Asset Recovery: HK orders tobacco company workers to repay HKD13 million

Lu Dayong, 62, former chairman of Nanyang Brothers Tobacco Company Limited (Nanyang Brothers), was earlier sentenced, in his absence, to an imprisonment of four years and six months by Judge Joseph Yau Chi-lap . Lu absconded and failed to turn up for the trial in June last year, and a warrant for his arrest was issued by the court.

Co-conspirators Ko Kit, 40, a director of Hang Chun Trade Development Limited (Hang Chun); and Chan Kai-san, 41, a sales manager of Hang Chun, were respectively jailed for three years and six months, and two years for their roles in the scam.

Judge Yau today allowed the prosecution's application and ordered Lu and Ko to pay HKD7.55 million in restitution to Nanyang Brothers.

The judge also ordered Lu, Ko and Chan to pay Nanyang Brothers a restitution of over HKD5.73 million.

The prosecution's application for court costs against Lu was also allowed by the judge. The amount of the costs is to be taxed (assessed by the Court).

Lu and Ko were earlier convicted of one count of conspiracy for an agent to accept an advantage from a cigarette trader, Golden Leaf International Development (Hong Kong) Limited (Golden Leaf), contrary to Section 9(1)(a) of the Prevention of Bribery Ordinance and Section 159A of the Crimes Ordinance.

Lu, Ko and Chan were found guilty of one count of conspiracy to defraud Nanyang Brothers.

The court heard that Nanyang Brothers, a subsidiary of publicly listed Shanghai Industrial Holdings Limited, manufactured "Double Happiness" cigarettes at a plant in Hong Kong.

Lu, then chairman of Nanyang Brothers, 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 that the cigarettes would be sold in the Mainland in breach of the contracts between Nangyang Brothers and Hang Chun.

Nanyang Brothers subsequently sold HKD48 million worth of cigarettes to Hang Chun.

Lu and Ko received HKD7.55 million in illegal commissions from two directors cum shareholders of Golden Leaf between January 2003 and February 2004 as rewards for causing Nanyang Brothers to sell "Double Happiness" cigarettes worth HKD42 million to Golden Leaf, the court was told.

The court also heard that the cigarettes sold to Hang Chun and Golden Leaf, which were prohibited from sales in the Mainland, had been smuggled to the Mainland via other places including the Philippines and Vietnam.

In the course of the investigation and subsequent trial, the ICAC had received full co-operation from the management of Nanyang Brothers.