Corruption in China

Macau's grand scam

PUBLISHED : Friday, 01 June, 2012, 12:00am
UPDATED : Friday, 01 June, 2012, 12:00am


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When Macau International Airport opened for business in November 1995, Ao Man-long, the city's secretary for transport and public works at the time, saw a golden opportunity.

After the completion of the airport's six-year construction programme, 78,789 square metres of adjoining land on Taipa were still vacant, and Ao's public works bureau said that this area should be used for Macau's development.

According to the evidence at his latest trial on corruption charges in Macau's Court of Final Appeal, the land was divided up at Ao's suggestion into five areas, each managed by a different company. The five companies - Tai Lei Loi, Sun Hung Fat, Sun Hou Kung, Sun Vai Ip and Lei Tin - were managed by a sixth, Lei Pou Fat, which was jointly owned by the Macau government and private businesses, including gambling mogul Stanley Ho Hung-sun's Sociedade de Turismo e Diversoes de Macau (STDM).

Ao appointed several of his officials from the Infrastructure and Development Office to work at Lei Pou Fat, but the court found that the prosecution had not established that Ao was in charge of all six companies.

In 1999, the five companies paid the Macau government a total of 2 billion patacas for the five pieces of land, compared with an estimate of 1.17 billion patacas by First Pacific Davies (Savills), a company commissioned by Ao to carry out an evaluation after he had decided in December 2004 to sell the land.

Ao, who will now serve 29 years in jail on corruption charges after his sentencing yesterday, told the court in his latest trial that Macau's government had decided to develop the land because the city's economy had been hit hard by the outbreak of Sars in 2003. But, according to evidence before the court, among the principal beneficiaries of this development was Ao himself.

According to Io Fu-chun, senior investigator in Macau's Commission Against Corruption, no bidding exercise for the Taipa project had been carried out by the time Ao met Hong Kong tycoon Steven Lo Kit-sing for the first time on January 14, 2005.

Io told the court Ao and Lo met at Restaurant 456 after they were introduced by Ho Meng-fai, the owner of construction company San Meng Fai. He is a key figure in the corruption scandals surrounding Ao, and a fugitive from Macau authorities.

Ho Meng-fai fled Macau in 2007, before he could stand trial on corruption charges, and was sentenced in absentia to 25 years in jail in June of that year. He remains the subject of an Interpol 'red notice', a request to police to identify and locate a suspect with a view to extradition.

Much of the evidence against Ao in his latest case was taken from notebooks seized at his home. Ao has denied the authenticity of some, but has confirmed to the court that Ho Meng-fai had introduced him to Lo and, later, to Joseph Lau Luen-hung, another Hong Kong property tycoon.

Since then 'we have only seen each other once or twice. We have had no further communication, not to mention any advantage being involved', Ao told the court.

Ao also confirmed that San Meng Fai had been involved in many government projects, including several for the Macau East Asian Games in 2005. Ecoline, a company controlled by Ao, had offered to consult on some of those projects, including one for the design of the canopy for the Macau Dome Stadium.

The court heard that, according to immigration records, Ao had met Lo, Lau or both at least 11 times between January 2005 and March 2006.

Telephone records showed that Ao had never called Lo directly, but called Ho Meng-fai instead. Ho would then call Lo. Lo would also go through Ho to get in touch with Ao. Further evidence of their relationship came from a name card that was confiscated from Ao's home, bearing the name of Lo.

George Lew Wing-tim, a director and architect at Hong Kong-based architectural firm Hsin Yieh, told the court that he had been instructed by Chinese Estates, a company headed by Lau and listed on the Hong Kong stock exchange, to work on a design for the Taipa site as early as December 2004, six months before bids were invited to develop the land. Chinese Estates even required the company to submit the study before the new year, without giving reasons.

Lew's testimony contradicted what Lo had told the court when he said that, initially, he was 'very keen' to develop the land but Lau was 'not as active'.

According to a notebook that Li Sau-lung, senior engineer of Chinese Estates, gave to the Macau graft busters, Lau had discussed the Taipa development with Ao, Lo and a representative of architects firm Hsin Yieh as early as February 2005.

'This showed that Lau was very concerned about this project,' Io said.

Lew and Kenneth Ng from Chinese Estates went to survey the site in March 2005, and Lew worked on the design again, adding in details.

That same month, Stanley Ho, whose STMD owns one-third of the Macau airport's operating company, had expressed an interest in developing the adjoining land. The gambling mogul had approached Antonio Lourenco, former director of Macau's Infrastructure and Development Office and then a manager of one of the five companies owning the land on Taipa, but Lourenco did not respond, according to Io.

At a meeting of Lei Pou Fat shareholders in May 2005, the firm agreed to put the land up for sale. Patrick Huen Wing-ming, STDM's representative, expressed dissatisfaction, saying that Stanley Ho's interest had been ignored.

In June of that year, Chinese Estates paid a HK$200,000 'research fee' to Hsin Yieh for its work on the project.

On 16 June, Ao verbally told Lourenco to invite three companies to take part in a closed bid. Lourenco invited Jones Lang LaSalle, CB Richard Ellis and an STDM-Vigers joint venture to submit bids, and gave them 10 days to prepare a proposal. The first two companies had no experience in property development in Macau.

