Chapter XI 

Ronald Li Fook Shiu Jailed 

The widely accepted policy of certain former, senior executives of Far East Exchange, The Kam Ngan Stock Exchange and/or The Kowloon Stock Exchange to accept preferential tranches of new shares, issued by companies, pitching Initial Public Offerings, was not considered immoral or illegal in days of yore. 

There were very logical arguments, given by stock-market executives, to encourage this practice which, today, would be considered an act, contrary to the laws of the Hongkong Special Administrative Region of the People’s Republic of China. 

One of the most-popular arguments of the early 1970s was that, in order to ensure a viable market in the shares of a new listing, certain members of the committees of the 3, dominant stock exchanges needed to have shares in the new listing in hand, those shares registered in their, or in the names of their nominated company(ies). 

The argument was made in such a manner as to sound as though these senior committee members of the 3 stock exchanges were acting in good faith for and on behalf of the new listings, its minority shareholders, and its chairmen, most of whom owned controlling interests in the companies, seeking a listing. 

Indeed, many a chairmen of an Initial Public Offering, upon seeing his company’s share price rise, spectacularly, within a very short space of time after floor trading had commenced, would take the trouble to thank these committee members for their sage advice and, perhaps, offer them even more shares at the Offer Price … or at a discount to that price. 

More often than not, the preferential tranches of new shares were delivered up, gratis, but not on all occasions. 

It is, now, recorded history that these preferential share tranches were given to certain Hongkong solicitors, accountants, doctors, an Urban Councillor and, in at least one case, to a Legislative Councillor. 

This practice was an open secret. 

The usual tranche, handed over to select committee members of the 3 stock exchanges, was 50,000 shares. 

Standards of morality change with the passage of time, as the annals of history record, and, looking back on those intoxicating days of the early 1970s in the British Crown Colony of Hongkong, one may wonder how the thinking of these intelligent men became so muddled. 

The answer, simply put, was insatiate greed. 

Thrust into a situation whereby vast amounts of money are there for the taking, it is, perhaps, quite understandable how even the most-zealous advocate of fair play could be tempted to taste the fruit, hanging from a low bough on a money tree. 

By 1987, just 18 years after the founding of Far East Exchange, it was estimated that Mr Ronald Li Fook Shiu, the first and only Chairman of Far East Exchange, had an estate with a net value in excess of $HK1 billion. 

It was speculated that he might have been the richest man in the British Crown Colony of Hongkong at the height of his glory as Chairman of Far East Exchange. 

But by 1987, The Independent Commission Against Corruption, an interdependent branch of the Hongkong Government, formed to clean up widespread corruption in the territory, with emphasis on the Hongkong Government’s Civil Service, primarily, had concluded its investigation into the Chairman of Far East Exchange and his committee members. 

That investigation proved to be the catalyst, leading to the eventual downfall of Mr Ronald Li Fook Shiu and many of his staunch followers and supporters. 

On January 2, 1988, Mr Ronald Li Fook Shiu was arrested by The Independent Commission Against Corruption. 

Twelve days later, he was charged with acts, allegedly contravening Section 9 (1)(b) of Chapter 201 of The Laws of Hongkong: The Prevention of Bribery Ordinance. 

Mr Ronald Li Fook Shiu was facing multiple charges, any one of which could put him in prison for up to 7 years if found guilty. 

The original charge was that Mr Ronald Li Fook Shiu had accepted more than one million shares in the Issued and Fully Paid-Up Share Capital of Kumagai Gumi (Hongkong) Ltd as an inducement to approve that company’s Initial Public Offering. 

Using the subterfuge of another stockbroker, Mr K.K. Zee (Mr Zee Kwok Kung), the Crown alleged that the shares, issued in this stockbroker’s name, were, in fact, for the account of Mr Ronald Li Fook Shiu. 

Bail for Mr Ronald Li Fook Shiu was set at $HK10 million. 

Along with Mr Ronald Li Fook Shiu, Mr Jeffrey Sun Hon Kuen, a former, senior official of Far East Exchange, was arrested and charged with similar offences. 

The charges against Mr Jeffry Sun Hon Kuen were that he accepted, in January 1987, a beneficial interest in 2 allotments in the Issued and Fully Paid-Up Share Capital of QPL International (Holdings) Ltd, aggregating 91,000 shares. 

Investors and committee members of The Stock Exchange of Hongkong Ltd were in a state of shock. 

Who next would be charged? 

The Independent Commission Against Corruption had gone after the head of the stock-market ‘snake’ and appeared, at first, to have a prima facie case against Mr Ronald Li Fook Shiu and his salaried deputy, Mr Jeffrey Sun Hon Kuen, so much so that, when an application for bail was made by solicitors, acting for and on behalf of Mr Ronald Li Fook Shiu, it was set at the, then, record-high level. 

Without question, at this time, the arrest and subsequent criminal charges, levelled against the Chairman of Far East Exchange and his deputy, was the biggest, single surprise to long-term residents of Hongkong since the founding of Far East Exchange as a direct challenge to the established and seemingly concrete monopoly of The Hongkong Stock Exchange of 1969. 

More shocks were to follow, however. 

Exactly 7 months and one week after the arrest and the filing of charges against Mr Ronald Li Fook Shiu, The Independent Commission Against Corruption levelled further charges against this billionaire. 

On August 10, 1988, Mr Ronald Li Fook Shiu was additionally charged with 4 counts of accepting beneficial interests in shares, connected with the flotation of Cathay Pacific Airways Ltd, Video Technology International (Holdings) Ltd, QPL International Holdings Ltd and Hysan Development Company Ltd. 

