A lawyer for Hong Kong’s securities watchdog yesterday urged a court to block the controversial privatization of telecoms giant PCCW (電訊盈科), saying it could destroy the city’s financial market.
Winston Poon (潘松輝), a barrister for the Securities and Futures Commission (SFC), said PCCW had only won shareholder approval for the buyout after insurance agents were given shares on condition that they backed the privatization.
“To allow share-splitting, which creates uncertainties or chaos, may have the effect of destroying the financial market in Hong Kong,” he told the court.
The claims came on the final day of a High Court hearing to decide whether the deal to take the city’s largest fixed-line operator into private hands should go ahead.
Poon said two businessmen had plotted to rig a shareholder vote which approved the US$2.1 billion buyout bid, which has been a long-held dream of PCCW chairman Richard Li (李澤楷), son of one of Asia’s richest businessmen, Li Ka-shing (李嘉誠).
Poon said the plot to split shares was hatched by Francis Yuen (袁天凡), the former deputy chairman of PCCW and chief executive of the local stock exchange, and Lam Hau-wah (林孝華), a senior manager at Fortis Insurance Company (Asia).
Fortis was previously a unit of Pacific Century Regional Developments (PCRD, 盈科拓展), which is controlled by Li.
After several phone conversations between Lam and Yuen in January, Lam bought 500,000 shares in PCCW and then handed them out to his employees under the guise of a bonus.
The gift came with an agreement that the employees sign proxy shareholder voting forms, which would then be used to support the buyout, Poon said.
“As soon as they were handed the shares they signed the transfer forms and the proxy forms — even before they got their name on to the share registry,” he told the court.
Poon argues that such share-splitting “abused” a law meant to protect minority shareholders.
Vote-rigging is not an offense in Hong Kong, but if it is found that some voters had a relationship with the major shareholders, they are not counted as independent and are ineligible to vote in such shareholder meetings.
Hong Kong law requires that more than 50 percent of individual shareholders support any privatization move.
Li and PCCW have repeatedly said they had no knowledge of any vote-rigging.
Lawyers for PCCW and PCRD on Tuesday lambasted the SFC’s investigation, calling it biased, inaccurate and incomplete.
The SFC started its investigation after local investor David Webb said he had been tipped off that hundreds of Fortis insurance sales agents were offered the shares in return for voting yes to the deal.