Jobless widow 240,000 yuan out of pocket in ant-breeding scam

PUBLISHED : Monday, 07 January, 2008, 12:00am
UPDATED : Monday, 07 January, 2008, 12:00am

Last July, 41-year-old widow and laid-off worker Zhang Liyun borrowed 240,000 yuan from relatives and friends to be a contract ant breeder for the Yilishen Tianxi Group, an aphrodisiac tonic maker based in Liaoning province. Ms Zhang was promised she would get the money back from Yilishen in four instalments within a year and would see a return of more than 30 per cent.

Ms Zhang is just one of more than a million people, mostly laid-off workers or farmers, who over the past eight years have signed such contracts with Yilishen, hoping to get rich quick or just make a living. They gave their life savings in exchange for boxes of ants that would supposedly be turned into health products. But their dreams were shattered in late November, when the group filed for bankruptcy.

Ms Zhang and other desperate ant farmers besieged the company's headquarters in Shenyang , and the provincial government offices, demanding compensation, but were told to wait until late March, after the company is liquidated.

Now, sitting in her two-bedroom apartment in an old, run-down residential building in Fushun, Ms Zhang flips through the heavy brochure trumpeting the glories of Yilishen, while grumbling: 'Why was I so stupid to believe what the group said? Why was I so stupid not to see it was a scam?'

There was nothing new or particularly sophisticated about the scam. Media reports said that from 2002 to 2004, Liaoning authorities stamped out 16 schemes that illegally raised funds by promising high returns to people who bought contractual bonds from the companies and planted trees, mushrooms, or raised rabbits or ants for them. But somehow ant breeders still did not relate Yilishen with a fraudulent scheme. They had their reasons.

Ms Zhang said the company had a reliable record of punctual payments and she thought raising ants for them was easy and safe. And all the publicity material served as strong endorsement of the company's credibility.

The company gave each ant farmer an album of news clippings from state media praising the company and its chairman, Wang Fengyou . They were also given a DVD of a nationally televised Lunar New Year gala, which included frequent close-ups of Wang clapping from the VIP front row of the audience.

'You see Wang doing one-on-one interviews on national television, and so many of his shots during the Lunar New Year gala. You can't help but believe he's a star businessman,' Ms Zhang said.

Nevertheless, yesterday's media darling is now in custody on criminal charges of instigating social unrest. Authorities have accused him of paying staff and company executives to organise protests outside government offices, although the nature of the protests was unclear.

Li Decai, a farmer in Liaoning's Dasiping township, invested 30,000 yuan in the scheme and said he was convinced that Wang had a cosy relationship with the government and that his firm would not fail. His belief was underpinned by pictures of Wang shaking hands with ministerial-level political figures.

Both Ms Zhang and Mr Li also said they were influenced by the company's commercial on CCTV, which was broadcast so often, they were convinced Yilishen had a popular product and was financially strong.

The country's No1 comedian, Zhao Benshan, who is a Liaoning native and hugely popular in the province, starred in the commercial and suggested the product could remedy male impotence. Zhao also created a character in the nationally televised television series Liu Laogen who cured stubborn diseases with ant wine - one of Yilishen's core products.

'We like Zhao Benshan and we believed in the products he endorsed. We trusted Wang Fengyou. We were fooled and who else can we blame except ourselves?' Ms Zhang said.

She said a woman who lives downstairs tried to kill herself after losing all her life savings and pension in the scam, and she too was desperate, trying to raise a son and planning to send him to middle school in the summer.

But a Beijing-based marketing professor who is familiar with Wang and the company but declined to be named because of the sensitivity of the matter said lower-level authorities were complicit for letting the company survive and giving Wang so many public honours.

'The northeast of China is no stranger to such schemes, which promise high returns to attract people to join and pay a certain sum of deposit. So many had been stamped out, but Yilishen survived,' the professor said. 'It is obvious the company has got government protection.'

Last July, 18 people in Beijing Yilin Timber were arrested for swindling more than 1.6 billion yuan out of 20,000 people. The company promised high returns on the sale of woodland properties through a pyramid-selling model.

In February, the Intermediate People's Court in Yingkou , Liaoning, sentenced Wang Zhendong to death for masterminding a fraud that duped three billion yuan from 'ant farmers' between 2002 and 2004. The court said people were offered a return of up to 60 per cent.

The professor said Yilishen's case was no different from those scams.

'It is interesting to note that there was a crackdown on the Yingkou ant-raising scam in 2005 but Yilishen remained unaffected, when they were both raising public funds illegally,' the professor said.

'Whether it's timber or ants, they're just the bait. The so-called reliable payment record or public relations image was just to seduce more people.'

But the government said the dispute was a matter between the depositors and Yilishen, and it was not involved. Its role stopped at helping calculate the remaining assets and using them to compensate creditors.

People claiming to be Yilishen staff members posted messages in online chatrooms saying the company had long suffered sluggish product sales and its major income came from the deposits of new ant farmers rather than product sales.

An open letter by a temporary Liaoning government office overseeing the issues surrounding Yilishen's bankruptcy said the firm had misused farmers' deposits and there was a huge gap between the remaining cash and payments owed to farmers.

'The scheme is like a snowball getting bigger and bigger. You have to get more and more recruits to keep the snowball growing.

'Once the money chain breaks, it bursts like a bubble,' the professor said. 'And believe me, no matter how successful the company looks, one day the bubble will eventually burst.'

He said that although he sympathised with those who had been duped, they should also not be excused for their greed and ignorance.

Farmed out

Thousands invested their life savings for the chance to be ant farmers

The number of people that signed contracts with Yilishen Tianxi Group in the past eight years was: 1.1m