Ex-official blames wine for dubious stock buy
A former director general of the Civil Aviation Department charged with insider trading yesterday testified that he had been under the influence of alcohol when he bought shares in Hong Kong Aircraft Engineering Company (Haeco), a transaction that earned him almost HK$80,000 in profit.
Albert Lam Kwong-yu, 66, told Eastern Court that he was 'drowsy' after consuming five glasses of alcohol and forgot that he was a non-executive director of Haeco when he bought 4,000 of its shares using his online bank account on June 4, 2010.
The purchase took place one trading day before Swire Pacific acquired 15 per cent of the company's stock from Cathay Pacific on June 7 and after Lam had been told of this price-sensitive information because he was on Haeco's board.
Lam on Thursday pleaded not guilty to insider trading. He is being prosecuted by the Securities and Futures Commission for making a profit of HK$79,436. Lam took the stand after Deputy Magistrate John Glass ruled that he had a case to answer, having heard evidence from witnesses called by the prosecution. Among the prosecution witnesses are Haeco's chief executive officer, Augustus Tang Kin-wing.
Lam told the court that on June 4 he went to the Hong Kong Club shortly before 1pm for a lunch that was also attended by Secretary for Security Ambrose Lee Siu-kwong.
He said he drank a gin and tonic, two glasses of red wine and two glasses of white wine. He had a nap at the club before Tang telephoned him at about 3.13pm, telling him of a board meeting to be held at 6pm that day in relation to Swire's intended acquisition of Haeco's shares from Cathay. He said when he returned to his office, he checked the price of Haeco's shares.
'I believe in my subconscious mind I [knew] I had to attend the Haeco meeting so I took the opportunity to look at the shares,' he said. 'I noticed the price of Haeco was around HK$84 per share. I thought it had dropped quite substantially since I last looked at it, [when] it was over HK$100,' he said.
When asked why he bought the shares, Lam said: 'I can only explain that at that moment I had totally forgotten that I was a director of that company. I thought it was a good price to buy.'
He then went to attend the Haeco meeting, which was held at 6pm and attended by directors and lawyers who were to brief attendees in relation to Swire's intended acquisition.
When asked by the prosecution why he didn't report his purchase of shares immediately at the meeting, Lam said: 'I was not feeling very well in my own mind. I was very drowsy.'
He added: 'I wasn't too sober at that time.' Lam said that at the time he was also looking forward eagerly to a gathering with former colleagues and was therefore not concentrating on the meeting.
On the morning of June 5, Lam said, he called Tang and confessed that he had bought shares of Haeco the day before, contravening company policy.
He said Tang told him it was a 'serious matter' and asked him to seek legal advice. After doing so, Lam said he instructed his lawyer to send a letter to the SFC.
Trading in Haeco shares was suspended on June 7 when the acquisition took place, the prosecutor said. On the same day, Swire announced a general offer to buy shares from other shareholders at the price of HK$105 per share - the same price it offered to Cathay. Trading of Haeco shares resumed on June 8, closing at HK$104 - about 24.1 per cent higher than the closing price on the last trading day before the public announcement, the court heard.
Lam sold the shares on June 9.
The court heard that Lam donated HK$82,000 to two charitable organisations after he promised Tang that he would not take any proceeds from the questionable deal.
The trial continues.
