A plot of government land in Sha Tin that was slated for private hospital development landed in the hands of a group of merchants and bankers in 1982 and control was later transferred to tycoon Li Ka-shing and his affiliates, official documents show.
The government sold the land to Stratton Development for HK$60 million in March 1982, and the company tried to convert the land for residential use four years later. Lands officials rejected the application in 1987 and two years later Stratton, which by then had changed its name to Union Medical Centre, came under the control of another tycoon, Lee Shau-kee.
Under Lee's control, part of the site was turned over to residential use. Lee's main company, Henderson Land, developed 46 per cent of the land into a luxury estate. It generated revenue of at least HK$3 billion for Henderson.
Union Hospital now occupies the rest of the 1.92-hectare site.
The land in Sha Tin is under scrutiny after the Audit Commissioner issued a report on Wednesday questioning whether health authorities had ensured that land earmarked for private hospital development was properly used by the operators.
The department said last night that due process had been followed in approving the change of land use.
Stratton Development appointed 10 businessmen of various nationalities as directors in the same month as the land transaction. Four years later, as Union Medical Centre, it applied to the Lands Department to turn the entire site into a property development, an official who is familiar with the application said.
About two months later, Li became a director, and Lee gained control in 1989.
The auditors revealed that the Town Planning Board approved the last of a series of attempts to use part of the site for private flats in 2000, a year before the Executive Council, under the leadership of chief executive Tung Chee-hwa, approved the plans.
The hospital, which started operating in 1994, says the land use was changed because of low demand for private hospital beds in the 1990s.
Union Hospital received up to HK$300 million for giving part of its site to Henderson Land.
The hospital said last night that the land use application was also made to support a government policy of building 85,000 flats a year under the Tung rule.
Lawmaker Abraham Razack said the Legislative Council's public accounts committee, which he chairs, would conduct a public hearing on regulations imposed on private hospitals as well as procedures in granting land to develop private hospitals.
The hearing was necessary because of the strong public interest in the issue, he said.
Many of the 11 private hospitals in the city were built on land granted to non-profit organisations at little or no cost. Union Hospital is different; it acquired the land for HK$60 million.
Legislator Kwok Ka-ki said the audit revelations raised questions of possible government-business collusion and of corruption. He urged the Independent Commission Against Corruption to investigate.