The practice of cross-leasing flats was legal and common among civil servants in the 1980s as they used rental income to pay off mortgages, a former high-ranking government official told the District Court yesterday.
Former secretary for the civil service Joseph Wong Wing-ping was called by former development minister Mak Chai-kwong to testify in a housing allowance fraud trial involving Mak and assistant highways director Tsang King-man.
Mak, 62, and Tsang, 57, are accused of deceiving the government of HK$700,000 by using two properties in which they had a financial interest to claim rental allowances from 1986 to 1990.
Mak also faces two counts, and Tsang three, of using documents with intent to deceive the government. The pair deny the charges.
Asked by Eric Kwok Tung-ming SC, for Mak, whether there were any figures to show how common the cross-leasing practice was, Wong, who was responsible for civil servants' benefits in 1988, said the government did not conduct such surveys.
"The survey was not conducted as cross-leasing among civil servants did not breach any regulations," he said.
Wong also said he had not come across any situation in which civil servants would have declared their cross-leasing practice when they applied for housing subsidies.
But the court has heard that it would violate the regulations if a civil servant used a flat in which he had a financial interest to apply for allowances.
It is the prosecution's case that Mak and Tsang were the genuine owners of the City Garden flats they rented from each other, and that the duo used the flats to claim housing subsidies from the government.
Wong, who was the only defence witness, said the now-defunct private tenancy allowance scheme had "structural deficiencies". That meant civil servants could use the allowances solely for renting, not purchasing, a property.
The scheme, which ran from the late 1970s to 1990, was adapted from a similar scheme for expatriate civil servants who would return to their homeland after service and had no interest in purchasing properties in the city, the court heard.
But local civil servants wanted to buy properties to live in after retirement, Wong said. Thus the Civil Service Branch, predecessor of the Civil Service Bureau, in 1990 introduced a housing financing scheme for civil servants to buy their own properties.
Asked whether the government took a charitable view on breaches of regulations back in the 1980s, Wong replied: "The government requirements on civil servants in complying with regulations and their conduct are getting higher."
The case was adjourned to May 27 for closing submissions.