Released airline tycoon in battle to win back lost assets

East Star Airlines founder Lan Shili returns from four-year jail term to pick up fight against investment group he blames for sinking carrier

PUBLISHED : Thursday, 20 February, 2014, 4:35am
UPDATED : Thursday, 20 February, 2014, 4:06pm

A former airline tycoon who was jailed for nearly four years for tax evasion is now back in the limelight with more controversy.

Lan Shili, once ranked China's 70th richest man by Forbes magazine, is waging a legal battle against a giant capital investment group, which he accuses of colluding with a former official to defraud his properties in Wuhan, Hubei.

"This is how an innocent private business owner is treated," Lan, 54, a Wuhan native, told the South China Morning Post yesterday after a scheduled court hearing was postponed.

Lan's press conference yesterday - during which he had planned to challenge Rongzhong Capital Investment with new evidence - was twice interrupted, first by a change of venue then by a power failure.

Lan, who had worked in the governments of Hubei and Hainan provinces, started a travel company in 1993 and later expanded into real estate. In 2005, he founded the now-defunct East Star Airlines. That year, Forbes estimated his net worth at about two billion yuan, making him China's 70th richest man.

In 2010, he was sentenced to four years' jail by the Wuhan Intermediate People's Court for evading some 50 million yuan (HK$63.5 million) in taxes.

He was released half a year ago and has since been overseeing the lawsuit that his East Star Group, the airlines' parent company, filed against Rongzhong Capital Investment.

The dispute goes back to 2008, when East Star borrowed money from Rongzhong, allegedly using the former's real-estate properties as security.

Lan blamed Rongzhong for worsening his firm's money problems when the investment group stopped its loans after it became clear that the airline was going bankrupt.

He claims that Rongzhong forged his signatures on the loan documents, costing him his properties. He is demanding the return of his real estate.

"Lan Shili is a liar," Rongzhong president Xie Xiaoqing said at a press conference called by the investment group on Tuesday to unveil what he said was evidence to support the firm.

East Star lost the lawsuit against Rongzhong in 2012, but the Hubei Higher People's Court reopened the case last August. A new trial date has yet to be set.

On Monday, former deputy Wuhan mayor Yuan Shanla - another key player in the saga - told reporters that he might sue Lan over his allegations.

While in jail in 2011, Lan had released a document accusing Yuan of abusing his power to bring down his airline. The local government dismissed the accusations as groundless rumours. Yuan retired from his post at age 58 the following year.

Yesterday, after his press conference was disrupted, Lan published his evidence on his microblog. They included papers purportedly showing the "forged" documents and Yuan's instructions to help Rongzhong acquire East Star's properties.

Lan said the jail term had made him stronger and that he planned to start a new business soon. "I can't wait for the court result because it might take years to come," he said. "I need to act now."