May 13, 2012 5:13 pm

Kwok brothers row escalates after arrests

When Walter Kwok lost a court battle in May 2008 to prevent his removal as chief executive by the board of Sun Hung Kai Properties, Hong Kong’s largest property developer, he suggested a cease in hostilities.

His two younger brothers, Thomas and Raymond, had wanted him demoted, claiming he suffered from bipolar disorder. Walter, 61, then wrote a letter to the board of the family-owned company that said: “We three are brothers. Why should we keep fighting each other?”

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The desire for peace between him and his two younger siblings proved brief. In 2010 Walter’s share of the family trust, which owns the 42 per cent family stake in the company with a market capitalisation of $30bn, was transferred to his family by his mother.

On May 3, however, when Hong Kong’s Independent Commission Against Corruption arrested Walter before releasing him on bail, the brothers might have had reason to unite. Just weeks earlier, Thomas, 60, and Raymond, 58, had themselves been arrested and released on bail under Hong Kong’s prevention of bribery ordinance that also included the arrest of a former head of the civil service, Rafael Hui.

The arrests sent shockwaves up the more than 100 floors of the gleaming ICC Tower that is owned by Sun Hung Kai and dominates Hong Kong’s skyline today. The investigation is likely to come to a climax in the next few weeks, if and when the brothers are charged. But few expect a truce between Walter and his younger brothers.

It is not clear whether Walter was a source of information for the investigation. Mr Kwok’s representative refused to comment. In 2008, one of the issues of contention involved enquiries launched by Walter into “why construction contracts were frequently awarded by SHKP to a select number of contractors”.

His brothers in turn alleged he unilaterally made decisions, especially in the company’s business in mainland China, without informing them or the board. Walter denies being bipolar. This pattern of “he says, they say” is likely to escalate if Hong Kong’s anti-corruption agency bring charges against Thomas and Raymond in the next few weeks.

Raymond and Thomas, whose properties include a bizarre theme park that is a replica of Noah’s Ark, have denied any wrongdoing. On April 3, days after they were released on bail, Thomas, who is a co-chairman of the company with Raymond, said, “Don’t worry. Here at SHKP its business as usual.”

The stock market has been less sanguine; Sun Hung Kai has lost a fifth of its value since March 29. Rafael Hui, who was arrested on the same day as the younger Kwoks, happens to be a long-time friend of the Kwoks who worked briefly for the company before he was elevated to Hong Kong’s chief secretary, the city’s second most powerful official, between 2005 and 2007.

Mr Hui, 64, made his way up the colonial civil service before leaving to head the territory’s provident fund company. He then worked for the Kwoks before returning to the government as political appointee in 2005. One retired senior government official, who Mr Hui worked with closely for a number of years, says: “Rafael told me that the Kwoks’ mother looked to him to give the brothers advice.”

Ronny Tong, a local legislator, recalls Mr Hui lobbying him and other legislators when he was working for the Kwoks before he was reappointed to the government as head of the civil service in 2005.

Mr Hui was allegedly the beneficiary of large unsecured loans and the rent-free use of a flat in a luxury development owned by Sun Hung Kai, according to reports published in the Chinese language press in Hong Kong.

Mr Hui has not publicly made any statements since his release on bail and the Kwoks have not commented on the details of the case. Under the city’s bribery ordinance, the ICAC would have to link charges of corruption to “some official duty Hui performed or chose not to perform,” says Mr Tong, the legislator and former chairman of the bar association in Hong Kong. “The linkage could be fairly tenuous.”

At an ICAC conference this month, its director Timothy Tong said there had been a shift towards public officials using and abusing public office to obtain a private benefit.

The comment captured the public mood. In the past few months, Hong Kong has been witness to outrage over revelations of an illegal basement of more than 2000 sq ft in the home of Henry Tang that derailed his campaign to become the city’s top official in July and trips by the city’s current de facto mayor, Donald Tsang, to Phuket on a tycoon’s plane.

For both the ICAC and the Kwoks, however, this tussle could be damaging.

Mr Tong may be in tune with the public mood in Hong Kong, but the ICAC is under the microscope as well. “It is inappropriate to arrest, release the news to the public and then sit back and not charge anyone forthwith,” says a lawyer, who is likely to represent one of the defendants.

Only two of the Kwok brothers’ 10 children work in the company and they are in their twenties and are regarded as too inexperienced to take over the company if Raymond and Thomas are charged.

“Of course, if the Kwoks are charged, acquisitions and major decisions will be affected,” says analyst Sylvia Wong of UOB Kay Hian, dismissing the business-as-usual line of the brothers. “Come on, it’s a family-run company.”

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