By Alex Frew McMillan
HONG KONG (Reuters) - Walter Kwok, the ousted head of Asia's biggest developer, Sun Hung Kai Properties <0016.HK>, has been arrested as Hong Kong's anti-graft agency widens a high-profile bribery investigation that has already netted Kwok's two younger billionaire brothers and the former No.2 in the city's government.
The dynastic Kwok family, Hong Kong's second-wealthiest, has gripped the former British colony's cozy, family-run business community with a long-running saga that includes Walter's kidnapping by gangsters in 1997 and a public feud a decade later.
Thomas and Raymond Kwok, co-chairmen of Sun Hung Kai, were arrested on March 29 along with Rafael Hui, Hong Kong's Chief Secretary from 2005-07 and a long-time Kwok family adviser. All have been released on bail. The Independent Commission Against Corruption (ICAC), which is leading the investigation, has not laid any charges.
The agency has fresh evidence that could point to suspected bribery while Hui was in office, potentially driving the investigation further into the government, a source familiar with the probe told Reuters on Friday, adding the Department of Justice, which must approve any charges in such a high-level investigation, was still combing through the evidence available.
The source did not want to be identified as the investigation is ongoing.
Sun Hung Kai said Walter Kwok, who was ousted as Sun Hung Kai chairman in 2008 but who remains a non-executive board member, told the company he was arrested late on Thursday as part of the ICAC investigation, and later released on bail.
The Kwoks, valued by Forbes magazine at $18.3 billion in March, before the arrests, rank locally in wealth only behind Asia's richest man, Li Ka-shing, founder of rival developer Cheung Kong (Holdings) <0001.HK>.
The tycoon brothers, who live together in a luxury family compound despite a long-running family feud, and Hui are part of a small elite that controls business in the city.
The ICAC confirmed the arrest of "a senior member of a listed company in Hong Kong", without identifying Kwok by name. A spokeswoman for Sun Hung Kai said the company had nothing to add to a stock exchange filing, which said the arrest would not affect the group's operations. Walter Kwok declined to comment, with a spokeswoman referring inquiries to the company statement.
Shares of Sun Hung Kai, Asia's largest developer valued at close to $32 billion, fell to a near-5-month low on Friday, closing down 1.8 percent, and have dropped 18 percent since co-chairmen Thomas and Raymond Kwok were arrested on March 29. They have denied any wrongdoing.
Hui has not responded to repeated attempts to contact him for comment. Reuters has reported that the ICAC is examining a series of payments to Hui, both before and after he was chief secretary, and linked to Sun Hung Kai.
Walter Kwok has said he was not involved with Hui. "Hui was employed by my two brothers and he was not a consultant to me or my mother," he said in a statement this week.
In a statement provided to Reuters on Wednesday, Walter offered some insight into the volatile and arcane dispute over the Kwok family trust that controls Sun Hung Kai. Walter was removed as a beneficiary of the trust in 2010 and is trying to gain access to trust documents.
Sources close to the Kwok family have said Walter lost an arbitration in Switzerland on seven counts. They said family matriarch Kwong Siu-hing in 2010 intended to split ownership of the trust three ways, including a portion for Walter's family - an intention she still holds, according to one of those sources.
His mother's favorite son, according to a family friend, Walter Kwok was kidnapped in 1997 by notorious gangster Cheung Tze-keung, known as "Big Spender". He was held for 6 days before a HK$600 million ($77 million) ransom was paid for his release. Cheung, executed a year later by firing squad, had Walter stripped to his underwear, held in a wooden box and fed a diet of rice and pork.
The incident left Walter badly shaken, but he returned to run Sun Hung Kai until he was forced out in 2008. In a writ filed in Hong Kong that year as part of his bid to avoid losing his chairmanship, Walter Kwok said Raymond and Thomas believed he had bi-polar affective disorder and was not fit to lead the company - which he denies.
Walter also raised a series of issues over how the company was run, adding his brothers repeatedly disagreed with his attempts to improve management.
There had been some speculation after the first arrests on March 29 that Walter may somehow have been involved with the investigation, but his arrest this week casts doubt on that particular conspiracy theory. Walter has denied any involvement in the probe.
Sun Hung Kai, long seen as one of Asia's best-run developers, said on March 19 that Thomas Chan, a board member in charge of buying land for the company, had been arrested - along with four other people the ICAC has not identified. Another Sun Hung Kai board member, Chan Kai-ming, died peacefully on March 28.
In his 2008 writ, Walter Kwok said he tried, unsuccessfully, to investigate Chan's role in the sale of a parcel of land in Hong Kong's New Territories. Chan expressed no interest in buying the land on offer, the writ states, but Sun Hung Kai later bought the land from a company Chan introduced "at a price much higher than that offered by the original vendor".
(Additional reporting by Twinnie Siu and Denny Thomas; Editing by Michael Flaherty and Ian Geoghegan)