Resources

Donald is an account manager of a brokerage company and has been licensed by the Securities and Futures Commission (SFC) to deal in securities. Since his company is keen to develop the futures brokerage business and needs more manpower to handle client orders, Donald is instructed by his supervisor to apply for the related license.  In fact, his company never considers whether Donald possesses the required qualifications and experience to be so licensed.

One day, a regular customer, Gordon, seeks Donald’s advice on index options.   Although Donald has yet to obtain the license, he is confident of providing advice to Gordon because, in preparing for the license application, he obtains plenty of reference material from his colleagues in the futures brokerage division.   He even accepts the order from Gordon to buy in index options contracts.

Martin manages the research department of a securities company.   On one business encounter, he meets Johnny who is the CEO of a listed company which engages in infrastructure development throughout Asia.   Johnny tells Martin that his company is in the final stage of obtaining the bid for the building of a highway in a Southeast Asian country and the terms offered by the government concerned are very attractive.   Johnny is optimistic that his company will make a huge profit from the project.   Having arrived back at his office, Martin issues a research report stating that Johnny’s company will obtain the profitable construction contract and he recommends the purchase of its stocks.

Doris  is  an  account  manager  of  a  brokerage  company.    One  day,  a white-collar worker named Kelvin steps into her company with a request to open an account to deal in securities.   He tells Doris that, as he plans to study abroad next year, he wants his savings of one hundred thousand dollars to have a good return so that he can have enough money to reach his goal early.   He asks Doris in what products he should invest.  Doris persuades Kelvin to open a margin account to buy second-line stocks.   However, Doris doesn’t try to explain to Kelvin the difference between margin accounts and cash accounts, nor the risks involved in the former.

Hearing that the Hang Seng Index is dropping rapidly soon after the opening of the stock market, Kelvin calls Doris and places the order to immediately sell all the shares in his account.   Because Doris also receives many other "sell" orders from her large clients that morning, she sets aside Kelvin’s order and busily handles their transactions.   When Doris has time to eventually execute Kelvin’s order, Kelvin has already suffered a great financial loss.

William is a fund manager who manages a number of Asian unit trusts comprising of low stake portfolios.   Given the keen competition with his fellow fund managers in the company, he sets out to make the unit trusts in his care the star performing funds within a short period of time.

Although his clients have clearly specified a low risk mandate, William still invests a large proportion of the funds of his discretionary clients in emerging Asian countries, ignoring any warning signs of an economic downturn within the region.   He even explains to the trustees of the unit trusts that the financial hiccup in some of the countries will soon be over.   However, the financial turmoil quickly spreads across Asia causing the collapse of several stock markets.   The unit trusts under William’s management suffer a tremendous loss.

Highlander Construction Ltd, the main contractor of a housing development project, employed five crane operators for lifting building materials for sub-contractors in the construction site.   The staff handbook of Highlander clearly stipulated that staff was prohibited from soliciting or accepting advantages from persons having business dealings with the company, including sub-contractors.   The crane operators were briefed this policy by the Human Resources Manager when they were first recruited.

Shortly after the commencement of work, the crane operators discussed a trade practice among themselves and decided to charge sub-contractors ‘tea money’ of $9,000 per month for expediting lifting of their building materials. To those sub-contractors who did not pay, the crane operators would delay the lifting of their materials.

CHAN was the director of Shing Kee Engineering Ltd, a subcontractor responsible for the superstructure plumbing works.   He was familiar with the crane operators.   They often went out for meals and gambled after work. When the crane operators were in financial needs, CHAN would lend them money.

A resident engineer YU was aware that the crane operators often gave priority  to  CHAN  in  lifting  plumbing  materials  before  attending  to  other sub-contractors.   He was also aware that the crane operators and CHAN kept a very close relationship.   Although there were suspicious undertakings, YU did not make a complaint to the ICAC as he had no evidence of corruption.

The crane operators accepted $35,000 from CHAN over a period of seven months as a reward for giving special attention to the lifting of CHAN’s materials.   The incident was finally revealed and they were all arrested and eventually convicted of offering/accepting advantages as a reward for expediting lifting for CHAN, contrary to Section 9 of the Prevention of Bribery Ordinance (POBO).   All of them got imprisonment sentences.

CHAN was the breadwinner of his family.   While serving his term, his son who was studying abroad had to return to Hong Kong as his family could no longer afford the costs involved.

Questions

1. Why were CHAN and the crane operators convicted of corruption offences?
2. Are customary/trade practices excuses for the crane operators to take advantages on the subcontractors?
3. What are the possible costs of corruption?
4. Should the resident engineer report any suspected corruption to the ICAC

if he only has suspicion and do not have any evidence?