“The Goldfinger”, a glitzy, big-budget movie (produced in part by AMTD Group, which is also the owner of DigFin), is a fictionalized account of the rise and fall of George Tan Soon-gin’s Carrian Group.
Carrian was the defining financial scandal for Hong Kong and Southeast Asia prior to the Asian Financial Crisis of 1997-98. It still holds lessons for contemporary finance and fintech.
The movie, directed by Felix Chong and starring Tony Leung and Andy Lau, presumably fictionalizes its characters because some of the people involved in Carrian are still alive – including George Tan.
It also doesn’t recognize the Malaysian element, plumping instead for a ‘Timorlaysia’. Whereas Hong Kong’s institutions eventually succeeded in bringing justice to the perpetrators, and used the scandal to instill a culture of corporate governance, the 1MBD affair suggests no such lessons have been learned in Malaysia.
The fictionalized avatar of George Tan is Tony Leung’s Henry Ching, who is portrayed throwing money around and leading a high-profile, glitzy life. Witnesses recall Tan as charismatic, but less about the movie’s booze and girls, and more about seducing bankers and investors.
A witness account by Target, an independent, subscription-only business newsletter operated by Raymonde Sacklyn, still exists online. He encountered George Tan for the first of many times in 1979:
“It was difficult not to like him because he exuded knowledge of his business, but in a modest manner, without a hint of ostentation; and, he permeated confidence in his ability to be able to execute his ideas, no matter what they were said to be. Mr George Tan Soon Gin seemed to have an hypnotic effect on nearly everybody around him.”
The movie portrays Henry Ching in full bling, but Sachlyn reports that George Tan was more obsessed with superstition, although he might have used this as a ruse; he tended to portray himself soberly, to look like a sound credit.
There’s a scene in “The Goldfinger” when British bankers approach the high-flying Henry Ching with an offer to provide a US$101 million loan, which Ching throws back in their face telling them this is an unlucky number, so how about US$168 million instead? According to Sacklyn, such a conversation did take place with a consortium of foreign merchant bankers (with the numbers starting at US$150 million and Tan grabbing an extra US$15 million to ensure good luck).
Sacklyn writes: “Some people wondered whether or not [Tan] was really superstitious or that he used this as a ruse. Regardless, [he] charmed his bankers to fund his every-hungry group of companies with loans, all the way up to HK$10 billion.”
Hong Kong in the late 1970s and early 1980s was not yet an international financial center, but it was on the verge, transitioning out of its manufacturing ‘Asian tiger’ roots. Its burgeoning securities market was lively but its institutions were weak, dominated by four stock exchanges, family-controlled banks, new-money real-estate tycoons, and mighty British-owned conglomerates (and of course HSBC, then known as Hongkong Bank).
Along with booms in Asian wealth came, inevitably, corruption. Hong Kong in the 1960s and 1970s was incredibly corrupt. The initial arena of corruption was public: ‘tips’ were expected for everyone from traffic cops to hospital nurses. Graft in public housing was raft. The chief superintendent of police was on the take, and fled to the UK.
The public uproar forced the colonial government to act, and it set up the Independent Commission Against Corruption in 1975, reporting directly to the governor. Cops hated it, and “The Goldfinger” portrays a rebellion that forced the governor to promise a moratorium on minor offences, while doubling down on ICAC’s mission – a wise move that paved the way for ICAC to become the leading force for cleaning up the territory. Its success has made it a model for many emerging markets.
But as Hong Kong evolved from an Asian manufacturing tiger into a financial and legal hub, ICAC’s mission changed too, for it then began going after corruption in the private sector. The Carrian Group would become its primary focus in this regard.
Andy Lau plays Lau Kai-yuen, a principal investigator, who is a fictionalized blend of real-life investigators, including Ricky Chu Man-kin, Christopher Chui Yiu-shing, and Brian Carroll.
