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  • Jul 23, 2014
  • Updated: 10:38am
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Live blog: Kwoks used 'elaborate' scheme to mask payments for Hui, prosecution says

PUBLISHED : Friday, 06 June, 2014, 10:12am
UPDATED : Friday, 06 June, 2014, 7:02pm

The prosecution will continue to lay its case before the jury today, after accusing the city's former chief secretary of being paid to be the "inside man" of property tycoons Thomas and Raymond Kwok.

Prosecutor David Perry QC also laid bare yesterday the painstaking methods allegedly used to conceal those payments.

Rafael Hui Si-yan, 66, faces eight charges related to bribery and misconduct in public office.

Sun Hung Kai Properties co-chairman Thomas Kwok Ping-kwong, 62, faces one charge of conspiracy to offer an advantage to Hui and two counts of conspiracy to commit misconduct in public office. Raymond Kwok Ping-luen, 61, also co-chairman, faces four charges, including one with Hui of furnishing false information.

SHKP executive director Thomas Chan Kui-yuen and former Hong Kong stock exchange official Francis Kwan Hung-sang each face two charges. All have pleaded not guilty.


4.39pm: After Perry ends this part of his opening speech, Mr Justice Andrew Macrae says one juror will be allowed to take her mother to the doctor next Thursday.

The trial is adjourned until Monday.

Power and influence in the government  should not be sold for his personal gain
Prosecutor David Perry QC

4.33pm: The jury is asked to read newspaper accounts of a press conference on July 6, 2005, in which the newly installed chief secretary - now chief of the West Kowloon Cultural District project - was grilled by the press about possible conflicts of interest owing to his past as SHKP consultant.

Reporters asked if he would lobby for the property firm. Hui, despite still being on the Kwoks' payroll, denied any conflict of interest and said his ties to SHKP had been severed.

Hui also assures them that the government has a good "internal control system". Even so, Perry says, the government had no way of knowing about the millions of dollars paid to Hui - which only came to light during the investigation.

4.04pm: But Hui's spendy lifestyle belied the fact his official income was decreasing, according to the prosecution.

Showing the jury Hui's bank statements, Perry explains how the defendant earned HK$4.58 million between July 2005 and June 2006. He took out HK$2 million from his accounts and racked up HK$1.68 million on his credit cards.

From July 2006-07, Perry says his HK$4.64 million earnings were eclipsed by his HK$2.46 million credit card bills and his withdrawal of HK$4.83 million in funds.

From July 2007 to June 2008, his income fell to HK$1.32 million as he left office. But he still drew HK$6.98 million from his accounts and spent HK$3.44 million using his credit cards.

This is why, Perry says, he was vulnerable to the Kwoks' offers. "He is willing to trade what he has to sell," Perry says. But power and influence in the government  should not be sold for his personal gain, he says.

3.49pm: Hui lived a splashy lifestyle way beyond what he could afford on his government salary and pension, according to the prosecutor. He has "a very refined taste," Perry says. "There is nothing wrong with expensive taste as long as you can afford it."

By the time he took office, then-chief secretary Hui allegedly had 14 bank accounts and 25 credit cards - with three bank loans, millions of secret funds and rent-free flats at his disposal.

Hui splurged on a HK$33,000 dinner at Nicholini's (an Italian restaurant) at the Hotel Conrad in October 2005. The next year, he spent HK$42,000 on a Bulgari watch. He withdrew HK$10,000 in cash almost every day and lived in deluxe hotels when travelling, the prosecutor says.

Hui also spent a "vast amount" of money to buy the best quality carrots and stable for his racehorse.

3.16pm: Perry highlights key entries in Raymond Kwok's diary between April and June 2005. They include, according to the prosecutor:

April 12: Rafael Hui meets "TK" (Thomas Kwok) at home to discuss the pre-dated invoices of HK$4.125 million for Hui.

April 19: Raymond Kwok notes he called Hui about people named Norman Chan and Joseph Yam.

April 23, 4pm: Raymond says he called Hui on the phone to discuss the invoice, particularly when the payment would be made.

May: A note that Rafael Hui has an oustanding debt of "3 million" that month, but Hui asked Raymond for an extension.

