Lunar New Year was approaching.
The wife and son of an account executive at Kingston were among those who were gifted share lots.
He bought 20,000 more shares on January 15. Proxy forms were again obtained because he wanted them to vote for the privatisation proposal so he could make some profit.
Ender Chan Yin-yuk, a client, followed Ma and bought one board lot of shares on January 9 last year and six board lots on January 13.
The six board lots were registered in the names of her friends and family members, who also did not pay for the shares.
Kwan wrote that “it is fairly clear Ma Kam-wah and Ender Chan had decided to split up some of the shares they bought to increase the headcount in support of the scheme to profit themselves”.
Of the shareholders’ meeting on February 4, Rogers commented that the votes for the buyout deal were completely manipulated because of share splitting.
The judge also said the offer price for the buyout deal, at HK$4.50 per share, was too low, with independent shareholders not treated equitably, saying the privatisation amounted to “little more than a confiscation of the independent shareholders’ shares at a depressed price”.
However, these independent investors had a win on September 15, with PRCD announcing it was withdrawing its intended application to the Court of Final Appeal for leave to appeal against the decision that blocked its effort to privatise the telecommunications company.
The company said its “shareholders’ best interests are served by drawing a line under this matter and focusing on the future”.
However, with a police investigation under way, there is no telling when a line will really be drawn.
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Silence loud on police raids over PCCW’s failed privatisation
Strangely, there is no word on the swoop on the homes and offices of Richard Li and others connected with attempt to take company private
Barclay Crawford
11 March 2010
In the week before the Lunar New Year, police raided the home of Richard Li Tzar-kai and a number of other residences and businesses connected with the failed HK$15.93 billion attempt to privatise PCCW last year.
Yet three weeks since a number of warrants were executed across the city, police have not even confirmed that any criminal investigation is under way.
Police have declined to say how many raids, if any, were carried out, who was questioned, and the exact dates of any searches or interviews.
Even requests for off-the-record confirmations of whether an investigation is in progress have been met with either silence or the standard reply when police do not want to say anything: “Police will not comment on individual cases.”
A number of non-law-enforcement sources have said that police either raided or approached a number of companies suspected of being involved in the now-suspended privatisation.
The companies included Fortis Insurance Co (Asia), which was accused of distributing 500,000 shares of PCCW to agents and friends in the weeks leading up to the shareholders’ vote on February 4 last year in order to get enough votes to force the privatisation through.
High-profile businessman Francis Yuen Tin-fan, a deputy chairman of Li’s bidding vehicle, Pacific Century Regional Developments (PCRD), and a former Fortis senior executive, and former Fortis regional director Inneo Lam Hau-wah have also been asked by officers of the Commercial Crime Bureau to discuss matters surrounding the privatisation.
The silence surrounding the police’s investigation marks a departure from their attitude to other recent high-profile cases also handled by the Commercial Crime Bureau.
Take for example the arrest of Tony Chan Chun-chuen on February 3, the day after a judge ruled that the fung shui master had forged a will in an attempt to claim the multibillion-dollar fortune of Nina Wang Kung Yu-sum.
A police spokesman said a 50-year-old man surnamed Chan had been arrested on suspicion of forging a document.
And on September 29 last year, police confirmed that they had raided the home of Edmund Dang, one of the partners of accountancy giant Ernst & Young, as part of a fraud investigation linked to a court case into the collapse of Akai Holdings.
An officer also confirmed that there had been raids on the accountancy firm’s offices in Central and Quarry Bay and other raids on companies connected to the case.
A police spokesman confirmed that officers were investigating a forged-document case and that a 41-year-old man had been arrested.
Despite official silence surrounding the PCCW investigation, there is plenty of material which can be drawn from the written judgments in the initial High Court decision on April 6 to allow the privatisation and the Court of Appeal’s to overturn it 16 days later.
