Hong Kong’s cash for IPOs bribery trial enters the final stages

by Vivian Yau, ACGA

21 September 2021

A former co-head of HKEX’s IPO vetting team is in the dock for bribery and misconduct in public office. ACGA’s Vivian Yau is following the case.

As both sides prepare closing arguments in the trial of Eugene Yeoh Kim-loong, ACGA looks back at six weeks of evidence involving 30 witnesses—and one unexpected revelation.

Yeoh is on trial with IPO consultant Richard Lum Chor-wah at the District Court in Wan Chai. The former senior executive at Hong Kong Exchanges and Clearing (HKEX) denies taking HK$9.15m in bribes to give the green light for listings. Lum has pleaded not guilty to offering an advantage.

The alleged graft involved 12 listings over the course of 5 years

According to the prosecution, Yeoh and Lum collaborated on at least 12 IPOs between 2014 and 2019. Nine of these entities listed on the Growth Enterprise Market (GEM), the secondary exchange for companies with smaller market capitalization.

Among the companies were some well-known restaurant operators in Hong Kong, including Classified Group, owner of brunch-favourites Classified and The Pawn. Fellow eatery chain, MS Concept, which runs Mr. Steak, and hot pot chain CBK Holdings, were also named.

The prosecution’s case is that Yeoh showed favour to IPOs that Lum was working on, in return for HK$9.15M paid via seven separate cheques. Five were deposited into the personal account of Yeoh’s spouse, Vivian Hao, and a further two cheques of HK$500,000 each were banked into the joint account of the couple.

Yeoh is also accused of getting help from Lum with a Hong Kong Jockey Club (HKJC) racing membership. According to the prosecution’s opening statement, Lum’s statement of sponsorship for Yeoh’s application, signed on 16 January 2016, states that the two have known each other for 10 years.

Friends with benefits

Yeoh rose up the ranks since joining HKEX in 2013 as vice president, IPO Vetting Team, in the Listings Department. He was promoted to senior vice president on 1 January 2014, and executive vice president on 1 January 2019. 

Yeoh’s role at HKEX was one of a gatekeeper. He would review IPO applications, flag up any issues, and present them for approval decisions: to the Listing Committee for main board applications, and the GEM listing approval group for secondary board IPOs.

Lum meanwhile marketed himself as an experienced IPO expert, familiar with HKEX internal staff and with HKEX enquiries or requirements, according to the witness statement of Albert Wong, an accountant involved in one of the 12 IPOs. 

It emerged through one of the prosecution’s witnesses that Lum’s going rate was HK$3M per IPO. Gary Lui Yue-yun, Chairman, CEO and Co-Founder of Anchorstone, one of the 12 IPOs, was introduced to Lum in 2015 by the company’s underwriter. According to his evidence, Benson Lo of Pacific Foundation Securities put him in touch with Lum, who Lo referred to as “boss.’’ There was no formal documentation for Lum’s consultancy role, according to Lui, and his payment was not bundled into the underwriting fee or commission.

After listing Anchorstone in July 2018, Lo subsequently got in touch with Lui, and asked him to settle Lum’s fee. Lui finally agreed to HK$1M and paid this into Lum’s account on 21 November 2018. Although Lum further reached out to Lui over multiple WhatsApp messages between late November 2018 and early January 2019 to ask for more, Lui ignored his messages.

The case was triggered by an anonymous whistle-blower complaint to HKEX

We learned that a whistleblower letter dated 4 February 2019 made its way to the internal mailbox of Ferheen Mohamed, HKEX group's general counsel. According to Mohamed’s evidence, she received the letter under confidential cover on 8 March that year. 

A decision was taken by the Exchange to handle the issue internally. According to Mohamed, the allegations were vague and non-specific. She scheduled meetings with Yeoh on 16 and 17 April. 

During the course of these meetings, it emerged that that Yeoh wiped his WhatsApp, Wechat and email messages at the end of each day, claiming that he wanted to save memory on his phone.

Yeoh was also asked by HKEX to handover bank statements, according to Mohamed. They received Yeoh’s personal bank account statements but not those relating to his joint account with his spouse.

Six weeks after Mohammed received the letter, on 23 April 2019, she updated Yeoh’s boss, David Graham, of the matters discussed in the meetings. Mohamed asked Graham to consider whether it would be appropriate for Yeoh to remain in his role. Eighteen days later, on 9 May, Yeoh formally resigned. He left HKEX on 8 August 2019.

The ICAC was watching

Agents from the ICAC conducted covert surveillance on Yeoh. They watched as Yeoh and Lum met four times between 13 March 2019 and 21 May 2019 at Exchange Square and the Elements mall. In three of the four meetings, Yeoh received items from Lum, including documents, a briefcase, and a paper bag, on 22 March, 9 April, and 21 May 2019, respectively.

The prosecution submitted a piece of email evidence where Lum asks Yeoh about LC Group’s IPO application. From David Graham’s and Grace Kan’s testimony, the court hears that those kind of messages would be handled as pre-IPO inquiries by another team member.

Yet despite Lum being part of the IPO process for the 12 companies, his name was not ultimately reported on the “list of parties involved” form for any of the IPO applications to HKEX, according to the defence.

Discretionary bonus withheld from retiring HKEX exec David Graham 

One unexpected revelation during the trial was that David Graham, former head of listing at HKEX, had his HK$5m bonus withheld by HKEX in late 2019. Payment was conditional on Graham cooperating with the ICAC and other regulatory bodies.

Graham was Yeoh’s supervisor during the time of the alleged money transfers between Lum and Yeoh but retired in December 2019 while the investigation into Yeoh was still ongoing. When asked by the judge, Gary Lam Kar-yan, whether the bonus was made conditional because HKEX sought his cooperation rather than clearing his name, Graham said it was the former.

Yeoh’s wife said she invested in funds for Lum…

The sole defence witness was Yeoh’s wife, Vivian Hao. She told the court that she used her connections in the finance industry to access high end investment products. She would pool money—including Lum’s—to buy these products which were typically out of reach to regular investors. 

She invested a total of HK$8.15M into five separate funds beween June 2017 and March 2019. The sum of HK$1M was returned to Lum in May 2019, the same month as Yeoh’s resignation. Hao’s reasoning was that Lum did not want to continue with a private company share purchase.

Hao admitted on the stand that she did not disclose the ultimate beneficiary ownership of the funds. She claimed it is common industry practice—though not best practice.

…and left home for two days when her husband was arrested 

During cross-examination of Hao, it emerged that her husband was arrested by the ICAC at the High Speed Railway Station in West Kowloon, Hong Kong, on 23 June 2019.

For the next two days, Hao left her newborn in the care of her helper and did not return home. She ignored calls from her helper when the ICAC went to their home to look for her on 24 June 2019. She claimed that the helper would usually message her about the children and that she did not check her voicemails back then.

ACGA has been following the case since it started on 9 August 2021. The court will hear closing arguments on 19 October at 9:30am.

About the Author(s)

Vivian Yau
Senior Research Analyst/ Thailand lead researcher, ACGA

Vivian Yau
 joined ACGA as a Research Analyst in 2020. She previously spent 5 years in finance and accounting roles within different industries, including retail and advertising. She is currently pursuing her Masters in Environmental Science and Management at Hong Kong University of Science & Technology, and previously passed her CFA Level II.

No Comment Yet.
Leave a Comment
Your email address will not be published. Required fields are marked *
Comment *
Remaining 500 character(s)
Name *
Company *
Email *
Location *