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A project engineer is employed by a chemical product manufacturer to supervise the engineering works performed by its contractors.   Due to his job nature, he develops a close companionship with a contractor who has recently undertaken a gas tank repair project of the company.

Learning that the project engineer suffers from substantial loss in a recent stock investment, the contractor immediately offers to lend the project engineer

$200,000 to help him overcome the financial difficulty.

When time comes for an inspection to be conducted for the gas tank repairing works, the contractor requests the project engineer to turn a blind eye to certain defects found in the finished works, saying that the defects can have little chance to pose a safety hazard.   He also reminds the project engineer of his generosity to him in the past.   The project engineer finds it difficult to require the contractor to rectify all the defects found in the works.

A senior engineer oversaw a large private housing project. An acquainted contractor asked him to approve extra funds for the project and promised a luxurious overseas trip in return.

A senior engineer was asked by a contractor to manipulate tender requirements in favour of his company in the bidding process.

The Wealthy Restaurant Group (the Group) consisted of a chain of ten restaurants in Hong Kong.   The Director of the Group, CHENG, was highly experienced in the food and beverage business but had no knowledge about construction and engineering works.  Hence, he relied on the expertise of Engineer WONG when there were selections of construction and engineering contractors.

WONG was authorised to approve decoration and renovation works up to a value of $300,000 and those above $300,000 would require CHENG’s endorsement.     According  to  company  policy,  contracts  below  $300,000 should be let by quotation and those above $300,000 by way of tender. Contracts should then be awarded to the bidder who offered the most competitive price, irrespective of quotations or tenders.

In January 2000, WONG approached one of the contractors KWAN. WONG convinced KWAN to offer him a commission (5% of the contract price) in return for supplying KWAN with quotation information submitted by other bidders every time when there was a quotation exercise.   With the information, KWAN could always submit the lowest bid and be awarded the contract on every occasion. WONG also split contracts of $300,000 or above into two or more contracts to avoid CHENG’s involvement in the award.

As the Group had no internal audit section, the malpractice was not discovered.   During the period from January 2000 to December 2001, most renovation contracts of the Group totalling $10 million were awarded to KWAN and WONG received over half a million dollars as commission in return.

WONG and KWAN were later arrested by the ICAC and convicted of offering/accepting advantages, contrary to Section 9 of the Prevention of Bribery Ordinance (POBO).   They were each sentenced to imprisonment and WONG was also ordered by the court to return the illegal commission to the Group.

As a registered engineer, WONG was sanctioned by his professional institution and was removed from the membership list.

Questions

1. Why were WONG and KWAN convicted of corruption offences?
2. What measures should be taken to prevent malpractice in tendering?
3. What can the management of the company do in order to prevent the splitting of orders?
4. What is the possible consequence of corruption?

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?