Lu Dayong, ex-chairman of tobacco manufacturer Nanyang Brothers Tobacco, has been jailed four years and six months by the District Court for bribery and fraud relating to cigarette smuggling.

Lu absconded and failed to show for trial in June. An arrest warrant was issued and he was found guilty in his absence.

Co-conspirators Ko Kit, a director of Hang Chun Trade Development, and Chan Kai-san, a sales manager for the company, were jailed for three years and six months, and two years for their roles in the scam.

Nanyang Brothers, a subsidiary of publicly listed Shanghai Industrial Holdings, manufactured Double Happiness cigarettes at a plant in Hong Kong. Lu approved Hang Chun and Golden Leaf as overseas distributors for Nanyang Brothers' cigarettes.

From November 2003 to February 2004 the trio concealed from Nanyang that Lu had interests in Hang Chun, and caused Nanyang to supply cigarettes to Hang Chun, knowing they would be sold on the Mainland in violation of contracts between the two companies.

Nanyang sold $48 million worth of cigarettes to Hang Chun. Lu and Ko received $7.5 million in illegal commissions from two director-shareholders of Golden Leaf from April 2003 to February 2004 as reward for causing Nanyang to sell cigarettes worth $42 million to Golden Leaf.