Henderson Land and law firm raided
Olga Wong and Phyllis Tsang
Police raided the offices of Henderson Land and a related law firm yesterday in a sharp escalation of the government's investigation into flat sales at the developer's 39 Conduit Road tower.
Officers from the force's commercial crime bureau seized documents concerning 20 uncompleted sales at the luxury block in Mid-Levels that led to suspicions of market manipulation, and invited representatives of the developer to assist with the investigation. But police said no one was arrested.
Police Commissioner Tang King-shing said companies and people related to the aborted sales could also be targets of the investigation. 'This is a very complicated case and many people are involved. The investigation does not only cover the companies involved but also those possibly related. We will conduct the investigation with a multi-dimensional approach,' he said.
Henderson said it welcomed the investigation. 'We will do our best to offer assistance so that the truth will be revealed,' a spokeswoman said.
The raids came a day after Chief Executive Donald Tsang Yam-kuen promised legislators he would make use of the opportunity arising from the controversy to address the problem of unfairness and lack of transparency in property transactions.
Legislators, lawyers, public commentators and the Lands Department have questioned the collapse of the 20 sales - including a duplex which went on sale for a record-breaking HK$88,000 per square foot - that were among 24 deals publicised by the developer and which were credited with boosting the luxury property market.
They have also asked why the buyers forfeited only 5 per cent of the purchase price and were not asked to compensate Henderson for any losses on resale. The Lands Department, under public pressure, has requested information from Henderson about the sales since March, including why it refunded deposits of more than HK$175 million to buyers in the aborted deals.
The fact that the buyers were all shell companies registered in the British Virgin Islands and represented by a single law firm, Lo & Lo Solicitors, has also intensified speculation the transactions may have been 'created' to boost prices of flats in the block and of the company's shares.
Henderson has released repeated public statements maintaining that the practice of using shell companies is common within the industry, but it could not stop investigations by the police and the Securities and Futures Commission.
The police commissioner said several people had been invited to assist with the investigation, without revealing names.
He said the bureau had obtained search warrants and raided several locations, including offices of the developer and the law firm in Central, at which documents were seized.
A veteran police officer said investigators could explore whether there was a case for conspiracy to defraud under common law, or a fraud case under the Theft Ordinance.
'There is reasonable doubt [about] those transactions,' he said. 'The detectives will trace the financial arrangement of these transactions, such as the mortgage documents issued by the bank.'
Fraud under the Theft Ordinance can involve a penalty of up to 14 years in jail.
Barrister and lawmaker Ronny Tong Ka-wah agreed that fraud charges under the Theft Ordinance could be brought, but said that collecting evidence would be difficult.
'The police would have to prove the developer had such an intention,' he said. 'They would also have to find victims. For example, buyers who suffered a loss as a result of the uncompleted transactions. There is little chance.'
He said there was a bigger chance of the Securities and Futures Commission taking action, since it needed only to prove that the developer had issued false information to mislead buyers, who relied on such information to make transactions.
Tong said he did not rule out the possibility that the police raids were just a government gesture to address public concerns.
Democratic Party lawmaker James To Kun-sun was among those who urged police to investigate the buyers, saying they could have submitted false documents - the agreements for sale and purchase on which they eventually defaulted - to the stamp duty office, since the authenticity of the transactions was now in question.
The Henderson Land spokeswoman said the company had provided relevant documents to police yesterday and staff were assisting with the investigation. She said company chairman Lee Shau-kee was not invited to help.
20 sales fell through at Henderson Land's 39 Conduit Road tower
The company refunded this amount of cash to buyers, in Hong Kong dollars: $175m