Former CSG Holding Managers Investigated Over $25.33 Million Transfer

* CSG said the former executives, including former Chairman Zeng Nan, have been accused of offenses that have damaged the company’s interests

* Police investigation followed allegations that 171 million yuan had been transferred to a company controlled by Zeng and other former executives

(Beijing) — Several former senior executives of Shenzhen-listed CSG Holding Co. Ltd., one of China’s leading manufacturers of industrial glass, have been placed under criminal investigation, two years after conglomerate Shenzhen Baoneng Investment Group Co. Ltd. took over control of the company, an exchange filing showed, underlining Baoneng’s ongoing fight against the former management team.

CSG Holding said that the former senior executives — including former Chairman Zeng Nan — have been accused of offenses such as breach of trust that have damaged the interests of the listed company, according to its Friday announcement (link in Chinese). Local police have taken criminal enforcement measures against the people involved.

The police investigation came after CSG Holding’s current management team, which Baoneng installed, alleged that 171 million yuan ($25.33 million) had been transferred to a company controlled by Zeng and other former executives, multiple sources within and outside CSG Holding told Caixin. Only two of them have recently been investigated, they said.

Based in Shenzhen, CSG Holding was founded in 1984 and went public in 1992, making it one of the earliest listed companies in China, according to its website. The company’s electronic glass products held more than 50% of the domestic market, it said in its 2018 semiannual report.

CSG Holding made headlines when Baoneng took control of the company in November 2016. As of the end of September 2016, Baoneng held a 25.72% stake in the company through three subsidiaries, including Foresea Life Insurance Co. Ltd. and Shenzhen Jushenghua Co. Ltd. After the takeover, the conflicts between the new personnel sent by Baoneng and the then-management team led by Zeng grew more and more heated. In November 2016, Zeng resigned from the company, along with several other executives. Baoneng’s executives then took over CSG Holding’s management.

The turmoil didn’t stop with the old management team’s departure. In March, CSG Holding changed its long-time auditor (link in Chinese) from PricewaterhouseCoopers to a local accountant firm in a bid to “ensure the independence and objectivity of the auditing work,” the company said in an exchange filing at the time. A former manager at CSG Holding told Caixin that the new management team started to review the financial records of former executives after they left.

While auditing CSG Holding’s 2017 annual report, the new auditor, Asia-Pacific (Group) Certified Public Accountants Co. Ltd., discovered that Zeng’s team might have transferred 170 million yuan to a company that it controlled that was unrelated to the listed company. CSG Holding then reported the case to the local securities watchdog in Shenzhen, which referred the matter to the police, according to the company’s exchange filing.

Baoneng has been on an acquisition spree over the past few years. Its chairman, Yao Zhenhua, who ranked the 12th richest person in China in the 2018 Hurun Report, had for a time eyed a takeover of one of the country’s largest homebuilders, China Vanke Co. Ltd. In 2015, Baoneng set up asset management products through its subsidiaries to fund its hostile takeover bid of Vanke. Although the bid failed, Baoneng still held a 25.4% stake in Vanke as of July 2016. However, it later began to offload its Vanke shares after running afoul of regulators cracking down on highly leveraged transactions.

Contact reporter Timmy Shen (hongmingshen@caixin.com)