Gome's founder to face lawsuits
Jailed retail tycoon Wong Kwong-yu is facing the first of what may be a wave of civil lawsuits brought against him by disgruntled investors after his conviction for insider trading.
An investor identified only as Li, has been notified by the Beijing No 2 intermediate court that the hearing will take place on September 6.
'Li is the first investor who has a court hearing confirmed,' the claimant's lawyer, Zhang Yuanzhong, said. 'I'm assisting dozens of other investors who have approached me to sue Wong.'
He said Li suffered a loss of about 400,000 yuan (HK$483,000) and is suing for that much and possibly additional compensation. A class action is also being considered, Zhang said.
Wong, founder of and a major shareholder in the mainland's second-largest household appliances retailer, the Hong Kong-listed Gome, was convicted of insider trading, illegal business operations and bribery in May 2010 and lost his appeal in August. He was sentenced to 14 years' imprisonment, fined 600 million yuan and had 200 million yuan in personal assets seized.
For the insider trading charge, Wong was convicted of manipulating the share price of the mainland-listed Beijing Centergate Technologies (Holding) Co in 2007, after he heard of a pending asset-restructuring deal between Beijing Centergate, where he was board chairman, and the Beijing Pengtai Company, where he was legal representative.
According to Li's court submissions posted on Zhang's website, he bought shares in Beijing Centergate on June 13, 2007, at 10.39 yuan per share and sold all the shares on June 15, 2007, at 10.08 yuan.
Meanwhile, Wong used the accounts of six people to buy up to 90 million yuan in shares in Beijing Centergate between April 27 and June 27, during which the share price continued to plummet. On June 28, with the announcement of the asset restructuring, the share price shot up and Wong made a profit of 3.48 million yuan.
Mainland media have estimated that 130,000 potential investors were affected by Wong's insider trading activities over this period.
While the civil lawsuits might be bad news for Wong, once China' richest man, he has won other victories. While in jail, he has still managed to exert influence on the Gome management, seeing the company's stock price rise, and he had his trusted representatives appointed to the board, while ousting his rival, Chen Xiao, who stepped down as chairman in March.
He has also remained out of the reach of the Hong Kong Securities and Futures Commission, which has been trying to get a high court order served on him and his wife to freeze HK$1.66 billion of Gome shares.