Hong Kong Is a Top Gun in Arms Traffic

NEW YORK — Henry Fok has one of the biggest fortunes in Hong Kong. His estimated net worth of $1.3 billion qualifies him for Fortune magazine’s list of the richest men in the world, where he ranks above such wealthy Americans as Ted Turner and Jack Kent Cooke.

Fok, 68, made his money by supplying China’s Communist regime during the Korean War and the American-led trade embargo. Afterward, he branched out into shipbuilding, real estate and Macao gambling casinos. He built hotels and made multimillion-dollar contributions inside China, where government leaders reciprocated by praising him as a “patriotic capitalist.”

Now, Fok’s son, Thomas, sits in an American jail, held without bail and awaiting trial here on federal arms-smuggling and money-laundering charges.

On Oct. 1, Thomas Fok was arrested by U.S. Customs agents at John F. Kennedy International Airport and charged with conspiring to bring 15,000 AK-47 automatic assault rifles into this country. He was caught in a sting operation by undercover agents who said they were buying weapons for nationalist forces in Croatia.

Customs agents said in an affidavit that Thomas Fok, who is 41, “described himself as an agent representing various state organizations which belonged to the Ministry of Defense in China. . . . Fok also said that his past negotiations have been with the Iranian royal guard navy, Iranian missile sites, the Pakistan army and the Tamil Tigers of Sri Lanka.”

The automatic weapons were to be packed, two at a time, in cardboard boxes marked as containing sweaters. Meanwhile, law enforcement sources said, Fok was trying to buy samples of fiber materials that can be used in the nose cones of missiles.

Fok’s case provides a rare glimpse of how some of Hong Kong’s wealthiest and best-established individuals travel around the world making connections with shadowy figures and putting together murky deals in exchange for a piece of the proceeds.

The case also illustrates Hong Kong’s role as a center of international arms traffic. Over the last decade, China has moved to import high-technology goods from the West and to export relatively low-cost arms to Third World nations. In the process, Hong Kong--with its advanced banking, communications and transport facilities and its commercial traditions--has emerged as a hub and meeting ground for arms merchants.

Although Hong Kong is still a British colony, China will regain sovereignty over it in 1997. Already, Chinese officials exercise a considerable degree of indirect influence over the colony’s affairs.

“Hong Kong is quite an important link in the long chain (of Chinese arms deals),” said Chong-pin Lin, a specialist on the Chinese military at the American Enterprise Institute. “You have greater freedom of movement there. And in Hong Kong, you can make contact with the outside world more easily.”

Participants in Hong Kong’s arms traffic extend well beyond the mainland or Hong Kong Chinese. In fact, when Fok was arrested at Kennedy Airport, U.S. officials also detained a representative of a British company, who was charged along with Fok. Customs agents said the British firm was helping to arrange the weapons shipment.

According to Thomas Fok’s lawyer, Michael Hess of the New York law firm of White & Case, Fok has a wife and two children living either in Hong Kong or Canada. “He owns homes in both places,” Hess said. When he was arrested, Fok handed U.S. authorities a Canadian passport but gave them his home address in Hong Kong.

Hess would not respond in detail to the U.S. government’s accusations against Fok. “Thomas pleaded not guilty,” he said. “We are preparing our legal research and talking to the government about the case.” He said that the younger Fok is paying his own legal fees.

It is not clear whether anyone else will be accused in the case. U.S. law enforcement officials, who spoke on condition that they not be identified, said there is no evidence to link the elder Fok to the alleged arms transaction.

Henry Fok has two other sons, Timothy and Ian, both of whom help run his family businesses. However, family spokesman Edward Lam told the South China Morning Post that Henry Fok has had little contact with Thomas.

“He (Thomas Fok) is not part of the family business in Hong Kong,” Lam told the Hong Kong newspaper. “He was in Hong Kong a few months ago, and they seldom contact each other.”

The elder Fok is president of the Chinese General Chamber of Commerce of Hong Kong and has close ties to some of China’s most powerful officials, including President Yang Shangkun, a veteran military strongman who is probably the closest associate to Deng Xiaoping, China’s paramount leader.

Henry Fok is the leading investor in Canton’s ritzy White Swan Hotel, where foreign visitors to China such as Queen Elizabeth II and then-Vice President George Bush have stayed.

