Tycoon needs time to get back on his feet

PUBLISHED : Monday, 20 February, 2012, 12:00am
UPDATED : Monday, 20 February, 2012, 12:00am

Confucius says a man knows the will of heaven by the age of 50, but Li Tuchun's world was turned on its head in his 50s and a close associate is not sure he can bounce back.

Li (pictured), the dethroned founder of yoghurt-based drink manufacturer Taizinai, has endured more than a year in detention and seen the case against him revisited twice and then dropped - all while the company foundered.

His lawyer, Zhai Yuhua, says 52-year-old Li is now focused on regaining his health in Beijing - he suffers from hypertension and coronary heart disease - before looking at any return to the business world.

Zhuzhou prosecutors notified Li late last month that they were dropping charges that he had illegally raised 130 million yuan (HK$160 million) in funds, due to lack of evidence.

Li spent 15 months in police detention before being released on bail for medical reasons in September. While he was in detention, Taizinai went though bankruptcy and liquidation. Li, its major shareholder, had no say.

Li's case was returned to police twice for further investigation following his arrest in June 2009 and the charges were changed in the process, which led to delays in the case.

'Li's case had a very bright ending, after a winding and painful process,' Zhai said. 'These tricks were used to delay the processes to find evidence. Zhuzhou prosecutors were aware he was innocent from the very beginning and they couldn't find anything wrong after more than two years.'

Zhai attributed Li's release to intervention by the procuratorate of Hunan. Li would not have been released without its involvement in the past half year, he said.

Li started Taizinai from scratch in 1996 after quitting his job at a state-owned enterprise, and made his name by spending 88.88 million yuan to win a top CCTV commercial spot a year later, even though it was many times the group's earnings.

He secured US$73 million in investment from London-based private equity firm Actis, Goldman Sachs and Morgan Stanley in early 2007 and borrowed 500 million yuan from a group of foreign banks in September of that year.

Li also developed a reputation for extravagance, with the group's headquarters in Zhuzhou modelled on Beijing's Tiananmen Gate and its factory on the White House.

The group's cash flow was drained in 2008 by the expansion of its production facilities, which coincided with the global economic crisis and a devastating blow to the mainland's dairy industry brought about by the melamine milk scandal.

Zhuzhou's city government and a dairy formed a new company, Zhuzhou Hi-Tech Dairy Management, to try to save Taizinai from bankruptcy in early 2009 but failed.

In April 2010, a court in the Cayman Islands, where Taizinai was registered, ruled the company bankrupt.

Subsequently, a Beijing law firm appointed to handle the bankruptcy proceedings in Hunan calculated that it owed more than 1.2 billion yuan to more than 1,300 creditors.

Many overseas organisations and individuals, including Citibank and the Royal Bank of Scotland, also claim to be owed several billion yuan by Taizinai.

The Zhuzhou government announced in July 2010 that Li had been officially arrested along with four other senior group executives, including his son Li Shuai, for 'illegally collecting public money'. Charges against the others were also dropped late last month.

In a further twist, Wen Dibo, a Zhuzhou government official assigned to head the new dairy firm to take over Taizinai, was put under shuanggui - a form of detention imposed on party members being investigated for corruption - a year after Li's arrest. It was reported that the detention of Wen, who reportedly clashed with Li, was related to the introduction of potential investors.