Letter to Donald Tsang
15 February 2008
Dear Chief Executive,
You will be aware of the great public concern that has followed the recent US$8.1m settlement by Mr David Li Kwok Po of charges by the SEC that he tipped off his friend about the impending takeover of Dow Jones. The SEC's charges contained very specific details of how and when the tipping took place. Your office has stated a week ago that you are studying the settlement. It is time to make a decision.
As you should know, most SEC civil allegations of insider tipping and dealing are settled without denying or formally admitting liability by the defendant, which avoids exposure to follow-on class actions from shareholders, which a negative court judgment would bring. Nevertheless, the SEC does not make its allegations lightly and the size of the financial settlements is comparable to the amounts it would win in court. Indeed in this case the settlement is greater than would be achieved in Hong Kong's Market Misconduct Tribunal (MMT), which is the comparable civil route in Hong Kong. In this case, co-defendant Mr Michael Leung agreed to pay twice the amount of his profits, whereas the MMT can only order disgorgement of profits plus costs and interest. Mr Li could have defended the case to try to clear his name, but he chose not to do so (having earlier claimed in a BEA announcement that he would "prevail in court"). The facts speak for themselves.
In a democracy, no cabinet member would withstand such a scandal, and they would resign (or be told to resign) forthwith. Cabinet members must be beyond reproach. If you wish your administration to have the respect of the public and international community, then you must require Mr Li to step down from the Executive Council without further delay. Good governance demands it. Please put Hong Kong's reputation as an international financial centre ahead of your personal friendship. We cannot allow a perception that the elite can buy their way out of allegations (at a cost greater than most citizens will earn in a lifetime) and retain public office.
There is ample precedent for this - in the previous administration, Mr Antony Leung stepped down after allegations that he benefitted from inside knowledge of his own tax proposals on luxury cars, even though he was never charged with any offence. Similarly, Mr Yeoh Eng Kiong stepped down after his handling of SARS, and Ms Rosanna Wong Yick Ming stepped down from Chairing the Housing Authority after the short-piling scandal. Your administration has yet to demonstrate the same level of accountability. Now is the opportunity to do so.
If I had entered such a settlement with the SEC, I would surely have to resign my directorship at HKEx or face removal by the board.
I attach the results of an opinion poll, from almost 1200 readers of Webb-site.com. Participation was free and based on a combination of e-mail address with associated 4-digit PIN to deter multiple voting. An overwhelming majority of respondents, 93.4%, say Mr Li should step down from ExCo, or equivalently, you should remove him. He serves at your pleasure, and his continued presence will be taken to be your support.
The opinion poll is of course not a random sample of the Hong Kong public, but it is highly unlikely that the public view would materially differ, and this would be confirmed by your own polling resources.
David M. Webb
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