Half of money still missing after rogue businessman's bad bets in futures market
Bank of China, the mainland's second-largest commercial lender, has been hit by a fresh scandal as it prepares for a multibillion-dollar Hong Kong listing by June.
Rogue businessman Zhu Dequan, conspiring with officials at a BOC branch outlet in Shuangyashan, Heilongjiang province, fraudulently obtained 96 bank bills and cashed them at other banks for 914.6 million yuan over the past three years, Beijing-based Caijing magazine reported yesterday.
The bank might lose more than 400 million yuan in the fraud and five bank officials, including the former head and deputy head of BOC's Simalu sub-branch in the city, had been arrested in connection with the crime, Caijing and mainland banking sources said.
It was another significant scandal to hit the lender following reports early last year that Gao Shan, the former head of a BOC sub-branch in the Heilongjiang provincial capital of Harbin, had absconded with more than one billion yuan of clients' deposits.
The Shuangyashan incident came to light a week after BOC filed preliminary documents with the Hong Kong stock exchange for its H-share offering and could affect investor sentiment.
'It doesn't matter that the amount of money involved was fairly small,' an analyst at a western bank said yesterday. 'It's the frequency of such things that makes it a hidden risk.'
The scam was uncovered last month after a Shandong sub-branch of China Construction Bank - the first big state bank to go public - demanded payment from the BOC branch for five bank bills totalling 48.9 million yuan.
The Simalu sub-branch, however, could find no record of the bills having been issued, the Caijing report said.
More than half the money has been recovered, but 432.5 million yuan remains outstanding.
Zhu, the head of Fuqiang Cereals and Oils Trading, had used much of the money for trading transactions and to speculate in the futures market, where he made heavy losses.
The Simalu sub-branch last month published an urgent notice in a mainland financial newspaper to announce the cancellation of 34 of the bills.
A BOC spokesman last night declined to comment on the scandal, saying he was still gathering information.
BOC's Hong Kong listing, already delayed by a debate on whether state assets have been sold too cheaply to foreign investors in bank reform and by calls for BOC to sell shares domestically, would not be further postponed by the Shuangyashan scandal, a professional involved in the share offering said.
'It's trivial,' he said, adding that the case's revelation was the result of improved internal controls at the mainland lender.
The Caijing report coincided with the opening of the trial of Liu Jing, Gao's driver, in connection with the Harbin bill fraud.