The privatisation can be traced back to May 2008, when PCCW launched a planned sale of a 45 per cent stake in its telecommunications subsidiary, HKT Group Holdings, with the company hopeful of raising US$2.5 billion.
But the plan was canned when disappointing bids from private equity funds including TPG, Bain Capital, Macquarie and Providence Equity Partners came in as low as US$450 million.
By October 13, PCCW shares had slumped to HK$2.75 - not far from the nine-year record low of HK$2.45 - and the company suspended trading with a view to announcing a privatisation proposal.
At 11am on October 13, Yuen received several telephone calls from the chairman of PCRD, Richard Li.
Li told the former stock exchange boss and long-time family business associate that he wanted to privatise the telecommunications company and he needed his help to set the price and work with the media.
Despite his role as vice-chairman, Yuen said he had not had any real responsibilities at PCRD up to that point. His life had been “quite leisurely”, involving little business and plenty of rounds of golf, the court heard.
However, one of his business ventures had been as a senior adviser to Fortis from May 2007 until March 2008. Yuen had long-standing ties with the company, having been the chairman when the company’s previous incarnation, Pacific Century Insurance Holdings, was bought by Fortis in 2007.
In November, Yuen had dinner with Fortis’ then regional director, Lam, and the regional executive director of Fortis Insurance, Paul Ng. The pair were old associates, having first met in 1994.
Yuen said they did not discuss the proposed privatisation of PCCW, with conversation instead focusing on Fortis’ business.
On December 30, PCCW’s shareholders met to vote on the proposed privatisation, with an offer of HK$4.50 per share for a total cost of HK$15.93 billion.
In the weeks leading to the vote, there were a number of companies and individuals who became big buyers of PCCW shares. Most were connected to each other in some way, either through family or friendship.
Buyers included horse-racing figure Eugene Chuang Yue-chien, his brother Henry Chuang Yue-heng, and a number of their friends.
These purchases were made largely through Chung Nam Securities, a stockbroker controlled by Eugene Chuang, and through Willie International Holdings, a property investment, securities, moneylending and energy company that has Henry Chuang as the main shareholder and chairman.
Chung Nam had come to the attention of the Securities and Futures Commission several times before, and was publicly reprimanded in 2000 for not giving clients the best execution price for their orders.
In November 2008, Henry Chuang was fined HK$350,000 for his involvement in the unauthorised withdrawal of more than HK$30 million in clients’ securities by Willie, all of which had been held by Chung Nam.
Henry Chuang used Smart Jump Corp, a subsidiary of Willie, to buy 14.04 million shares in PCCW from December 4 to 17.
Over the same period, another client of Chung Nam, Main Purpose Investments, a subsidiary of listed GR Vietnam Holdings, bought 27.3 million shares. Many of the company’s directors were friends of Eugene Chuang, the court said.
However, any visions the Chuangs and their associates had on making a quick buck from the buyout were foiled by the December 30 meeting.
Individual investors - some of whom had bought shares in the company for HK$131 each before PCCW took over the former Hong Kong Telecommunications in 2000 - were not happy at the share valuation, despite the offer price being increased from HK$4.20 to HK$4.50 per share.
Others were also disgruntled by the fact that PCRD and China Network Communications Group Corp, the other buyout vehicle, would receive a one-off dividend of up to HK$17.5 billion, largely drawn from the company’s cash reserves. This essentially meant the companies would not be paying for the buyout with their own money.
With no chance of the privatisation being passed, the meeting was adjourned at 12.45pm.
Three hours later that day, Yuen again called Lam, although what was said between the two was not revealed in later interviews with the securities regulator.
On Monday January 5, with the business world rolling again after the Christmas break, a PCCW share-buying spree began.
Again, Yuen was on the phone to Lam, calling three times.
Lam called back before lunch.
It was later that afternoon that Lam bought 500,000 shares in PCCW, saying later to SFC officers the plan was to give them out to his Fortis insurance agents as a bonus they would “remember and appreciate”, the court heard.
