Hong Kong graft watchdog arrests KPMG manager over IPO

HONG KONG: Hong Kong's graft watchdog said Thursday it has charged a senior manager at consultancy giant KPMG with corruption stemming from a mainland company's initial public offering in the city last year.

The Independent Commission Against Corruption (ICAC) said Leung Sze-chit was charged with offering a 100,000 Hong Kong dollar (13,000 US dollars) bribe to a subordinate in connection with fabric firm Hontex International Holdings' IPO.

The flotation has come under fire amid allegations of false accounting.

The ICAC said Leung, 32, and another unnamed person gave money to the employee on February 20 as a "reward" for writing up a misleading accountant's report that appeared in Hontex's IPO prospectus.

KPMG's Hong Kong office did not immediately comment.

Leung's arrest comes after the Hong Kong bourse's watchdog made a rare move to recover almost 130 million US dollars that Hontex raised in the share sale.

Last week, the Securities and Futures Commission (SFC) won a court injunction to freeze the funds raised by Hontex, which listed on Christmas Eve.

On Thursday, the SFC said it has recovered 882 million Hong Kong dollars of the firm's 997,400,000 dollar IPO proceeds.

"The SFC is continuing to make inquiries to identify more assets," it said in a statement on Thursday.

"Hontex is alleged to have disclosed materially false or misleading information in its prospectus dated 14 December 2009, which was likely to have induced investors to subscribe for the Hontex shares.

"The SFC alleges that Hontex's financial position in its IPO prospectus has been materially overstated."

Calls to Fujian-based Hontex's office in Hong Kong went unanswered Thursday.

Trading in the firm's shares has been suspended since last Tuesday.