Managing director of Chinese firm faces jail sentence in Hong Kong

Edward Lehman, managing director and founder of Chinese law firm Lehman Lee & Xu, has been found guilty of a second contempt of court by the Hong Kong High Court and has received a six-month prison sentence, suspended for two years.

The judgment and sentence come following the long-standing disputes between Lehman and his former business partner Russell Brown, with whom he set up the Chinese accounting firm LehmanBrown over 10 years ago. The Hong Kong court cases essentially relate to the control of the LehmanBrown firm and the ownership of trademarks.

Brown first filed a law suit against Lehman for defamation in June 2010 before the Hong Kong High Court. An injunction order was granted by Mr Justice To on 23 July 2010 to restrain Lehman from publishing defamatory statements and making slanderous statements concerning Brown, his wife Zhou Han Brown and his company Effiscient.

On 19 April 2011, Lehman was found in contempt of court for breaching the injunction order. The second committal hearing took place before the Hong Kong High Court in July 2012 before Mr Justice Harris. Harris J held that by sending further emails in October 2011, Lehman further breached the injunction order.

In the second committal proceedings, Harris J ordered that Lehman be committed to prison for six months and the custodial sentence be suspended for a period of two years upon the condition that Lehman commits no further contempts of court. Lehman was also ordered to pay the plaintiff the legal costs of HK$800,000 (£63,000).

Lehman, a US citizen, was also in legal hot water in the US. In September 2010, Lehman and his firm Lehman Lee & Xu were sued by the firm’s US clients in a New York Federal Court for fraud and breach of fiduciary duty.

The lawsuit claimed that in June of 2010, the Lehman defendants had fraudulently induced the plaintiffs and their investors to deposit approximately US$1.2 million (£739,000) into an escrow account which the defendants subsequently misappropriated.

In May 2012, the court ordered the defendants to pay the plaintiffs the amount of US$5.4m in damages after the judge granted a Rule 37 motion for terminating sanctions.

Lehman was one of the first foreign lawyers to work in China and was widely known in the Chinese legal community. In 1992, he helped set up Lehman Lee & Xu, a Chinese law firm, in Beijing and has served as the firm’s managing partner since its establishment. The firm was once among the largest law firms in China, but a large number of lawyers have left to join other firms over the past five years.

Lehman is appealing against Harris J’s judgment.