WEBVTT - ‘The Great Wall of China’: A law firm’s cautionary tale 0:00:04.880 --> 0:00:10.520 The Australian Financial Review. When Australian law firm Mallison Stephen 0:00:10.600 --> 0:00:14.600 Shak merged with China's king and Wood in twenty twelve, 0:00:15.080 --> 0:00:16.280 it broke new ground. 0:00:16.800 --> 0:00:21.760 So Kate WM is the first international firm headquartered in Asia. 0:00:22.440 --> 0:00:26.880 So the future for US is aligned with very much 0:00:27.000 --> 0:00:30.800 the emergence of Asia, including China. 0:00:30.880 --> 0:00:34.000 Shi Jimping was just coming to power, and while the 0:00:34.040 --> 0:00:39.040 two countries' political and legal systems were vastly different, most lawyers, 0:00:39.120 --> 0:00:43.320 politicians and business people believe China would continue to open up. 0:00:43.240 --> 0:00:43.800 To the world. 0:00:44.920 --> 0:00:48.120 One person who was there right from the start was 0:00:48.200 --> 0:00:52.560 Chinese lawyer Rupert Lee. He was integral to the merging 0:00:52.600 --> 0:00:56.240 negotiations and would go on to become the firm's chief 0:00:56.280 --> 0:01:01.840 operating officer its third most senior executive. But late last year, 0:01:02.320 --> 0:01:07.080 Rupert Lee was out. His sudden departure led Financial Review 0:01:07.160 --> 0:01:11.280 journalist Max Shanahan to start digging around, and what he 0:01:11.400 --> 0:01:15.920 discovered among court files in Beijing, allegedly corrupt wind farm 0:01:15.959 --> 0:01:20.479 deals in Montenegro and a controversial legal conference in Russia, 0:01:21.040 --> 0:01:26.479 has raised serious questions about how Kingenwood Mallison's manages risk 0:01:26.640 --> 0:01:29.560 and conflicts across its jurisdictions. 0:01:30.120 --> 0:01:32.800 Kingwood Mallisons has no independent directors who might pull them 0:01:32.880 --> 0:01:34.800 up and say, you know, hold on what deals we 0:01:34.920 --> 0:01:38.720 being exposed to? Why is Rupert who's on our global 0:01:38.720 --> 0:01:41.600 board worrying eight million Hong Kong dollars from the firm? 0:01:41.680 --> 0:01:42.680 When's he going to pay it? Buck? 0:01:43.319 --> 0:01:47.199 Welcome to the Finn. I'm Lisa Murray. This week Max 0:01:47.240 --> 0:01:52.720 Shanahan on kwm's China experiment and whether it can last. 0:02:01.160 --> 0:02:16.320 It's Thursday, June nineteenth. Hi, Max, thanks for coming on 0:02:16.360 --> 0:02:20.280 the podcast, Lisa, thanks for having me. KM has been 0:02:20.360 --> 0:02:24.840 operating as a global law firm since twenty twelve. What 0:02:25.080 --> 0:02:27.919 made you decide to start looking into the merged firm 0:02:28.000 --> 0:02:29.720 and how it works now? 0:02:30.240 --> 0:02:33.040 Oh, well, I've always been interested in how the mergers worked. 0:02:33.560 --> 0:02:36.079 It's a merge between an Australian and a Chinese law firm. 0:02:36.120 --> 0:02:39.240 They're such radically different legal systems it must be really 0:02:39.320 --> 0:02:41.679 difficult to bridge those systems. How are they pulling it off? 0:02:41.720 --> 0:02:43.960 If they are pulling it off? And so the way 0:02:43.960 --> 0:02:46.679 this sort of all came about was I'd written a 0:02:46.720 --> 0:02:50.960 story about the global chief executive retiring Soe Kench and 0:02:51.000 --> 0:02:53.440 then I started to hear about this guy Rupert Lee, 0:02:53.560 --> 0:02:56.880 who was the global chief operating officer, heard that he 0:02:56.960 --> 0:02:59.200 was leaving as well, and I'd planned to write a 0:02:59.240 --> 0:03:01.960 story about it. But then last October one of the 0:03:01.960 --> 0:03:05.840 international legal trade publications reported that not only was he 0:03:05.919 --> 0:03:08.560 leaving the firm, Kingwood Mallison's was suing him for eight 0:03:08.600 --> 0:03:11.160 million Hong Kong dollars, and so that sort of set 0:03:11.160 --> 0:03:12.440 off all sorts of red flags. 