Enigma Network

Judge extends Convoy court hearing to September, as plaintiffs seek time to add Hong Kong’s ‘Toy King’ to the list of defendants

PUBLISHED : Tuesday, 06 March, 2018, 7:58pm
UPDATED : Wednesday, 07 March, 2018, 12:08am

Francis Choi Chi-ming, a Hong Kong entrepreneur who built his fortune producing toys for brands such as Mattel, will be added to a growing list of defendants in a lawsuit over the city’s biggest financial scam in decades, according to the plaintiffs.

Choi, known as the “Toy King”, will join 27 other defendants in a lawsuit brought by Convoy Global Holdings at the High Court. Mr Justice Jonathan Harris adjourned the hearing of the suit to September for Convoy’s legal team to amend their writ.

The latest development is a twist in the unprecedented joint investigation by Hong Kong’s market regulator and anti-corruption body into allegations of fraud involving HK$4.4 billion (US$561.74 million) at Convoy, a local financial services provider that counts the city’s mandatory employees fund as its customers.

At the centre of the scandal is former Convoy director Roy Cho Kwai-chee, a Hong Kong-trained medical doctor turned securities investor. Cho, who wasn’t present at the court hearing, stands accused of being the mastermind in a series of transactions that bilked Convoy of billions of dollars.

Cho’s flagship company Town Health International Medical Group is also at the centre of up to 50 companies – dubbed the Enigma Network – with cross holdings to each other, which regulators claim have conspired to entrap minority investors.

Crystal Choi, the daughter of the toy producer, is chairman of Town Health, while Choi himself is vice-chairman and non-executive director of the clinic operator.

Both Convoy and Town Health are under the largest anti-graft investigation in Hong Kong. The Independent Commission Against Corruption and the Securities and Futures Commission executed a search warrant on February 9 at the premises of Town Health but made no arrest.

Explainer: Who’s who in the tangled web of the Convoy enigma

In December, the two agencies raided Convoy’s offices and arrested four people, including Convoy’s former chairman, Quincy Wong Lee-man, and former chief executive Mark Mak Kwong-yiu, who was then chairman of financial services firm, Lerado Financial Group.

Convoy’s new management, in place since December, has filed three lawsuits against the defendants, which include Cho, in a claim amounting to HK$715 million.

Cho has not been seen in Hong Kong since late November, stirring speculation he may have fled the city. The court has received a letter from Cho’s mother stating that she did not know of his whereabouts.

Choi had been a patient at a medical clinic in Sha Tin operated by Cho, which may have been the starting point for closer financial ties.

The two are joint shareholders in an entity called Broad Idea International, with Cho owning 50.1 per cent while Choi controls the remainder, according to Convoy’s writ.

Broad Idea owns a 18.85 per cent stake in Town Health, which in turn owns a 4.5 per cent stake in Convoy.

Will Hong Kong’s ‘enigma network’ unravel with next week’s Convoy court hearings?

In a sweeping management change in mid December, Johnny Chen Chi-wang was appointed chairman, along with five other new directors. The chairman has the backing of the Tsai family, Convoy’s largest shareholder with a 29.98 per cent stake, and the owner of Taiwan’s second-largest bank, Fubon Financial Holding.

A separate writ filed by businessman Kwok Hiu-kwan, the second-largest shareholder of Convoy with a 29.91 per cent stake, will be heard for a week beginning August 27.

The Kwok writ maintains that a decision to invalidate his voting rights during a shareholder meeting in December was improper.

Shareholder fires back at ‘rude’ chairman in boardroom battle at troubled Hong Kong firm Convoy

At the time, Kwok’s voting rights were invalidated on the basis that his shares are related to the ousted former chairman, a claim that Kwok disputes.

The judge also ruled that a writ filed by minority Convoy shareholder Zhu Xiaoyan to be stayed as the allegations and claims were similar to Convoy. Her writ will be handled after the Convoy and Kwok hearings.