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QIA investment with Hong Kong Lau family (part 2): Thomas Lau was convicted of “Insider Trading”

Posted: September 11th, 2017

Qatar’s sovereign wealth fund, controlled by the country’s ruling Al-Thani family, purchased a 20% stake in the Hong Kong premium retail operator Lifestyle International Holdings Ltd. for U.S. $600 million in October 2014. It was one of the Qatar Investment Authority’s (QIA) most visible moves in the greater China region.

The QIA, via its subsidiary Qatar Holding, currently retains a 23.05% interest in the Lau-family controlled Lifestyle International. Thomas Lau and his family hold a 51.69% stake. The family of Thomas’s brother, Joseph, also retains a substantial stake in the listed enterprise (see Part 1 of this series).

At the time of the acquisition, Lifestyle International chairman Thomas Lau Luen Hung said that his company “will work closely together with Qatar to leverage on each other’s business strengths and network to further grow our business.” Lau referred to the QIA’s investment as a “strategic partnership.”

Public records, however, show that the QIA’s strategic partners in Hong Kong, the Laus, have been beset by an assortment of legal controversies.

Thomas Lau “Insider Trading” Charges

In February 2005, the Hong Kong government issued a press statement disclosing that the territory’s Financial Secretary formed an Insider Dealing Tribunal to investigate “possible insider dealings in the listed securities of Asia Orient Holdings Limited in 1999.” By August 2005, the Tribunal disclosed that it had been investigating Thomas Lau, and a subsequent Hong Kong court filing revealed that the case “relates to dealings by Thomas Lau in the shares of Asia Orient Holdings Ltd. (AOH) in 1999.”

During the investigation, Thomas Lau hit back against the Tribunal, alleging that the inquiries “were improper and lacked transparency” and filed an challenge to the Hong Kong courts prior to a ruling on the case — a challenge he lost.

Thomas Lau Found Guilty of “Insider Trading”

The Insider Dealing Tribunal released a statement in September 2006 in which it “concluded its findings by unanimous decision that Mr Thomas Lau Luen Hung had engaged in insider dealing.”

The Hong Kong government subsequently published reports on the Tribunal’s findings. In short, Thomas Lau in 1999 owned a substantial stake in a private company, China INFOBANK Limited, that specialized in “the gathering and collecting of information relating to China news and business, and storing and supplying that information from a database to customers and subscribers.” On 13 September 1999, the listed company Asia Orient Holdings (AOH) engaged in discussions with China INFOBANK to acquire a large percentage of the news aggregator’s private stock (held in part by Lau). News of the pending deal broke on 14 September, and “the share price of AOH recorded an increase of 4.05% after a public announcement that it had entered into discussions” regarding the acquisition.

Between 14 September and 20 September 1999, Thomas Lau made a net acquisition of 26,364,000 shares in AOH “at prices ranging from $0.77 on 14 September 1999, and $0.90 on 20 September 1999.” After the announcement that AOH had acquired its stake in China INFOBANK, AOH’s shares surged by 40.86%, resulting in a substantial profit for Thomas Lau.

Insider Dealing Tribune Logo

Found guilty, the Tribunal ordered Thomas Lau on 15 December 2006 to pay a HK$34 million (roughly U.S. $4.35 million) fine to the government. That same day, Thomas Lau resigned as Chairman and Chief Executive of the Lau family-controlled Chinese Estates Holdings. The resignation, disclosed to the Hong Kong Stock Exchange, stated the following:

The reason given by Mr. Thomas Lau for his resignation is that he was involved in an inquiry by the Insider Dealing Tribunal of Hong Kong (the “Tribunal”). According to the report of the Tribunal dated 8th September, 2006 (the “Report”), the Tribunal has found the dealings in listed securities of Asia Orient Holdings Limited undertaken by Mr. Thomas Lau between 14th and 20th September, 1999 constituted insider dealing. On 14th December, 2006, the Tribunal made orders against Mr. Thomas Lau pursuant to which, amongst other things, Mr. Thomas Lau shall not, without the leave of the Court of First Instance of Hong Kong, be a director of the Company, or United Metals Holdings Limited (a company listed on The Stock Exchange of Hong Kong Limited), for a period of 12 months commencing from 22nd December, 2006.

Thomas Lau appealed the Tribunal’s findings through several layers of the Hong Kong court system, but in December 2009, Hong Kong’s Court of Final Appeal ruled in favor of the government, ending Lau’s case.

The next post in this series will look at Joseph Lau, whose family has interests in the QIA-invested Lifestyle International.