Shanghai Public Security Bureau officially arrested Zhou Zhengyi, chairman of Shanghai Nongkai Development Group, yesterday on two charges.
The first charge accused Zhou of falsely reporting the registered capital of his company when applying for registration to authorities. False reporting is usually performed by using fake certificates and documents, or through other fraudulent methods to acquire the company registration.
The second charge claims Zhou manipulated the stock trading price.
Local authorities, however, did not mention specifically which company Zhou falsely registered or which stock Zhou manipulated.
Since Zhou was arrested in Shanghai, he will be tried in the city where he built up his fortune in the 1990s.
Last year, Forbes magazine named Zhou the Chinese mainland's 11th richest person with a fortune estimated at US$320 million.
According to Chinese Criminal Law, Zhou, if convicted, may face a maximum term of three years behind bars for false company registration, and/or a penalty fine, usually between 1 to 5 percent of the bloated registered capital in the false registration. For the stock trading price manipulation, the maximum term could reach five years, and/or a penalty fine equal to, or up to five times the illegal earnings.
Zhou, 42, known in Hong Kong as Chau Ching-ngai, was detained in May in Shanghai over the funding of his business, mainly focused on properties.
Zhou's arrest came the same day a Bank of China special committee said in Hong Kong that former executive Liu Jinbao exercised bad judgment in approving a US$226.9 million loan to Zhou.
Liu, former chief executive and vice chairman of Bank of China (Hong Kong) Ltd, was transferred back to Beijing in May. The probe committee also recommended the bank accept the resignation of another executive, Or Man-ah, involved in the granting of the loan, The Associated Press reported.
The special committee was formed to examine the lending practices of Bank of China (Hong Kong) after questions surfaced about a 1.77 billion Hong Kong dollar (US$226.9 million) loan issued to New Nongkai Global Investments Ltd, fully owned by Zhou.
Zhou sought the loan, granted in June 2002, to buy a controlling stake in Hong Kong-listed Shanghai Land Holdings Ltd, which is now in receivership.
The committee criticized Or, deputy chief executive for corporate banking, for backing the loan without regard for risk. The investigation also found that while bank officials followed procedure in making the loan, Liu had shown poor judgment.
It was reported that Liu was still under investigation by Bank of China.
(eastday.com September 6, 2003)
