Pressure mounts on Hong Kong leader over payout amid crisis

HONG KONG (Reuters) - Democratic lawmakers on Thursday demanded an investigation into a $6.4 million (3.95 million pounds) business payout to Hong Kong's embattled leader Leung Chun-ying, as political fallout grew from massive student-led protests in the Chinese-controlled city.

The controversy ratchets up the pressure on the pro-Beijing leader just days after tens of thousands of people occupied the streets of the Asian financial centre to demand full democracy, and called for Leung to step down.

The campaign against the former property surveyor and son of a policeman has now extended from the streets to the city's legislative chambers where democrats have the numbers to veto major decisions and potentially cause policy paralysis.

Australia's Fairfax Media reported this week that engineering firm UGL Ltd paid Leung a total of more than $6 million in 2012 and 2013 in relation to its acquisition of DTZ Holdings, a property consultant that employed Leung as its Asia Pacific director before he took office in July 2012.

Leung's office denied any wrongdoing. DTZ was not immediately available to comment on Thursday, while UGL denied any wrongdoing, saying it was under no obligation to disclose the agreement.

As part of the contract Leung signed with UGL in December 2011, he agreed to promote the "UGL Group and the DTZ Group as UGL may reasonably require, including but not limited to acting as a referee and adviser from time to time", according to a copy seen by Reuters.

Leung's office said in a statement on Thursday that such assistance would only be provided in the event that he failed to be elected Hong Kong leader, and providing that such assistance would not create any conflict of interest.

"We would welcome an investigation, invoking the powers and privileges ordinance so that we can summon witnesses (including Leung) and papers and other evidence," Emily Lau, the head of the Democratic Party, told Reuters.

"We have to proceed very cautiously. It's a very serious allegation and we need to look into it more carefully before deciding on any impeachment action ... though we won't rule it out."

Lau said the democrats would try to form a select committee to investigate Leung, although the formation of such a group would have to be backed by the entire 70-seat legislature and there was no guarantee that would happen, given the pro-Beijing majority.

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Scenes of tear gas wafting between some of the world's most valuable buildings, violent clashes, mass disruptions to business and commuter chaos over the past 11 days have underscored the challenges Beijing faces in imposing its will on Hong Kong.

The protests, triggered by China's decision in August to rule out direct elections in 2017, have already caused a back-log in the former British colony's Legislative Council where scores of meetings have been cancelled.

Two lawmakers from the radical group, People Power, plan to escalate their actions to try to paralyse the government's operations this week, local media reported.

On Friday, student leaders are expected to hold talks with government officials in a bid to ease tensions, but they have little hope of finding a solution to end the protests.

Protest numbers have dwindled to just a few hundred people at various sites around the city, but activists have managed to keep up their blockade of some major roads.

The report on payments to Leung will only pile further pressure on the government and could even lead protesters to pull out of the talks. They plan to announce the next wave of their civil disobedience campaign on Thursday evening.

The Fairfax Media report does not suggest Leung committed any crime, although it raises questions about his transparency.

Hong Kong shareholder activist David Webb said Leung appeared to be in breach of Hong Kong's Prevention of Bribery Ordinance.

"It is illegal to receive an advantage without the consent of your principal, if you?re are an agent. In legal speak, that's what he is, he was an agent of DTZ Holdings plc, in administration," he said.

"So I think the ICAC needs to investigate whether he received an advantage without the knowledge and consent of Ernst and Young."

The ICAC refers to Hong Kong's graft-busting agency, the Independent Commission Against Corruption.

Leung signed the deal with UGL in December 2011, two days before he stepped down as Asia Pacific director of DTZ, which is now a division of UGL.

He had already announced his plans to run for Hong Kong's top job, although his main rival, Henry Tang, was the presumed front-runner until he was tarnished by an illegal construction scandal and self-confessed marital infidelities.

An election committee stacked with Beijing loyalists chose Leung as leader in March 2012 and he was sworn in on July 1.

(Additional reporting by Clare Baldwin, Greg Torode and Donny Kwok,; Writing by Anne Marie Roantree; Editing by Jeremy Laurence)

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