The shares were divided into 500 lots of 1,000 shares.
In a later interview with the SFC, Lam said he expected those who received the shares to know about the proposed privatisation and that they would receive HK$4,500 for each of their share lots later.
The shares were to be handed out to the five team heads under him, with his secretary and sister Lam Hau-yuk handling the distribution.
There were 335 Fortis insurance agents who became instant shareholders because of Lam’s purchase, along with nine secretaries, clerks or receptionists, 12 partners of the agents, and 37 friends and acquaintances including a tailor, a babysitter and a hairdresser.
The secretary might have been told to pass the shares on to agents, but she had no problem distributing them to random people who had more connection with her than Fortis, suggesting to the Court of Appeal’s judge Mr. Justice Anthony Rogers that the object seemed to be ensuring all the shares were distributed to different people.
The secretary left her office in Langham Place Mongkok and crossed town to the office of Lesley Wai, Yuen’s secretary, in Citibank Plaza in Central to collect the proxy voting forms, which she then distributed with the shares.
The judge said the journey to pick up the voting proxies for the upcoming privatisation meeting from the deputy chairman of the company instigating that very privatisation and advising on the privatisation price could only “raise the suspicion of complicity”.
In what the Rogers described as “no mean feat of organisation”, by January 19 she had distributed all the shares and proxy forms for the upcoming privatisation vote and had them all returned to her for individual registration.
Yuen denied having any knowledge that Wai had provided any proxy forms. However, at 6pm on January 5, Yuen again called Lam on his mobile telephone.
In a later SFC investigation, in which Lam was told he was being investigated for offences under the Securities and Futures Ordinance, he said he knew he could not influence how the shareholders would vote. Doing so was “sensitive” and would create a lot of trouble if there was a “high-profile investigation”.
On Saturday January 31, the Chinese-language newspaper Ming Pao published an article saying a report had been made to the Independent Commission Against Corruption and the SFC that Fortis agents had been given shares on the understanding that they voted for the privatisation.
The article mentioned Yuen, his position in the privatisation vehicle, and his former position with the insurance company.
Yuen called at 9.15pm, at first saying the conversation was about golf. Later, in an interview at his lawyer’s office, he said he had inquired about the fact the newspaper had been quite “noisy” about Fortis agents.
“So he just said, well, he’s not aware of any improper activities ... so I just take it that there’s sort of improper activity in their part on that.”
Rogers said it “strained the imagination too much” that someone who had been accused of taking part in something that was underhand or illegal would be satisfied with the statement that there were “no sort of improper activities”.
At the very least, he would have requested Lam find out more and get back to him on Monday.
For this reason, he said he did not believe Yuen’s statement that until he made his second affidavit on March 17 he had no idea about Lam’s actions.
“I find it impossible to say that Mr. Yuen’s statement ... has the ring of truth,” the judge said.
On February 4, as PCCW shareholders approved the HK$15.93 billion privatisation deal in a heated meeting dominated by the vote-buying allegations, Yuen sent two texts to Lam. He said these were only to find out the time of a lunch meeting.
The Court of Appeal found the timing of telephone calls and the collection of the proxy forms “cast a shadow of doubt over whether and to what extent Yuen had influenced or was involved in” the alleged vote-rigging scheme.
“Because he gave the shares away and even paid the costs of the transfer, he was in effect buying the votes,” Rogers said of Lam.
“There was a clear manipulation of the vote. The court cannot sanction dishonesty.”
Along with the Lam’s big purchase of shares, Eugene Chuang bought 132 board lots of shares through Chung Nam from January 13 to 21, and encouraged his employees, friends and clients to do the same so they could vote in the upcoming privatisation.
The company’s records showed that 125 of the 132 lots of 1,000 shares each were settled by cash orders of exactly HK$4,000, an increase on the actual price of between HK$3,840 and HK$3,910.
