Sun, Aug 14, 2005 - Page 11 News List

Chinese banker gets suspended death sentence

SCANDALAt a time when the Bank of China is trying to woo foreign investors, a former chief executive of its subsidiary in Hong Kong was convicted on embezzlement charges


One of China's best-known bankers was convicted of embezzlement on Friday and given a suspended death sentence, state media reported, the latest chapter in a series of banking scandals in China.

The conviction of Liu Jinbao (劉金寶), the former chief executive of the Bank of China's (中國銀行) publicly traded subsidiary in Hong Kong and a vice chairman of the entire bank, comes at an embarrassing time for the bank. It has been in talks to conduct an initial public offering and sell stakes to four foreign investors: the Royal Bank of Scotland Group, Temasek Holdings of Singapore, UBS and the Asian Development Bank.

The Chinese government has used US$60 billion of the nation's foreign currency reserves in the past two years to shore up the capital bases of the Bank of China and two of its big rivals, the China Construction Bank (中國建設銀行) and the Industrial and Commercial Bank of China (中國工商銀行). This spending has been unpopular among urban residents aware of the issue, and a series of bank corruption cases have made the use of foreign currency reserves even more controversial.

"They're pouring the money in, but it's going out the other side," said Nicholas Lardy, an expert on Chinese banking at the Institute for International Economics in Washington.

The official New China News Agency reported that Liu had been sentenced to death with a two-year suspension, and his personal assets were confiscated. Suspended death sentences are typically commuted to life imprisonment in China.

The severity of the sentence given to Liu, who was convicted of taking US$173,000 in bribes and embezzling US$2.7 million on his own and with others, highlights the stringency of China's penal code and the efforts of Beijing's leaders to contain corruption.

Liu was recalled to Beijing and dismissed in May 2003, following the bankruptcy of one of the biggest borrowers from the Hong Kong subsidiary of the Bank of China. The bank forced the borrower, New Nongkai Global Investments Ltd, into bankruptcy for nonpayment of US$95 million of a US$270 million loan that had been extended less than a year earlier.

The government news agency did not mention that case on Friday, or explain when the embezzlement or bribes took place.

The Changchun Municipal Intermediate People's Court in China's Jilin Province convicted Liu along with two former vice presidents of the Bank of China's Hong Kong subsidiary and the general manager of Liu's office. The vice presidents, Zhu Chi (朱赤) and Ding Yansheng (丁燕生), were each sentenced to 13 years in prison and a US$247,000 fine, the news agency said, while the general manager, Zhang Debao (張德寶), was sentenced to eight years and a US$185,000 fine.

The conviction and sentencing nearly coincide with the sentencing of top WorldCom executives involved in that company's US$11 billion accounting fraud. Bernard Ebbers, the founder and chief executive of WorldCom, was sentenced last month to 25 years in prison while Scott Sullivan, the former chief financial officer of WorldCom who testified against his former boss, was sentenced on Thursday to five years in prison. Ebbers is appealing his conviction.

As the top banker at the most important Chinese-owned bank in Hong Kong, Liu was the face of Chinese banking in China's most important center of international finance and served as chairman of the Hong Kong Association of Banks.

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