Brokerage trio cleared in HK's biggest corporate fraud case

Convoy Global's former executive director, Roy Cho Kwai-chee, and two former associates were found not guilty of attempting to defraud the company of HK$89 million as Hong Kong's securities watchdog failed to secure convictions in its largest investigation.

Cho, former chief financial officer Christie Chan Lai-yee and former executive director Byron Tai Ye-kai were also cleared of publishing false statements in Convoy's 2016 annual accounts.

The decision is a setback for the Securities and Futures Commission and the Independent Commission Against Corruption, which brought the charges in May 2019.

Both agencies had assigned considerable resources to the investigation, which involved multiple raids and seizures of property and documents.

Prosecutors alleged Cho, who owned 50 percent of shares in Convoy, acted as a "de facto or shadow director" at the company, exerting significant influence over its operations.

In April 2016, Cho suggested that Convoy acquire True Surplus International Investment but failed to disclose that he held a 55 percent stake in the firm.

Five months later, Cho, Chan, and Tai caused Convoy's subsidiary to buy True Surplus for HK$89 million, with Cho receiving HK$57 million from the deal, according to the ICAC.

District Court judge Ernest Lin Kam-hung ruled the evidence by prosecutors was not sufficient to prove deception.

Lin said Cho's controlling shareholding in True Surplus was public record and his role in Convoy was known. The three defendants had no need to conceal the fact from the board, he said.

Although the judge agreed Cho had a conflict of interest in the acquisition, other board members failed to raise questions, Lin said.

The ICAC said it respects the judgment and will carefully study it with the Department of Justice.

The SFC had been investigating Convoy since 2017 after activist investor David Webb accused the firm of being part of an elaborate network of intertwined public companies, prompting the share prices of several of them to collapse.

Cho, a 56-year-old doctor-turned-financier, was accused of being at the center of a network.

In separate ongoing civil claims brought by Convoy's new management, Cho allegedly used the insurance and securities brokerage to make margin loans to other businesses connected to him by directing confidants at the firm through a secret e-mail account.

On December 7, 2017, ICAC officers and the SFC arrested several Convoy directors. Trading in Convoy Global has been suspended since.

avery.chen@singtaonewscorp.com