Caixin
Jun 10, 2017 03:19 AM
SOCIETY & CULTURE

Fugitive Tycoon Guo Directed Staff in Loan Fraud, Former Employees Say

(Beijing) – Three senior employees of China’s fugitive businessman Guo Wengui pleaded guilty to fraud charges Friday in a court in the northeast city of Dalian. They confessed to using fraudulent documents to obtain a loan and foreign currency totaling billions of yuan under the direction of Guo, also known as Miles Kwok.

Standing trial in Dalian Xigang People's Court were Yang Ying, the former chief financial officer of Beijing Pangu Investment Co., a property company controlled by Guo; Lü Tao, the company’s deputy general manager; and Xie Honglin, a senior financial manager.

Prosecutors charged the three with obtaining a loan of 3.2 billion yuan ($470 million) from the Agricultural Bank of China in 2010 based on falsified company contracts, official seals and receipts. The loan was used partly to fund Guo’s purchase of a controlling interest in Beijing-based Minzu Securities Co. and to repay personal debt, according to the defendants’ testimony. 

Lü and Xie were also accused of buying $13.5 million of foreign currency using fake contracts and documents. The money was for Guo’s purchase of a private jet in Hong Kong.

The trial is the first criminal case involving Guo’s company since Chinese authorities in April requested that Interpol issue a “red notice” for Guo’s arrest.

The defendants will be sentenced at a later date, the court said. Lawyers for the defendants asked for leniency, saying they were following the instructions of Guo.

“I broke the law under the instructions of Guo in hopes that I could get a promotion in the company and show my loyalty to Guo,” Lü said.

Sources from Dalian’s judiciary system told Caixin that prosecutors are investigating a series of suspicious bribery, embezzlement and fraud cases involving Guo and his companies. The court prosecution summary said Guo himself would be dealt with "in separate cases."

According to the indictment in the Friday hearing, Guo instructed the three executives in early 2010 to falsify documents from a property renovation project run by Beijing Pangu, including a contract with fake company stamps and financial documents with inflated earnings, to obtain the 3.2 billion yuan property development loan from an ABC branch in Beijing.

Court documents show that Guo obtained the loan with support from senior management of the bank when his company suffered a capital crunch.

The head of ABC at that time was Xiang Junbo, who later became chairman of China Insurance Regulatory Commission but came under investigation for allegations of graft in April.

Yang testified that 1.6 billion yuan of the loan was used to fund Guo’s acquisition of Minzu; 400 million yuan, to repay Guo’s personal debt; and about 70 million yuan, for Guo to buy a luxury residence in Hong Kong. An additional 600 million yuan was transferred to Hong Kong.

The loan was fully repaid in 2014 when the National Audit Office carried out an audit of ABC. The repayment partly came from loans and funds raised from Ping An Bank, Founder BEA Trust Co., Zhongtai Trust Co. and other financial institutions, according to the defendants’ testimony.

In the fraudulent currency case, the indictment said Lü and Xie purchased $13.5 million in U.S. dollars from the Bank of Communications in 2012 using a fake contract and invoice. The false documents said the money was for a furniture import deal with a company owned by Guo Qiang, Guo Wengui’s son. Instead, the currency was used to buy a private jet for Guo in the name of a Hong Kong company called World Century Limited.

In court, Lu and Xie said they also fabricated a statement from the State Administration of Foreign Exchanges under the direction of Guo to prove the legitimacy of the money for a Hong Kong bank.

Guo, the 50-year-old controlling shareholder in Beijing Zenith Holdings and Beijing Pangu Investment, is believed to be living in the U.S. after he fled China in 2014 to avoid graft investigations that brought down his close ally Ma Jian, the disgraced former vice minister of the Ministry of State Security.

A 25-minute video that surfaced online in April showed Ma confessing to taking more than 60 million yuan in bribes from Guo and using his position and power to benefit Guo in a number of controversial business deals, including the acquisition of the controlling stake in Minzu Securities.

Separately, a newly disclosed court document indicated that Guo paid nearly 6 million yuan in bribes to Meng Huiqing, a mid-level official at the Central Commission for Discipline Inspection, for favors that included helping gain control of a private company from which Guo made about 400 million yuan. 

Meng was sentenced to 12 years in prison after being convicted of bribery last year.

Contact reporter Han Wei (weihan@caixin.com)

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