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August, 2004:

Bail For Blue-Chip Chief

Standard 26 August 2004 – Vanson Soo

A hearing has been adjourned into four senior executives, including the deputy chief executive officer of blue-chip Shanghai Industrial Holdings, for their alleged involvement in a HK$116 million cigarette smuggling case.

Further arrests are likely in the probe by the Independent Commission Against Corruption, which is investigating another 16 suspects, an ICAC spokeswoman said.

The four executives, who were arrested in Hong Kong in February, appeared in Eastern Magistrates’ Court on Tuesday, charged with laundering HK$50.3 million from suspected cigarette smuggling and corrupt activities.

They include Shanghai Industrial deputy chief executive and executive director Lu Dayong.

Lu, 57, is also chairman of Nanyang Brothers Tobacco, the wholly owned, cigarette-making arm of Shanghai Industrial, which makes the top-selling Double Happiness cigarette brand in China.

Hong Kong-listed Shanghai Industrial is one of the mainland’s biggest listed conglomerates, a behemoth with interests ranging from dairies, property and tobacco to microchips and cars.

When the company went public in 1996, it was oversubscribed 158 times and helped to ignite a massive boom in China shares. Its market capitalisation is HK$12.8 billion.

The other three are director Ko Kit, 35, sales manager Chan Kai-san, 36, and former director Lin Jianding, 38 – all of Hang Chun Trade Development.

No pleas were taken and the case was adjourned to November 23. The four were released on bail ranging from HK$100,000 to HK$500,000 each.

The executives were among 20 arrested by the ICAC for alleged involvement in cigarette smuggling activities.

At the time, the ICAC said it had charged an individual with accepting HK$11.4 million in bribes in connection with the smuggling of 116 containers of cigarettes into China.

ICAC investigators also said the alleged bribes – ranging from HK$18,000 to HK$150,000 per container of cigarettes – had been paid since last December by at least six syndicates in return for the continued supply of cigarettes, which were smuggled through Southeast Asia to China. According to the mainland magazine Caijing earlier this year, the import plan of China National Tobacco Import and Export Corp (CNTIEC) showed the Nanyang Brothers Tobacco factory in Tuen Mun was limited to exporting only 24,720 units of cigarettes, each worth 4,000 yuan (HK$3,772), to the domestic market in the first half of 2004.

Although their official export value was supposed to total no more than 100 million yuan, the ICAC discovered the December, January and February shipments alone exceeded that, the magazine claimed.

Shanghai Industrial spokesman Derek Fung said Lu has been suspended from all his executive duties since February 27.

The group said recently the case will not have any material impact on its operations.

Fung said although Nanyang Brothers Tobacco is a subsidiary of Shanghai Industrial, he does not know how the three Hang Chun employees are related to Nanyang Brothers Tobacco, except that they are probably business partners.

Lu, who graduated from the Party School of Shanghai in industrial enterprise management, was previously deputy general manager of Shanghai Tobacco Holdings and director of Shanghai Cigarette Factory.

Caijing said Lu has more than 35 years’ experience, mostly in Shanghai, in the tobacco industry.

Bloomberg records show that Lu held 0.28 per cent of Shanghai Industrial shares in December last year.

Shanghai Industrial is expected to release its interim results on Monday. Its shares closed 0.75 per cent higher at HK$13.50 on Tuesday.

4 Charged For Money Laundering

News.gov.hk – 23 August 2004

A tobacco executive and three others have been charged for allegedly laundering $50.3 million, believed to be proceeds of suspected cigarette smuggling and corrupt activities.

Nanyang Brothers Tobacco Chairman Lu Dayong, 57, Hang Chun Trade Development Director Ko Kit, 35, Hang Chun Sales Manager Chan Kai-san, 36, and former Hang Chun Director Lin Jianding, 38, will appear at Eastern Magistracy tomorrow to face a joint holding charge under the Organised & Serious Crimes Ordinance.

The charge alleges that between December 1 last year and February 23, the defendants conspired together to deal with sums of money, knowing or having reasonable ground to believe the money, in whole or in part, directly or indirectly, represented proceeds of an indictable offence.

Independent Commission Against Corruption enquiries have found the money was allegedly generated through corruption and smuggling.

Inquiries into the corruption aspects of the case are underway.