Hong Kong's biggest corruption trial starts today

Thomas and Raymond Kwok, the billionaire brothers running Hong Kong’s second-largest developer, are set to go on trial today for bribing the Chinese city’s former No. 2 official.

All three men have pleaded not guilty and denied all charges.

Rafael Hui, the Government’s Chief Secretary from June 2005 to June 2007, received payments and loans of more than HK$35 million (US$4.5 million), prosecutors allege. The charges also relate to his roles as head of Hong Kong’s pension fund authority before that, and as a cabinet member from July 2007.

The case has sparked scrutiny of ties between Hong Kong’s tycoons and officials as the government tries to tackle popular discontent over a record wealth gap. The Kwok brothers, co-chairmen of Sun Hung Kai Properties Ltd. (16), are worth a combined $16.6 billion, according to the Bloomberg Billionaires Index, ranking among Asia’s top 30 richest.

“Prosecuting the second-most senior ranking government official and two of the richest men in Hong Kong is unprecedented here,” said Tony Kwok, who was deputy head of the city’s Independent Commission Against Corruption from 1996 to 2002 and isn’t related to the accused. “In other countries, such a case would most likely attract strong political interference and pressure.”

Hong Kong, which reverted to Chinese rule in 1997, has a separate government and legal system from the mainland. The ICAC created by the British colonial government is credited with successfully taming rampant graft in the city in the 1970s.

'Top Lawyers'

Both Kwok brothers are represented by top London lawyers - Clare Montgomery for Thomas and John Kelsey-Fry for Raymond. The government’s advocate is David Perry. Hui has been represented by Hong Kong lawyers Edwin Choy and Danny Chan at hearings this year.

Judge Andrew Macrae is presiding over the jury trial, which is scheduled to last for 70 days. Hong Kong’s Director of Public Prosecutions Keith Yeung, who took office in September, recused himself from involvement as he previously advised on the case when he was in private practice.

Thomas, 62, faces one charge of conspiracy to offer an advantage to Hui and two counts of conspiracy to commit misconduct in public office. Raymond, 61, faces four charges while Hui, 66, faces a total of eight charges.

Sun Hung Kai director Thomas Chan and Francis Kwan, a former executive at Hong Kong Exchanges & Clearing Ltd., have also pleaded not guilty in the case and denied two charges against each of them. All five men are out on bail.

'Tallest Buildings'

Sun Hung Kai owns the city’s two tallest buildings where companies including Morgan Stanley, Credit Suisse Group AG and UBS AG have their Hong Kong offices. The company, which also builds luxury apartments and shopping malls, has said the case has not and will not affect its operations.

Co-founded in 1963 by Thomas and Raymond’s father Kwok Tak-seng, Sun Hung Kai has benefited from a decade-long boom in Hong Kong home prices. The family controlled about 43.5 percent in the developer, according to figures in the company’s latest interim annual report. Sun Hung Kai fell 1.5 percent to close at HK$95.50 yesterday, valuing the family’s stake at HK$113.2 billion. The family trust declined to comment about the stake.