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Fiends in high places

Following the spectacular arrests of the two Kwok brothers who run Sun Hung Kai Properties, alongside that of former chief secretary Rafael Hui Si-yan, there is much talk of the 'unprecedented' nature of this event and a great deal of self-serving waffle about how high-level corruption is unusual in Hong Kong.

It must be stressed that this corruption case is yet to be tested in court. However, it is clearly big news. Although some people are painting this event as a one-off, the reality is that Hong Kong has suffered a long series of allegations of wrongdoing at the very highest levels.

In terms of long-standing impact, the 1988 swoop on the leaders of the stock exchange remains unchallenged. They were found guilty of accepting bribes to push certain candidates ahead in the listing queue. Ronald Li Fook-shiu, the exchange's chairman, was jailed.

Of more long-standing significance was the establishment of the Securities and Futures Commission (SFC) in 1989.

It was given more powers than its predecessor and a general greater awareness of the need to monitor the activities of the stock exchange.

Chim Pui-chung, was sent to jail in a separate case of fraud and forgery. Those facts did not stop his re-election to the Legislative Council after completing his sentence. He now represents financial services in Legco.

It seems that at the higher levels of Hong Kong's corporate world forgiveness and amnesia are valued qualities. In 1986, the Insider Dealing Tribunal of the Securities Commission, the forerunner of the SFC, censured Li Ka-shing and other executive directors of Cheung Kong Holdings for dealings connected with International City Holdings, because they had inside knowledge of a get-out clause in a HK$1 billion property sale.

While nothing on the scale of the Carrian fraud scandal of the early 1980s has emerged since then, all its component parts keep reappearing. Mostly they seem to surround mainland firms listed in Hong Kong.

David Webb's Webb-site.com keeps a useful tally of jailbirds from locally listed companies, which shows that the overwhelming majority are from mainland companies and they are hardly marginal players: the list includes Wang Xuebing from Bank of China.

To qualify for Webb's exclusive list, those mentioned actually have to go to jail, but no one has been jailed for insider trading at Citic Pacific - although Simon Chui Wing-nin, a former assistant director in the finance department, has been charged with the crime.

The stock exchange's view of all this seems to be to plough ahead as avidly as possible to secure more mainland listings. It insists there are no real quality issues.

Hong Kong has a regulatory regime that stands somewhere between the severe legislation that prevails in Western Europe and the US, and the more lax, self-regulating stance often seen in Asia.

As ever, the argument for laxity is that it will not scare off business or keep it tied up in red tape. This argument may well appeal to the Kwok family at Sun Hung Kai Properties.

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