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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?

Mr Kwok, manager of a listed company, was responsible for his company’s property investment.  He solicited “commission” from two estate agents who sourced suitable properties for his company.

Production manager Mr. Wong was deployed to oversee the whole mechanical production process in the mainland and award production order to suitable factories. Two manufacturers offered him kickback for placing more production orders.

Mr. Chung had established a toy manufacturing enterprise in the Mainland in partnership with his friends. He solicited rebate from a Mainland supplier as a reward for placing purchase orders…

Mr Chow, one of the four shareholders of a chemical engineering company in Hong Kong, was in charge of procurement for its mainland factory.  A Hong Kong supplier tried to secure orders from Mr Chow by presenting him expensive gift and offering him rebate