Case Analysis

The site supervisor was the employee and hence agent of the construction company.  He solicited and accepted advantages (i.e. the “introduction fees”) from the workers for referring them to work at the construction site, which was related to the affairs of the construction company (i.e. his principal).  In the absence of the principal’s permission to solicit and accept advantages, he had contravened Section 9(1) of the Prevention of Bribery Ordinance (Cap.201) (POBO).  As a result, the site supervisor was sentenced to imprisonment and ordered to pay $200,000 as restitution to the construction company.  The workers who paid the “introduction fees” had also contravened Section 9(2) of the POBO, for offering advantages to an agent of the company.

Case in Perspective

Under the POBO, both the giver and receiver of bribes commit an offence.  In addition, trade practice or custom could NOT be an excuse for soliciting, offering or accepting bribes. 

In the above case, the site supervisory staff breached the trust placed on him by his employer in the recruitment of workers and abused his powers for personal gains.  This rendered himself liable to criminal liabilities, damaged the reputation of the construction company and the industry as a whole, and might even undermine the quality and safety of the works, particularly if incompetent workers were recruited for the works only because they were willing to pay the “introduction fees”.  

To prevent their staff/employees and agents from falling prey to corruption in the recruitment of workers and hence ensure the quality and safety of works, construction companies should put in place adequate corruption prevention safeguards in recruitment of workers.  Examples of safeguards include –

(a) Prohibit staff/employees or agents, through staff code of conduct or employment contracts, from soliciting and accepting advantages in relation to their work particularly in the recruitment of workers;

(b) Enhance the transparency of payment of wages to workers (e.g. adopting written employment contracts and clearly specifying the wages therein) and put in place control measures in the procedures for recruitment of workers;

(c) Arrange payment of introduction/handling fee, if applicable and payable to the staff/agents, directly to the staff/agents responsible for recruitment of workers; and

(d) Remind staff/employees, agents and workers to be vigilant and report suspected corruption to the ICAC immediately.

Ken  should  clearly  know  that  the  orders  of  his  company’s  clients  are non-public information which will have a substantial effect on the trend of the futures market.   However, he still deliberately delays effecting transactions for clients and conspires with Anna to make use of this market-sensitive information for personal gain.   Both of them have engaged in front running and thus violate the *Codes of Conduct.

Ken and Anna may be guilty of a corruption offence too.   Under Section 9 of the Prevention of Bribery Ordinance (POBO), Ken's sharing of the profit from the front running operation can be treated as accepting an advantage from Anna as a reward for his doing an act in relation to his principal’s affairs, i.e. passing the information of his company orders to Anna.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

Alan breaks the *Codes of Conduct and Section 9 of the Prevention of Bribery Ordinance (POBO) as he agrees to abuse his official position as a member of the broker selection committee by persuading other members to offer business to Agnes and accepts rebate in return without permission from his employer. Likewise, Agnes also breaches the Codes of Conduct and the PBO for offering an illegal advantage to Alan.   Although Alan hasn’t executed the "under-the-table" deal, both of them still commit a corruption offence.   Under the law, a person will be found guilty even though the purpose of bribery has not been carried out.

*Remarks: Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Code of Conduct for Corporate Finance Adviser and the Fund Manager Code of Conduct.

If the advantage offered, i.e. the antique watch, was not a reward for Margaret in abusing her official position, Margaret might not contravene the Codes of Conduct^[1] issued by Securities and Futures Commission and the Prevention of Bribery Ordinance (POBO).   However, she should be mindful of situations which might lead to the violation of the Codes of Conduct and the law.  Margaret should seek her principal’s (i.e. employer’s) approval before accepting the gift.  Moreover, she should decline the gift if she felt that the acceptance would put her in a position of obligation to the offeror.   In case of doubt, it would be prudent for her to consult her employer on whether she could accept the gift.

Although entertainment  is  common  in  business  practice  and is not  an advantage under the POBO, Margaret should avoid accepting excessive levels of entertainment which might affect her objectivity in dealing with clients.

[1] Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Corporate Finance Adviser Code of Conduct and the Fund Manager Code of Conduct.

Peter violated the Codes of Conduct[1] issued by Securities and Futures Commission by abusing his official position to refer business to David in return for accepting an advantage in the form of a country club membership. Peter failed to fulfil his obligation to protect the interests of his employer and clients as David might not be the broker who provided the best service to his company, not to mention the excessive brokerage fee charged.

If Peter had not obtained prior permission from his employer to accept the advantage, both Peter and David breached Section 9 of the Prevention of Bribery Ordinance (POBO).  Peter committed an offence of accepting a bribe and David committed an offence of offering a bribe.  

[1] Codes of Conduct refer to the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, the Corporate Finance Adviser Code of Conduct and the Fund Manager Code of Conduct.

Philip must obtain the consent from his principal to accept the commission, otherwise both Philip and Ken would breach Section 9 of the Prevention of Bribery Ordinance. Without the approval of Philip’s principal, Ken would commit an offence of offering a bribe while Philip would commit an offence of accepting.

