Hong Kong heir apparent's forbidden "palace" poses headache for China

HONG KONG Feb 16 (Reuters) - The man tipped to be Hong Kong's next leader has become embroiled in a scandal over an illegally built "hole in the ground" that has stirred public mistrust and posed a headache for Beijing's Communist Party leaders who back him.

Henry Tang, a wealthy businessman turned civil servant, has long been considered the front-runner to become the financial hub and former British colony's next chief executive.

But what was widely expected to be a shoo-in for Tang -- carefully orchestrated by pro-Beijing factions behind the scenes -- has instead become embroiled in controversy.

Tang's popularity ratings have steadily declined in recent months over allegations in the newspapers of extra-marital affairs, verbal gaffes and now a seemingly innocuous row over illegal constructions, including one under a swimming pool in one of his luxury properties.

While not apparently a serious offence in itself, Tang's halting, inconsistent explanations and obfuscations have stoked public suspicion and newspaper headlines.

When media reports first surfaced of a basement built under the swimming pool in violation of building regulations, Tang said at the time it was only "a hole in the ground to store things in, that's all".

Later, however, newspapers published architectural plans of the subterranean leisure space, measuring some 200 square metres, including a jacuzzi, wine cellars and spacious rooms in what the tabloid Apple Daily called an "underground palace".

"This completely crosses the bottom line of tolerance from the public," said Albert Ho, the chairman of Hong Kong's opposition Democratic Party who is also contesting the March election but is unlikely to muster many votes.

"GIVE ME A CHANCE"

On Thursday, reporters and angry citizens massed outside Tang's multi-million dollar villas, some hiring cranes to film over the high walls in defiance of a refusal to allow reporters inside, while activists donned Pinocchio masks with long noses demanding full transparency, not lies, from Tang.

"The worst thing for him is he changed his response several times in several days, and each later version showed the earlier version was a lie," said Ma Ngok, a political scientist in Hong Kong. "Undoubtedly this whole scandal will deal a heavy blow to his credibility."

Following intense media pressure, the bespectacled Tang, stuttering at times, appeared with his wife late on Thursday to apologise to the people of Hong Kong for the scandal, but said he had no intention of dropping out of the leadership race.

"I ask the people of Hong Kong to give me a chance to serve the people," he said, explaining that his wife, who broke down into tears, had been responsible for building the basement but that he should have dealt with the issue more comprehensively.

He denied that he'd lied and tried to cover up the scandal, explaining that he wanted to protect his wife from blame.

Tang, 59, is the wealthy son of a Shanghainese industrialist with close ties to China's former Communist Party leadership, including former president Jiang Zemin, and is known for his love of vintage wines.

Despite Beijing's promise to grant Hong Kong full democracy as the "ultimate aim", the people of Hong Kong have no direct say in their next leader, who will be chosen on March 25 by a 1,200-member election committee stacked with Beijing loyalists.

While China's Communist Party leaders have backed Tang from the start, some say the tide of public opinion has turned markedly, something few envisaged late last year when he resigned as head of the civil service to join the race.

With China facing a critical leadership transition later in the year, such scandals will be unwelcome in the small but influential city whose moves towards full democracy have antagonized China's Communist leaders since 1997 when it returned from British to Chinese rule.

"China won't make any hurried decisions (on Tang)," said Ivan Choy, a political pundit when asked if Tang might fall from favour.

"Much depends on the fallout. They still have some time but ... senior leaders would have to meet to discuss this including Xi Jinping," he added, referring to China's expected next leader now touring the United States. (Reporting by James Pomfret; Editing by Nick Macfie)