By James Pomfret and Clare Baldwin
HONG KONG (Reuters) - Democratic lawmakers in Hong Kong demanded anti-graft officers investigate a $6.4 million business payout to Chief Executive Leung Chun-ying on Thursday, as political fallout grows from massive student-led protests calling for democracy in the Chinese-controlled city.
The controversy ratchets up the pressure on the pro-Beijing leader just days after tens of thousands of people occupied the streets of the Asian financial centre and called for Leung to step down.
The campaign against the former property surveyor and son of a policeman has now extended from the streets to the city's legislative chambers where democrats have the numbers to veto major decisions and potentially cause policy paralysis.
Australia's Fairfax Media reported this week that engineering firm UGL Ltd paid Leung a total of $6.4 million in 2012 and 2013 in relation to its acquisition of DTZ Holdings, a property consultant that employed Leung as its Asia Pacific director before he took office in July 2012.
Leung's office denied any wrongdoing. DTZ was not immediately available to comment, while UGL said it was under no obligation to disclose the agreement.
As part of the contract Leung signed with UGL in December 2011, he agreed to promote the "UGL Group and the DTZ Group as UGL may reasonably require, including but not limited to acting as a referee and adviser from time to time", according to a copy seen by Reuters.
Leung's office said in a statement that such assistance would only be provided in the event that he failed to be elected Hong Kong leader, and providing that such assistance would not create any conflict of interest.
Leung stepped down from DTZ on December 4, 2011, two days after signing the deal with UGL, which acquired the property consultancy. Leung was sworn in as Hong Kong chief executive in July 2012.
"After CY Leung became CE (chief executive), he should have terminated the contract, because as a CE, it was impossible for him to continue accepting huge payment to help promote UGL or DTZ," Democratic Party chief executive Lam Cheuk-ting said in a letter to the Independent Commission Against Corruption seen by Reuters.
"There's reason to believe that CY Leung was eyeing the unpaid remuneration by UGL so that he continued with the agreement. Even worse, since CY Leung honoured the agreement and accepted the payment, how could he not declare to the Executive Council?" said Lam, who is a former anti-graft agency official.
The ICAC said it did not comment on individual cases.
UGL said the agreement was simply a non-compete arrangement to ensure that Leung would not move to a competitor, set up or promote any business in competition with DTZ, or poach any people from DTZ.
Emily Lau, head of the Democratic Party, told Reuters it would try to form a select committee to investigate and possibly impeach Leung, although the formation of such a group would have to be backed by the entire 70-seat legislature and there was no guarantee that would happen, given the pro-Beijing majority.
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Scenes of tear gas wafting between some of the world's most valuable buildings, violent clashes, mass disruptions to business and commuter chaos over the past 11 days have underscored the challenges Beijing faces in imposing its will on Hong Kong.
The protests, triggered by China's decision in August to rule out direct elections in 2017, have already caused a backlog in the former British colony's Legislative Council where scores of meetings have been cancelled.
Democratic lawmakers on Thursday threatened to veto some government funding applications, although none that affect people's daily lives, as they step up their civil disobedience campaign and try to paralyse government operations.
On Friday, student leaders are to hold talks with government officials in a bid to ease tensions.
"There will be a dialogue between government and students this Friday," student leader Alex Chow told reporters.
"The government must respond to the public's demand for democracy that can convince the Hong Kong people that we can see light at end of tunnel, regarding democratic development, and that we can see changes, instead of acting like a human recorder in repeating the bureaucratic content that it had repeated and repeated again."
Protest numbers have dwindled to just a few hundred people at various sites around the city, but activists have managed to keep up their blockade of some major roads.
The report on payments to Leung, who has refused calls from protesters all week to step down, will only pile further pressure on the government and could even lead protesters pulling out of the talks.
The Fairfax Media report does not suggest Leung committed any crime, although it raises questions about transparency.
Leung signed the deal with UGL in December 2011, two days before he stepped down as Asia Pacific director of DTZ, which is now a division of UGL.
He had already announced his plans to run for Hong Kong's top job, although his main rival, Henry Tang, was the presumed front-runner until he was tarnished by an illegal construction scandal and self-confessed marital infidelities.
An election committee stacked with Beijing loyalists chose Leung as leader in March 2012 and he was sworn in on July 1.
Leung's company, CY Leung & Co, merged with DTZ in 2000. He was a key player in the company's expansion into China.
(Additional reporting by Greg Torode, Farah Master, Donny Kwok, Clare Jim and Michelle Price,; Writing by Anne Marie Roantree; Editing by Nick Macfie)