16 February 2019
It remains unclear whether his bosses in Beijing had a clear picture of Leung's receipt of the suspicious payment beforehand. Photo: Bloomberg
It remains unclear whether his bosses in Beijing had a clear picture of Leung's receipt of the suspicious payment beforehand. Photo: Bloomberg

Leung’s UGL payout: Plenty of unanswered questions

Chen Zuoer, former deputy director of the Chinese State Council’s Hong Kong and Macau Affairs Office, was quoted as saying that Hong Kong’s chief executive Leung Chun-ying is a person of “hard bone” (courageous with an unyielding stance). I found Chen’s remarks somewhat ironic.

How can that description fit someone who is backed by an authoritarian regime and would only talk to selected media, someone who either hides in his luxurious air-conditioned office or travels in an armored limousine surrounded by bodyguards and policemen to dodge the public.

Quite the contrary, Leung’s scandal of accepting a suspicious payment from an Australian firm after he became chief executive reveals that he can sell his “hard bone” to anyone from overseas who pays him a nice price.

The HK$50 million (US$6.44 million) secret payment from UGL, a Sydney-based engineering firm, surfaced when the embattled Leung was already grappling with mounting public rage and distrust of his administration. People suspect that Leung may be still providing some sort of service to UGL after he took office as Hong Kong’s top leader in July 2012 — a typical case of conflict of interests.

Later, some media reports said Beijing knew about the payment and thought nothing of it. The reports cited Beijing’s top envoy in Hong Kong, Zhang Xiaoming. 

But I wonder whether Beijing and Zhang are aware that during UGL’s 2011 acquisition of DTZ Holdings, parent of the property services firm in which Leung was Asia Pacific director and a key shareholder, a Chinese state-owned enterprise based in Tianjin quoted a price that was 100 million pounds (US$161.7 million) higher than UGL’s offer (77 million pounds).

No one can confirm whether Beijing has full knowledge of the transactions, but if it does, then it’s another fresh piece of evidence that Leung is disclosing all to his Beijing bosses but nothing to Hong Kong people, who he ought to be accountable to.

It also reflects the stark difference between Beijing and Hongkongers when it comes to the integrity of a senior official. Beijing may think that it’s no big deal.

And, if Leung is outright innocent in the whole matter, why can’t Beijing or Leung’s close allies produce any evidence to prove that the exposé is indeed “a conspiracy by evil overseas powers”, just like many mainland cadres do to whitewash their scandals?

Zhang and a number of other communist cadres have affirmed Beijing’s support for Leung. I suspect that in Beijing’s view, as long as Leung remains unswerving in the test of political allegiance, it is of little significance whether he is truly clean or not.

However, it’s also likely that Beijing does not have a full picture of Leung’s deal with UGL. If it is the case, then Beijing may feel that it was kept in the dark for years. It will then have two options: sacking him or continuing to back him in the thick of the protests to lend him a chance to atone for his misdeeds.

Also, I wonder if Beijing feels some regret for sacrificing Henry Tang Ying-yen in the 2012 CE election: all the scandals haunting Leung have turned out to be graver than Tang’s illegal structures at his Kowloon Tong villas and his extramarital affairs.

Furthermore, besides the pledge that he won’t compete against UGL or poach any member of the senior management, Leung also promised to advise on UGL’s takeover in his contract with the Australian firm. I’m particularly interested in one clause in the contract: (Leung is entitled to the payout to compensate him for not competing against UGL) “provided that such assistance does not create any conflict of interests”.

UGL later explained that it believed that Leung stood a slim chance to win the election, In order to make sure that Leung won’t be a competitor as he resumes his profession, UGL offered such a generous payout.

But I still fail to grasp the rationale. If UGL and Leung really wanted to avoid any sensitivities, they could have simply stated clearly that the contract would void with immediate effect if Leung was elected. It could have saved both parties from falling under suspicion of any conflict of interests. But now, it’s obvious that the contract remains in effect — Leung accepted the payment after he was sworn in.

Another intriguing point is, Leung got the money from UGL exactly on the day when the Tianjin SOE quoted a higher price for DTZ holdings, according to Hong Kong Economic Journal. What a strange coincidence.

UGL’s takeover at a lower bid has cost DTZ Holdings’ shareholders dearly in terms of lost profit. What’s more, the Australian firm is now reselling DTZ to a US-based private equity fund for US$1 billion. If the deal is completed, UGL will pocket a fat difference of almost US$900 million. The Tianjin SOE guy must be watching in fury.

This is a translation of Mr. Lian Yizheng’s commentary that appeared in the Oct. 20 issue of the Hong Kong Economic Journal.

Translation by Frank Chen

–Contact us at [email protected]


Revelations on a secret payment by Australian firm UGL have undoubtedly dealt another blow to Leung, who is already struggling to cope with the crisis triggered by student protests. Photo: Bloomberg

A protester holds a banner calling for Hong Kong chief executive CY Leung’s resignation. Photo: Bloomberg

Former full-time member of the Hong Kong Government’s Central Policy Unit, former editor-in-chief of the Hong Kong Economic Journal

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