Hong Kong authorities have arrested two people suspected of misleading the government into entering a now-partly suspended HK$52.9 million contract to supply water bottled from mainland China to government offices in the city.
The duo – a married couple – were arrested on suspicion of fraud on Sunday, the police force and customs authorities said on Monday. They have launched a probe into the company held by the 61-year-old man and his 57-year-old partner, officers told a press conference.
A preliminary investigation suggested that they had secured the contract to supply water to civil service offices through fraudulent means, said Ernest Wong, chief superintendent of the Commercial Crime Bureau.
The authorities found that the company had no relationship to a supplier in Guangzhou that it purported to be sourcing the water from, and instead sourced the product from a different supplier in Dongguan.
Aside from the couple, a mainland Chinese man is also wanted for suspected involvement in the case, Wong said. The officers did not mention the names of the companies involved.
‘No affiliation’
The Government Logistics Department said on Saturday that the government had “partially” terminated the contract with a company called Xin Ding Xin Trading Co. which won the deal in June.
Xin Ding Xin would supply bottled water branded “XinLe” and manufactured by Robust (Guangdong) Drinking Water’s Guangzhou branch to government offices for a 36-month period starting from late June.
“Having received information on [Xin Ding Xin]’s business operation recently, the GLD was not satisfied that [it] would still be capable of performing the contract,” the department said in a statement on Saturday.
However, the Guangzhou supplier said it had no affiliation with the company held by the two suspects, only that it had been approached by the company for water quality reports, said Fanny Kung, the bureau’s senior superintendent.
Wong also said the authorities believed the couple had used the reports to prove that the water was up to standard, in order to meet the GLD tender requirements.
Wong also said he understood that the authorities had not paid for the water, citing a 30-day payment period in the tender terms.
Yuen Long warehouse
The police investigation led to a warehouse in Ngau Tam Mei, Yuen Long containing some 2,600 bottles of water, which were traced back to the Dongguan water plant. As of Sunday, about 30,000 bottles had been delivered.
Along with their mainland counterparts, the authorities will also look into the roles of the two suspects as well as the hygiene and water quality conditions at the Dongguan facility.
At the press conference, Head of the Customs and Excise Department’s Trade Descriptions Investigation Bureau Tommy Kwok said that making a false trade description in the course of trade or business can be punishable by a HK$500,000 fine and five years in prison.
Meanwhile, Secretary for Financial Services and the Treasury Christopher Hui has set up a task force to review the government’s procurement regime, with Hui’s bureau also inviting the Audit Commission – the public spending watchdog – to review the tender procedure and identify any negligence or deficiencies.
