Hong Kong court finds a broker and three ex-directors guilty of fraud, in a win for ICAC's clean-up of Convoy's financial scandal

so-called Enigma Network, layers of overlapping shareholdings, attempted but failed in December, former minister Frederick Ma Si-hang, Roy Cho Kwai-chee, acquitted in November 2020

Hong Kong’s graft busters scored a victory in their attempt to prosecute one of the city’s biggest financial fraud cases in recent decades, when a court declared three former executives of Convoy Global Holdings and a broker guilty of conspiracy to commit fraud.

Convoy’s former chief executive Mark Mak Kwong-yiu, former chief financial officer Christie Chan Lai-yee, and former manager Wong Shuk-on were found guilty alongside the broker Lee Yick-ming of charges to defraud the company over a HK$51 million (US$6.58 million) kickback involved in four bonds sold in 2014 and 2015, according a verdict by the Deputy District Court Judge Newman Wong Hing-wai.

The three former Convoy executives were also found guilty of defrauding the Hong Kong stock exchange. The accused will remain on bail until their next hearing on October 9 for mitigation and sentencing, according to the court schedule.

The verdict marks the first victory for Hong Kong’s Independent Commission Against Corruption (ICAC) since the anti-graft agency began its investigation with the city’s securities watchdog agency into Convoy’s financial dealings in December 2017. One of the largest managers of Hong Kong’s Mandatory Pension Fund (MPF), Convoy was a crucial piece of the so-called Enigma Network, a cluster of interrelated companies with layers of overlapping shareholdings that have defied years of regulatory crackdown amid suspicions of fraud, market manipulation and corporate malfeasance.

so-called Enigma Network, layers of overlapping shareholdings, attempted but failed in December, former minister Frederick Ma Si-hang, Roy Cho Kwai-chee, acquitted in November 2020

Mark Mak Kwong-yiu, former chief executive of Convoy Global Holdings, during a press conference on June 28, 2010, at the Convoy Wealth Centre on Des Voeux Road Central in Sheung Wan. Photo: SCMP.

Convoy is the largest independent financial adviser in Hong Kong with more than 100,000 customers. Trading in Convoy‘s shares has been halted since December 2017, and its management has changed after a high-profile joint investigation by the ICAC and the Securities and Futures Commission (SFC) went public.

The company’s shares were delisted in May this year. Its largest shareholder – the family of Richard Tsai Ming-hsing of Taiwan’s Fubon Financial Holdings, with a 29.98 per cent stake, is in control of the board now.

so-called Enigma Network, layers of overlapping shareholdings, attempted but failed in December, former minister Frederick Ma Si-hang, Roy Cho Kwai-chee, acquitted in November 2020

Christie Chan Lai-yee, former chief financial officer of Convoy Global Holdings, appearing at the Eastern Magistrates' Court in Sai Wan Ho for a fraud case on 24 July 2019. Photo: Jonathan Wong

Its second-largest shareholder Kwok Hui-kwan, son of the founder of the Shenzhen-based developer Kaisa Group Holdings, with 29.91 per cent, attempted but failed in December to appoint himself and five others including former minister Frederick Ma Si-hang, to Convoy’s board.

The company’s current management back by Tsai family had filed a number of civil lawsuits against former director Roy Cho Kwai-chee and his associates in 2017 and 2018 over HK$4 billion (US$516 million) that was allegedly pilfered from Convoy, including a suit seeking HK$715 million in compensation. Those cases are still pending. In February, Convoy reported a combined loss of HK$2.6 billion for 2017, 2018 and 2019.

so-called Enigma Network, layers of overlapping shareholdings, attempted but failed in December, former minister Frederick Ma Si-hang, Roy Cho Kwai-chee, acquitted in November 2020

Gransing Securities general manager Lee Yick-ming at the Eastern Magistrates' Court in Sai Wan Ho for a fraud case on 24 July 2019. Photo: Jonathan Wong

Cho, the former chief financial officer Chan and Convoy’s former executive director Byron Tan Ye-kai were acquitted in November 2020 of attempting to defraud HK$89 million from Convoy, in the ICAC’s first legal setback. The regulator said it is appealing the verdict.

The latest victory was an important victory for the ICAC. Mak, Chan, Wong and Lee were charged with a conspiracy to defraud Convoy, its board of directors and investors in four bond placements in 2014 and 2015.

The three former executives instructed Convoy to pay HK$51 million in fees to Lee’s Gransing Financial Holding for arranging a bond sale, the court heard. However, 96 per cent of the sum, or HK$49.61 million, were paid back to a securities unit of Convoy without informing the company about the arrangement. The three former Convoy executives were also charged for defrauding the city’s stock exchange by not disclosing the payment.

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