Former SOE Head Handed Death Sentence for Fraud Scheme
Court finds former general manager of Guangzhou-based company guilty of scam involving loss of state assets worth 284 million yuan
By staff reporter Wang Jing (Beijing) –
A former executive of a state-owned enterprise in southeastern Guangzhou has been sentenced to death recently for bribery and draining hundreds of millions of yuan from state assets.
Zhang Xinhua, former general manager of Guangzhou-based Baiyun Nonggongshang United Co. Ltd, was found guilty by the city’s intermediate People’s Court of embezzling 72 million yuan worth of state-owned assets and taking another 100 million yuan in bribes. The court also convicted him of causing a loss of 284 million yuan in state-owned assets.
The court announced the conviction on December 10. Zhang was sentenced to death. He appealed immediately.
State news agency Xinhua reported the trial and said investigators found 55 people involved in the case, including executives at other SOEs, village officials, judges, lawyers and managers of auction companies. They received lighter punishments than Zhang.
Court files as seen by Caixin show that Zhang gradually seized Baiyun’s assets by faking documents to make his own companies look like a big debtor of the SOE. He also abused his power as Baiyun’s general manager to dole out personal favors, in exchange for bribes.
Baiyun was set up in 1979 and owned more than 16 square kilometers of land including forestry, reservoirs, fishing ponds, orchards and farming land. It also held shares in more than 20 subsidiaries and affiliated companies.
Zhang joined Baiyun in 1982 at the age of 20 after he graduated from a technical secondary school. He started as a salesman and worked his way up the ranks. In 1998, he became the SOE’s general manager.
In 2003, Baiyun’s debt had grown to 620 million yuan after years of losses. According to the court files, it was unable to repay loans and many of its bank accounts were frozen.
The files show that Zhang and several other executives concocted a scheme to set up two privately-owned companies to acquire Baiyun’s court-seized assets in auctions and take over others by fabricating documents that showed Baiyun owed the firms debt.
In 2003, Zhang set up and owned 20 percent of Guangzhou Guangtian Zhiye Co., Ltd. The rest of the firm was held by other Baiyun executives.
Three years later, he founded Xinyutian Co. Ltd., which soon bought all of Guangtian’s shares for 450,000 yuan. After several transactions, Zhang controlled 25.38 percent of Xinyutian. Executives of Baiyun and some of its subsidiaries held the other shares.
Zhang arranged for the transfer of Baiyun’s assets to Guangtian and Xinyutian through various channels, according to the court files. From 2003 to 2013, the two companies paid Baiyun only 45.65 million yuan in exchange for assets worth 330 million yuan, resulting in a loss of 284 million yuan for the SOE.
Judging by the percentage of Zhang’s holdings in the two companies, he gained 72 million yuan from the transfers. He also gained from the companies’ combined after-tax profit of 76 million yuan, the court says.
The court files include an example of how Guangtian used a fake loan to seize assets from Baiyun. In 2005, it fabricated a contract that says it lent 16 million yuan in a six-month loan to a Baiyun orchard. When the orchard could not pay back the loan, Guangtian took the case to a court, which later ruled that two of Baiyun’s properties, which it valued at 10 million yuan, should be transferred to Guangtian in lieu of cash to repay the debt.
The Guangzhou intermediate court revalued the properties and said they were worth 105 million yuan, 10 times the original evaluation.
The court also said Zhang took advantage of his position in Baiyun and took nearly 100 million yuan in bribes.
Some of Baiyun’s employees had repeatedly reported Zhang and his side dealings to anti-graft authorities since the founding of Guangtian, but none of them received much attention, media reports say.
China Business News cited one of the tipsters as saying that the authorities they filed their reports to refused to look into the matter on grounds that it did not concern them.
In 2007, Guangzhou Finance Holdings Group Co., Ltd., a state-owned financial investment company, set up a subsidiary to sort out Baiyun’s debt. Zhang became its general manager.
Zhang was placed under investigation by the party’s corruption watchdog in June 2013 and arrested in September that year. His case opened in August and represents one of the largest-ever graft cases concerning state assets in Guangzhou, Guangdong Province.
Zhang did not seem to have fully recognized the gravity of the crimes he was charged with, said Wu Xiaoping, vice director of the anti-corruption bureau under the Guangzhou procuratorate. “He still thought he could get out with a (two-year) suspended (death) sentence.”