(NOTE: This is one of my many investigative exposés on commercial crimes during my newsroom days. It bagged the Society of Publishers in Asia (SOPA) award for Excellence in Business Reporting in 2005. Somehow the link to the story is not working so I am pasting the entire script below. I also penned a follow-up piece under a different byline following the Lehman Brothers mini-bonds scandal – you can find it here.)
By Vanson Soo 2004-11-01
Fund losses spark fury
There is never a shortage of bad investments _ or people eager to sell them to you. From Internet come-ons to “boiler rooms” in Bangkok, investors are bombarded with a steady stream of supposedly low-risk, high-return deals.
What is not so common is an investment scheme making similar claims marketed by one of the United Kingdom’s biggest financial institutions carrying what many investors took to be the implicit approval of reputable banks on three continents.
More than 7,000 Hong Kong investors, many of them affluent professionals and small businessmen, invested in one such product, the Offshore With Profits (OWP) funds sold by Clerical Medical Insurance (CMI), a subsidiary of Halifax-Bank of Scotland, one of the UK’s biggest mortgage lenders. Hong Kong was the place where a significant amount of sales for a fund that totalled about US$3.5 billion at its peak _ it is now about half that size _ took place with investors here typically investing more than US$100,000 each.
Although CMI says it does not have complete data, available information suggests that Hong Kong investors alone put more than US$700 million in the funds. Most now wish they had not. That is especially true of those who borrowed up to three times their initial investment to buy extra shares in the fund, only to see its asset value dive. At stake is whether or not they were misled by the sales pitch _ and whether Hong Kong regulators will conduct a thorough investigation into what is shaping up as one of the biggest losses in Hong Kong fund history.