That same day, Ao called Ho Meng-fai, who then called Lo. Lo then travelled to Macau.

On 22 June, Joseph Lau and Steven Lo met Ao in a Macau restaurant, at a table booked by Ho Meng-fai.

The next day, Stanley Ho wrote to the Macau Infrastructure Development Office, saying this was an 'unprofessional way of conducting the tender process' and demanding an extension to the deadline for submitting a proposal, as 10 days was hardly enough to prepare a 'presentable and detailed plan'.

By that time, Hsin Yieh was making amendments to its own plan for the site, drawn up on behalf of Lo and Lau. On June 24, Lo purchased a company called Moon Ocean, and approached Jones Lang LaSalle, the court heard.

'Lo appeared to be the shareholder of Moon Ocean, but in reality Lau was the shareholder. Lau was the only person to put in capital,' Io said.

Chinese Estates later asked Hsin Yieh to submit a copy of its proposal for the airport site to Jones Lang LaSalle.

On 27 June, all three companies submitted their plans, with bids ranging from 1.1 billion patacas to 1.368 billion patacas, all of them below the price of 2 billion patacas paid to the Macau government in 1999.

In the bid-reviewing process, it was found that Jones Lang LaSalle submitted the plan on behalf of Moon Ocean, while CB Richard Ellis helped a company called APEX to submit an offer. The joint bid by STDM-Vigers turned out to be only from STDM.

The proposal submitted by Jones Lang came to 70 pages, while that of CB Richard Ellis was only one page. STDM submitted a rough design plan of 15 pages.

Andre Ritchie, a former senior technician who reviewed the bid applications, said all the bids should have been disqualified because of irregularities, but Lourenco decided to award the land to Jones Lang LaSalle for 1.368 billion patacas.

Ritchie said he found no evidence that Ao had interfered in the bidding, but thought he could have as Lourenco had to report to Ao every week. Io told the court that Ao and Lourenco had spoken over the phone on 19 occasions that year, of which 14 were between June and October.

On July 28, 2005 the bid review committee decided to award the land to Jones Lang LaSalle, a decision approved by Ao.

Io told the court that on September 25, Lo and Lau 'made up' a HK$20 million contract to make it seem as if it covered a consultancy fee paid between Lo's bma Investment and Eastern Base.

In fact, only Hsin Yieh had been consulted by Chinese Estates and its fee had been settled.

A month later, Ao's Ecoline issued a debit note to Ho Meng-fai and asked him to pass it on to Lo. In the name of Eastern Base, Lo asked Moon Ocean for the money. Moon Ocean then lent Lo HK$20 million from Lau's company Group Luck.

On October 24, a cheque co-signed by Joseph Lau and his younger brother Thomas Lau was passed to Eastern Base. On the same day, a sum of HK$20 million was deposited to Ecoline's Bank of China Hong Kong account.

Three days later, Lo treated Lau and Ao a meal at the Waldo Hotel in Macau, for which Lo paid HK$18,000. Subsequently, Ao put a tick beside the word '2000' in his notebook, indicating that he had received HK$20 million, Io told the court.

The notebook also carried words like 'Big Lau' (Joseph Lau's nickname), 'airport' and 'land'.

Lo confirmed in court that Lau's Chinese Estates had deposited HK$20 million into Eastern Base's account. But he then argued that the HK$20 million was a 'preliminary payment' for San Meng Fai, and that this was the 'usual practice' in the industry.

But his point was soon rebutted by Leung Wah-tat, an architect who worked on the project for Hsin Yieh.

Leung, who testified two days after Lo, said there was no such thing as a 'preliminary payment', and it was unheard of to pay a construction firm any money before any progress had been seen on a project.

Lo said he and Lau had met Ao 'once or twice' but denied their meetings were related to the project. He said the meetings were arranged by Ho Meng-fai. Ao gave the court a similar account.

Lo also told the court that he knew of the government's plan to sell the plots of land as early as late 2004 through Jones Lang LaSalle's agent, Tony Lo Hing-hung.

The court also heard that Moon Ocean was fully owned by Lo when the 1.368 billion patacas bid was submitted in June 2005. It was later sold to Lau for HK$1.6 billion. The five plots of land, worth 2 billion patacas in 1999, were sold by Lei Pou Fat to Moon Ocean for 1.167 billion in 2005.

Comparing this price with those of two pieces of government land sold in 2004 and 2008, Io said, the Macau government should have earned between 3.9 billion and 21.3 billion patacas more from the sale of the land near the airport.

Fong Kin-fao, a lawyer for Ao, said the prosecution failed to establish beyond a doubt that Ao had actually interfered in the bids for the land opposite the airport and other government projects.

But prosecutor Kuok Un-man said that Ao had abused his power as an official and had disgraced the Macau government, likening Ao's alleged bribe-taking for the sale of government land to 'running his own business'.

'For his own advantage, the whole of Macau society had to pay the bill,' she said.


The amount, in patacas, an investigator says the government of Macau missed out on due to Ao's airport-land dealings