0:03:13.480 --> 0:03:15.520 So he started looking into Rupert Lee. 0:03:16.040 --> 0:03:18.320 Yeah, so it turned out that he got himself into 0:03:18.400 --> 0:03:21.320 quite a bit of legal and financial trouble. So obviously 0:03:21.360 --> 0:03:23.960 there was some sort of falling out, and katiewm had 0:03:24.000 --> 0:03:27.520 sued Rupert Lee for taking an eight million Hong Kong 0:03:27.520 --> 0:03:30.560 doll alone from the Hong Kong partnership. So it got 0:03:30.600 --> 0:03:32.480 to the points where we had to try and track 0:03:32.560 --> 0:03:34.800 him down. By this time he'd left the firm, he 0:03:34.880 --> 0:03:36.720 was sort of difficult to get in touch with. So 0:03:36.760 --> 0:03:39.160 we sent someone around to his place in Hong Kong, 0:03:39.240 --> 0:03:41.920 in quite a nice neighborhood on Hong Kong Islands, and 0:03:41.960 --> 0:03:44.520 we dropped a list of questions under his door. A 0:03:44.520 --> 0:03:46.600 few days went by and I managed to track down 0:03:46.640 --> 0:03:48.240 a phone number and I gave him a call and 0:03:48.280 --> 0:03:50.520 he said he'd received our questions and he was going 0:03:50.560 --> 0:03:51.520 to send me a response. 0:03:52.040 --> 0:03:55.560 So before we delve into Rupert Lee's financial and legal 0:03:55.600 --> 0:03:59.400 problems and how he responded to your questions, let's go 0:03:59.520 --> 0:04:02.720 right back to the start. Why did Mallisons and King 0:04:02.840 --> 0:04:05.160 and Would decide to merge in the first place. 0:04:05.920 --> 0:04:08.320 So Mallison's has always been one of the top firms 0:04:08.320 --> 0:04:11.120 in Australia. It was founded almost two hundred years ago. 0:04:11.520 --> 0:04:15.000 Two of the current High Court bench did time at Mallison's. 0:04:15.120 --> 0:04:18.279 There's sort of high profile business people and war directors 0:04:18.400 --> 0:04:22.200 like Nicola Wakefield Evans for example. They're sort of smattering 0:04:22.240 --> 0:04:25.200 of kind of conservative politicians that have come out of there. 0:04:25.520 --> 0:04:27.240 And so it's a place that if you go through 0:04:27.320 --> 0:04:29.080 law school and you get a clerk shup at Mallison's, 0:04:29.480 --> 0:04:31.640 you're sort of set up for a good career if 0:04:31.680 --> 0:04:33.479 you stay in the firm all through the connections you 0:04:33.560 --> 0:04:35.520 get you can go on to arrange different careers in 0:04:35.600 --> 0:04:38.240 the bar or in business. And so the context of 0:04:38.279 --> 0:04:41.880 the merger is about fifteen years ago a lot of 0:04:41.880 --> 0:04:44.920 Mallison's rivals in Australia were doing deals to tie up 0:04:44.920 --> 0:04:47.640 with UK firms to add some sort of global element 0:04:47.680 --> 0:04:51.039 to their business. So Free Hills, an Australian law firm, 0:04:51.040 --> 0:04:53.440 did a tie up with Herbert Smith Allen's, one of 0:04:53.440 --> 0:04:56.480 their big rivals with Link Leaders, a UK firm and 0:04:56.520 --> 0:04:59.000 Mallison's had tried the other few times but nothing really 0:04:59.360 --> 0:05:01.640 came to pass, so they started to talk to China. 0:05:01.760 --> 0:05:02.159 Mm hmm. 0:05:04.240 --> 0:05:07.200 Chinese President Hu Jintao arrived at the White House to 0:05:07.360 --> 0:05:11.960 an elaborate welcome ceremony. The two leaders spent most of 0:05:12.000 --> 0:05:16.480 their time talking about the economy, both repeatedly uttering the word. 0:05:16.320 --> 0:05:18.599 Of the day cooperation, cooperation. 0:05:18.800 --> 0:05:21.000 And at this time China's economy was really booming and 0:05:21.040 --> 0:05:23.120 it was the next big thing. Trade between Australia and 0:05:23.200 --> 0:05:26.320 China was really expanding at a rapid base. 0:05:26.640 --> 0:05:29.159 Well it was because of the continuing demand from China, 0:05:29.279 --> 0:05:32.359 largely that Australia's economy managed to fare better than most 0:05:32.360 --> 0:05:35.080 developed countries during last year's global financial crisis. 0:05:35.080 --> 0:05:37.279 It was opening up its economy and everyone thought this 0:05:37.440 --> 0:05:40.520 growth and liberalization would just continue as it was. 0:05:40.760 --> 0:05:44.240 The pilot Free Trade Zone allows foreign competitors' access to 0:05:44.320 --> 0:05:48.000 China's highly protected services sector. The government is promising to 0:05:48.040 --> 0:05:50.680 cut through the red tape for businesses opening here and 0:05:50.680 --> 0:05:52.400 give investors tax benefits. 