Although at the end of the day Philip might not be able to fulfil the agreement and Ken might not reward him, they were still liable to prosecution if a verbal agreement of corruption had been reached.

Bryan might breach the Code of Conduct[1] of the bank by accepting an advantage from Alan, i.e. the abnormally low price and the favourable repayment terms. Bryan should decline such an offer or seek approval from the bank's management.

Although the advantage did not seem connected to Bryan's official duties at the time of the offer, it might put him in a position of obligation to reciprocate in future and place him in a compromising situation when he was asked to return a favour.

[1] According to HKMA’s Supervisory Policy Manual CG-3, each authorized institute (bank) should develop its own Code of Conduct containing certain minimum conduct requirements which include “no member of staff should solicit, accept and retain personal benefits from any customer of the bank or any individual organisation doing or seeking to do business with it.”

In the above case, the bank manager was an employee of the bank, i.e. an agent under Section 9 of the Prevention of Bribery Ordinance (POBO) while the bank was the principal.

The bank certainly would not allow the manager to accept advantages related to  his  official  position,  thus  the  rebate  was  an  illegal  advantage  and the acceptance of which constituted an offence of accepting a bribe. The finance company director also committed bribery for offering illegal advantages.  

Under the POBO, food or drink for consumption on the occasion when it is provided is considered as "entertainment", which is not defined as an advantage. Even though it is not against the law to accept entertainment, accepting excessive level of entertainment by a bank staff may breach the Code of Conduct of the bank. The bank manager compromised his impartiality when he dined frequently with the finance company director.

Although entertainment is common in business practice, a bank staff should avoid meals or entertainment that are excessive in nature or frequency, so as not to cause embarrassment or loss of objectivity when conducting business with clients. In case of doubt, it would be prudent to consult the bank’s management prior to acceptance.

Under Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror will also be guilty of the offence. Even if the acceptance of bribes takes place outside Hong Kong, if any part of the bribery act (including offering, soliciting or accepting a bribe) takes place in Hong Kong, the case can be pursued under the POBO. Furthermore, according to Section 11 of the POBO, as long as the offeror of bribes intends to induce the acceptor to extend his/her favour(s), both parties would have committed bribery offence even if the acceptor claims that he/she 'did not actually have the power to do so', 'did not intend to do so' or 'did not, in fact, do so'. Hence, Mr Lee might have committed the offence of offering bribes and could not claim in his defence that the purpose of the bribes had not been carried out. Similarly, if Mr Cheung had accepted the red packet without declaring it to the bank, he might also have committed an offence even if he had not ultimately helped Mr Lee.

Entertainment means the provision of food and drink for immediate consumption, whereas dried seafood, spirits or red packets are advantages. The offeror cannot offer bribes in excuse of 'an established custom in the trade or 'trade practice'. According to Section 19 of the POBO, the court will not accept such defence on the part of either the offeror or the acceptor, but will only consider whether or not the acceptor has the permission of the principal.

According to the guidelines laid down in the Supervisory Policy Manual — Code of Conduct (the Code) issued by the Hong Kong Monetary Authority, a bank employee must declare any advantage received in the course of business.  While the acceptance of mere entertainment does not constitute an offence, entertainment that is in any way luxurious is very likely a prelude to corruption or bribery. Hence, the Code further stipulates that a bank employee can only accept normal business entertainment such as an ordinary meal.

When facing corruption temptation, Mr Cheung should make a declaration in compliance with the Code and report the offering of gifts and red packets offered by Mr Lee to the bank in order to protect himself from being implicated in a bribery case.

Under Section 9 of the Prevention of Bribery Ordinance (POBO), it is an offence for any agent, without the approval of his principal, to solicit or accept an advantage as a reward for or an inducement to perform an act in relation to his principal’s affairs or business. The offeror will also be guilty of the offence. 

In this case, the manager, an employee (agent) of the finance company (the principal), accepted commission (advantage) from the property developer as a reward for favourably recommending the loan proposal (an act in relation to the finance company’s business). Under the POBO, the manager was considered to have accepted the advantage even his wife received the advantage on his behalf.  Hence, the manager might have contravened Section 9(1) of the POBO for accepting bribes. The property developer might have contravened Section 9(2) of the POBO for offering bribes.

On the other hand, the manager might have breached Section 9(2) of the POBO for bribing the property valuer (agent of the property valuation agency) to inflate the value of the collateral, while the latter might have contravened Section 9(1) of the POBO for accepting bribes from the manager. They also might have contravened Section 9(3) by each submitting false, misleading valuation reports to their employers.

The manager might have also breached the Banking Ordinance which prohibits any employee of an authorized institution to receive any gift, commission etc. for his own personal benefit or advantage or for that of any of his relatives, for procuring or endeavouring to procure for any person any advance, loan, financial guarantee or credit facility from that institution.