Founder Group executives held in graft probe following Zenith allegations that executives have committed insider trading, selling state assets, rigging stocks, as well as bribery and forgery of documents

http://www.scmp.com/print/business/china-business/article/1674119/beijing-zenith-proposes-three-candidates-join-board-founder

Founder executives held in graft probe following Zenith allegations

Monday, 05 January, 2015, 11:26am

Toh Han Shihhanshih.toh@scmp.com

Senior executives of securities firm’s parent held for questioning after two months of corruption accusations by shareholder Zenith

Top executives of Peking University’s Founder Group, the parent of Founder Securities which has been hit by allegations of corruption, have been taken away for questioning, Founder confirmed.

Founder Group chairman Wei Xin, chief executive Li You and  president Yu Li were taken away by mainland authorities on Sunday “to assist with investigations”, the company said.Caixin, citing unnamed sources, said Founder Group vice-president Li Guojun (a younger brother of Li You) had also been taken away.

Founder said the board of directors had appointed a new chairman and a new president.

For  two months, Beijing Zenith Media, the second largest shareholder of  Shanghai-listed Founder Securities, has been making allegations of corruption against Founder Group’s top management, mainly   through Zenith’s Sina Weibo microblog.

Zenith’s allegations include Wei, Li You and other senior executives committing insider trading, selling state assets, rigging stocks, as well as bribery and forgery of documents.

Rumours have been rife on some Chinese political gossip websites in recent weeks that tied certain members of Founder’s management with the family of tainted official Ling Jihua.  Ling, a former aide to Hu Jintao, is now under investigation.

The investment arm of Peking University issued a statement two weeks ago,  brushing off recent “unverified rumours” as “against financial and legal common sense”.

Last month, Founder Group said on its website that it had sued Zenith, a mainland property developer, for libel. It said on its website on December 24 that it had reported Zenith’s “malicious rumour-mongering” to  police and the   internet watchdog.

A court has frozen three billion yuan (HK$3.7 billion) of Founder Securities’ assets following complaints by Zenith, the South China Morning Post reported on Saturday.

Zenith said in a Sina Weibo post  it was seeking compensation of three billion yuan from Founder Securities in the legal dispute. Only in August, the two companies had joined hands, with Zenith’s majority-owned Minzu Securities merging with Founder Securities in a 13 billion yuan deal.

Zenith says it owns 21.9 per cent of Founder Securities. Founder Group owns 41.2 per cent of Founder Securities, according to Bloomberg. Before yesterday’s announcement it had repeatedly denied the executives were in trouble.

In a Sina Weibo microblog posting on Sunday,  Zenith said it would unilaterally hold an extraordinary general meeting on  January 15 to change Founder Securities’ board of directors and board of supervisors.

Founder Securities announced yesterday that  it would hold a extraordinary general meeting on January 21 in Beijing to decide whether to appoint  three independent directors proposed by Zenith.

Yin Mingzhu was a director, deputy managing director and head of the board of supervisors of Minzu from 2002 to May 2013, Huang Weiping is a member of the committee of  Renmin University, while Chen Guoxin is an academic at Nankai University and Tianjin University, according to Founder’s announcement.

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