0:05:52.760 --> 0:05:55.200 The merger was eventually done into the last few months 0:05:55.200 --> 0:05:59.279 of the Hugean Taoer era, and there was a new leader, Xijimping, 0:05:59.440 --> 0:06:01.880 who was meant to continue on this liberalization. 0:06:02.360 --> 0:06:05.320 However, it is widely hoped that his new government will 0:06:05.360 --> 0:06:08.440 take some drastically needed reforms in order to get the 0:06:08.480 --> 0:06:11.680 country's economy back on track and to fight the ever 0:06:11.720 --> 0:06:13.279 growing problem of corruption. 0:06:14.120 --> 0:06:17.200 I was actually in China at the time in twenty twelve, 0:06:17.200 --> 0:06:20.240 and I remember that period. I remember the merger and 0:06:20.240 --> 0:06:23.000 everyone being so excited about it, and I also remember 0:06:23.440 --> 0:06:26.560 writing stories about China at the time opening up not 0:06:26.680 --> 0:06:31.360 just economically but politically. Everyone expected political reforms from Sheeting Ping, 0:06:31.520 --> 0:06:34.159 So there was a lot of optimism at the time. 0:06:34.560 --> 0:06:37.080 And both firms saw a huge opportunity in this to 0:06:37.120 --> 0:06:40.080 capitalize on that sentiment, and so the dually ended up 0:06:40.080 --> 0:06:42.120 doing was with King and Wood, which is one of 0:06:42.120 --> 0:06:44.080 the top Chinese firms that was set up in the 0:06:44.120 --> 0:06:47.680 early nineties just as private law firms were first allowed 0:06:47.720 --> 0:06:50.640 in China, and from the start it wanted to really 0:06:50.640 --> 0:06:54.960 focus on doing international work and appealing to Western clients, 0:06:55.320 --> 0:06:57.080 so its name is a great example. There was no 0:06:57.200 --> 0:07:00.840 King no Wood. They were just emulating this ideal of 0:07:00.880 --> 0:07:05.200 what an imagined kind of authoritative and well connected Western 0:07:05.279 --> 0:07:08.039 law firm looks like. At the time they merged, there 0:07:08.080 --> 0:07:10.200 were sort of roughly the same size between one hundred 0:07:10.200 --> 0:07:12.960 and fifty two hundred partners, and now the Chinese partnership 0:07:13.000 --> 0:07:16.680 is double the size of the Australian partnership. And there's 0:07:16.680 --> 0:07:18.960 this great scene in a book that was written about 0:07:19.080 --> 0:07:22.600 the history of Kingwood Mallson's where these three senior Australian 0:07:22.600 --> 0:07:25.200 partners get on a plane to Beijing and then they 0:07:25.280 --> 0:07:27.800 turn up in their shirt sleeves and it's freezing cold, 0:07:27.840 --> 0:07:30.320 and they make their way to the Kingwood offices in 0:07:30.320 --> 0:07:33.920 this big tall building in Beijing, and they greeted in 0:07:33.960 --> 0:07:36.520 this huge boardroom. There's only three of them, and on 0:07:36.520 --> 0:07:39.600 the other side there's eleven Chinese partners and this guy 0:07:39.640 --> 0:07:42.520 who was managing partner, as time Strooke Fuller, he leans 0:07:42.520 --> 0:07:44.600 across to his colleagues and he says, you know, I 0:07:44.600 --> 0:07:45.680 think we've undercooked this. 0:07:46.440 --> 0:07:51.440 But despite the Mallison's delegation being completely out numbered, the 0:07:51.560 --> 0:07:55.840 talks went well, the two firms did end up eventually merging. 0:07:56.720 --> 0:07:59.720 Tell us about the deal, how did it actually work. 0:08:00.400 --> 0:08:03.000 So the firm's structured as a Swiss Varian, which is 0:08:03.040 --> 0:08:06.320 this sort of structure that's not uncommon in these big 0:08:06.360 --> 0:08:10.480 international law firms, and it means that each member partnership 0:08:10.480 --> 0:08:13.800 in each country is financially separate, so things go badly 0:08:13.840 --> 0:08:15.680 in one part of the world, it doesn't bring the 0:08:15.720 --> 0:08:18.080 rest of the firm down with it. So what's different 0:08:18.080 --> 0:08:22.480 about Kingwood Mallison's is there's only three main partnerships as