Jailed Hong Kong media tycoon Jimmy Lai Chee-ying is set to spend more time behind bars after he was found guilty of defrauding a government-owned enterprise over the unauthorised operation of a consultancy firm at the offices of his now-defunct Apple Daily tabloid-style newspaper.
A District Court judge on Tuesday (Oct 25) convicted Lai and a former Next Digital executive of fraud after finding the pair’s “deliberate” concealment of the private firm went beyond what would typically be a civil breach of contract and deserved criminal punishment.
Lai, 74, stood trial earlier this year on two counts of fraud after being accused of covering up the operations of Dico Consultants at the paper’s Tseung Kwan O headquarters for more than two decades in breach of its land lease conditions.
Next Digital’s former chief administrative officer Wong Wai-keung, 60, faced one count of the offence for his alleged role in the matter since 2016.
The group’s then chief financial officer and chief operating officer Royston Chow Tat-kuen, who was previously a defendant in the case, turned against his former boss and colleague in the witness box after prosecutors agreed to drop the charge against the 64-year-old on condition he help in the pair’s prosecution.
The prosecution was seeking the pair’s conviction based on what they called the deliberate concealment from, and false representations to, landlord Hong Kong Science and Technology Parks Corporation, concerning Dico’s operation status until it was exposed in 2020.
The court heard that terms for Apple Daily’s land lease included a ban on using office space for purposes other than “publishing and printing of newspapers and magazines and ancillary services”.
Dico, which had provided secretarial services to private companies controlled by Lai’s family and managed the tycoon’s personal assets, allegedly fell outside designated purposes in the lease.
The landlord had never received any licensing application since Dico began operating in a 646 sq ft office in April 1998. The now-defunct publication was said to have earned at least HK$1.09 million (S$198,000) in rent from the firm, with the latter able to evade land premium of up to HK$110 million.
In Tuesday’s verdict, Judge Stanley Chan Kwong-chi ruled that Lai had a duty to ensure all associate or subsidiary companies running on Apple Daily grounds complied with the corporation’s requirements by either applying for permission or making inquiries about their eligibility to operate on the site, both of which the media mogul had failed to do for Dico.
Chan said such an obligation arose from the “special contractual relationship” manifested by Apple Daily’s lease, under which the newspaper could use the government lot with favourable terms subject to certain restrictions to prevent abuse.
“The lessee’s obligation cannot be clearer under these circumstances,” Chan said in his 156-page verdict. “A failure to act can naturally constitute concealment. A false statement can even be treated as an act to defraud.”
Lai’s failure to disclose Dico’s operations over the years clearly showed the tycoon understanding that the firm did not qualify for a licence, the judge held, adding Dico’s involvement in Apple Daily’s animation works did not change the fact its primary business was irrelevant to publication.
Defence counsel contended that the newspaper had remedied the situation in mid-2020 by changing Dico’s registered address and relocating its offices, adding it had been forthcoming in telling the corporation in an email that Dico “does not occupy and is not operating on any part of the lot”.
But the judge dismissed the claim as “specious” and a “red herring”.
“[Lai] had never inquired about whether Dico needed a licence, nor had he ever bargained with the corporation over its suitability for a licence,” Chan said.
“The lessee had never disclosed the fact that Dico had occupied its premises … In light of the special conditions in the lease, such failure to disclose naturally constituted deliberate concealment and a fraudulent act.”
Lai was sentenced last year to a total of 20 months’ imprisonment for his roles in four unauthorised assemblies. He is currently remanded in the maximum-security Stanley Prison awaiting a collusion trial under the Beijing-decreed national security law.
Apple Daily closed during a crackdown under the city’s national security law in June last year.
This article was first published in South China Morning Post.