Shanghai Electric probes fraud claim

PUBLISHED : Tuesday, 08 August, 2006, 12:00am
UPDATED : Tuesday, 08 August, 2006, 12:00am

Power equipment maker investigates allegations of fund misappropriation

Shanghai Electric Group, one of China's largest maker of power generation equipment, is investigating allegations that one of its executive directors has misappropriated corporate funds and a non-executive director has illicitly borrowed 3.2 billion yuan to invest in a toll-road project.

Executive director Han Guozhang, 57, was detained on August 1 for investigation by the Communist Party's Central Disciplinary Committee, according to a memo from Hong Kong-based Information Centre for Human Rights and Democracy.

The centre, known for exposing human rights violations in China and central government investigations into economic crime, quoted an unnamed source as saying Mr Han had allegedly illegally siphoned funds from the company's employee insurance scheme. The memo did not indicate the value of funds involved.

A Shanghai Electric spokesperson said it was investigating the allegations, adding it should not affect the company as Mr Han was not responsible for its day-to-day operations.

'Shanghai Electric has not disclosed this information about Mr Han according to Hong Kong law,' the centre said. Listing rules state that companies are required to disclose price-sensitive information in a timely manner.

The company in 2004 put 10 million yuan into the 'Sunshine Protection Scheme', under which claimants from accidents can receive payouts of up to 100,000 yuan, a Xinhua report said in January.

Shanghai Electric also failed to disclose that non-executive director Zhang Rongkun had been under official investigation since July 17 for alleged illegal borrowing of 3.2 billion yuan to invest in a toll road between Shanghai and nearby Hangzhou, the memo said.

Mr Zhang, 32, is chairman of privately owned Fuxi Investment Holding, which took an 8.15 per cent stake in Shanghai Electric in 2004 for 949.7 million yuan. The stake has gained 143 per cent in value.

Fuxi has bought a 99.35 per cent stake in Shanghai Road and Bridge Development for 3.2 billion yuan, according to press reports.

Shanghai Electric deputy chairman Chen Longxing said he last saw Mr Han last week but had not seen Mr Zhang for a long time.

Shanghai Electric shares closed down 0.35 per cent at HK$2.85.