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 (
"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 (
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.
Liu had the good fortune to graduate in 1976 from the University of International Business and Economics in Beijing, long a training ground for top civil servants. The Cultural Revolution was ending after a decade in which many students had been unable to complete their studies, and the country was about to embark on a quarter century of rapid economic growth in which any expertise in economics and business was frequently a ticket to personal success.
Liu joined the Bank of China immediately upon graduation and went to London the following year to work for the bank as a foreign exchange and gold bullion trader. He was transferred to Shanghai in 1981 and worked his way up to general manager of the Shanghai branch in 1994 before being transferred in 1997 to run the Hong Kong operation.
Dow Jones reported from Kuala Lumpur, Malaysia, that Zhang Yanling, the executive vice president of the Bank of China, told reporters at a conference there on Friday that the bank was still on track for an initial public offering "maybe at the end of this year or early next year."
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