Australia, 0:08:22.600 --> 0:08:25.360 China and Hong Kong, so that's a bit unique. But 0:08:25.480 --> 0:08:28.040 despite that, it's intended to present to the world as 0:08:28.040 --> 0:08:30.840 a single firm. It's pitched to clients as I think 0:08:30.880 --> 0:08:33.920 the line that uses where the top tier international firm 0:08:34.040 --> 0:08:37.200 for Asia from Asia. So the merger presented heaps of 0:08:37.200 --> 0:08:40.480 opportunities for the firm, but the different Australian and Chinese 0:08:40.480 --> 0:08:43.440 attitudes in some cases to governance and risk also through 0:08:43.520 --> 0:08:44.600 up lots of challenges. 0:08:44.960 --> 0:08:48.960 What are some of the challenges you've confronted in putting together. 0:08:48.840 --> 0:08:51.960 Such established firms from such different settings. 0:08:52.040 --> 0:08:55.320 Yes, we don't have long enough for all of the challenges. 0:08:55.600 --> 0:08:56.840 It's a classic question. 0:08:56.720 --> 0:08:59.160 In an interview about a decade ago then global managing 0:08:59.200 --> 0:09:00.760 partners to it full set as much. 0:09:01.080 --> 0:09:04.000 Right from the start of Kingwood and Mallisons, this concept 0:09:04.000 --> 0:09:06.959 of merger of equals not a takeover of Australia of 0:09:07.080 --> 0:09:10.240 China or China of Australia. Everybody has an equal voice. 0:09:10.280 --> 0:09:12.400 But he stressed that the two firms still shared these 0:09:12.400 --> 0:09:15.800 common values and the relationship was developing with speed and 0:09:15.840 --> 0:09:16.800 everything was going to plan. 0:09:17.000 --> 0:09:19.360 I think every month and every year that goes by, 0:09:19.679 --> 0:09:22.160 people see the benefit of merging the firms. 0:09:22.440 --> 0:09:26.520 And so while this varian structure isolates risk, it also 0:09:26.559 --> 0:09:28.920 has the effect of clouding visibility over each of the 0:09:28.960 --> 0:09:33.280 partner firms, particularly in the Mallison's case, when you have 0:09:33.800 --> 0:09:37.920 clients with big data protection of concerns, they want to 0:09:37.920 --> 0:09:39.719 know that their data isn't going to be shared with 0:09:39.760 --> 0:09:41.320 the Chinese part of the firm, So you have to 0:09:41.360 --> 0:09:44.559 erect these walls within the firm, which sort of compounds 0:09:45.120 --> 0:09:48.760 the existing walls between the partnerships. So that makes things 0:09:49.200 --> 0:09:52.160 difficult to manage in some cases. So what it really 0:09:52.200 --> 0:09:55.800 means is that while each partnership leverages the brand the 0:09:55.840 --> 0:10:00.480 reputation and the international connections of KWM, in practice, little 0:10:00.520 --> 0:10:03.600 knowledge or transparency over what each part of the firm 0:10:03.840 --> 0:10:06.280 is working on. So I spoke to a bunch of 0:10:06.320 --> 0:10:09.640 former partners and staff at KWM, some of whom were 0:10:09.679 --> 0:10:12.160 really closely involved in the merger, some of whom were 0:10:12.160 --> 0:10:14.839 there until quite recently, and they all said that there 0:10:14.880 --> 0:10:18.080 was always an awareness that there were transparency issues in 0:10:18.160 --> 0:10:21.400 the partnership. One former partner said they caught it within 0:10:21.440 --> 0:10:24.240 the firm the Great Wall of China, which he took 0:10:24.240 --> 0:10:26.240 to me, and the gap between what you understand is 0:10:26.240 --> 0:10:29.479 happening and what is actually happening in the Chinese partnership. 0:10:29.960 --> 0:10:32.800 Another gave me an example. They were working with a 0:10:32.880 --> 0:10:35.119 major bank kill as a client and they had operations 0:10:35.120 --> 0:10:37.880 in Australia, Hong Kong and China, but they just couldn't 0:10:37.920 --> 0:10:40.680 find out which partner in the Chinese firm the client 0:10:40.760 --> 0:10:42.760 was using, so in the end they had to go 0:10:42.760 --> 0:10:45.280 and ask the client directly. So I was clearly problems 0:10:45.320 --> 0:10:49.200 with communication between the international elements and yeah, because of 0:10:49.200 --> 0:10:53.200 all these cybersecurity