Lawmaker and PolyU academic Fernando Cheung says vice-president Nicholas Yang was meant to close all subsidiaries following an earlier scandal
JEFFIE LAM AND STUART LAU
UPDATED : Sunday, 24 April, 2016, 11:28pm
Nicholas Yang is in trouble over two British Virgin Island companies, although he denies impropriety. Photo: Nora Tam
Polytechnic University’s questionable decision to set up two offshore firms in 2012 and 2013 and later omit any mention of them in its financial statements was in violation of the guidelines of both the institution and the University Grants Committee, the South China Morning Post has learned.
PolyU’s senior management, including then vice-president Nicholas Yang Wei-hsiung who became the city’s innovation and technology minister, is under pressure to explain why the publicly funded institution would engage in a practice normally associated with tax avoidance and hiding wealth.
In 2010, PolyU was gripped by a management crisis after a group of teaching and administration staff launched a joint action urging the governing council to improve its governance and transparency after the university lost a record HK$900 million in the previous year.
A three-member review panel chaired by Dr York Liao delivered a damning report revealing that PolyU lacked a thorough business plan, budget forecast and exit strategy before setting up dozens of subsidiaries which eventually lost it more than HK$50 million.
The report set out four key recommendations. They included halting the appointment of senior staff as directors of such companies, considering exit strategies in business plans and establishing an effective governance structure and accountability. PolyU’s management accepted the report and pledged to improve governance.
But barely two to three years later, according to the latest batch of Panama Papers studied by the Post, PolyU proceeded to launch two offshore companies which lacked accountability.
“It is apparently a blatant violation of the recommendations made by the panel,” said Labour Party lawmaker and PolyU academic Dr Fernando Cheung Chiu-hung, who led the staff action in 2010.
Cheung said Yang, who joined PolyU as executive vice-president in 2010, was supposed to shut down the subsidiaries. The lawmaker said he had no idea why the now minister ended up establishing BVI firms instead.
“There is no reason for a publicly funded institution to set up offshore companies unless there’s something such as assets, transactions or directorship that you want to hide,” he said.
According to the panel report, Sun Wah-PearL Linux and Digital Forensics Limited, a joint venture now partially owned by one of the university’s BVI firms, PearL-Sun Wah (Offshore) Company, was losing HK$2.5 million as of 2009.
Wong Chun-long, a council member in 2013, told the Post that management also owed the public an explanation as to why the governing body was not informed of the decision to set up the BVI firms.
Meanwhile, Simon Lee of Chinese University’s school of accountancy, said the omission of BVI firms in PolyU’s financial statements constituted a breach of the guidelines set by the University Grants Committee, a major source of funding for local universities.
He cited the guidelines as saying that an institution that controls one or more subsidiaries as defined by the Hong Kong Financial Reporting Standard for Private Entities should prepare consolidated financial statements.
“As stated in the guidelines, the users of financial statements include the public. Universities use public money. They should contain more than what is required,” Lee said.
PolyU did not respond to inquiries. Yang earlier said there was nothing improper in the arrangement.
http://m.scmp.com/news/hong-kong/politics/article/1938265/hong-kong-polytechnic-university-move-set-two-offshore-firms
