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Ex-Tobacco Chief Convicted of Bribery

January 22, 2009 –

The former chairman of a tobacco manufacturer, charged by the ICAC, was today convicted at the District Court in his absence of bribery and fraud in relation to cigarette-smuggling activities.

Lu Dayong – the 61-year-old former chairman of Nanyang Brothers Tobacco Company – absconded and failed to turn up for the trial last June, and the court issued a warrant for his arrest.

Lu, Hang Chun Trade Development’s director Ko Kit, 40, and sales manager Chan Kai-san, 41, were found guilty of one count of conspiracy to defraud Nanyang Brothers.

Lu and Ko were also convicted of conspiracy for accepting an advantage from cigarette trader Golden Leaf International Development (Hong Kong).

Judge Joseph Yau adjourned the case until February 20 for sentence, pending background reports. Ko and Chan were remanded in the Correctional Services Department’s custody.

The court heard Lu, then Nanyang Brothers chairman, approved Hang Chun and Golden Leaf as overseas distributors for Nanyang Brothers’ cigarettes.

Between November 2003 and February 2004, Lu, Ko and Chan concealed from Nanyang Brothers that Lu had interests in Hang Chun, and caused Nanyang Brothers to supply “Double Happiness” cigarettes to Hang Chun, knowing the cigarettes would be sold in the Mainland, in violation of contracts between Nangyang Brothers and Hang Chun.

Nanyang Brothers subsequently sold $48 million worth of cigarettes to Hang Chun.

Lu and Ko received more than $7.5 million in illegal commissions from two directors and shareholders of Golden Leaf between April 2003 and February 2004 as a reward for causing Nanyang Brothers to sell “Double Happiness” cigarettes worth $42 million to Golden Leaf.

The cigarettes sold to Hang Chun and Golden Leaf were prohibited from sale in the Mainland, but they had been smuggled there through other places including the Philippines and Vietnam.

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