The six-page letter that could fell Hong Kong’s leader

Apparently, chief executive Leung made some other commitments too.
Apparently, chief executive Leung made some other commitments too.
Image: Reuters/Bobby Yip
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The Beijing-backed chief executive of Hong Kong, CY Leung, has stood firm as pro-democracy protesters called for his resignation over the last week and a half. But a new exposé accusing Leung of unscrupulous business dealings could put his job in jeopardy.

According to an investigation by Fairfax Media, the chief executive accepted secret payments totaling £4 million ($6.4 million) from an Australian engineering firm that bought DTZ Holdings, the insolvent property firm where Leung served as director and chairman of its Asia Pacific operations. Though UGL and Leung signed the agreement before he took office, the fees were paid in two installments in 2012 and 2013—after he was sworn in—and involve what appear to be ongoing commitments to promote DTZ’s business.

In a contract dated Dec. 2, 2011 (pdf)—not a week after Leung confirmed his candidacy for chief executive, and four months before Hong Kong’s election committee picked him—UGL agrees to pay Leung for not competing against DTZ, as well as the following:

A screenshot from the contract obtained by Fairfax Media (the handwritten emendations concerning potential conflict of interest are reportedly by CY Leung).
A screenshot from the contract obtained by Fairfax Media (the handwritten emendations concerning potential conflict of interest are reportedly by CY Leung).
Image: Fairfax Media

Leung’s office, however, says this is all above board since the fees “arise from Mr Leung’s resignation from DTZ, not any future service to be provided by him.”

But while noncompete agreements are fairly standard for an executive of Leung’s profile, the contract’s other clauses are more plainly shady: Leung agrees to provide “assistance in the promotion” of UGL and DTZ and that he will serve as “a referee and advisor from time to time”—which clearly indicates future commitments. Also questionable is that Leung, who was sworn in on Jul. 1, 2012, never disclosed any of this.

At the time the contract was signed, few believed Leung stood a chance of winning the chief executive position, a seat picked by a electoral committee whose members have strong ties to Beijing. UGL told Fairfax Media that that was why it neglected to include a clause invalidating the agreement in the event that Leung was elected.

The exposé’s timing—days before the pro-democracy movement leaders meet with the government—is curious. The Beijing-backed Hong Kong government has little room to bargain in terms of reforming election procedure, which could entrench the protesters’ resolve. Leung stepping down would be perhaps the easiest of the protesters’ demands to fulfill.

And protesters are likely not the only ones displeased with the chief executive at the moment. It’s largely thanks to Leung that throughout the last few months, China’s leaders have consistently misjudged Hongkonger sentiment. His report to China’s leaders on the critical issue of universal suffrage for the 2017 chief executive election failed to mention that a large swath of voters objected to the nomination procedure. The police’s uncharacteristically brutal use of tear gas and pepper spray on protesters—which riled up support for the movement—was another miscalculation.

It’s not clear where Fairfax Media obtained the contract. When asked about the publicly-floated theory that Beijing may have leaked the information to Fairfax, Nick McKenzie, one of article’s authors, told Quartz:

I’m afraid we never comment on the identity of sources, I can only say they were people with deep concerns about the probity of CY and UGL’s dealings and that we only got the story very recently.

The fact that John Garnaut co-wrote the story is notable. Now back in Australia, Garnaut was for many years a highly accomplished foreign correspondent in Beijing, thanks to his many sources connected with the Chinese government. When asked about the source of the information, Garnaut told Voice of America that his team received the document “out of the blue” last Sunday, from an anonymous source.