The court case against a former Allied Group executive facing $680 million fraud allegations collapsed yesterday after the judge accused the Securities and Futures Commission of 'malpractice' in their handling of an expert witness crucial to the prosecution's case. The sensational ending of the trial, one of the costliest and longest-running fraud cases in Hong Kong's history, raised questions about the way in which the SFC uses its powers of investigation. The judge's criticism comes as the body is about to be granted more extensive powers under new securities legislation. Mr Justice Conrad Seagroatt ordered a permanent halt to the prosecution of former Allied Group chairman Lee Ming Tee, who had denied charges of conspiracy to defraud and publishing a false statement of account between 1990 and 1992. The judge decided it would be unfair to continue with the trial because a crucial expert witness called by the prosecution, businessman Meocre Li, had given evidence without defence lawyers or the court realising he had been the subject of an SFC investigation. Mr Justice Seagroatt also criticised the way in which that investigation, which ended two months before the fraud trial started without any action being taken against Mr Li, had been handled by SFC investigators. He said favourable treatment had been given to Mr Li partly because of his position as an expert witness for the prosecution in the pending trial. He said the failure of the SFC to disclose to the Department of Justice, responsible for prosecuting Mr Lee, that they were investigating the witness created a 'perception of unfairness'. He said expert witnesses had to have a flawless reputation if they were to present evidence in that capacity. The Department of Justice reacted to the decision by lodging a notice of appeal to the Court of Final Appeal. Mr Lee's co-accused, Ronald Tse, 48, who faces the same charges and is also a former Allied Group executive, was not involved in the present proceedings. His prosecution has been suspended while he receives medical treatment in Australia. Their jury trial was stopped in March after 4.5 months when it was learned that information which may have affected Mr Li's role as an expert witness had not been disclosed. This related to a separate matter involving a mainland company. But as a result of the inquiries which followed, the SFC investigation also came to light. This was the second time the proceedings had been 'permanently' halted. In 2000, a different judge ruled there could not be a fair trial because an initial government-appointed investigation into the Allied Group in 1992 had been mishandled. That was later overturned by the Court of Final Appeal, which paved the way for the jury trial in which Mr Li was a witness. The case has raised concerns, particularly with the SFC's investigatory powers about to be boosted. The Hong Kong Society of Accountants' president David Sun Tak-kei said: 'With the new regulation becoming effective soon, the government must ensure the SFC will use its expanded investigative powers properly.' Hong Kong Stockbrokers' Association chairman Wilfred Wong Wai-sum also said the SFC should increase its transparency in its investigation. SFC chairman Andrew Sheng said he had not yet studied the judgment in detail so could not comment on the case. The SFC however will study the judgment. Mr Sheng said the SFC has been improving its staff and transparency in the past years to prepare for the introduction of the new securities law. A spokesman for the Financial Services and Treasury Bureau said it would look into the judgment before it would comment further.