Shanghai Ritz-Carlton owner is controlled by family with corruption conviction

Sun Hung Kai Properties (SHKP), a major Hong Kong property developer, is the sole owner of the Ritz-Carlton Shanghai, Pudong.[1] SHKP is controlled by the Kwok family.

The Kwok family has been dogged by controversy. A member of the Kwok family, who formerly served as a co-chairman, was convicted in a Hong Kong court in 2014 of bribery of a senior Hong Kong official; another SHKP executive director was convicted for the same offense. In addition, after the release of the Panama Papers, it was revealed that the Kwok family owned an Australian security firm that until 2017 operated migrant detention centers and had been the subject of numerous allegations of abuse.

SHKP: A family business

SHKP is controlled by the Kwok family through a trust passed on by its founder, Kwok Tak-seng, to his wife (Kwong Siu) and three sons (Raymond, Thomas, and Walter).[2] The family was estimated in 2017 to be collectively worth about $40 billion.[3]

The SHKP board includes a number of family members. Chairman Raymond Kwok Ping-luen is a nephew of director Kwong Chun and an uncle of director Adam Kwok Kai-fai. Raymond’s son Christopher Kwok Kai-wang serves as a director and another son, Edward Kwok Ho-lai, as an alternate director. Family members make up four of the eight executive directors.[4]

Co-chairman and executive director convicted in bribery scandal

Thomas Kwok served as co-chairman of SHKP from 2011-2014 alongside his brother Raymond. Thomas stepped down after he was sentenced in 2014 for paying HK$8.5m to Rafael Hui, a former chief secretary of Hong Kong, to be the group’s “eyes and ears” in government. Raymond was also arrested, but was acquitted of all charges.[5] Thomas lost his final appeal in June 2017.[6]

Former Sun Hung Kai executive director Thomas Chan Kui-yuen was also convicted for a role in the Hui bribery case.[7] Chan had used a family trust to funnel US$8.8m from Thomas Kwok to Hui and a further US$2m from himself.[8]

Raymond currently serves as sole Chairman and Managing Director of SHKP.[9]

SHKP request divided law firm at center of Panama Papers leak

According to the leaked files in the Panama Papers release, the arrest of Chan Kui-yuen in 2012 led to a battle within Mossack Fonseca – the Panama law firm at the center of the leak – over whether to part ways with SHKP.

In 2012, SHKP requested that the law firm shut down a company, Yorkshire Limited, that was controlled by Chan. According to the Guardian,

Mossack Fonseca staff became suspicious when SHKP told it that Yorkshire Limited, of which Thomas Chan Kui-yuen had been a director for 20 years, had no purpose. They discovered that Chan, a senior SHKP figure, had been arrested weeks earlier on charges of bribing a Hong Kong government official, raising concerns that it was illegal for him to act as a director in the BVI.

SHKP repeatedly refused requests for due diligence documents. The Guardian quoted an internal exchange in which a compliance staffer asked a Hong Kong colleague: “Why this client does not provide information of the company?” The colleague replied: “This client is a very famous list co, land developer in HK. They used to buy BVI cos for their various projects.”

Eventually, SHKP agreed to supply the documents.[10]

Mossack Fonseca announced in March 2018 that the firm would close.[11]

 

[1] Annual Report 2016-17, Sun Hung Kai Properties, p. 76. https://www.SHKP.com/Content/Uploads/Reports/E00016_AR_201617.pdf.

[2] Jennifer Lo, “Sun Hung Kai’s struggle to restore investor confidence,” Financial Times, 7/31/16. https://www.ft.com/content/c558abcc-54dc-11e6-befd-2fc0c26b3c60.

[3] Louise Moon, “Sun Hung Kai Properties’ Kwok family is Asia’s third richest, according to latest Forbes ranking,” South China Morning Post, 11/15/17. https://www.scmp.com/business/money/wealth/article/2120033/sun-hung-kai-properties-kwok-family-asias-third-richest.

[4] The full board (excluding alternates) consists of eight Executive Directors, three Non-Executive Directors and seven Independent Non-Executive Directors. Board of Directors, Sun Hung Kai Properties, retrieved 7/26/18. https://www.SHKP.com/Pages/board-of-directors.

[5] Jennifer Lo, “Sun Hung Kai’s struggle to restore investor confidence,” Financial Times, 7/31/16. https://www.ft.com/content/c558abcc-54dc-11e6-befd-2fc0c26b3c60.

[6] Jennifer Lo, “Hong Kong tycoon Thomas Kwok loses final corruption appeal,” Nikkei Asian Review, 6/14/17. https://asia.nikkei.com/Asia300/Hong-Kong-tycoon-Thomas-Kwok-loses-final-corruption-appeal2.

[7] Chris Lau, “Rafael Hui case: Hong Kong Court of Final Appeal judgment in brief,” South China Morning Post, 6/14/17. https://www.scmp.com/news/hong-kong/law-crime/article/2098312/rafael-hui-case-hong-kong-court-final-appeal-judgment-brief.

[8] Joshua Robertson and Paul Farrell, “How a Hong Kong corruption scandal sparked strife at Mossack Fonseca,” The Guardian, 4/3/16. https://www.theguardian.com/news/2016/apr/04/how-a-hong-kong-corruption-scandal-sparked-strife-at-mossack-fonseca.

[9] Directors and Board Committees, Sun Hung Kai Properties, retrieved 7/25/18. https://www.SHKP.com/en-US/Pages/directors-and-organization.

[10] Joshua Robertson and Paul Farrell, “How a Hong Kong corruption scandal sparked strife at Mossack Fonseca,” The Guardian, 4/3/16. https://www.theguardian.com/news/2016/apr/04/how-a-hong-kong-corruption-scandal-sparked-strife-at-mossack-fonseca.

[11] Cat Rutter Pooley and Barney Thompson “Panama Papers law firm Mossack Fonseca ‘to close’,” Financial Times, 3/15/18. https://www.ft.com/content/c2501cf4-2824-11e8-b27e-cc62a39d57a0.