The elder Fok also has built a resort hotel and golf course in China’s Guangdong province, which adjoins Hong Kong. And he donated more than $10 million for a new swimming pool and other facilities at the sports complex in Beijing where China is hoping to sponsor the Summer Olympics in the year 2000.

Throughout the years, there has been occasional speculation that Henry Fok might be working closely with or as a front for the Chinese government in his Hong Kong business activities.

“China has helped Mr. Henry Fok to rescue (a Hong Kong shipping group),” the British magazine Economist reported five years ago. “Mr. Fok is taking the role that Cosco, China’s national shipping corporation, is unable to take for reasons of political face.”

In the 1970s, one of Fok’s companies held a monopoly on the supplies of sand from China to Hong Kong’s construction industry. Another Fok company, Far East Overseas Oil, was the sole distributor for Chinese petroleum products in Hong Kong after the oil embargo of 1973.

Although Thomas Fok told undercover U.S. Customs agents that he represents organizations within the Chinese Defense Ministry, law enforcement sources suggest that he may have been stretching the truth. There is no evidence to corroborate this claim, they say.

U.S. law enforcement officials say that the customs sting investigation that led to Fok’s arrest dates back about 18 months, to the time when undercover agents began talking to him about buying arms.

According to the affidavit U.S. Customs agents prepared before Fok’s arrest, undercover investigators began recording their phone conversations with Fok earlier this year and began corresponding with him by fax machine. It was a faxed message that contained Fok’s boast of his ties to the Chinese Defense Ministry and of his familiarity with Iran’s armed forces and missile sites, the affidavit said.

Last June, two undercover agents met with Fok and agreed to buy AK-47 automatic weapons from him for $403 apiece. In July, Fok sent three sample rifles to New York City on LOT, the Polish airline. Soon afterward, the customs officials said in their affidavit, Fok called one of the undercover agents and said that “he was holding an order for 15,000 AK-47 rifles and 500 RPG-7 rocket-grenade launchers.” The undercover agents eventually offered to buy the rifles but not the grenade launchers.

Fok also said that he had found a contact “who could assist in laundering profits from the guns transactions to evade the IRS,” the customs officials said.

According to their affidavit, Fok said that the contact who could provide these weapons was in London, and he later identified the British company as Rogers Aviation of Bedford, England. The British firm was supposed to obtain the weapons from a factory in Poland. Law enforcement sources say they believe that officials at the Polish factory thought they were entering into a legitimate transaction.

The total value of the arms deal was supposed to be slightly more than $6 million. On Oct. 1, Fok and representatives of the British firm flew from London to New York City, where customs officials said they intended to pick up $2.4 million as a down payment for the first shipment of weapons and to fly it back to Britain in a chartered plane.

But Fok was arrested at Kennedy Airport that day, along with Dennis Hartley, who handles munitions sales for Rogers Aviation, according to the affidavit. Both men were charged with conspiring to import weapons into the United States without a license and with conspiring to launder cash from the transaction.

Curiously, two months after their arrests, both Fok and Hartley are still in jail, waiting for a trial that is now scheduled to begin Feb. 24. Bail has not been set for either man. Hess, Fok’s attorney, a representative of one of New York’s most prestigious law firms, acknowledged that he has not asked for bail to be set for his client.

Henry Fok: ‘Patriotic Capitalist’

Financial interests and activities of Henry Fok, one of the world’s richest men, who has long had close ties with China’s government:

* Net worth: $1.3 billion.

* Laid foundation of his fortune by selling arms to Chinese Communists in 1950s; has subsequently donated millions of dollars to China, earning praise as “patriotic capitalist.”

* Invested in shipbuilding, hotels, real estate, gambling; developed monopoly on casino business in Macao.

* Leading investor, vice chairman of board of directors of White Swan Hotel in Canton.

* Chairman of Chinese General Chamber of Commerce in Hong Kong.

* Donated more than $10 million for construction of swimming pool at National Olympic Sports Center in Beijing.

* Helped finance road from Zhuhai to Canton in South China; built golf course and resort in town of Zhongshan, South China.

SOURCES: Fortune magazine, Associated Press, New China News Agency