The trial has begun in Hong Kong of four company directors accused of letter of credit (L/C) frauds that have allegedly cost the Hang Seng Bank more than HK$200 million.

Ho Siu-hoi, Tam Kei-kwong, Leung Chi-por and Lee Tsang-kong, face seven counts of conspiracy to defraud. The defendants deny the charges brought against them.

Bogus transactions

The prosecution alleges the defendants obtained L/Cs from Hang Seng Bank on the basis of documents that showed bogus transactions between companies owned by Tam, Leung and Lee and two other companies owned by Ho's father, Ho Chi-chun.

Between 1994 and 1998 Hang Seng Bank issued 258 L/Cs to the two companies - Au Kiang International and Dero Enterprises - for an amount in excess of HK$880 million according to prosecutor Charlotte Draycott. She told the Court of Instance that the fraud had cost the bank HK$208.5 million.

Property investments

The money was allegedly used to finance property investments, typically to bridge the difference between 70 per cent mortgages provided by banks and the purchase price of properties bought by the two companies.

Draycott told the court that bribes had probably been paid to bank staff in the process of the frauds. Commissions of 0.5 per cent of the money they raised were paid to Tam, Leung and Lee. Ho Chi-chun is believed to have fled to mainland China.

This article represents the view of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.