concerns that clients had, there were big 0:10:53.240 --> 0:10:56.480 internal boundaries erected between the partnerships. They were on completely 0:10:56.520 --> 0:11:01.560 different document sharing systems. Even simple inform was difficult to 0:11:01.720 --> 0:11:04.559 obtain and it really was an environment that was conducive 0:11:04.600 --> 0:11:07.520 to any sort of corporation or collaboration and rupe. 0:11:07.520 --> 0:11:10.839 At least job as chief operating officer was to oversee 0:11:10.880 --> 0:11:15.240 that cooperation between the Australian and Chinese lawyers. But it 0:11:15.280 --> 0:11:18.520 doesn't sound like there was much going on. Max. When 0:11:18.520 --> 0:11:22.000 did Lee's problems become a problem for KWM. 0:11:22.520 --> 0:11:24.960 Yeah, So it turns out that while he was global 0:11:25.040 --> 0:11:27.480 Chief operating Officer of the firm, which is quite a 0:11:27.480 --> 0:11:29.719 big job, he was also had this whole range of 0:11:29.760 --> 0:11:32.640 private business interests on the side, probably the most colorful 0:11:32.679 --> 0:11:35.320 of which is this payments company, which got caught up 0:11:35.360 --> 0:11:38.880 in China's gambling crackdown in twenty twenty one. One of 0:11:38.960 --> 0:11:43.000 its employees was convicted for facilitating payments for an illegal 0:11:43.000 --> 0:11:45.880 aligning casino run by Sun City Group, which is quite 0:11:45.880 --> 0:11:49.199 well known in Australia for its junkets operation, which came 0:11:49.280 --> 0:11:53.680 up in inquiries into Crown and Star casinos. He was 0:11:53.679 --> 0:11:56.200 alleged to have been part of a group that helped 0:11:56.400 --> 0:11:59.439 channel funds to the chair of relisted company the chair 0:11:59.559 --> 0:12:03.240 was also his business partner in a separate business. In 0:12:03.400 --> 0:12:05.880 twenty twenty three, he gets this huge three hundred and 0:12:05.880 --> 0:12:09.719 seventy million Hong Kong dollar money lenders claim from this mysterious, 0:12:09.920 --> 0:12:13.080 small little lender in Kowloon. He says, nothing to worry 0:12:13.120 --> 0:12:15.439 about there. Even if that is the case, it's sort 0:12:15.440 --> 0:12:18.160 of a unusual thing for a global law firm executive 0:12:18.200 --> 0:12:22.000 to be caught up in. And then in February last year, 0:12:22.040 --> 0:12:24.920 he gets this bankruptcy petitioned from a financial firm in 0:12:24.960 --> 0:12:28.440 Hong Kong, and Rupert says Katoem actually helped him out 0:12:28.440 --> 0:12:31.880 here and they even opened a file for him, helped him. 0:12:31.960 --> 0:12:36.360 He says, security settlement in this bankruptcy claim. Kingwood Mouson's 0:12:36.360 --> 0:12:39.760 Australia completely denies that, which is a bit unusual. And 0:12:39.800 --> 0:12:41.839 the other unusual thing is that there's this just lack 0:12:41.880 --> 0:12:44.959 of agreement between Rupert and KWM about how he actually 0:12:45.040 --> 0:12:49.600 came to leave the firm. So KWM Australia says that 0:12:49.720 --> 0:12:53.520 KWM China asked him to resign halfway through last year 0:12:54.040 --> 0:12:57.559 because of I presume all these financial business issues which 0:12:57.559 --> 0:12:59.800 are really piling up on top of each other Ruperts 0:12:59.800 --> 0:13:02.400 said that he actually left of his own cord and 0:13:02.440 --> 0:13:04.880 that he was retained as a business consultant at the 0:13:04.880 --> 0:13:06.920 firm until the end of last year, so there's a 0:13:06.960 --> 0:13:13.720 bit of discordance between those two explanations. Naturally, all of 0:13:13.720 --> 0:13:15.720 this made me want to look further into what he 0:13:15.760 --> 0:13:18.439 was doing while I was still working for KIM, and 0:13:18.480 --> 0:13:21.600 I discovered that in twenty seventeen he became the director 0:13:21.880 --> 0:13:25.360 of this big state owned electricity company that was also 0:13:25.520 --> 0:13:28.680 quite a major client to Kingwood Mouson's and about a 0:13:28.720 --> 0:13:31.880 year before Lee joined the board of that firm, it 0:13:31.920 --> 0:13:34.800 had brought into a wind farm project in Montenegro that 0:13:34.960 --> 0:13:40.440 is now the subject of corruption investigations in three separate countries. 