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Monday, 24 August 2009
Gome boss names names and stays in the game
Wong Kwong-yu, the billionaire businessman whose detention nine months ago triggered Guangdong’s biggest corruption scandal in years, may be languishing in police custody but his nine-month detention has not curbed his wheeling and dealing.
Kenneth Howe and Daniel Ren in Shanghai 23 August 2009
Wong Kwong-yu, the billionaire businessman whose detention nine months ago triggered Guangdong’s biggest corruption scandal in years, may be languishing in police custody but his nine-month detention has not curbed his wheeling and dealing.
Mr. Wong was detained by the Beijing Public Security Bureau in November on suspicion of “economic crimes”. Since then, almost a dozen prominent mainlanders - top Guangdong law enforcement officials, the mayor of Shenzhen, a gambling ship operator tied to triads - have been arrested or detained in connection with the case.
At the same time, while being held in an undisclosed location, Mr. Wong (known as Huang Guangyu on the mainland) has been buying and selling millions of Gome shares. In the process, he’s beaten back attempts to dilute his ownership in the giant electrical-appliance retailer he founded in 1987.
In a country where arrest does not usually come with executive privileges - where tycoons fall out of sight and their empires collapse - Mr. Wong’s continued ability to do business is a rare exception. And he’s earned it by co-operating with the authorities.
A central government official close to the investigations said Mr. Wong had provided a great deal of detail about corruption by government officials, including Chen Shaoji, Guangdong’s former police chief.
“Wong has talked a lot more than expected during the probe into him,” the official said.
In return, Mr. Wong has been given privileges not accorded to other detainees.
“Wong has access to a 42-inch plasma television, the phone and lawyers. Why can’t he do business from his cell?” a source with knowledge of the situation told a South China Morning Post columnist.
A Gome official close to its top management said Mr. Wong was still influencing the company from behind bars and still had decision-making authority.
“He is playing it safe to protect his own assets,” the company source said. “He still thinks the Gome empire belongs to him and his family.”
During his nine-month detention, Mr. Wong arranged a “sell high/buy low” deal in which he first sold more than 235 million shares of Gome at HK$1.704 per share through his vehicle Shinning Crown Holdings. A week later he bought more than 816 million Gome shares at 67.2 HK cents per share.
Through these manoeuvres he not only increased his stake in Gome but effectively torpedoed an attempt by private equity firm Bain Capital to acquire another 9 per cent stake in Gome. It already held 9.8 per cent through convertible bonds.
This month, Hong Kong’s Securities and Futures Commission accused Mr. Wong of fraud in an earlier stock buy-back that in 2008 netted him HK$2.2 billion to repay a personal debt, said to be from gambling. The SFC secured a court order freezing HK$1.6 billion of his funds, and a brief procedural hearing on the matter is scheduled for September 8.
No Hong Kong authorities have yet been able to reach Mr. Wong, said a source close to the investigation.
His frozen funds are only a fraction of the US$6.3 billion the Hurun Report said the 39-year-old was worth when it named him China’s richest man last year.
Mr. Wong’s liberty to conduct business while at the vortex of a major corruption scandal is partly due to co-operation with authorities.
Since his detention, five top Guangdong officials - the former provincial police chief and his deputy as well as the mayor of Shenzhen - have been arrested in a widening corruption scandal. In each case, mainland media reported a link with the investigation of Mr. Wong. The allegations they cite include bribing officials all the way up to central government departments for Gome’s back-door listing in Hong Kong five years ago, money laundering, tax evasion and high-stakes gambling.
In addition to law enforcement officials, at least five of Mr. Wong’s business associates, as well as his wife and brother, have been detained.
But there is another likely reason for Mr. Wong’s relative freedom to carry on business. Gome is China’s largest retailer of electronic appliances, with more than 1,000 stores in 205 cities, and employs almost 49,000 people. A collapse of one of the nation’s best-known brands and the effect it would have on local economies, employees and other businesses - it owes banks and suppliers more than HK$16 billion - could be significant. Gome itself acknowledged the special care the government had given the affair in a letter in June.
“In handling the case of Wong Kwong-yu, the bureau [the Beijing Municipal Public Security Bureau] showed its regard for Gome’s stability, its staff and society’s harmony.” The letter added that the bureau had maintained a regular dialogue with senior management and helped solve some operational problems.
