HKEX Held Bonus From Listing Head Amid Bribery Case, Court Hears
(Bloomberg) -- Hong Kong Exchanges & Clearing Ltd. delayed paying its retiring head of listing a discretionary bonus on the condition for his full cooperation in a bribery investigation involving one of his subordinates that started in 2019.
HKEX told David Graham, who retired in December 2019, they would withhold his HK$5 million ($642,530) bonus until the investigation into the former co-head of IPO vetting, Eugene Yeoh Kim-loong, was concluded, or after a reasonable time of about two years, according to a Feb. 28, 2020, letter that was submitted to a Hong Kong court on Tuesday by Yeoh’s lawyer, MK Wong.
Testifying at court, Graham said the arrangement was “sensible” and was mutually discussed.
In a follow up, District Court Judge Gary Lam Kar Yan asked to clarify if the exchange had wanted to secure Graham’s full cooperation after he left the firm rather than see whether a full investigation would “clear his name” from any involvement in the case. Graham said that was his belief since the case had only been going on for about six months by the time of his retirement.
The exchange on Tuesday declined to comment on the court hearings.
The biggest scandal in three decades has weighed on HKEX since Yeoh was held in June 2019 on charges of taking bribes that helped pave the way for at least 12 IPOs. Also on trial is IPO consultant Richard Lum Chor-wah, who allegedly paid HK$9.15 million ($1.18 million) in bribes to Yeoh between 2017 and 2019 and helped the former vetting executive gain membership to the tony Hong Kong Jockey Club.
The improprieties came to light through a complaint to the exchange in February 2019. An internal investigation led by then Group General Counsel Ferheen Mahomed discovered that Yeoh would erase email and phone messages daily and also failed to provide financial statements for vetting. Yeoh was then offered to resign by Graham and gave his notice in May, according to the prosecution.
Yeoh and Lum were arrested the following month after a joint operation by the Independent Commission Against Corruption and Securities and Futures Commission codenamed “Cold Mountain” after assistance by HKEX. They were officially charged in March 2020, and both pleaded not guilty as the trial began at the Hong Kong District Court last month.
More than 10 sponsor banks involved in suspicious IPOs, including bankers from Guotai Junan International, Ample Capital Ltd. and Titan Financial Services Ltd., testified in court on their dealings with Lum. Under oath, most of the bankers said that they didn’t personally know Lum and were unclear on why the consultant took part in pre-IPO meetings without being named in the professional parties list filed to HKEX.
The court hearings revealed that Yeoh had sent emails containing confidential IPO application details to his personal email account multiple times. Lum also sent key points and draft answers to Yeoh for advice before his IPO applicants responded to HKEX inquiries.
Yeoh’s lawyer, Wong, had questioned whether there were clear and written rules prohibiting Yeoh to forward work emails to a personal account, or whether he needed to report his affiliation with Lum.
Yeoh shouldn’t have used his personal email account and was obliged to report the correspondences, as well as the money deposited from Lum, to HKEX, Graham told the court.
Lum had promoted himself as an “IPO guru” to companies seeking to list, asking as much as HK$5 million in a consultant fee from one company, according to the prosecutors.
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