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Panama Papers

Hong Kong innovation minister, Polytechnic University embroiled in Panama Papers leaks

Documents show that Nicholas Yang was involved with two companies set up by the institution through Panamanian law firm Mossack-Fonseca in the British Virgin Islands

PUBLISHED : Friday, 22 April, 2016, 10:39pm
UPDATED : Saturday, 23 April, 2016, 12:12am

Polytechnic University has been found to have secretly set up two companies registered in an offshore tax haven, one of them set up through a top staff member who became Hong Kong’s IT minister, according to the latest batch of Panama Papers studied by the South China Morning Post .

The university management, including then vice-president Nicholas Yang Wei-hsiung, established the firms in the British Virgin Islands in 2012 and 2013.

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While it is not illegal to do so, the revelation has raised questions on whether it is appropriate for a publicly funded academic institution to engage in a practice normally associated with tax avoidance and hiding wealth.

Details of Yang’s involvement, coming just five months after he took office as secretary for innovation and technology, were in leaked documents from a Panamanian law firm obtained by the International Consortium of Investigative Journalists.

Yang’s exact role was not clear, but he facilitated the transfer of shares between the university’s business arm, PolyU Enterprises, and one of the firms.

The university on Friday confirmed that the two BVI companies were set up “to hold the investments of PolyU in companies that are no longer active in operation”, adding that it was “more cost-effective” to hold and manage them that way.

Yang appeared upset when he was approached by the Post on Friday. “[PolyU] has given you an explanation. Just believe it,” he said. “Why would you ask me?”

But PolyU council member Rodney Chu Wai-chi said he had “no memory of knowing there were two BVI companies”. He said it was “not appropriate” for the university to set up BVI firms.

Pan-democratic lawmaker Kenneth Leung, an experienced tax lawyer, said the university’s explanation raised more questions than answers.

“If the parent company based in Hong Kong was not intended for making investments, why would the subsidiaries be created to hold investments?” Leung said.

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He also dismissed the argument about cost-effectiveness, saying an additional layer of companies only added inflexibility.

Pro-establishment lawmaker Chan Kam-lam, another council member, disagreed with criticism, saying: “I don’t see any problem as it is very common for people or companies to hold a BVI firm in an international financial centre like Hong Kong.”

Education sector lawmaker Ip Kin-yuen said he was shocked to learn that PolyU held two offshore accounts, which he said were highly inappropriate and also unnecessary.

“Many would wonder why the publicly funded institution would want to bypass public scrutiny,” he said. “How can we ensure there is no wrongdoing when the accounts of the companies are so secretive?”

The council, being the institution’s decision-making body, should be fully aware of the firms’ existence, he added.

According to the leaked documents, PolyU reached out to the law firm, Mossack Fonseca, in 2012 to establish the first BVI firm in October that year. It was called PearL-Sun Wah (Offshore) Company.

That was quickly followed by a second firm in May 2013 – PearL-DigiPower (Offshore) Company.

Three weeks later Yang, who was PolyU Enterprises’ chief executive officer at the time, signed an agreement that effectively allowed the shares of the second subsidiary to be passed to the university’s commercial arm.

Both firms had the university’s director of finance, Louis Heung Sai-kit, listed as the only director.

The Education Bureau distanced itself from the matter. Citing institutional autonomy, it said the university “is not required to report” to the government on activities relating to the establishment of other corporate bodies.