Soon after Mr. Wong’s detention in late November, other prominent figures began to fall.
Lin Chiu, “the gambling king of the high seas” who, along with his younger brother and a triad, held an interest in the casino ship Neptune, was detained in connection with the Wong corruption scandal.
Mr. Lin invited Mr. Wong and officials to gamble aboard the Neptune and helped the tycoon launder money, according to the influential Caijing magazine. He also tried to help Mr. Wong’s wife, Du Juan, in her attempt to flee the mainland.
Macau casino industry insiders say Mr. Wong was a huge and prolific gambler, and among the top high rollers in China. As a gambler, his reputation in the industry was for always repaying debts on time and in full, no matter how much he lost.
The detentions of Mr. Wong and Mr. Lin soon brought down a number of Guangdong officials, including:
• Chen Shaoji, chairman of the Guangdong CPPCC and former Guangdong police chief; • Zheng Shaodong, Mr. Chen’s former deputy, who rose to become the top economic-crime buster; • Xiang Huaizhu, Mr. Zheng’s deputy; • Wang Huayuan, formerly Guangdong’s top graft buster; and • Xu Zongheng, mayor of Shenzhen.
What is not clear is Mr. Wong’s relationships with these officials, but bribery, gambling, money laundering and smuggling are rumoured.
However, Pu Xingzu, a politics professor at Fudan University, said: “It is obvious that the businessman’s wrongdoings were backed by powerful government cadres. These unscrupulous business tycoons wouldn’t be able to complete their scandalous criminal acts without the support from the authorities.”
Such collusion between business leaders and officials had become increasingly rampant, casting doubt on the fairness of policymaking, he said.
The former officials are believed to be being held in shuanggui, under which the party detains officials under investigation until they are turned over to prosecutors. Shuanggui, usually run by the Central Commission for Discipline Inspection, the Communist Party’s top anti-graft watchdog, is a prelude to imprisonment or even the death penalty for disgraced senior cadres.
Mr. Wong’s alleged “economic crimes” have not been officially listed. But shortly after being detained and before he was linked to Guangdong law enforcement officials, he was accused of stock manipulation.
The allegation concerns Beijing Centergate Technologies (Holding), a property developer controlled by Mr. Wong. The company said his private investment arm, Beijing Pengrun Investment, had been charged by the China Securities Regulatory Commission with manipulating Centergate’s share price and that of Shanghai-listed retailer San Lian Commerce with “a huge amount of money”.
Shares in San Lian surged in March 2008 after Gome bought a 10.69 per cent stake to become its largest shareholder. This sparked speculation that Gome might take over the firm. Gome later raised its stake to 19.71 per cent but no takeover offer was made. It was also reported that earlier in 2007, Gome planned to inject property assets into Centergate, driving its share price higher. That plan was then halted. Centergate disclosed last year that its chairman, Xu Zhongmin, was being investigated for the same economic crimes Mr. Wong is suspected of.
According to Caijing, Mr. Wong was also connected to share price manipulation at Shandong Jintai Group, a pharmaceuticals and medical equipment maker largely owned by his brother, Huang Junqin.
On July 9, 2007, Jintai said its shareholders would inject 22.1 billion yuan of assets into the company and that it would also raise about 2.57 billion yuan through a private share placement. Jintai’s shares jumped more than 700 per cent, but fell back when the deal did not happen.
Huang Junqin was taken into custody and Jintai said in February that its chief financial officer, Zhang Xinwen, had disappeared.
Both cases involved the mysterious Liu Fang, a wildly successful investor who earned more than 100 million yuan from trading, especially in Shandong Jintai. Later revealed by China Central Television to be a taxi driver, Mr. Liu was widely accused in mainland newspapers and on financial websites of being a front for a clandestine group after Mr. Wong was detained.
Beijing Pengrun Investment, whose current chairman is Wong’s sister Huang Xiuhong, is connected to both stock manipulation cases.
At the time, Caijing cited CSRC’s director of inspection, Liu Hongtao, as saying the Pengrun connection may just be the tip of the iceberg.