May 5: An entry on a "Rafael Hui package" with the merger of MTR and KCRC (Kowloon-Canton Railway Corporation).

May 9: A conversation with Hui about the Eastern Harbour Tunnel.

May 11: Rafael meets Thomas Kwok again when Hui is expected to become chief secretary under Donald Tsang.

June 14: First payment of invoice to Hui.

June 20: Thomas Kwok passes the first HK$4 million to Thomas Chan

Perry says Hui was a member of the Executive Council when the plan for the movement of money was under way.

He notes that in August 2007, there was an uptick in e-mail traffic between Francis Kwan and his "good friend in Singapore" about the funds.

2.55pm: Perry promises to give the court a glimpse of the lifestyle and riches of Hui. But before that, he brings up an "important document" - Raymond Kwok's diary - which recorded meetings and payments to Hui.

2.39pm: When Rafael Hui was chief secretary, he did declare receiving gifts, in accordance with regulations, the prosecutor says.

In 2005, he  makes a "very full disclosure" of gifts such as mangoes from the Pakistan government, a fruit basket, a stamp, portraits and mooncakes. But there is no sign of the multimillion-dollar payments, Perry says.

"Do you think anyone is interested that he received mooncakes, when he received HK$8.5 million?" Perry says. "You would look in vain for any report of millions of dollars from property developers."

2.31pm: Hearing resumes. Prosecutor David Perry QC informs the jury his opening speech may last until next Tuesday.

THE FIRMS:

Sun Hung Kai Properties - owned by the Kwoks; alleged source of all the funds sent to Rafael Hui

Honour Finance Company - the financial arm of SHKP, from which Hui secured several loans

Villalta - owned by Thomas Chan; allegedly used to transfer funds to Hui

Top Faith Enterprises - operated by Rafael Hui; alleged recipient of some of the payments from SHKP

1.30pm: A break is announced. The trial will resume at 2.30pm.

1.25pm: "It needs a lot of detective work to identify the source of this funding," Perry says of the payments to Hui, adding that it would have taken months of planning.

When Hui received HK$11.182 million in November 2007, he received it in four batches: HK$1 million sent to Hui's company, Top Faith Enterprises, then three cheques (for HK$3 million, HK$4 million and HK$3.182 million) to Hui.

Though on paper, Thomas Chan is the origin of the funds, Perry says he was "being used by his big bosses at SHKP who want to get away from this picture".

To offset the HK$12 million Chan sent through Villalta, Perry says Thomas Kwok rewarded Chan with a series of bonuses amounting to HK$13 million in 2008. In a memo to his brother Raymond, Thomas Kwok signs off on the bonus and praises Chan - their "loyal" and trusted employee, according to Perry - for his good performance at SHKP.

12.35pm: Perry says the plan gets even "more elaborate" when Thomas Chan's company, Villalta, sends HK$12 million to Hui. It first sent the funds to an "offshore" Singaporean company owned and controlled by Kwan's best friend. The money was converted to US currency before being wired back to Hong Kong, where it was deposited in two separate instalments.

[Hui had] massive conflicts of interest because he had been bribed
David Perry QC

12.30pm: The prosecution next stresses how problematic it is for a senior government official like Hui to borrow funds and ask for favours from a property developer - and, worse, not to publicly disclose these loans.

Perry cites how Hui, while managing director of the Mandatory Provident Fund Schemes Authority, secured a HK$900,000 loan from SHKP's financial arm, Honour Finance. He repaid this in May 2003, when he stepped down from the authority.

As far back as 2001, Hui allegedly secured a HK$1.5 million loan from Honour for "tax purposes'. Upon receiving the loan, he renewed the MPFA's lease at One IFC, with SHKP as co-owner.

In 2005, as chief secretary, Hui got an unsecured loan of HK$3 million from Honour, payable in 12 months. When the deadline came, Hui asked for an extension. Perry framed the situation as Hui asking for a "favour" from SHKP while he was handling West Kowloon matters.

12.20pm: What benefits could Hui give in return, the prosecutor asks. Perry makes the link between Hui's time as SHKP consultant from 2004-05, in which he "gave advice" on West Kowloon projects, to the chief secretary becoming chairman of the West Kowloon Cultural District project. Hui also set the stage for Raymond Kwok's negotiations for the Ma Wan Island development, the lawyer says.

