Jianping Qu was 35 years old when he arrived in the US a decade ago, a veteran of the rough and tumble of China's marketplace. He has said he left after allegations of fraud in a real estate deal led to a 90-day "detention" by the authorities in Shanghai.
By last year, Qu (pronounced Chu) was a wealthy man. He had accumulated at least US$100 million in cash in his personal accounts and another US$300 million in the accounts of his Silicon Valley companies, in which he is both the dominant shareholder and chief executive. In a court filing in his divorce in 2003, Qu gave his annual salary as US$40.1 million, making him one of the highest-paid chief executives in America.
But his only major partner and customer, New World Development, a multibillion-dollar conglomerate based in Hong Kong, now accuses Qu and his company of defrauding it of US$700 million for a system that never worked. Qu counters that New World never held up its end of the deal to gain the full approval of the Chinese authorities for his technology.
The first of a series of court cases is set to go to trial next month in California. It will be the first time, experts say, that allegations on this scale of fraud and misappropriation of funds involving China's exploding economy will be presented in a US courtroom. The bitter dispute also raises the issue of whether the scramble to cash in on the vast economy in China has blinded some companies to the business risks.
worthless
New World, whose stock fell sharply after it announced last year that its US$700 million investment was worthless, says it paid Qu and his company, PrediWave of Fremont, California, to deliver a system that would provide interactive video services, like video on demand, to 100 million cable subscribers in China.
What made PrediWave's system so attractive to New World was that it did not require a two-way cable system. Rewiring in the US cost more than US$100 billion. PrediWave said it could provide the same service over the basic one-way cable prevalent in China and most of the developing world.
From the beginning of the partnership, said Dennis Ellis of the Los Angeles law firm of Paul, Hastings, Janofsky & Walker, New World's spokesman and lead counsel in the US, Qu was engaged in "looting" New World's investment, duping the company into believing he would provide it with a commercially viable system.
"We were defrauded," Ellis said.
Qu declined repeated requests for an interview made through his lawyer and PrediWave's general counsel, Vincent Lin. Lin said Qu had been "traveling in Asia" for much of the last year "trying to recoup his reputation in the business community."
Lin, who works out of PrediWave's mostly abandoned headquarters, insisted that the company and Qu were victims of a ruthless decision by New World to cut them out of "the billions that can be made in China" in favor of a more politically acceptable partner.
A crucial element in the case is the role of the managing director of New World's technology subsidiary, Douglas Chan Wing-tak, who made the deal with PrediWave and appears to have approved all the spending on the company and Qu. In e-mail messages obtained by the New York Times, Chan urges Qu to accept cash bonuses of up to US$38 million. Just before the deal unraveled in April of last year, Chan called on Qu to accept another US$25 million bonus, writing: "I feel very strongly on this. As the captain of our `ship,' you are worth every penny of it."
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