CY Leung reportedly sought further HK$37 million in UGL deal
PUBLISHED : Wednesday, 15 October, 2014, 5:57pm
UPDATED : Wednesday, 15 October, 2014, 6:08pm
James Griffiths, Benjamin Robertson and Joyce Ng
Chief Executive Leung Chun-ying. Photo: Felix Wong
Chief Executive Leung Chun-ying reportedly sought a further 3 million pounds (HK$37 million) from Australian firm UGL as part of his former company DTZ’s sale on top of the eventually agreed upon 4-million-pound deal, which has left him potentially facing investigation by Hong Kong’s anti-graft agency.
In a secret contract signed in December 2011 but revealed last week, UGL agreed to pay Leung 4 million pounds in two instalments in 2012 and last year. Both the Australian firm and Leung said the money was to prevent him from joining or forming a rival firm within two years. But the deal also contained an “additional commitment” by which Leung agreed to “[act] as a referee and an adviser from time to time.”
According to Fairfax Media, which obtained emails sent by top UGL and DTZ executives concerning the sale, Leung wanted an additional 3 million pounds to compensate him for stock he held in DTZ’s Japanese subsidiary.
“Please find attached CY’s analysis of his contributions he’s made to the Japanese business and which he is looking to be reimbursed as part of his cooperation for the UGL deal,” Fairfax quoted an email from an associate of Leung to DTZ’s main creditor RBS as saying.
This request for a larger sum of money, which was eventually denied, almost caused UGL to walk away from the deal.
“I do have a busy and heavy schedule and a business to run and no time for negotiating games,” UGL chief executive Richard Leupen wrote in an email dated November 26, 2011 to DTZ chairman Tim Melville-Ross. “[Leung] communicates in one-liners and gives us nothing to think we are going to reach agreement.”
“He apparently is still talking about the 3 million GBP he’s spent in Japan and there’s is [sic] no way we’re paying that on top of the 4.0 GBP agreed – this is a deal breaker,” Leupen wrote in a subsequent email.
One former senior DTZ executive told the South China Morning Post on Monday that Leung being a consummate businessman saw the UGL deal as an opportunity.
“CY lost a lot of money in DTZ. In his mind he might have been trying to recoup his losses,” said the Hong Kong based executive, speaking on condition of anonymity.
The revelations come as Leung is already facing calls for him to resign from pro-democracy protesters who have filled the streets of Hong Kong since late September. Photo: Bloomberg
The new revelations raise further questions about the sale of DTZ to UGL, particularly after it was revealed this week that a Chinese firm made a larger offer after Leung had entered into private negotiations with the Australian company.
UGL eventually bought London-listed DTZ for 77.5 million pounds in a deal that wiped out both shareholders and unsecured creditors, and required British-taxpayer-backed bank RBS to take a 30 per cent loss on a £110 million loan to the troubled real estate consultancy.
Leung would not say whether or not he welcomed the new suitor. In an email response to the Post, Leung’s spokesman Michael Yu wrote, “The decision to sell DTZ was a decision made by DTZ board of directors.”
In a report, Ernst and Young, acting as administrator for the troubled real estate consultancy, said the new offer would have taken eight weeks to complete and it was decided there was “insufficient time” given DTZ’s “cash flow position” and a “lack of further funding” from RBS.
The bidder was later reported in the Chinese press to be Tianjin Innovation Financial Investment Company, although Post reporters have been unable to reach the company for confirmation. It is not yet known whether Leung – in his role as a board member and chairman of DTZ’s lucrative Asia-Pacific operations – was asked for his opinion on Tianjin Financial.
Leung announced his resignation from DTZ’s board on November 24, which took affect on December 4, in order to stand as a candidate in Hong Kong’s chief executive election. His resignation as Asia-Pacific chairman was effective as of January 2012.
On December 2 that year, Leung signed an agreement with UGL that stipulated that he would receive payment of 4 million pounds in two instalments in 2012 and 2013, should the UGL bid prove successful. The payments were not mentioned in Leung’s annual disclosure filings.
A formal complaint has been lodged with Hong Kong’s Independent Commission Against Corruption (ICAC) by representatives of the NeoDemocrat party. Pan-democrat lawmakers also vowed to investigate Leung’s conduct in the Legislative Council.
The deal is also facing investigation in Australia, where Green Party Senator Christine Milne has called for police to look into the matter.
“People in Hong Kong are fighting for a stronger democracy while we in Australia are watching our democracy die under the weight of corruption,” Milne said.