The real-life special task force was assembled in 1985 and included more than 40 officers combing through 47 filing cabinets filled with Carrian and related-company paperwork. The movie throws in some made-up gangster stuff, but it also shows that the key to the investigation was meticulous forensic accounting.
The Carrian Group
George Tan’s background is unclear (Malaysian or Singaporean?) but he rocked into Hong Kong and became friends with a local tycoon, Chung Ching-man, who helped him acquire a sleepy listed company (Mai Hon Enterprises); the two men’s companies engaged in many cross-dealings among entities. Tan renamed his prize Carrian Investments and went on a speculative buying spree that mesmerized Hong Kong.
The signature deal was the purchase of Gammon House on the edge of Central for HK$1 billion, and flipped it within seven months for HK$1.7 billion, netting a 70 percent profit. The press and the business community wanted to know where Tan got the money for such a deal; he never answered the question, insinuating it might come from the Philippines’ Marcos family or some other untraceable connection.
Target’s Sacklyn quotes Tan’s response to such questions: “Is it important to know their names? Isn’t it enough that they are willing to invest in Hongkong?”
Gammon House was then rebranded as Bank of America Tower. The deal caught the attention of the stock exchanges and the global banks, which led to Wardley’s, the investment-banking arm of HSBC, forwarding loans to Carrian. These loans went to purchasing many assets, from a bank and taxi and shipping companies in Hong Kong to real-estate deals in the US and Singapore.
Within three years, Tan had parlayed a HK$200 million investment in Mai Hon Enterprises into a US1$ billion-plus global portfolio. The movie portrays this and his use of inflating share prices to gobble up more assets, which are then used as collateral for the next purchase. But beneath everything was the question: where did the money originate?
The money, it turned out, came from Malaysia. The swindle was straightforward: Tan and his associates bribed senior bankers and auditors in Malaysia to provide them with extensive loans. The awful irony is that these corrupt officials represented Bumiputra Bank, a government-owned institution established by the Mohammed Mahathir government to serve small Malay business owners.
Carrian ran up enormous debts, as it relied on share-price manipulation and bank debt to keep the party going. The collapse began with Paul Volcker’s US Federal Reserve jacking up interest rates to combat inflation. Hong Kong adopted a currency board pegging its dollar to the US greenback in 1983, itself a response to a local currency crash set off by jitters over the 1982 Sino-UK negotiations on Hong Kong’s status. Carrian’s confidence game required the one thing that now didn’t exist. When international banks started calling in their loans, Carrian didn’t have the money.
This was more than just a problem for Carrian, however. The group had become ‘too big to fail’, akin to Lehman Brothers in 2008.
Every major institution was exposed to Carrian. The extended group of companies employed about 40,000 Hongkongers, making it a vital stabilizer to the economy. Its stock was held by nearly every retail and institutional punter; its shares were held as collateral by many trading companies and family conglomerates. Carrian had built up an empire without ever paying in cash. But it was all hot air.
Many powerful groups would be embarrassed by Carrian’s collapse. Vickers da Costa, a leading stockbroker, and senior officers of law firm Johnson, Stokes and Master, and auditor Price Waterhouse (before it became PwC), were implicated, as was Ewan Launder, who then headed Wardley, HSBC’s investment bank (he was charged with corruption in 1981).
However, most of this didn’t come to light until the macro picture changed in 1983 – another case of a surprise hike in the price of money that unveiled the hucksters. That same year, a Malaysian bank auditor named Jalil Ibrahim was sent to Hong Kong to investigate unauthorized loans from Bank Bumiputra, and he was found murdered. This set off the police investigation which then led to ICAC’s involvement.
Although the ICAC and the police built strong cases against Tan and his co-conspirators, they underestimated how a rich, well-connected person could thwart justice. Twice the ICAC took Tan to trial, in 1986 and in 1992, and both cases collapsed.