Also, Mr Ronald Li Fook Shiu was charged with accepting sub-underwriting commissions, connected with the share flotation of Cathay Pacific Airways Ltd. 

And, on that same day of August 10, 1988, 6 other senior, former members of Far East Exchange and continuing serving members of The Stock Exchange of Hongkong Ltd (by this time, the 4 stock exchanges had been amalgamated) were charged with offences under The Prevention of Bribery Ordinance. 

The 6 new Defendants were:

  1. Mr Charles Sin Cho Chiu, the, then, Chairman of The Stock Exchange of Hongkong Ltd;

  2. Mr Kenneth Wong Kai Ming, the, then, Vice Chairman of The Stock Exchange of Hongkong Ltd;

  3. Mr Cham Siu Leun, a Vice Chairman of The Stock Exchange of Hongkong Ltd;

  4. Mr Joseph Ma Ching Chung, an Executive Director of Tai Sang Land Development Ltd and a Committee Member of The Stock Exchange of Hongkong Ltd;

  5. Mr John Chong Lap Hong, a Vice Chairman of The Stock Exchange of Hongkong Ltd; and,

  6. Mr Edward Woo Pak Hay, a solicitor and a Committee Member of The Stock Exchange of Hongkong Ltd.  

Then, 2 months and 3 days later, on October 13, 1988, Mr Ronald Li Fook Shiu was charged with an additional 7 offences under The Prevention of Bribery Ordinance. 

Then, about 7 months after those charges had been filed, on May 31, 1989, Mr Ronald Li Fook Shiu was charged with a further 17 offences under The Prevention of Bribery Ordinance. 

On that occasion, he was charged with 4 counts on his own behalf and 13 counts in conjunction with 7 former, Far East Stock Exchange officials plus Mr Ronald Li Fook Shiu’s son, Solicitor Alfred Li Kwok Lung, of the firm of Iu, Lai and Li. 

The Crown’s case was that the 8 Defendants, all of Far East Exchange Ltd, had solicited and accepted preferential allocations of beneficial interests in shares and/or commissions under sub-underwriting contracts of 14 companies in return for supporting or approving the granting of listings and permission to deal in the companies’ shares between May 12, 1986, and October 29, 1987. 

As for Mr Alfred Li Kwok Lung, he was charged with aiding and abetting, counselling and procuring the 8 executives of Far East Exchange to solicit and to accept the beneficial interest in shares in respect of the flotations of shares in the Issued and Fully Paid-Up Share Capitals of 2 publicly listed companies between September 1987 and October 1987. 

Magistrate Warner Banks was informed that the Crown had amassed more than 3,000 pages of documents in order to prove the allegations. 

On August 1, 1989, the Crown withdrew its allegations in respect of the initial charges against Mr Ronald Li Fook Shiu and, thereafter, the case was moved to the High Court. 

About 4 months later, on November 29, 1989, the Crown withdrew 8 charges against Mr Ronald Li Fook Shiu and amended 8 other charges against his son and the other 7 Defendants. 

Then, 2 weeks later, one more charge of bribery was withdrawn against Mr Ronald Li Fook Shiu. 

And so it went on: First, the Crown would launch an attack, charging Mr Ronald Li Fook Shiu with corruption, only to withdraw the allegations; then, the Crown would amend a charge; and, then, make an appeal against an amendment with regard to a former charge. 

It was all very confusing, to the accused, the legal community, and to the Press, which was having trouble, keeping abreast of the situation since it had become very fluid, changing course on a weekly, and, sometimes, a daily, basis. 

Many people in Hongkong were wondering what in the world was going on in this very high-profile, criminal case. 

It took 20 months for the case to be heard. That was on September 3, 1990. 

Within 46 days, it was all over. 

Mr Ronald Li Fook Shiu had been found guilty on 2 counts of accepting advantages for supporting, or refraining from obstructing, the granting of the listing of shares in the Issued and Fully Paid-Up Share Capitals of Cathay Pacific Airways Ltd and Novel Enterprises Ltd in 1986 and 1987. 

During the course of those 46 days, the High Court was shown that Mr Ronald Li Fook Shiu had earned a profit from share dealing for the Financial Year, ended March 31, 1987, of not less than $HK30 million; and, that he had earned not less than $HK19.50 million from share trading for the Financial Year, ended March 31, 1988. 

Those profits included gains in trading in the shares of Cathay Pacific Airways Ltd and Novel Enterprises Ltd. 

The trial judge was Mr Justice Bokhary, the son of a stockbroker who owned a seat on The (original) Hongkong Stock Exchange. 

In summing up the case against Mr Ronald Li Fook Shiu, Mr Justice Bokhary said that he imposed a sentence of 2 years in prison on each of the 2 counts, sentences to run consecutively. 

Claiming mitigating circumstances, the learned Justice said that, had he looked only at the high position that Mr Ronald Li Fook Shiu once held, he would have imposed the maximum sentence of 7 years in prison on each count. 

But there was praise for Mr Ronald Li Fook Shiu from this learned Justice, too. 

Mr Justice Bokhary, in reading out his lengthy determination in Open Court, said that Mr Ronald Li Fook Shiu had never permitted a listing of a prospective company that did not deserve to be listed on Far East Exchange.

For Hongkong, the trial, conviction and jailing of Mr Ronald Li Fook Shiu rammed home an important message to the international investment world: Hongkong had an accountable Administration, after all.