Source:
https://scmp.com/business/companies/article/3010454/hong-kong-charges-alleged-mastermind-citys-largest-financial
Business/ Companies

Hong Kong charges alleged mastermind who sparked city’s largest financial probe in decades for conspiracy to defraud Convoy

  • Roy Cho Kwai-chee, the alleged mastermind in Hong Kong’s largest financial investigation in decades, has been charged with conspiracy to defraud Convoy Global Holdings by the city’s anti-corruption investigator
Roy Cho Kwai-chee, 55, former director of Convoy Global Holdings Limited (CGHL), formerly named as Convoy Financial Holdings Limited (CFHL), arrives at the Eastern Court in Sai Wan Ho on 15 May 2019. Photo: SCMP/Sam Tsang

Roy Cho Kwai-chee, the alleged mastermind in Hong Kong’s largest financial investigation in decades, has been charged with conspiracy to defraud Convoy Global Holdings by the city’s anti-corruption investigator.

Cho allegedly conspired to defraud Convoy and its affiliates, leading Hong Kong’s largest independent financial advisory firm to invest more than HK$89 million (US$11.3 million) in a company related to him, according to statements by the Securities and Futures Commission (SFC) and the Independent Commission Against Corruption (ICAC).

The charge is the culmination of a joint investigation since December 2017 by the two regulators in a HK$715 million (US$91 million) legal battle surrounding Hong Kong’s biggest financial scandal in decades.

The joint force’s first mission led to the arrest of four former executives of Convoy and its network companies, dubbed the Enigma Network by Hong Kong’s activist shareholder David Webb as a list of 50 stocks to avoid.

The ‘@Convoy’ building, which houses the headquarters of Convoy Global Holdings in Hong Kong. Photo: Bloomberg
The ‘@Convoy’ building, which houses the headquarters of Convoy Global Holdings in Hong Kong. Photo: Bloomberg

Today’s action is part of Hong Kong’s carrot-and-stick approach to clean up misconduct and reforms to attract global investors to Asia’s second-largest financial market. The SFC has stepped up its enforcement, imposing a record US$100 million fine on four major global banks – UBS, Morgan Stanley, Merrill Lynch and Standard Chartered – for failing in their duty as the financial sponsors of initial public offerings (IPOs) between 2009 and 2014.

Cho, 55, acted as a de facto, or shadow, director of Convoy, exerting significant influence over Convoy’s operation directly or indirectly while he owned 50 per cent of the company, the ICAC said.

In April 2016, Cho introduced Convoy to a potential acquisition of True Surplus International Investment, in which he owned 55 per cent. True Surplus was engaged in investing assets and provided consultancy service. Its principal asset was its interest in two investment funds which required continuous capital commitment.

Five months later, Cho and other senior Convoy executives caused its subsidiary Convoy Collateral to buy True Surplus for more than HK$89 million, ICAC said.

Between April 1, 2016 and December 7, 2017, Cho had conspired with two other persons to defraud Hong Kong’s stock exchange as well as the directors, shareholders and investors of Convoy as he did not disclose his stake in Convoy and True Surplus, or his role in both companies, ICAC said.

A former vice-chairman of Town Health International Medical Group, Cho was mostly unreachable for more than a year. He re-emerged in March with a quarter-page advertisement in the Chinese language daily newspaper Sing Tao Daily.

“There are some people who use various reasons to try to contact myself or my family in what amounts to harassment,” Cho said in the advertisement, adding that he had engaged the law firm KCL & Partners to protect his reputation, and that he would take legal action to defend himself and his family.

The law firm did not respond to several requests by South China Morning Post to contact Cho.

Dressed in a black suit with a blue tie when he appeared at the Eastern Magistracy in Sai Wan Ho, Cho posted HK$200,000 in bail and faced a travel ban. The court granted his appeal for a short trip to Australia to handle a migration application of his family, and imposed an additional HK$500,000 bond. The next hearing has been scheduled for July 24.

Trading in Convoy’s shares had been suspended in Hong Kong since December 2017, after the ICAC and the SFC initiated a joint action to investigate it for corruption and market misconduct. The agencies raided Convoy’s office in December 2017 and arrested four people, including Convoy’s former chairman Quincy Wong Lee-man. The company has since appointed a new team of senior managers.

Convoy’s senior officials, led by chairman Johnny Chen Chi-wang, have filed writs against Cho and other related parties involved in a complex network of companies for their role in the company’s HK$4.043 billion private placement in 2015.

In one of the writs, Convoy claims HK$715 million in compensation from Cho and 12 others – nine persons and three companies – for a series of transactions that had led to losses at Convoy Collateral.

Cho was dismissed from Convoy’s board last year after the company, the largest independent financial consultant in Hong Kong, could not contact him.