An incumbent director and two former directors of an investment company were charged by the Independent Commission Against Corruption in an alleged bribery scandal involving illicit payments relating to a restructuring deal of a listed company.

Introduction

Kennedy Wong Ying-ho (“Wong”) is the incumbent director of Perfect Ace Investments Limited (“PAIL”).Together with two former directors, Chui Chuen-shun (“Chui”) and Richard Yin Ying-neng (“Yin”), the trio face a joint charge of offering an advantage to an agent,contrary to section 9(2)(a) of the Prevention of Bribery Ordinance (Cap 201) (“POBO”).Wong additionally faces another similar charge alone.

Background

In October 2007, PAIL entered into a restructuring agreement with a listed company, Ocean Grand Chemicals Holdings Limited (“OGCH”), its provisional liquidators and an accounting firm.The Defendants offered an advantage, namely a service agreement as a consultant of PAIL, to Herbert Hui Ho-ming (“Hui”), a then executive director of OGCH.Subsequent to the completion of the restructuring in 2008, PAIL became the major shareholder of OGCH and Wong became its chairman.Hui retained his post within OGCH.

In 2009, OGCH was renamed Hong Kong Resources Holdings Company Limited (“HKRH”) and acquired 5 subsidiaries from the publicly-listed 3D-GOLD Jewellery Holdings Limited (“3D-GOLD”).

Charges against the Defendants

The charge against the Defendants alleges that in November 2007, during the restructuring of OGCH, the Defendants offered a consultancy agreement to Hui in exchange for his performance of duties and exercise of powers that may be assigned, vested in, or directed by the board of directors of PAIL or OGCH.

The other charge, which was only faced by Wong, alleges that in August 2009, Wong offered an advantage, namely a share option at HK$1 for the subscription of 15 million preference shares of HKRH for HK$1.8 million, to Hui for his participation in HKRH’s acquisition of the 5 subsidiaries of 3D-GOLD.

Some key points about section 9(2)(a) of POBO

Under section 9(2)(a) of POBO, any person who, without lawful authority or reasonable excuse, offers any advantage to any agent as an inducement to or reward for or otherwise on account of the agent’s doing or forbearing to do, or having done or forborne to do, any act in relation to his principal’s affairs or business.

The Court has taken a restrictive approach in interpreting the term “in relation to his principal’s affairs”.It is insufficient to merely show that the recipient of the bribe (i.e. Hui) is an agent in fact.The Prosecution must go further to demonstrate that the person(s) offering the bribe (i.e. the Defendants) must have intended the act or forbearance of the agent to influence or affect the principal’s affairs.Thus, it is a paramount ingredient that the action or forbearance of the agent should be aimed at the principal.

It is also noteworthy that corruption offences under section 9 of POBO focus on the state of mind of the offender.Therefore, where a person offers to pay a reward pursuant to a corrupt arrangement which calls for payment upon the occurrence of a contemplated event, once he makes an offer to pay with the corrupt purpose in mind, the offence of offering under section 9(2) of POBO is committed.

One special issue about this case is that Hui had passed away in September 2014, therefore, no charge was laid against him.Were he still alive, he would very likely be charged with accepting an advantage as an agent, contrary to section 9(1)(a) of POBO.At first glance, one may think that Hui’s death may hinder prosecution.Nevertheless, the gravamen of section 9(2)(a) offence lies in the making of an offer to pay a corrupt reward, and the offence is complete at the moment the offer is made, regardless of whether or not the corrupt agreement will be honoured by the offeree.In other words, for the Prosecution to establish the charges, it is unnecessary to prove that Hui has done the act for which the reward is being offered.Accordingly, Hui’s absence should not cause a serious hindrance to prosecution of the Defendants.

Watch this space

The Defendants appeared at the Eastern Magistracy on 5 August 2015.The trial was adjourned until 11 September 2015.The Prosecution plans to summon 34 people to give evidence, including an assistant from Wong’s law firm and two non-executive directors of HKRH.

As the matter just entered into judicial process, it would be entirely premature at this preliminary stage to provide a detailed analysis of the case.  The outcome of the case remains to be seen.In the meantime, stay tuned to see how the evidence bears out and if the offence may be made out on the charges against the Defendants.