Hong Kong's Chief Executive Cuts Another Corner

President Xi Jinping may be waging war on higher level corruption on the mainland. But in Hong Kong, lower-octane skullduggery continues at the highest levels. Despite recent scandals involving former Chief Executive Donald Tsang and his once heir-apparent, Henry Tang, and the corruption conviction of former Chief Secretary Rafael Hui and a property tycoon, top officials appear incapable of keeping their public and private interests separate.

In the latest case, the current Chief Executive Leung Chun-ying appears to have been dishing out favors in return for a huge contribution by a Hong Kong property tycoon to a Swedish institute where Leung’s son is a researcher.

The chairman of Chinese Estates Holdings, Lau Ming-wai, donated HK$300 million (US$38 million) to the prestigious Karolinska Institute, which in turn is to set up a research laboratory in the territory. That might seem an innocent enough donation with some benefit to Hong Kong’s role as a center for scientific research, in this case medical. However, the story is rather more complicated. Leung’s son Leung Chuen-yan is a post-doctoral research fellow at the Karolinskia Institute, a post he acquired by virtue of a grant from the Croucher Foundation, a fund created by a former leading Hong Kong stockbroker, to promote research by Hong Kong citizens at foreign universities.

The younger Leung’s qualifications for the post are not in dispute. What is, however, is why his father should have been so keen to promote Lau’s interest in the Institute, meeting its head, Professor Anders Hamsten, both in Hong Kong and in Europe when Leung visited last year. Lau was introduced to Hamsten at a dinner hosted by Leung and attended by the Swedish Consul-General in Hong Kong.

While the son’s academic credentials are not in question, Leung’s evident spurring of Lau to make a major donation to it raises serious questions about Leung’s confusion of public and private roles.

Making it look even more suspicious it that it has been widely reported that Lau was to be appointed to a senior position in the Hong Kong government – Undersecretary at the Information and Technology Bureau. This is to be a new ministry supposedly to foster IT development. However, its creation has been held up by a filibuster by pan-democratic members of the Legislative Council. They have always opposed the need for such a ministry, which they fear may be used to control internet content.

Lau Ming-wai is 34 years old and last year assumed the chairmanship of the family company following conviction in Macau for corruption of his father, Joseph Lau Leung-hung. The elder Lau, always a controversial figure, was sentenced to eight years in prison for a HK$20 million bribe to former Macau public works minister Ao Man-long.

However, as there is no extradition treaty between Macau and Hong Kong, Lau can live happily there without fear of having to serve his sentence. Meanwhile the son has been busy getting in the good books of the Hong Kong government, supporting the semi-official Bauhinia Foundation and being awarded an Honorary Fellowship by the City University of Hong Kong, which had early received a HK$127 million gift from the Joseph Lau Charitable Trust.

Even assuming that Lau is qualified for the job his gift to Leung son’s Institute, the matter raises red flags. A Chief Executive with any sense of propriety would have avoided such obvious links which have all the hallmarks of quid pro quo deals. Though not overtly corrupt they show a disdain for the needs to keep family and public interests in separate spheres.

This latest show of disdain follows revelations last year that Leung had been paid HK$50 million by an Australian company, UGL, which had acquired the bankrupt British-based DTZ. This was supposedly in return for a two year non-compete agreement by Leung, a surveyor by profession, who was a DTZ shareholder.

This was controversial on several grounds. First, it was at the expense of the creditors of DTZ. Second, his services could not have been worth so much unless he had some connections to potentially corrupt mainland officials. Third, although most of the money was paid after he became Chief Executive, it was not declared as income for tax purposes on the grounds that it was not payment for work but payment for non-work.

Whether or not the deal was legal – it is still under investigation in London where DTZ was then based and whose major creditor was Lloyds Bank – it again showed a worrisome willingness to ignore propriety. Leung was out to maximize his income regardless of how the tax-paying public viewed the behavior of top officials.

But Leung has probably long felt that his long record of slavish loyalty to the Communist Party in Beijing is adequate protection and that he can mix public and private interests with impunity. And Lau knows how to use the family fortune to buy its way back into official favor after the Macau scandal that claimed his father.