Hong Kong is reeling from the arrest of two of its most prominent property tycoons in what could be its most high-profile corruption case for decades.
Brothers Raymond and Thomas Kwok both devout Christians stand accused of bribing a former senior government official, Rafael Hui, who was also arrested, reports Reuters. At a packed press conference this week, they said they expected to be exonerated. But over $5bn was wiped off the value of their company, Sun Hung Kai Properties (SHKP).
The arrests coincide with intense "public discontent" in the former colony about stratospheric property prices. But there is also speculation that they may be linked to a long-standing feud with the Kwoks' older brother, Walter, whom they ousted as chairman in 2008 with backing from their mother, claiming he was "mentally unfit to run the business".
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In a city "where property is king", the Kwoks are "local royalty", says CNN.com. But their eccentricities have long been "Hong Kong tabloid fodder". They're famous for building a theme park featuring a life-sized replica of Noah's Ark, "built to specifications listed in the Bible". It includes a restaurant, hotel "and a coffin in which visitors are encouraged to lay down and think upon their life".
The Kwok family saga is racier than many outside Hong Kong might suspect, says the Singapore Straits Times. It contains all "the juicy ingredients" of a riveting drama serial: "a kidnapping, feuding siblings, a mistress, charges of mental illness, a bitter boardroom coup, a family torn apart".
The dynasty began when the brothers' father, Kwok Tak-seng, moved to Hong Kong from mainland China after World War Two and set up SHKP, riding one of the biggest property booms in history. On Kwok senior's death in 1990, the empire's reins passed to his eldest son, Walter.
But the family's wealth soon rebounded on them. In 1997, Walter was kidnapped by a gangster, Cheung Tze-keung (aka "Big Spender"), and kept for a week stripped naked in a wooden box, while his family negotiated his freedom. Cheung received "the biggest ransom paid in Hong Kong history" (around US$7m), before being caught and executed in 1998.
The seeds of the feud are probably personal. Raymond and Thomas long disapproved of their (married) brother's 30-year relationship with his mistress, Ida Tong Kam-hing, dubbed "HK's Camilla" by the tabloid press. When Walter tried to co-opt her onto SHKP's board, "a bitter battle for control" ensued, culminating in the 2008 coup which forced his removal and elimination from the family trust. He sued his brothers for defamation after they allegedly claimed he was a "liar" who "suffered from bipolar disorder".
Did Walter have a hand in his brothers' arrest last week? There is speculation to that end, notes The Wall Street Journal (see below). Whatever the case, this saga looks set to run and run.
How the arrests affected the brothers' $18bn empire
"Business as usual" is the message from Sun Hung Kai Properties, but this affair has rocked the world's second-largest property company by market valuation, says Reuters. The two younger Kwok brothers whose controlling stake in SHKP, floated in 1972, was valued by Forbes at $18.3bn in March continue as co-chairmen.
But the arrest a fortnight ago of a third director, Thomas Chan Kui-yuen (also for suspected bribery), and the death of a fourth, have left significant gaps in SHKP's formerly seven-strong board.
Shares in the blue-chip which owns developments in China and Singapore, as well as interests in Hong Kong telecoms and bus companies were "hit for six", diving 13% in one day last week, notes Citywire. Several UK fund managers including Henderson, Standard Life and M&G were affected.
It's easy to see why SHKP was considered an attractive stock. "Hong Kong is undoubtedly far less corrupt than any other city in Asia," security expert Steve Vickers told CNN. Within Hong Kong, the Kwok brothers had a reputation for probity, straight dealing, and good quality developments. SHKP is "one of the best-run developers we have in Hong Kong", says Andrew Sullivan of Piper Jaffray Asia Securities.
Details of the allegations that sparked the arrests, instigated by Hong Kong's Independent Commission Against Corruption (ICAC), remain unclear and neither brother has been charged, says the Singapore Straits Times. But there are reports they may be linked to the court case filed by Walter Kwok in 2008.
At the time, he claimed he was "forcibly removed... because he wanted to investigate certain matters within the company and improve its corporate governance". The arrested senior civil servant, Rafael Hui (a former SHKP adviser), is thought to have taken the younger brothers' side. Meanwhile, Walter Kwok has so far refused to comment on the arrests.
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