A construction contractor in Hong Kong has been suspended and its staff arrested for corruption in relation to the alleged falsification of tests on concrete used for the Hong Kong-Zhuhai-Macao Bridge (HZMB) mega-project.
The alleged malpractice, discovered in May 2017, forced the Hong Kong Government to urgently check the structural integrity of the partially-completed project. Preliminary testing showed that the tested structures were not defective.
It was alleged that the contractor falsified concrete strength tests by replacing concrete samples with metal cylinders and high strength concrete cubes, and adjusted the times on testing machines to cover up irregularities.
The Government had engaged the contractor to carry out concrete and soil density testing for the HZMB project in 2013. It is alleged that the malpractice started in early 2015.
The ICAC arrested 21 of the contractor’s staff, who were then released on bail. The Government suspended the contractor from tendering for architectural and engineering consultancy services on Government projects for at least 12 months.
The ICAC said there was no evidence that any other contractors, material suppliers or public officials were involved.
Since discovering the malpractice in May 2017, the Government carried out visual inspections, non-destructive concrete strength tests and full coring on sections of the HZMB to check for anomalies. Tests on 1,400 stress-critical locations (47% of the total of 3,000 stress-critical locations) revealed that the tested structures were all up to standard. The testing is ongoing.
Put simply, this scandal is a disaster for the contractor involved. Its reputation has been tarnished, it cannot tender for Government projects for at least 12 months, and it may be liable for damages arising from its alleged misconduct. This is likely to severely impact the contractor’s bottom line in Hong Kong going forward.
All companies must be vigilant to ensure they root out and prevent corrupt activities within their operations. Here are quick tips to reduce the risk of being hit by a similar scandal.
- Monitor compliance and audit: Appoint a senior employee (or several) to monitor compliance across the organisation. Carry out regular audits of financial records and employees’ conduct. Consider engaging external accountants and lawyers to assist with the audit process
- Implement an anti-corruption programme: Put in place comprehensive policies and guidelines and provide regular training to staff.
- Encourage reporting: Adopt a procedure for employees to confidentially report corruption or other unlawful conduct that they see.
Dealing with a corruption investigation
Companies should be prepared for and respond appropriately when faced with a corruption investigation. Here are quick tips on dealing with investigations by the ICAC and similar bodies.
- Be prepared: Prepare and distribute a manual for employees on how to respond to investigations and dawn raids. Carry out training for employees, especially receptionists, managers, financial staff, sales staff, IT staff and in-house lawyers. Training may include running a “mock” dawn raid.
- Protect your rights: It is important to comply with any requests from investigators if you are required by law to do so. Equally, you are entitled to assert your legal rights. For example, in most cases you may object to producing a document that is subject to legal professional privilege.
- Confidentiality and PR: A company under investigation (and employees and officers of the company) should be careful not to disclose the fact that it is under investigation. A PR strategy should be prepared in case the investigation becomes public.
About the HZMB
The HZMB is a mega-size sea crossing linking Hong Kong, Zhuhai and Macao via a 22.9 km-long bridge and 6.7 km-long subsea tunnel. It is expected to be completed in December 2017. The Hong Kong section includes the Hong Kong Boundary Crossing Facilities, Hong Kong Link Road and Tuen Mun-Chek Lap Kok Link. The diagram below shows the HZMB main bridge and details of the Hong Kong works.