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| Hong Kong Polytechnic University |
The university, known locally as PolyU, had not declared in any of its financial reports that it set up two companies in the British Virgin Islands, or BVI, in 2012 and 2013 as wholly owned subsidiaries of the university, raising questions about its financial transparency and reporting.
PolyU’s president, Timothy Tong Wai-cheung, admitted in an email to staff last week that the use of such firms were never mentioned in any annual financial reports, but he insisted the use of offshore firms was legitimate.
The “purpose and process” was legitimate and had been approved by members of the university council, he said, adding the university’s council chairman at that time and the committee on knowledge transfer under the council were informed of the decision to set up the offshore subsidiaries.
“Please rest assured that the decision of using a BVI company arrangement had been carefully reviewed by the management and vetted by an advisory committee comprising external members, and with advice from a reputable external law firm,” said Tong in the email to staff, leaked by Hong Kong’s English language newspaper, South China Morning Post.
Although the use of offshore companies is not illegal in Hong Kong, questions have been raised about the standard of the university’s financial reporting and compliance. Chu Wai-chi, chairman of the Polytechnic University Staff Association, said a responsible institution should disclose offshore firms for public scrutiny.
Joint venture
Tong has said the use of the offshore companies was not disclosed in PolyU financial statements because of the “insignificant value of the investments”.
However, Franco Wong Chak-hang, president of the PolyU students’ union, said the university management had "still failed to explain why this could not be done with a local firm”.
Tong also defended the use of the offshore firms as a way to “insulate PolyU from risks” arising from a business in which the university was “no longer actively involved”.
The business referred to is the subject of some controversy. Local newspapers digging into the Panama Papers found that one of the BVI firms set up by PolyU known as PolyU Enterprises, helped transfer a large amount of the university’s share in a joint venture to a pro-Beijing businessman Choi Koon-shum, who is a delegate to the Chinese People’s Political Consultative Conference, an advisory body to the Beijing government.
Choi, the president of Sun Wah Group – a Hong Kong-based trading conglomerate – had been a member of the PolyU council and donated around US$2 million to the university in 2003.
The transfers did not involve public money. However, questions are also being asked about the role, revealed in the Panama Papers, of Nicholas Yang Wei-hsiung, now the Hong Kong government’s secretary for innovation and technology.
In his previous role as PolyU’s executive vice-president, Yang signed the BVI registration document, and was the CEO of PolyU Enterprises. The documents surfaced in the Panama Papers of law firm Mossack Fonseca which has shed light on the secretive use of offshore companies.
Yang has told local media the arrangement was “part of my work as the then executive vice-president of the university to manage its administration, which involves nothing improper”.
The Hong Kong government has not responded to calls by local lawmakers to investigate the university and others named in the Panama Papers.
The International Consortium of Investigative Journalists, which revealed in early April that it had access to some 11.5 million Mossack Fonseca documents, has said Hong Kong was the Panamanian law firm’s most active office – almost a third of the companies the law firm was collecting fees for were based in Hong Kong and China.
Other universities
In the wake of the PolyU revelations, the University of Hong Kong, or HKU, and the Chinese University of Hong Kong, or CUHK, voluntarily revealed their own use of offshore firms.
However, unlike PolyU, CUHK has consistently reported this in its financial reports. It said the decision to set up in BVI was approved by the governing council.
CUHK said it had held a dormant, unprofitable BVI firm named HKIX Hong Kong Ltd since 2000. “The original purpose was to take advantage of the flexibility” in order to transfer shares for technology transfer spin-offs that might attract the interest of international investors, according to a statement to local newspapers.
HKU has said it owned five BVI firms, two of them set up in 2000 to hold 11.7% shares in an unnamed biotechnology company. The offshore firms had been dormant for some years, the university said.
Three other firms were set up by Versitech, a not-for-profit technology transfer arm owned wholly by HKU. Only two are still in operation, holding 20% shares in medical services companies.
Only one of the five BVI firms was mentioned in HKU’s annual reports.
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