"[Hui had] massive conflicts of interest because he had been bribed," Perry says, using the term for the first time in his arguments.

12.05pm: Focus turns to Hui's luxury Leighton Hill apartments, which he got rent-free. Perry says that despite Hui signing a new 30-month tenancy agreement on June 24 - days before he officially became chief secretary - which stated he would pay market-rate rent of HK$160,000 a month, "in truth, he was reimbursed".

11.56am: Perry turns the jury's attention to a chart that shows both Thomas Chan's family trust and his private company, Villalta - one of the alleged vehicles used to funnel secret payments to Hui. 

Villalta disbursed HK$10.8 million by cashier order to middle man Francis Kwan, "not for investment purposes", but as payment for Hui. The prosecutor says Chan used the corporate entity to distance himself in this "elaborate" scheme.

Ask yourself if this: Is this the normal way for anyone to transfer money? Will you go this route?
David Perry QC, on the payments allegedly made to Hui

11.17am: The prosecutor now shows charts illustrating how all five defendants used a maze of transfers to deliver the millions of dollars to Hui. Perry tells the jury not to be daunted by its complexity. "They were made to be difficult for people to understand what's going on," he says.

The prosecution's charts show how:

  • Hui received a series of payments totalling HK$8.5 million between March to June 2005. They were delivered from Thomas Chan via Francis Kwan. The middle man allegedly used his sister-in-law Mabel Chan's bank account for some of these transfers.

 

  • Hui received several cheques or cashier orders for amounts ranging from HK$250,000 to HK$1.4 million between June 27 to 29 - the days leading up to his swearing-in as chief secretary.

 

  • hours before the official ceremony in which Hui would become chief secretary of Hong Kong, HK$4.7 million was deposited into his account at 9.06am.

 

  • in one case, Francis Kwan - the middle man in all these transfers - withdrew HK$150,000 in cash and cashier order from an HSBC branch in North Point, then walked a few minutes to a Standard Chartered bank and deposited it to Hui's account.

 

"Ask yourself if this," Perry tells the jury. "Is this the normal way for anyone to transfer money? Will you go this route to break down the money into small sums and to make the payments on different dates?"

10.34am: Perry talks about an invoice, with an annotation in Raymond Kwok's handwriting, indicating it was "OK" to make the payments - packaged as a "special bonus" - "in view of Mr Hui's excellent performance for the past 13 months" between March 2004 and March 2005.

The prosecution asks why such a bonus is needed, given that Hui was already paid for his consultant duties. Perry says the payment voucher for this was dated April 19, 2005.

10:20am: Even as Hui terminated his consultancy agreement with the Kwoks in March 2005, the chief-secretary-to-be submitted invoices to SHKP requesting cheque payments of about HK$375,000 per month from May 2005 to February 2006 for Top Faith Enterprises, the lawyer says. These totalled HK$4.125 million.

Perry says the cheques were sent to Hui's address at Leighton Hill - the rent-free luxury apartments given to him by SHKP. When the money started coming in, Hui was already chief secretary. So Hui was issuing invoices for services he could not possibly deliver, Perry says.

10.16am: Straight to business, prosecutor David Perry QC says the jury will be asked to look at charts that show how funds flowed from the Sun Hung Kai Properties businessmen to former chief secretary Rafael Hui.

In his opening statements yesterday, Perry detailed how the Kwoks, through Thomas Chan - who in turn used middle man Francis Kwan - funnelled money to Hui.

Perry cites the charge of conspiracy to commit misconduct against Hui for accepting HK$4.125 million from Raymond Kwok via Hui's own company, Top Faith Enterprises. The prosecutor describes the exchange as: "You give me money, I give you goodwill."

When Hui was being tipped as the next chief secretary, he ended his consultancy agreement with SHKP. Perry says he did so because "it is important for [Hui] that he is not SHKP man".

10.03am: The trial begins as Mr Justice Andrew Macrae and the nine-member jury take their seats.

9.49am: Good morning and welcome to SCMP's live blog. The city's highest-profile graft trial resumes today amid heavy rains. Long queues are seen at the High Court, stalling even prosecutor David Perry QC, who was eventually allowed to skip the line and head to the courtroom at 9.45am.

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