The arrest of two of the city's leading tycoons has shocked Hong Kong
Also arrested was the former second highest official in the bribery investigations
Comes as a number of scandals question government and business ties
Kwoks control the world's second largest property developer by market cap
Brothers at the helm of a company that helped build Hong Kong’s skyline and the man who once was the city’s number two official were arrested in an investigation of a bribery case has shocked the former British colony.
Thomas Kwok, 60, and Raymond Kwok, 58, and their families control Sun Hung Kai Properties, which built the city’s three tallest skyscrapers. The billionaires were taken into custody by the city’s Independent Commission Against Corruption.
Share price Sun Hung Kai, the world’s second largest property developer by market capitalization, was down as much as 15% in the first four hours of trading Friday, losing nearly $6 billion in market value.
According to local media, the ICAC also arrested Rafael Hui, 64, who was Hong Kong’s Chief Secretary from 2005 to 2007, and a former advisor to Sun Hung Kai. The trio was held for questioning, but has not been charged. The ICAC hasn’t released details of the case. Sun Hung Kai confirmed that the Kwok brothers were taken into custody.
In a city where property is king, the sight of local royalty being taken into the ICAC headquarters riveted Hong Kong media, and comes at a time where the city’s reputation for transparency has been tainted by a number of scandals, most recently accusations against Chief Executive Donald Tsang that he got a sweetheart deal on an apartment and accepted private jet and yacht trips from businessmen.
The arrest also comes on the heels of Hong Kong’s selection of a new Chief Executive last Sunday and protests about process, in which only 1,200 people representing the city’s elite – including the two Kwoks– are allowed to vote.
The arrests “strengthen the perception that government and business is too close, especially now it involves a former number two Hong Kong (politician),” said David Webb, a corporate governance activist. “It’s part of an overall pattern of increasingly suspicious behavior that is deeply upsetting to residents.”
Who are the Kwoks?
The Kwok brothers and their family are the 27th richest in the world, with an estimated wealth of $18.3 billion, according to Forbes magazine. The family has controlling interest of Sun Hung Kai Properties, the world’s second largest property developer by market capitalization.
The family wealth has grown as Hong Kong property values, fed by increased investment from mainland China, have skyrocketed. The company has developed properties in Mainland China and Singapore, and interests in telecommunications and bus companies in Hong Kong
The Kwoks have been embroiled in a family dispute since 2008, when they led a fight to oust brother Walter Kwok as chairman and chief executive. Thomas and Raymond became chairman and chief executive, respectively, while Walter Kwok remained a non-voting member of the board.
“I thought (the arrest) is probably a follow-on from the family split in 2008 … it’s notable that Walter has not been arrested,” said Webb. According to court documents filed in 2008 during the family’s legal battle, Walter Kwok questioned contracts awarded “to a select number of contractors,” as well as a land deal in the city’s New Territories.
The Kwoks couldn’t be reached for comment.
Noah’s Ark and a kidnapping
The Kwoks developments include the International Commerce Center, International Finance Center and Central Plaza, which are the tallest buildings in Hong Kong and among the highest skyscrapers in the world.
Besides their property empire, Thomas is known for his evangelical Christian views. The family was instrumental in the building of a theme park with a life-sized replica of Noah’s Ark – a $103 million project funded by the Hong Kong government but run by Sun Hung Kai.
The 450-foot long Ark was built to the specifications listed in the Bible, the architect told CNN in 2009, and includes a restaurant, hotel and a coffin – in which visitors are encouraged to lay down and think upon their life. Sun Hung Kai property Central Plaza also has a church in its 75th floor atrium.
The Kwok family first became Hong Kong tabloid fodder in 1997, when older brother Walter was kidnapped for a week before his family gave a ransom of more than $77 million.
Hong Kong and corruption
This latest scandal comes just weeks after Hong Kong newspapers reported that outgoing Chief Executive, Donald Tsang, allegedly received a sweetheart deal on a Shenzhen apartment from a mainland businessman, as well as taking private jet and yacht trips with other Chinese tycoons. Tsang has admitted taking some trips, but said he had paid his own way, and he received no break on the Shenzhen apartment.
The arrests of the Tsang’s former second in command and the Kwok brothers is “an earthquake” for Hong Kong’s business community, said Steve Vickers, a security expert and former head of the Hong Kong police Criminal Intelligence Bureau.
“Hong Kong is undoubtedly far less corrupt than any other city in Asia. It does have a very powerful anti-corruption legislation and it is regularly enforced,” Vickers said. “But this particular case is so high profile … the issue will be whether charges follow.”
According to Transparency International’s 2011 Corruptions Perceptions Index, Hong Kong is the 12th least corrupt countries in the world – the U.S., by comparison, ranked 24th.
The Kwoks will continue to run daily operation of Sun Hung Kai, according to the company board.