The movie version portrays one instance of a British judge greeting Tan obsequiously before throwing out the case. This account is backed up by Sacklyn, who says of the presiding judge, Justice Barker:
“During the trial, he took long luncheons in the Hongkong Club, and, nearly always, drank copious quantities of alcohol…at the start of each trial day, it was common for Mr Justice Barker to ask, prior to the start of the day’s proceedings, ‘Mr Tan, I hope you are well today’, or statements to that effect.”
Simon Bowring, an esteemed Hong Kong-based journalist and historian, noted the only severe penalties went to the Malaysian fixers. Wardley’s Launder as well as a few other international bankers got off with light sentences or fines for accepting bribes. He wrote of the affair in the mid 1990s:
“The two were important cogs in the system of corrupt loans, but hardly kingpins. They, non-Chinese, non-British became the fall guys while bigger fish received little or no punishment.”
Bowring was highly critical of the judges’ refusal to accept the ICAC’s case of linking payments and bribes to specific favors given to George Tan. Was Hong Kong going to take white-collar crime seriously?
The final verdict
The ICAC finally, patiently, achieved the win. The key turned out to be another Malaysian, Lorrain Osman, who had facilitated bribes to Bank Bumiputra for extending massive loans to Carrian. Osman had fled to Europe and was jailed in France, but it took ICAC many years to get him extradited.
Osman, perhaps remembering the fate of the murdered Jalil Ibrahim, used his lawyerly training to fight extradition, but in 1993 he went to Hong Kong. He testified that he helped Carrian defraud Bank Bumiputra and the Malaysian government by funneling US$292 million of loans to a shell company in Hong Kong controlled by Tan.
Tan was found guilty and served three years in prison.
As depicted in “The Goldfinger”, the Carrian case consumed the careers of many officers. This was no ordinary case: the ICAC’s credibility was at stake. The size of the scandal and its insidious corrupting of justice made it all the more important for Hong Kong’s future as a global financial center that crimes this brazen must be punished.
The movie ends on a suitably ambivalent tone, with Andy Lau’s investigator finally seeing his nemesis go to jail, but at a high personal cost – and knowing that for more than a decade, Tony Cheung’s tycoon continued to bribe powerful people in order to remain a free man.
But the ICAC did win. Hong Kong was now on a US dollar peg system, backstopped by the Hong Kong Monetary Authority’s Exchange Fund, while HKMA granted three big banks (HSBC, Bank of China, and Standard Chartered) the privilege of printing the territory’s cash.
Carrian had been the most spectacular scandal, but many banks were caught short by the 1983 interest-rate rise. The HKMA used its Exchange Fund to bail out and consolidate several of these banks, asserting itself as a lender of last resort. It uncovered rampant connected lending, fraud, and generally bad risk management.
The government followed up with the 1986 Banking Ordinance that imposed corporate-governance standards, capital-adequacy and liquidity requirements, and robust regulation. This same year saw the city’s four stock exchanges merged into what is today Hong Kong Exchanges and Clearing, with proper oversight under the Securities and Futures Commission.
But for people at the time, it was the Carrian scandal that captured the imagination, both revealing the corruption of an embryonic financial capital as well as glamorizing one man’s ability to bullshit and bribe his way to incredible wealth. A proper global financial center relies on trust, and George Tan was walking evidence that trust was in short supply. The ICAC, by tirelessly pursuing this case, established the trust required for the new institutions of Hong Kong to flourish.
Lessons for today? These scandals are as timeless as they are iterations of the same concept. Remember what Tan said to the journalist, Sacklyn: “Is it important to know their names? Isn’t it enough that they are willing to invest in Hongkong?”
Yes, it’s important to know the names! The sources of money! To have a proper audit and paper trail of relationships and dealings! Because if a community ignores these questions because it’s thrilled by a wheeler-dealer’s charisma and apparent success, then it is setting itself up for a disaster. This was true today with, say, FTX – and it continues to be true for any part of crypto or TradFi where opacity is condoned.
In the meantime, enjoy “The Goldfinger” – don’t take it too seriously (it’s entertainment) but also appreciate that the essence of its story is true, and though it’s set in 1980s Hong Kong, its tale is universal.