Hong Kong government calls off protest talks, defends leader's $6.4M payment

Story highlights

  • Claims Hong Kong's leader received millions of dollars from Australian company
  • Money was paid while C.Y. Leung was in office, yet he didn't declare it
  • Contract signed in December 2011 before Leung was appointed chief executive
  • Leung's office said it was a "standard non-poach, non-compete arrangement"
Hong Kong's government has called off talks with pro-democracy protesters, as political rivals repeated calls for leader C.Y. Leung to resign -- this time over claims that he accepted multi-million dollar private payments while in office.
The government negotiator, Hong Kong Chief Secretary Carrie Lam announced the cancellation of talks Thursday, hours after protest leaders encouraged supporters to keep up their occupation of city streets.
"We cannot accept the linkage of dialog with occupying activities," Lam said, prompting protest groups to announce the official start of a "non-cooperation" movement, and new calls for supporters to pack the main protest site "beyond its capacity" on Friday night.
Earlier on Thursday, political rivals rounded on Leung after a report by Australia's Fairfax Media that he received $6.4 million ($HK50 million) in undisclosed payouts from Australian engineering group UGL while in office.
According to the report, Leung signed the contract in December 2011, entitling him to payouts from UGL, which had recently bought the assets of Leung's employer, troubled British property agent DTZ.
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Months after the deal was signed, Hong Kong's 1,200-member Election Committee appointed Leung as chief executive of the Special Administrative Region of China. Two payments of $3 million (HK$25 million) were allegedly made in 2012 and 2013, during the time Leung was in office.
In a statement on Thursday, both UGL and Leung's office defended the contract, calling it a "standard non-poach, non-compete arrangement." Payments were staggered over a two-year period to ensure Leung complied with both obligations, UGL said.
UGL said at the time the company "specifically did not want Mr Leung working with a competitor nor establishing or assisting in the establishment of a business competing directly with DTZ."
It added that media reports referring to "secret payments" were "baseless and misleading." "UGL was under no obligation, legal or otherwise, to disclose the agreement," it said. UGL said its bank, the Royal Bank of Scotland, was aware of the payments, and the total DTZ sale price was reduced to reflect them.
Claims "outrageous"
However, Leung's rivals in the Legislative Council described the claims as "alarming" and called for Leung to make a "full and frank disclosure."
"I don't think the Hong Kong people or our constitution would allow the chief executive, which is the head of the executive authorities, to have another job and to have an agreement to help a company -- this is outrageous," said Emily Lau, Chair of Hong Kong's Democratic Party.
Lau said members of the Legislative Council, Hong Kong's governing body, would seek to launch an investigation into the payments. But she acknowledged that a majority vote would be needed to approve a formal investigation -- and that the pro-Beijing majority, which backs Leung, would be unlikely to vote in its favor.
The Neo-Democrat Party said it had filed a complaint over the payments with the Independent Commission Against Corruption (ICAC), with the request that it be investigated.
However, Leung's allies, including pro-Beijing legislator, Starry Lee, who is a member of the Executive Council, said she didn't consider the payments to be a conflict of interest.
"Up to now, I think it is a normal business dealing and it has been confirmed by some of the business people," she said.
Pressure intensifies
Leung had already been under pressure to resign from pro-democracy protesters who for the last two weeks have blocked access to the city's business district, demanding a greater say in how Hong Kong's leader is chosen.
Pro-democracy campaigner, former Democrat Party leader and council member, Albert Ho said the group was in the "final stages" of preparing documents to impeach Leung for the way he had handled protests -- and it was too early to talk about impeaching him on the matter of the payments.
He called on the chief executive to explain the agreement, though he added: "I can hardly see how an explanation can be satisfactory, but he's entitled to answer, he's entitled to be heard."
Why was the deal struck?
The contract came about during UGL's purchase of DTZ's assets in December 2011. The property group had been struggling and in early November Leung and his fellow DTZ directors decided to call in administrators, according to Fairfax.
Leung resigned on November 24, and the sale went through in early December for $125 million (HK$970 million), UGL said in a statement on Thursday.
As founder of DTZ's North Asia business, Leung was considered crucial to the company, something that UGL chief executive Richard Leupen made clear in an interview with the South China Morning Post in September 2012.
"CY's history of having set this company up will always be with DTZ. He's been an important part of the history of the company and has been an important part for us in buying the company," Leupen was reported to have said.
Leung's office said Thursday that without the contract UGL would not have proceeded with the deal.
"No services provided"
The Hong Kong Information Services Department confirmed on Thursday that under the contract Leung would "provide assistance in the promotion of the UGL Group and the DTZ Group as UGL may reasonably required, including but not limited to acting as a referee and adviser from time to time."
However it said in a statement "such assistance will ONLY be provided in the event that Mr Leung failed to be elected as Chief Executive, and providing that such assistance will not create any conflict of interest."
It added: "Mr Leung has not provided any service to UGL after signing the above agreement."
The department added that the contract was a "resignation agreement" which covered scenarios if Leung did not win the election.
It repeated UGL's statement to Fairfax that at the time the contract was agreed, media coverage suggested that "other candidates were favoured to be elected."
In the months before the March 2012 election, Beijing-backed former top civil servant Henry Tang Ying-yen was considered to be the likely choice of the Election Committee.
But after what was described as a "calamitous campaign," Chinese allegiances were said to have shifted in the final weeks to Leung.
A spokesman for China's Ministry of Foreign Affairs declined to comment on the controversy on Thursday.
Leung's political opponents say answers are needed from a chief executive who has already lost the trust of the people.
"Hong Kong is dealing with this pro-democracy protests and people taking over the streets, the last thing we need is to have another big controversy surrounding the chief executive himself," the Democrat Party's Lau said.