Minibond sales trial begins for BOC manager

Minibond sales trial begins for BOC manager

Diana Lee / Standard

Friday, November 26, 2010


A banker yesterday went on trial for the fraudulent selling of structured products linked to Lehman Brothers - the first such case in Hong Kong.
Cheung Kwai-kwai, 47, who was the Bank of China's personal financial services manager, denies nine counts of fraud and inducing others to invest HK$5.12 million and US$215,000 (HK$1.67 million) between February 2005 and February 2008.

The six complainants, aged from 40 to 78, were a car mechanic, proprietor of a trading company, part-time security guard, retired vegetable hawker and retirees.

Only one of them had a secondary school education.

The prosecution claims they were persuaded to buy the minibonds when they renewed their fixed deposits or used other bank services.

The proprietor was identified as Lau Ka-yiu who invested HK$3 million for the Constellation Series 56.

The first witness was Siu So-chun, 62, a retired Po Leung Kuk maid who has known Cheung since 1990 because her son attended a kuk nursery.

According to senior public prosecutor Jonathan Man Tak-ho, Cheung handled Siu's fixed deposits.

He alleged Cheung twice persuaded Siu to purchase Minibond Series 17 and 34, respectively, for US$30,000 in February 2005, and US$35,000 in January 2008.

She assured her they were secure investments and principal-protected.

Furthermore, the interest rate was higher than a fixed deposit.

Siu was not informed the products were related to Lehman Brothers, the court heard.

"When she said the principal was guaranteed, I thought it was safe," Siu testified. She has since been compensated for her losses.

"I told her `you don't need to show me the document, I believe in you.' I knew her for so many years, nothing went wrong previously," Siu said.

The prosecutor alleged some of those who purchased the minibonds were told they were low-risk products "similar to fixed deposits but with a higher interest rate."

Cheung was also accused of making false representations that the minibonds belonged to entities such as HSBC, MTR Corp and Coca-Cola, and that customers could only lose one-seventh or one- eighth of the principal invested if any entity went wrong.

Two university witnesses will testify that the minibonds and the minibond Constellation Series were credit-linked notes and not principal-protected, and investors could lose part and possibly all of their investment.

The 20-day trial continues on Monday before Judge Garry Tallentire.