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Casino tycoon's family feuds over Macau fortune

By KELVIN CHAN,AP Business Writer

POSTED:
LAST UPDATED: 08:25 a.m. HST, Feb 01, 2011



HONG KONG— As three "wives" and 16 children of tycoon Stanley Ho grasp for control of his casino fortune, the veneer of professionalism has peeled from his business empire, one of many family-run companies facing succession time bombs in this southern Chinese entrepot.

The ailing, 89-year-old Ho is emblematic of a generation of Asian magnates who made their millions through cozy relationships with the region's political power brokers. They now face a world where governments are less tolerant of monopolies and where globalization has brought competition and innovation that sweeps aside weaker businesses.

Many of the outlandish trappings of the Asian-style crony capitalism found from South Korea to Hong Kong to Indonesia have faded. Still, the family business empires the old order sustained have sprouted numerous branches, creating a tangle of dynastic rivalries that belie the modern patina.

In Ho's case, there is a lot to fight over: his personal wealth of $3.1 billion, according to Forbes magazine, and the lion's share of the Macau gambling industry — the world's biggest. Ho once had a monopoly on Macau's casinos but now his business interests, which are listed on the stock exchange of neighboring Hong Kong, vie against giants like Las Vegas Sands Corp. and MGM Resorts.

Though his illnesses have left him a facsimile of his former flamboyant self, Ho's business rise has paralleled the fortunes of Macau.

The enclave grew from a seedy, colonial outpost administered by corrupt Portuguese administrators into a modern, Chinese-run gambling powerhouse that has overtaken Las Vegas. Macau reverted to Chinese sovereignty in 1999, and the government ended Ho's monopoly in 2002 to boost the economy. Last year, gambling revenues surged to a record $23.5 billion.

Key to Ho's gambling success was his now-deceased first wife, Clementina Leitao, whom he wed in 1948. Her father was a prominent lawyer in Macau, and her connections to Portugal and to Macau high society helped Ho and his partners win the casino monopoly in 1962. Around the same time, Ho married Lucina Laam under a Qing dynasty code which allowed men to take multiple wives. Hong Kong outlawed the practice in 1971.

Ho has fathered children with two other women, Ina Chan and Angela Leong, whom he refers to as his "wives," though he is not legally married to either. Ho reportedly met Chan, who was a nurse, when she was hired to take care of an ailing Leitao, who died in 2004.

The rival branches of the billionaire's family are now publicly feuding over control of his casinos and a collection of businesses that run everything from the ferries connecting Hong Kong and Macau to department stores, hotels, Macau's airport and its horse- and dog-racing tracks. Principally at stake is his $1.6 billion interest in Hong Kong-listed casino operator Sociedade de Jogos de Macau, known as SJM.

"Thanks partly to our relatively recent industrial emergence, most of the local companies are still in family control, not widely held, so we have a greater share of succession issues," said David Webb, a shareholder activist who runs the Hong Kong corporate governance watchdog Webb-site.com.

The power struggle erupted in public on Jan. 24 with a company statement that Ho had given his SJM stake to the families of his second and third wives. A flurry of claims and counterclaims by family factions ensued.

At one point, Ho was wheeled out in a chair by his third wife, Chan, to read a halting statement on Hong Kong television declaring the dispute had been settled. Ho's lawyer, who says the casino magnate was pressured into the statement and wants to divide his estate equally, filed suit to reclaim the assets, likely leading to a protracted legal tussle. Public relations firms for Ho's second and third families and for Ho's lawyer said he was not available to comment.

As the high-stakes drama plays out, it has highlighted the dilemma faced by a generation of aging Hong Kong tycoons who, reluctant to relinquish power, are beset by competing claims to their fortunes.

The family of Nan Fung Group founder Chen Din-hwa has been squabbling over his company, which has interests in property, textiles and shipping. Chen, 87, is Hong Kong's 11th richest person, according to Forbes, who puts his wealth at $3.8 billion.

The sons of Kam Shui-fai, the late founder of Hong Kong restaurant chain Yung Kee, renowned for roast goose, are battling for control of his estate. In 2008, the chief executive of Sun Hung Kai Properties, a major developer, was ousted by his two younger brothers after he accused them of plotting to remove him by portraying him as mentally ill.

Such disputes are "to a certain extent quite common in Chinese family businesses, particularly if the patriarch has a number of wives and concubines," said Victor Zheng, an assistant professor at Hong Kong University who has written a book on the Chinese inheritance system.

Tradition dictates that Ho give the family of his first wife a greater share of the estate, said Zheng, who added that it appeared as if the families of the second and third wives were plotting to claim a bigger share.

Elsewhere in Asia, the handover of family wealth between generations is now largely choreographed in advance.

Under the longtime dictatorship of Indonesia's Suharto, whose lucrative family-run businesses dominated the economy, sibling rivalry over multimillion dollar deals burst into the public arena. But today, disputes in most family-run conglomerates — the Salim Group, for instance, headed by Liem Sioe Liong — tend to be handled discretely. One generation quietly passes on control to the next.

Likewise in South Korea, where family controlled conglomerates, known as chaebol, have long been the drivers of the country's economy. Control of the two most prominent chaebol — respectively anchored by Samsung Electronics Co. and Hyundai Motor Co. — is widely expected in coming years to pass smoothly to a third generation.

Ho, however, has long courted publicity.

Allegations of organized crime have dogged him for years, most recently in a 2010 report by the New Jersey gaming commission that accused him of letting Chinese criminal gangs, or triads, prosper inside his casinos during the 1990s.

Ho denied any ties and has never been charged.

Born in 1921 into Hong Kong's wealthy Ho Tung family, he was 13 when his father lost his fortune in a stock market crash and abandoned the family.

During the Second World War, Ho, fluent in English and Chinese, was working as a telephone operator for British forces when the colony fell to Japan. He ditched his uniform and boarded a boat for neutral Macau, where legend has it he landed with only $10 Hong Kong dollars in his pocket, and started a trading business that supplied Japanese forces.

During the war, he also led smuggling and trading trips up the Pearl River Delta and its tributaries in neighboring Guangdong province in China, on one occasion surviving a pirate attack, according to the book "Asian Godfathers" by Joe Studwell, who cites a rare and unpublished interview given in 1995 to historian Philip Snow.

He has been known to spend lavishly. In 2007, he paid $8.9 million for a bronze horse head stolen by French troops 150 years ago from China's imperial palace so he could donate it to a Chinese museum.

In August 2009, he underwent brain surgery to remove a blood clot after falling and hitting his head, according to news reports. He didn't leave the hospital for seven months.

In his twilight, Ho appears an increasingly tragic figure, but some believe the succession battle may be the casino king's one last power play.

"I think Dr. Ho himself may try to manipulate these different branches of the family, and the problem may become even messier," said Hong Kong University's Zheng.

____

Associated Press writers Kelly Olsen in Seoul, South Korea and Robin McDowell in Jakarta, Indonesia contributed to this story.






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