The alleged cash payments were set apart from Chung Nam’s normal cash deposits. Chuang personally withdrew HK$500,000 in cash on January 15.
He also bought 18 lots through another company he controlled, Radland.
Just as had happened with the Fortis purchase, each of the 132 lots was registered in the names of different clients and employees, with Chung Nam assisting in the supply and transfer of the proxy forms as well as collecting them and holding on to them.
Madam Justice Susan Kwan Shuk-ying noted in her High Court judgment that a fair number of those who bought the single board lots were inexperienced investors with little or no understanding of what they were buying.
Wong Sau-Chun, an elderly and illiterate woman who signed a proxy form, did not even know she had an account with Chung Nam.
Over the same period - on January 13, 14, 22 and 22 - Pollyanna Chu Yuet-wah bought 2.3 million shares in PCCW through two companies, Kingston Securities and Macau casino operator Golden Resorts Group.
Chu and her mother own Kingston, which was the financial underwriter and adviser to hairstylist-turned-businessman Carson Yeung Ka-shing’s purchase of English Premier League team Birmingham City.
In 2007, Yeung bought and sold a stake of more than 5 per cent in Golden Resorts.
Close to 200 employees of Kingston and Golden Resorts and their family members also bought shares in PCCW. These included 11 from Macau, with an executive of Kingston going there to open accounts for them.
An SFC informant, Witness B, who had been employed by Golden Resorts, said she had been instructed to buy shares in PCCW and pass the voting rights back to the company
“Witness B was told that buying one lot was a show of support for the boss but buying three lots would earn the purchaser more money,” the court heard.
When she refused because she did not have enough money, her superior offered to pay for the shares. Witness B still refused, and afterwards her job performance became an issue and she was asked to leave.
Chu denied her former employee’s allegations and claimed the purchases made by Kingston’s clients were their own investments and had nothing to do with her.
However, the court said this denial lacked credibility and said Chu would have collected a HK$1.5 million profit if the privatisation had been passed.
There were also strong grounds to infer that she had established a plan to get employees, clients, friends and relatives to buy shares in PCCW.
Another account executive, Chu Kong-wing, who bought 1,000 shares, recommended the stock to his family and friends as he thought they could make a profit, and 14 of his clients bought one lot each. His wife and son received gifts of single board lots from Ma Kam-wah, a manager and account executive at Success Securities, another company with connection to Kingston involved in buying shares and doling them out to family, friends and colleagues.
Ma bought 50,000 shares on December 29, just before the court meeting. He bought a further 15,000 shares on January 12, dividing them into 15 lots and handing out 14 to family members and friends and keeping one for himself.
He said he did this because he wanted to cheer them up as the Lunar New Year was approaching.
The wife and son of an account executive at Kingston were among those who were gifted share lots.
He bought 20,000 more shares on January 15. Proxy forms were again obtained because he wanted them to vote for the privatisation proposal so he could make some profit.
Ender Chan Yin-yuk, a client, followed Ma and bought one board lot of shares on January 9 last year and six board lots on January 13.
The six board lots were registered in the names of her friends and family members, who also did not pay for the shares.
Kwan wrote that “it is fairly clear Ma Kam-wah and Ender Chan had decided to split up some of the shares they bought to increase the headcount in support of the scheme to profit themselves”.
Of the shareholders’ meeting on February 4, Rogers commented that the votes for the buyout deal were completely manipulated because of share splitting.
The judge also said the offer price for the buyout deal, at HK$4.50 per share, was too low, with independent shareholders not treated equitably, saying the privatisation amounted to “little more than a confiscation of the independent shareholders’ shares at a depressed price”.
However, these independent investors had a win on September 15, with PRCD announcing it was withdrawing its intended application to the Court of Final Appeal for leave to appeal against the decision that blocked its effort to privatise the telecommunications company.
The company said its “shareholders’ best interests are served by drawing a line under this matter and focusing on the future”.
However, with a police investigation under way, there is no telling when a line will really be drawn.
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