Wednesday, 17 February 2010

Gome boss finally charged over fraud


Former Gome Electrical Appliances Holding chairman Wong Kwong-yu has been formally charged in Beijing with insider trading, bribery and unspecified business crimes after 15 months in police custody.

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Guanyu 道 said...

Gome boss finally charged over fraud

Neil Gough
16 February 2010

Former Gome Electrical Appliances Holding chairman Wong Kwong-yu has been formally charged in Beijing with insider trading, bribery and unspecified business crimes after 15 months in police custody.

Wong, once the mainland’s richest man and also known as Huang Guangyu, on Friday had his case remanded to the Beijing Second Intermediate People’s Court. He will be jointly prosecuted along with unnamed co-defendants and others charged in relation to his case, the official China News Service reported at the weekend.

Wong was arrested by the Beijing Public Security Bureau in November 2008 on suspicion of “economic crimes”. His rapid rise to fabulous wealth and his even quicker downfall highlight the murky nature of the mainland justice system and underlined the frailties of cross-border regulatory enforcement in Hong Kong.

Nearly a dozen prominent officials and businessmen have been detained, arrested or disciplined on the mainland in the wake of the nationwide investigation into Wong.

At the same time, part of a HK$1.65 billion asset pool controlled by Wong and his wife, Du Juan , remains frozen under a Hong Kong High Court order. The injunction was first issued in August following allegations by the Securities and Futures Commission that the pair engaged in stock market “fraud or deception” to the detriment of retailer Gome and its shareholders. But the regulator was unable to confirm whether writs had been served against the couple due to Wong’s unknown whereabouts.

“The SFC is continuing to liaise with mainland authorities with a view to assisting the court to effect service on them [Wong and Du],” the watchdog said at the time. The SFC has yet to announce results of its probe, which is believed to be ongoing despite Beijing prosecutors’ move to issue formal charges.

Born into a poor family in Shantou, Wong founded Gome as a street-side electronics shop in Beijing in 1987. The firm expanded rapidly and now operates more than 1,000 stores in over 200 cities. Gome listed on the Hong Kong stock market in 2004 and counts private equity giant Bain Capital as a major investor.

The month before he was detained, Wong’s fortune was estimated at US$6.3 billion by the Shanghai-based Hurun China Rich List, which ranked him No 1. He was replaced as chairman of the firm within weeks of his detention and resigned as an executive director of the firm in January last year. Despite detention in an undisclosed location, Wong was able to buy and sell millions of Gome shares, beating back attempts to dilute his controlling 35.55 per cent stake.

The roster of heavyweight mainland officials caught up in the wake of Wong’s investigation includes Xu Zongheng, the former mayor of Shenzhen; ex-Guangdong police chief and chairman of the provincial Chinese People’s Political Consultative Conference Chen Shaoji and Wang Huayuan, formerly Guangdong’s top graft buster. Lin Chiu, a main investor in Hong Kong gambling cruise operator Neptune Group, was also reportedly arrested in late 2008 on the mainland on suspicion of helping Wong launder money.

The fallout may continue to grow. In December, the Shanghai Communist Party discipline inspection committee stripped former Shanghai deputy police chief Zhu Ying of his membership on the committee for disciplinary violations related to Wong’s case.