Additional reporting by Choi Chi-yuk, Neil Gough, Jasmine Wang, Shirley Yam and Enoch Yiu
3 comments:
Gome boss names names and stays in the game
Kenneth Howe and Daniel Ren in Shanghai
23 August 2009
Wong Kwong-yu, the billionaire businessman whose detention nine months ago triggered Guangdong’s biggest corruption scandal in years, may be languishing in police custody but his nine-month detention has not curbed his wheeling and dealing.
Mr. Wong was detained by the Beijing Public Security Bureau in November on suspicion of “economic crimes”. Since then, almost a dozen prominent mainlanders - top Guangdong law enforcement officials, the mayor of Shenzhen, a gambling ship operator tied to triads - have been arrested or detained in connection with the case.
At the same time, while being held in an undisclosed location, Mr. Wong (known as Huang Guangyu on the mainland) has been buying and selling millions of Gome shares. In the process, he’s beaten back attempts to dilute his ownership in the giant electrical-appliance retailer he founded in 1987.
In a country where arrest does not usually come with executive privileges - where tycoons fall out of sight and their empires collapse - Mr. Wong’s continued ability to do business is a rare exception. And he’s earned it by co-operating with the authorities.
A central government official close to the investigations said Mr. Wong had provided a great deal of detail about corruption by government officials, including Chen Shaoji, Guangdong’s former police chief.
“Wong has talked a lot more than expected during the probe into him,” the official said.
In return, Mr. Wong has been given privileges not accorded to other detainees.
“Wong has access to a 42-inch plasma television, the phone and lawyers. Why can’t he do business from his cell?” a source with knowledge of the situation told a South China Morning Post columnist.
A Gome official close to its top management said Mr. Wong was still influencing the company from behind bars and still had decision-making authority.
“He is playing it safe to protect his own assets,” the company source said. “He still thinks the Gome empire belongs to him and his family.”
During his nine-month detention, Mr. Wong arranged a “sell high/buy low” deal in which he first sold more than 235 million shares of Gome at HK$1.704 per share through his vehicle Shinning Crown Holdings. A week later he bought more than 816 million Gome shares at 67.2 HK cents per share.
Through these manoeuvres he not only increased his stake in Gome but effectively torpedoed an attempt by private equity firm Bain Capital to acquire another 9 per cent stake in Gome. It already held 9.8 per cent through convertible bonds.
This month, Hong Kong’s Securities and Futures Commission accused Mr. Wong of fraud in an earlier stock buy-back that in 2008 netted him HK$2.2 billion to repay a personal debt, said to be from gambling. The SFC secured a court order freezing HK$1.6 billion of his funds, and a brief procedural hearing on the matter is scheduled for September 8.
No Hong Kong authorities have yet been able to reach Mr. Wong, said a source close to the investigation.
His frozen funds are only a fraction of the US$6.3 billion the Hurun Report said the 39-year-old was worth when it named him China’s richest man last year.
Mr. Wong’s liberty to conduct business while at the vortex of a major corruption scandal is partly due to co-operation with authorities.
Since his detention, five top Guangdong officials - the former provincial police chief and his deputy as well as the mayor of Shenzhen - have been arrested in a widening corruption scandal. In each case, mainland media reported a link with the investigation of Mr. Wong. The allegations they cite include bribing officials all the way up to central government departments for Gome’s back-door listing in Hong Kong five years ago, money laundering, tax evasion and high-stakes gambling.
In addition to law enforcement officials, at least five of Mr. Wong’s business associates, as well as his wife and brother, have been detained.
But there is another likely reason for Mr. Wong’s relative freedom to carry on business. Gome is China’s largest retailer of electronic appliances, with more than 1,000 stores in 205 cities, and employs almost 49,000 people. A collapse of one of the nation’s best-known brands and the effect it would have on local economies, employees and other businesses - it owes banks and suppliers more than HK$16 billion - could be significant. Gome itself acknowledged the special care the government had given the affair in a letter in June.
“In handling the case of Wong Kwong-yu, the bureau [the Beijing Municipal Public Security Bureau] showed its regard for Gome’s stability, its staff and society’s harmony.” The letter added that the bureau had maintained a regular dialogue with senior management and helped solve some operational problems.
