Chinese refrigerator manufacturer Guangdong Kelon Electrical Holdings Co confirmed yesterday that five of its senior executives are under police investigation and have been detained on suspicion of "economic crimes."
In a statement, the company said the five include the company's chairman, Gu Chujun, its executive director, Yan Yousong and financial controller Jiang Baojun.
The statement followed state media reports that said Gu was suspected of misusing Kelon's funds to acquire other companies.
Kelon, whose shares are traded in Shenzhen, said that despite the investigation, the company and its other managers were conducting business as usual.
Reports that the company has been placed under government trusteeship were untrue, it said.
Phone lines at the company's headquarters rang busy despite repeated attempts to reach its public relations department.
Shares in Kelon and several companies affiliated with it were suspended from trading beginning on Monday.
Kelon, based in Guangdong, makes refrigerators, freezers, air conditioners and other small appliances. The company's largest shareholder is Guangdong Greencool Enterprise Development Co, whose Greencool Technology Holdings Ltd. has shares traded in Hong Kong.
Gu holds a 60 percent stake in Greencool, which in turn holds a 26.4 percent stake in Kelon.
Gu is also chairman of Greencool Technology.
China's stock market watchdog, the China Securities Regulatory Commission, began investigating Kelon over suspected violations of securities rules in April. Results of the probe have not yet been released.
However, the company's troubles became apparent when it reported a loss of more than 60 million yuan (US$7.23 million) in the fourth quarter of last year after reporting a total profit of 200 million yuan (US$24 million) in the first three quarters.
The company said last month that it expects to post a huge loss in the first half of this year.
Last month, Kelon said three of its independent directors had resigned because the company failed to provide them with information on "potentially abnormal" transactions.
Gu, an engineer by training, founded Greencool after inventing chlorofluorocarbon-free refrigerants that are ecologically less damaging to the environment than traditional refrigerants, which have been blamed for contributing to the problem of global warming.
In the past his name has appeared on various lists of most wealthy Chinese.
However, state media reports said authorities were investigating Gu's alleged use of up to 800 million yuan (US$96.4 million) of Kelon's cash to pay for the acquisition of three Chinese companies: Meiling Electrical Appliance, Yaxing Bus and Xiangfan Bearing.
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