The bankruptcy of Lehman Brothers has turned Alex Chow into one of Hong Kong's most unlikely street protestors. Nearly every day for the past month, the 50-year-old white-collar worker has spent his lunch hour protesting in front of a Citibank branch amid the office towers of the Central District. Clad in a conservative blue suit and owl-like glasses, Chow leads a group of demonstrators who lost much of their savings after Citi sold them financial products backed by Lehman. "They claimed it was like a money market," says Chow. "But it was very high-risk gambling."
In an attempt to get their money back, Chow and other middle-class Hong Kong investors have taken to the streets. With bullhorns blaring slogans such as "Citibank, shame of America!" they stand at one of the busiest corners in the city, across from a multilevel Louis Vuitton shop, carrying signs denouncing Citi as a "devil bank" that "swindled us out of our life savings." Some wear face masks (because, says Chow, they're ashamed to have lost so much), although Chow himself has no hesitation in appearing publicly. The goal, he says, is to "push the bank to make some compensation."
So far, they have made little headway. With New York-based Citigroup (C) breaking itself into pieces to survive, the bank has far bigger problems than the complaints of Chow and his crew. The bank says it has taken their complaints seriously and has looked into the allegations. "We have already had individual meetings with them several times," says Citibank Hong Kong spokeswoman Kathy Cheung. "We have studied their cases and carried out investigations." The conclusion? "Their cases are not valid," she says. "Everything was conducted in a professional manner. They signed the documents. We have seen nothing to indicate the transactions were carried out without their authority."
Compensation for Some
Not all the cases are so clear cut in favor of the bank, though. In instances where Citi finds salespeople behaved inappropriately, the bank will compensate investors, says Cheung. The bank won't comment on the number of those cases or the amount of compensation involved. However, Cheung says the bank has received "over 500 complaints so far" from the "under 2,000 customers" who had invested through Citi in Lehman equity-linked notes and market-linked notes issued by the doomed bank. Cheung argues not all of the people who have taken to the streets were naive and didn't know what they were signing. "A lot of them are experienced investors," she says. "They know they may not have a case, but they still try."
Chow disputes Citi's conclusion and has taken his case to court. Last June, he alleges, a Citi agent behaved inappropriately when convincing him to buy a Lehman $130,000 equity-linked note. "They did not disclose there was no guarantee," he says. "We had a feeling it was only a safe deposit instead of a high-risk investment."
The concerns of small investors such as Chow hurt by the Lehman collapse is a hot political issue in Hong Kong. Investors in the city purchased some $2.5 billion in Lehman structured notes (known as mini-bonds) and other products. The Core Group of Citibank Victims, launched in October to lobby on behalf of investors who had purchased Lehman products through the bank, has more than 1,000 members, says Lawrence Tse, 48, who heads the group. Overall, he puts the number of Hong Kong people who purchased Lehman products from banks locally at more than 20,000.
Lawmakers have been critical of the banks in the fallout from the Lehman failure, and regulators are vowing to tighten rules governing how banks market such products. On Jan. 16 the Hong Kong Monetary Authority (HKMA), the territory's top banking regulator, announced it had referred to the Securities & Futures Commission (SFC) eight Lehman-related cases involving complaints of alleged misconduct by two banks. A spokesman for the HKMA told BusinessWeek no executives were available to comment. However, according to its Web site, the HKMA has referred a total of 251 cases involving 15 banks to the SFC since October. In a Jan. 9 statement, the HKMA said it has also informed banks it expects them to implement a series of measures "aimed at strengthening the existing regulatory regime and investor protection framework."
Still, Chow and his band of protestors say the government should do far more. Josip Ma is chairman of the Right to Inherent Dignity Movement Assn., a group advocating for people caught up in the Lehman debacle. "Why did the government allow these wholly unregulated, uncontrolled products to be sold to the public?" he asks. Ma argues that blaming people who lost money isn't fair. "Everybody thinks we have good regulations, control, supervision," he says, so investors expect the government to protect them from "unusual terms, hidden risks, and legal pitfalls." Tse, from the Core Group of Citibank Victims, says his organization is talking with similar groups in Taiwan, Macao, and Singapore about joining forces to launch a class action in the U.S. "We are not satisfied with the attitude of the [Hong Kong] government," he says.
Chow knows many pedestrians passing by him and the other protestors in front of the Citi branch are skeptical of their motives. "Most of them think, you must want to get more money," he says. "But that's not true." The street protests, he vows, will continue.
Einhorn is Asia regional editor in BusinessWeek's Hong Kong bureau.