Soon after Mr. Wong’s detention in late November, other prominent figures began to fall.
Lin Chiu, “the gambling king of the high seas” who, along with his younger brother and a triad, held an interest in the casino ship Neptune, was detained in connection with the Wong corruption scandal.
Mr. Lin invited Mr. Wong and officials to gamble aboard the Neptune and helped the tycoon launder money, according to the influential Caijing magazine. He also tried to help Mr. Wong’s wife, Du Juan, in her attempt to flee the mainland.
Macau casino industry insiders say Mr. Wong was a huge and prolific gambler, and among the top high rollers in China. As a gambler, his reputation in the industry was for always repaying debts on time and in full, no matter how much he lost.
The detentions of Mr. Wong and Mr. Lin soon brought down a number of Guangdong officials, including:
• Chen Shaoji, chairman of the Guangdong CPPCC and former Guangdong police chief;
• Zheng Shaodong, Mr. Chen’s former deputy, who rose to become the top economic-crime buster;
• Xiang Huaizhu, Mr. Zheng’s deputy;
• Wang Huayuan, formerly Guangdong’s top graft buster; and
• Xu Zongheng, mayor of Shenzhen.
What is not clear is Mr. Wong’s relationships with these officials, but bribery, gambling, money laundering and smuggling are rumoured.
However, Pu Xingzu, a politics professor at Fudan University, said: “It is obvious that the businessman’s wrongdoings were backed by powerful government cadres. These unscrupulous business tycoons wouldn’t be able to complete their scandalous criminal acts without the support from the authorities.”
Such collusion between business leaders and officials had become increasingly rampant, casting doubt on the fairness of policymaking, he said.
The former officials are believed to be being held in shuanggui, under which the party detains officials under investigation until they are turned over to prosecutors. Shuanggui, usually run by the Central Commission for Discipline Inspection, the Communist Party’s top anti-graft watchdog, is a prelude to imprisonment or even the death penalty for disgraced senior cadres.
Mr. Wong’s alleged “economic crimes” have not been officially listed. But shortly after being detained and before he was linked to Guangdong law enforcement officials, he was accused of stock manipulation.
The allegation concerns Beijing Centergate Technologies (Holding), a property developer controlled by Mr. Wong. The company said his private investment arm, Beijing Pengrun Investment, had been charged by the China Securities Regulatory Commission with manipulating Centergate’s share price and that of Shanghai-listed retailer San Lian Commerce with “a huge amount of money”.
Shares in San Lian surged in March 2008 after Gome bought a 10.69 per cent stake to become its largest shareholder. This sparked speculation that Gome might take over the firm. Gome later raised its stake to 19.71 per cent but no takeover offer was made. It was also reported that earlier in 2007, Gome planned to inject property assets into Centergate, driving its share price higher. That plan was then halted. Centergate disclosed last year that its chairman, Xu Zhongmin, was being investigated for the same economic crimes Mr. Wong is suspected of.
According to Caijing, Mr. Wong was also connected to share price manipulation at Shandong Jintai Group, a pharmaceuticals and medical equipment maker largely owned by his brother, Huang Junqin.
On July 9, 2007, Jintai said its shareholders would inject 22.1 billion yuan of assets into the company and that it would also raise about 2.57 billion yuan through a private share placement. Jintai’s shares jumped more than 700 per cent, but fell back when the deal did not happen.
Huang Junqin was taken into custody and Jintai said in February that its chief financial officer, Zhang Xinwen, had disappeared.
Both cases involved the mysterious Liu Fang, a wildly successful investor who earned more than 100 million yuan from trading, especially in Shandong Jintai. Later revealed by China Central Television to be a taxi driver, Mr. Liu was widely accused in mainland newspapers and on financial websites of being a front for a clandestine group after Mr. Wong was detained.
Beijing Pengrun Investment, whose current chairman is Wong’s sister Huang Xiuhong, is connected to both stock manipulation cases.
At the time, Caijing cited CSRC’s director of inspection, Liu Hongtao, as saying the Pengrun connection may just be the tip of the iceberg.
Additional reporting by Choi Chi-yuk, Neil Gough, Jasmine Wang, Shirley Yam and Enoch Yiu
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