Questions raised over Australian firm’s HK$50m deal with C.Y. Leung

Leung Chun-ying has pocketed £4 million (HK$50 million) over the past two years from a deal with an Australian company in which he agreed to “act as a referee and adviser” if asked.

The revelation prompted questions about possible misconduct by the chief executive.

The arrangement was made between Leung and engineering firm UGL on December 2, 2011 – months before he became chief executive but a week after his declaration to run for the post. UGL sought to buy insolvent property services firm DTZ, of which Leung was a director and chairman of its Asia-Pacific operations.

Leung announced his resignation from DTZ on November 24, 2011, and officially left the company on December 4.

Two days before his departure, he entered into a contract with UGL in which the Australian company agreed to pay Leung £4 million over the next two years not to compete with UGL or DTZ.

Protestors from the NeoDemocrats protest against CY Leung made with a listed Australian company just after he announced he was running for Chief Executive nearly four years ago. outside ICAC Headquarters at Quarry Bay. Photo: David WongThe Chief Executive’s Office said it was a resignation agreement that set out possible scenarios if Leung lost the election.

“Mr Leung has not provided any service to UGL after signing the above agreement.”

The office added that any assistance by Leung would only have been provided if had lost the election, and that DTZ’s senior management was aware of the negotiations. Leung and UGL yesterday said the deal was standard business practice, and Leung added that it “does not involve any deferred rewards”.

But in the additional commitments stipulated in the contract, Leung said he would provide assistance to UGL “including but not limited to acting as a referee and adviser from time to time”.

Critics said Leung should not serve a commercial firm while serving as chief executive.

The deal also raises questions about Leung’s responsibilities to other DTZ directors. Ex-chairman Tim Melville Ross said he was not aware of the deal, while DTZ’s administrator, Ernst & Young, told the Post it “had no detailed knowledge” of the deal.

The controversy, first reported in Australia, could drag the chief executive into a new political crisis, with many local lawyers and former anti-graft investigators questioning the deal.

Under the deal, Leung could not set up a rival company and poach people from DTZ over the two years. UGL said it wanted to protect its acquisition as it feared Leung might lose the election and then set up a rival firm.

“It is standard business practice to pay for such undertakings, as you are requiring the individual to take obligations and to forgo future opportunities,” it said.

Leung did not declare to the government register anything related to UGL in August 2012 nor July this year.

Lawmaker Kenneth Leung said the deal may have exposed impeachable misconduct. He also said there was a conflict of interest for Leung to be chief executive while playing an advisory role to a commercial company.

Will Giles, partner at Hart Giles Solicitors and Notaries, said Leung had entered a “post employment covenant”, and the payment was for continuing obligation beyond employment.

A former investigator for the Independent Commission Against Corruption, Stephen Char Shik-ngor, questioned the deal with reference to the Prevention of Bribery Ordinance.

“Being a private company director, if you receive an advantage, then you must seek the permission of the principal – the board of directors. But if [Leung] has not disclosed this to the company, then it’s possible he may have breached the law.”