business, markets, icac, crime in hong kong, crime, financial regulation, banking & finance, sfc, enigma network, hong kong court slaps jail time on four people over plot to defraud convoy, in a win for city’s anti-corruption investigator

Three former executives of Convoy Financial Service Holdings and a local broker were sentenced to up to seven months in prison, as Hong Kong wrapped up its four-year investigation into the city’s biggest financial malfeasance in decades.

Convoy’s former executive director Mak Kwong-yiu was jailed for seven months, while former Gransing Securities general manager Lee Yick-ming was sentenced to five months in prison, Hong Kong’s Independent Commission Against Corruption (ICAC) said in a statement on Saturday. Mak, 47, was also banned from holding any corporate directorship for three years, the ICAC said.

Convoy’s former financial controller Christine Chan Lai-yee was sentenced to five months in prison while former manager Wong Shuk-on received a four-month jail term, both getting an 18-month deferment in serving their sentences, ICAC said.

The sentencing of the four accused, after being found guilty by the District Court last month of conspiring to cheat Convoy of HK$51 million (US$6.8 million) in commissions from four bonds sold between 2014 and 2015, is the epilogue of the biggest financial fraud case in Asia’s financial hub in decades. Convoy is the centrepiece of the so-called Enigma Network, a group of up to 50 companies hidden by layers of cross holdings and opaque corporate structures that regulators claim have conspired to entrap minority investors.

business, markets, icac, crime in hong kong, crime, financial regulation, banking & finance, sfc, enigma network, hong kong court slaps jail time on four people over plot to defraud convoy, in a win for city’s anti-corruption investigator

Convoy’s former financial controller Christine Chan Lai-yee was sentenced to five months in prison with an 18-month deferment at the District Court in Wan Chai on 16 October 2021. Photo: Dickson Lee

The ICAC and the Securities and Futures Commission (SFC) commenced a joint investigation in December 2017 into alleged fraud at Convoy, cracking down on malfeasance to restore investors’ confidence in corporate governance in Asia’s financial hub.

The city’s Hang Seng Index stock benchmark is among the world’s worst-performing major equity markets this year, as Beijing’s regulatory crackdown on everything from e-commerce to ride-hailing triggers an exodus of capitals.

business, markets, icac, crime in hong kong, crime, financial regulation, banking & finance, sfc, enigma network, hong kong court slaps jail time on four people over plot to defraud convoy, in a win for city’s anti-corruption investigator

Convoy’s former manager Wong Shuk-on received four months’ jail sentence with an 18-month reprieve at the District Court in Wan Chai on 16 October 2021. Photo: Dickson Lee.

“The ICAC will continue to collaborate with relevant regulatory bodies, including the SFC, to combat corrupt and illicit activities in the financial market so as to uphold the integrity of the market, maintain a level playing field for businesses, and sustain Hong Kong’s status as an international financial centre,” the anti-corruption agency said in the statement. “The ICAC has made continuous and proactive efforts in assisting listed companies in enhancing their corporate governance.”

Mak and his three associates conspired to hire Gransing Securities to arrange Convoy’s four bond placements in 2014 and 2015, according to court proceedings. The brokerage secretly hired Convoy Investment Services (CIS), in which Mak and two other former Convoy executive directors held significant stakes, to help sell the debts. In return, CIS received HK$49.6 million in commission and HK$1.2 million in bonus. The details on the bond offerings were never disclosed to Convoy’s board of directors and the company’s shareholders, according to court papers.

Such behaviours constituted a conflict of interest that harmed the interest of shareholders and obstructed the law enforcements of the financial regulators, ICAC said in the statement.

Convoy was expelled from the main board of Hong Kong’s stock exchange in May after failing to meet the bourse operator’s listing condition. Trading in the stock had been halted since December 2017 when the fraud investigations began.

The company is also the stage of a boardroom tussle involving one of Taiwan’s wealthiest families, and a property magnate in southern China. The company’s largest shareholder, with a 29.98 per cent stake, is Richard Tsai Ming-hsing of Taiwan’s Fubon Financial Holdings. Fighting for control of Convoy is Kwok Hui-kwan, the son of Shenzhen property magnate Kwok Ying-shing, who owns 29.91 per cent of the company. The Kwoks have solicited the help of Hong Kong’s former minister and MTR Corporation chairman Fred Ma to fight on their behalf.

Convoy, one of the largest financial managers of Hong Kong’s mandatory pension fund, reported a combined loss of HK$2.6 billion for the three years from 2017 to 2019.

“We are pleased to see the criminal outcomes achieved in the case, which proves the effectiveness of our strategy to collaborate with other law enforcement agencies in [fighting] serious corporate fraud cases,” the SFC’s executive director of enforcement Thomas Atkinson said in a statement after the sentencing.

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