Big chunk of compensation to Gome could end up back in Wongs' pocket
Of the HK$420m penalty, HK$150m might end up back in couple's pockets via special dividend
It might seem that the HK$420 million jailed mainland billionaire Wong Kwong-yu and his wife, Du Juan, have been ordered to pay in compensation to the firm he founded would put a huge hole in their pockets.
However, the actual penalty the couple would suffer for their misconduct in 2008 could be much less. This is because although Wong has been behind bars on the mainland since 2010, the couple remain the largest shareholders of Gome Electrical Appliances, with 35.55 per cent.
If the retailer decides to pay the HK$420 million out as a special dividend, the couple would be able to put nearly HK$150 million back in their pockets.
This shows how savvy Wong is as a businessman and sheds light on the couple's agreement earlier this month to pay the compensation to Gome in exchange for the agreement by the Securities and Futures Commission not to take further action against them.
The SFC started a legal battle with the couple after it alleged they handled a share repurchase by Gome in a manner that would benefit themselves at the company's expense.
Wong, who set up a street-side electronics stall in 1987 that he turned into the country's largest retailer of electronic appliances, was the wealthiest man on the mainland in 2007.
A Beijing court sentenced him in 2010 to a 14-year prison term and a fine of 600 million yuan (HK$756 million) for insider trading and other financial crimes. However, many say he still does business from his cell by remote control.
The agreement with the SFC has shown his street smarts. As the largest shareholders, Wong and Du would get back a big chunk of the compensation, which the regulator says represents their ill-gotten gains.
Bain Capital held 11 per cent of Gome, BlackRock had 7 per cent and Carmignac Gestion 5 per cent, exchange data showed.
But to be fair, Wong and his wife, as shareholders, are eligible to get part of the cash.
The key issue here is transparency. Neither the SFC nor Gome has disclosed whether the couple would give up their right to receive any payout from the compensation or, if they get some money back through a special dividend, how much they would eventually pay for their misconduct.
On Thursday, Gome said it had not yet decided how to spend the windfall, pending shareholders' approval. But few would expect them to say no to a large sum of money, so an approval is likely.