0:14:01.480 --> 0:14:04.840 Max, we're talking about King and Wood Mallison's, the first 0:14:04.960 --> 0:14:08.880 ever Sino Australian law firm, which has been operating for 0:14:08.920 --> 0:14:13.280 over a decade now. Your investigation has uncovered some real 0:14:13.400 --> 0:14:17.040 governance challenges for the firm and these were highlighted in 0:14:17.080 --> 0:14:20.880 a wind farm deal which its lawyers advised on in Montenegro. 0:14:21.640 --> 0:14:24.520 As you said, the deal is now the subject of 0:14:24.520 --> 0:14:29.080 corruption investigations in three separate countries. Tell us about the 0:14:29.120 --> 0:14:32.040 deal and how KWM was involved. 0:14:32.760 --> 0:14:36.280 Yeah, So Kingwood Mallisons provided legal advice over the course 0:14:36.320 --> 0:14:40.239 of about three years for this wind farm project in Montenegro. 0:14:40.680 --> 0:14:43.760 It was a product of China's Belton Road initiative, which 0:14:43.840 --> 0:14:47.400 was the signature foreign policy of jijimping. It provided huge 0:14:47.400 --> 0:14:50.920 opportunities for legal work. So one of these projects took 0:14:51.480 --> 0:14:55.240 KWM to Malta, which is a small island in the Mediterranean. 0:14:55.840 --> 0:14:58.360 It's a European Union member country and it sort of 0:14:58.560 --> 0:15:00.960 tried to leverage that to make its way in the world, 0:15:01.280 --> 0:15:05.120 tried to attract a lot of foreign investments through becoming 0:15:05.120 --> 0:15:08.840 a haven for offshore companies. Now rupidly had become a 0:15:08.840 --> 0:15:12.480 non executive director of this state owned company called shang 0:15:12.560 --> 0:15:16.120 Hi Electric Power in May twenty seventeen. It was a 0:15:16.120 --> 0:15:19.760 longtime client of Kingwood Mallison's and his appointment came in 0:15:19.760 --> 0:15:22.160 the same month that he was appointed as its global 0:15:22.240 --> 0:15:25.800 chief operating Officer. So Shanghi Electric was involved in a 0:15:25.880 --> 0:15:29.240 range of deals in Southern Europe, including buying a third 0:15:29.240 --> 0:15:32.320 of Malta's state owned energy company and a Malta which 0:15:32.360 --> 0:15:35.200 was in a heap of debt at this point, and 0:15:35.240 --> 0:15:37.320 so in twenty sixteen, which is about a year before 0:15:37.400 --> 0:15:40.640 Lee joins the board. Shanghai Electric brought the rights to 0:15:40.680 --> 0:15:43.760 build this wind farm in Montenegro, which was done as 0:15:43.760 --> 0:15:46.520 a partnership with an A Malta. The law firm was 0:15:46.560 --> 0:15:49.920 responsible for completing due diligence on the project. But the 0:15:49.920 --> 0:15:52.160 real problem with the deal was the price that Shanghai 0:15:52.240 --> 0:15:54.760 Electric paid for the wind farm. It forked out more 0:15:54.800 --> 0:15:57.040 than three times of value that the wind farm had 0:15:57.040 --> 0:16:01.280 garnered just a couple of months previously. And Kingwood Mallinson's 0:16:01.360 --> 0:16:04.480 was the law firm responsible for drafting the contracts which 0:16:04.640 --> 0:16:07.760 enabled that deal to go through. And there's never any 0:16:07.760 --> 0:16:11.280 explanation about why that markup is paid. So Rupert Lee 0:16:11.360 --> 0:16:13.520 is not alleged to have broken any rules, ought to 0:16:13.520 --> 0:16:15.200 have been aware that the propriety of the deal had 0:16:15.240 --> 0:16:18.160 been caught into question. He only became a director after 0:16:18.200 --> 0:16:20.960 the price markup was paid, and he told me he 0:16:20.960 --> 0:16:23.520 was unaware that cato IM had even acted on the deal. 0:16:24.200 --> 0:16:28.920 So max, are the investigations chiefly about that markup in price? 