Hongkong: Fromer Wardley boss Ewan Launder may have been convicted at last but few lessons have been learned from Carrian and other insider financial scandals
The bribery conviction of former Wardley chief executive Ewan Launder for actions connected to the Carrian group some 17 years ago is occasion for a trip down memory lane. Some past financial scandals, of varying degrees of gravity, are relevant at this time if only because we are supposed to learn from experience. Given the frequency with which olds scams are repeated, old rogues resurface and new booms give way to busts, I doubt it. However, try we must. The dogged determination shown by the ICAC to bring Launder to justice has certainly been impressive, tracking him for years till his arrest in Britain in 1993 and battling for years for his extradition and eventual conviction. Throughout the Carrian-related scandals, the ICAC had often seemed up against bizarre legal judgements. The courts also seemed to show greater willingness to pass long prison sentences on Malay bankers such as Hashim Shamsuddin - who got 10 years - and Rais Saniman than on the Chinese and expatriate figures who were at least as important in the whole corrupt Carrian scam. Tan, the centre of the fraud, got three years, a Barclays banker just one. Others whose corruption was revealed in the course of various aspects of Carrian affair were never pursued at all. One German made a particularly successful escape to South America while his local deputy served time. Whether Launder was at the top of his particular tree has never been publicly debated. Unfortunately, it usually takes a spectacular collapse like Carrian, which cost billions to banks and countless sums to small investors, to probe financial sector corruption. Likewise it was only after an embarrassment on the scale of the 1987 closure of the stock market and collapse of the futures market - partly because of the default of offshore companies linked to Sino group's Robert Ng -- that authorities moved against stock exchange chairman Ronald Li. Though it had long been known in the marketplace that there was usually a price to pay for new listings, a blind eye had been cast on malpratice so long as the public was not aware of what the elite was up to. By forcing an amalgamation of stock exchanges the government had created a cosy little monopoly at the centre of which was Li , whose corrupt practices were indulged by the investment banking industry. Until the 1987 crash, those in the know preferred not to disturb this golden goose. Ronald Li got four years for his receipt of shares in two floats including that of Cathay Pacific. They came via Wardley, whose responsible executive claimed the deal had been approved by his superior, John Bond, who could not remember. Fast forward to 2000. The role of the ICAC includes corruption prevention as well as prosecution. One wonders how closely it looks at arrangements in which decisions involving huge sums of money can be taken without public bidding procedures or transparency in decision making. One area which should be of concern is that for the issue of 3G mobile phone licences. There may be good reason not to put these out to open tender. But if, as overseas experience suggests, they are of such value every step of their issue should be watched like a hawk by the ICAC. The same should perhaps also apply to rule waivers granted by the GEM, the little corner of the HKSE monopoly which the market policemen treat like their uniformed counterparts treat the sex industry of Mongkok. The easiest money made in Hongkong at least since the Red Chip craze has been by those who received placements of shares in well-connected dot com companies prior to small public offering and a barrage of breathless sales talk and so-called "research" from the usual crowd of investment bankers. Will the authorities care - let alone dare -to try to penetrate the veil of BVI, Panama and other anonymous locations to find who were the beneficial recipients of this largesse? If not, forget all talk of tightening up on insider dealing, or reducing ways of corrupting civil servants. It took a high level insider trading scandal in 1976 to persuade the government to set up the Insider Dealing Tribunal. Even that only had powers to admonish and embarrass. Now the government says it intends to make insider dealing an offence, subject to criminal and/or civil action. But will it ever obtain the powers of investigation to prove such things? The BVI web not the WWW. That 1976 case, involving share sales by then directors of Wheelock, was uncovered by the press, not by the Securities Commission. It is also noteworthy that the first case referred to the tribunal related to 1979 dealings in Hutchison at the time HSBC sold a 22% effective controlling stake to Cheung Kong. The tribunal blamed a public relations employee and a journalist for leakage of information, though they had not profited from it, but found no culpability among those, including a Cheung Kong director and well placed stockbroker who just happened to have been profitable heavy buyers of Hutchison just prior to the announcement. This judgment, delivered two and half years after the episode, was greeted with appropriate derision. Among the few businessmen ever to have been found "culpable" by the Tribunal were Li Ka-shing, and other Cheung Kong directors, in 1986 because of their role in the announced sale of a big property development to Beijing's Everbright group which sparked a surge of confidence in the property market. It was not revealed till after Everbright backed out, that it always had a cost free option to so do. Mr Li does not appear have suffered unduly from the Tribunal's censure for his role in this. No tribunal ever had the opportunity to rule on whether minorities suffered from the takeover in1977 by Cheung Kong of Wynncor, a public company which owned the HK Hilton Hotel, now the site of the Cheung Kong Centre. Minorities were advised by Wardley, headed by Launder, even though it had been closely involved with Cheung Kong since the previous year, including in a large placement of Cheung Kong shares. Questions about apparent conflicts of interest and possible insider dealings raised publicly about this, in print, at that time and by the above signed were never answered. Has anything changed?