0:16:29.600 --> 0:16:32.600 Yes, So there's three governments investigating the deal to try 0:16:32.640 --> 0:16:35.280 and find out why the Montenegro and the Maltese and 0:16:35.320 --> 0:16:38.080 the Spanish governments are all in on it, and Europoles 0:16:38.280 --> 0:16:41.520 involved as well. The allegations are that the price was 0:16:41.560 --> 0:16:44.960 inflated and some of the money eventually found its way 0:16:45.000 --> 0:16:49.040 to offshore accounts held by senior Maltese politicians, and it 0:16:49.080 --> 0:16:52.960 was also controversial because of the involvement of this Maltese 0:16:53.080 --> 0:16:58.080 casino entrepreneur and property developer named Jorgen Fenick. Jorgen Fennick 0:16:58.440 --> 0:17:01.480 has been accused of all austrating the car bombing murder 0:17:01.560 --> 0:17:04.880 of an investigative journalist who was looking into the Missouri 0:17:04.920 --> 0:17:05.760 wind farm deal. 0:17:06.160 --> 0:17:11.040 Carojuana Galitzia was the country's best known investigative journalist. She 0:17:11.200 --> 0:17:14.480 was killed on Monday in this car minutes after she 0:17:14.560 --> 0:17:16.200 left her home in Malta. 0:17:16.040 --> 0:17:19.880 And another equally suspected deal involving the same characters. 0:17:20.320 --> 0:17:23.919 Galizia ran a popular blog in which she highlighted the 0:17:24.000 --> 0:17:28.480 cases of suspected corruption in Malta. Once described as a 0:17:28.560 --> 0:17:32.880 one woman WikiLeaks, she famously led the Panama Paper's investigation 0:17:33.080 --> 0:17:34.840 into corruption in Malta. 0:17:35.119 --> 0:17:39.080 And almost five million euros from the markup made its 0:17:39.080 --> 0:17:44.040 way to companies controlled by Fenik, so Jorgan Fenik was 0:17:44.720 --> 0:17:48.040 arrested on these charges related to the car bombing. In 0:17:48.119 --> 0:17:49.000 late twenty nineteen. 0:17:49.280 --> 0:17:52.440 Police have now arrested one of the country's most prominent 0:17:52.520 --> 0:17:54.560 businessmen in connection to the case. 0:17:54.840 --> 0:17:58.760 Organ Fenek, was detained by armed officers after his yachts 0:17:58.880 --> 0:18:02.160 was intercepted. As Walter's handling of the case has drawn 0:18:02.240 --> 0:18:04.040 international criticism. 0:18:03.880 --> 0:18:06.119 He was released on bail in January this year and 0:18:06.160 --> 0:18:10.280 there's still no trial dates. Kingwood Mausons isn't alleged to 0:18:10.320 --> 0:18:12.879 have broken any rules or to have been aware of 0:18:12.920 --> 0:18:15.800 the potential corruption, and a lot of it happens downstream 0:18:15.840 --> 0:18:18.360 from its involvement, but I think it is something you'd 0:18:18.359 --> 0:18:21.600 probably ask questions about you. Why are we writing in 0:18:21.640 --> 0:18:23.879 this massive markup to this company no one's ever heard of? 0:18:24.320 --> 0:18:28.359 But Kingwood Mallsons extends its relationship with Shanghai Electric and 0:18:28.560 --> 0:18:32.119 the Montenegro Deal, continuing to act as its legal advisor, 0:18:32.200 --> 0:18:35.080 and in twenty eighteen it secures the financing for the 0:18:35.119 --> 0:18:38.720 project to enable it to actually be constructed and go ahead. 0:18:39.560 --> 0:18:43.359 You also came across another example that exposed the different 0:18:43.400 --> 0:18:47.680 approaches of the Australian and Chinese partnerships. How did a 0:18:47.800 --> 0:18:51.480 KWM lawyer end up as a speaker at a contentious 0:18:51.560 --> 0:18:56.840 legal conference in Saint Petersburg the year after Russia invaded Ukraine. 0:18:57.400 --> 0:19:02.280 So the senior kater and partner Tian Wenjing, who also 0:19:02.359 --> 0:19:05.800 worked on the Montenegro wind farm deal. In May twenty 0:19:05.840 --> 0:19:08.960 twenty three, she turns up at this big Saint Petersburg 0:19:09.080 --> 0:19:12.960 legal conference, which is organized by the Russian Ministry of Justice. 0:19:13.200 --> 0:19:15.960 So this wasn't just your run of the mill legal conference. 0:19:16.040 --> 0:19:19.119 There are a lot of boring panels about legal professional things, 0:19:19.160 --> 0:19:22.720 but the sort of keynote speakers at this event were 0:19:22.760 --> 0:19:26.280 the Russian Foreign Minister Sergey Lavrov and the Russian former 0:19:26.320 --> 0:19:30.280 president dmitriy Medvedev. There were political panels, including one which 0:19:30.359 --> 0:19:34.760 is called the Russophobia twenty first century Nazism. Most gollingly, 0:19:34.800 --> 0:19:37.560 probably there was a panel which promoted the forced relocation 0:19:37.720 --> 0:19:40.439 of Ukrainian orphans into Russia. This is the subject of 0:19:40.480 --> 0:19:44.720 an international Criminal Court arrest warrant. That panel was headed 0:19:44.720 --> 0:19:48.800 by two Russian cabinet ministers. Tian Wenjing she appeared on 0:19:48.840 --> 0:19:49.680 two panels. 0:19:50.080 --> 0:19:54.560 It is my honor to talk about Chinese approach from 0:19:54.600 --> 0:19:56.800 a perspective of chalish. 0:19:56.480 --> 0:20:01.200 Lawyer alongside representatives of these major Russian state owners enterprises. 0:20:02.440 --> 0:20:08.160 I never could expect to witness such changes that were 0:20:09.440 --> 0:20:11.879 observing currently. 0:20:11.400 --> 0:20:15.159 One of which was the United Shipbuilding Corporation, whose representative 0:20:15.200 --> 0:20:16.399 was actually leading the panel. 0:20:16.920 --> 0:20:20.600 I'm very optimistic about the current situation Russia in now 0:20:22.080 --> 0:20:24.560 is it undergoing the period of changes. 0:20:24.880 --> 0:20:27.360 This is the company which builds the majority of Russia's 0:20:27.440 --> 0:20:32.280 naval fleet and it's sanctioned by the Australian government. Spoke 0:20:32.280 --> 0:20:35.800 about opportunities arising from other global law firms exits from 0:20:35.880 --> 0:20:39.560 Russia and the growing market for Russian companies to arbitrate 0:20:39.640 --> 0:20:43.439 disputes in Hong Kong and China. The program for one 0:20:43.480 --> 0:20:46.879 of her panels referred to unfriendly countries such as Australia, 0:20:46.920 --> 0:20:50.600 which were continuing to strengthen their sanctions policies against Russia 0:20:50.600 --> 0:20:54.320 and Belarus. And a result of all the Western sanctions 0:20:54.320 --> 0:20:57.560 on Russia, which has isolated from the global financial system 0:20:57.600 --> 0:20:59.639 and then forced big Western companies to pull out of 0:20:59.680 --> 0:21:02.240 the country. That's opened up a lot of opportunities for 0:21:02.359 --> 0:21:05.680 Chinese companies, and it's natural that Chinese lawyers would follow 0:21:05.720 --> 0:21:09.000 that business. It's quite a lucrative source of business. But 0:21:09.080 --> 0:21:11.960 this kind of shows the intensions at the heart of 0:21:11.960 --> 0:21:15.840 this Kingwood Malson's relationship. On its Australian website, the firm 0:21:15.920 --> 0:21:19.640 is advising clients on how to comply with Western sanctions 0:21:19.640 --> 0:21:23.280 on Russia, including on its energy sector. On its Chinese website, 0:21:23.480 --> 0:21:26.879 Tian co author and article with this chief executive of 0:21:26.920 --> 0:21:30.280 a Russian energy plant company on how to actually invest 0:21:30.320 --> 0:21:32.719 in the Russian energy sector, and this guy has eventually 0:21:32.720 --> 0:21:34.280 a couple of months later a sanctioned. 0:21:34.040 --> 0:21:36.040 The very different approaches. 0:21:36.160 --> 0:21:38.680 Yeah, kind of acting at cross purposes and pulling in 0:21:38.800 --> 0:21:39.840 very different directions. 0:21:40.320 --> 0:21:45.400 So then a final question Max, can KWM continue as 0:21:45.440 --> 0:21:49.399 a Sino Australian firm or do these different approaches to 0:21:49.480 --> 0:21:52.800 governance and risk management start to affect its brand and 0:21:52.840 --> 0:21:56.879 reputation so much that it could force a rethink on 0:21:57.000 --> 0:21:57.520 the merger. 0:21:58.080 --> 0:22:00.639 So this whole merger was based on on a bit 0:22:00.640 --> 0:22:02.639 of a punt, which is a rare thing for law firms, 0:22:02.680 --> 0:22:05.639 that China's growth was going to continue as it was, 0:22:05.920 --> 0:22:09.160 It's economy and politics was going to continue to liberalize, 0:22:09.240 --> 0:22:11.920 but none of that came to pass. So the original 0:22:11.960 --> 0:22:14.760 sort of thesis for the merger isn't there anymore. But 0:22:14.880 --> 0:22:17.240 even if the Australian Partnership wanted to leave the firm, 0:22:17.240 --> 0:22:19.600