A Hong Kong judge has found real risks of siphoning off of assets, irregular transactions and accounting irregularities in a company that owns Citigroup Tower, a landmark building in Shanghai's glitzy Pudong financial district.
Justice Queeny Au-yeung has appointed a receiver and manager for the 42-storey tower, which is being fought over in a bitter legal dispute between two mainland-born brothers who are alleging theft of assets worth hundreds of millions of yuan.
The two brothers are Ding Yu and Ding Gang. The latter owns 99 per cent of Shanghai Bading Property, a real estate firm which owns a substantial share of the tower, and collects rent from the property.
Justice Au-yeung in the high court described Citigroup Tower as a 'very valuable commercial complex'. The value of the building is undisclosed.
In the dispute over ownership, Ding Yu claimed to be the owner of Citigroup Tower, saying Ding Gang and their sister Ding Xiao Hong - who owns 1 per cent of Shanghai Bading - were only Ding Yu's nominees.
Although Justice Au-yeung has not decided which brother is the rightful owner of Citigroup Tower, she said a receiver and manager for the property should be appointed.
'If Ding Yu succeeds, it will mean his brother has shamelessly deprived him of his hard-earned assets. That is akin to theft. If no receiver is appointed, Ding Gang will be in sole control and Ding Yu might suffer irreparable damage,' the judge said.
Citi does not own the building and declined to comment or disclose financial details. In 2002, Citi signed a deal with Shanghai Bading to move its China headquarters to the building, which was completed in 2005, reported the China Daily.
In June 2010, Ding Yu and Ding Xiao Hong tried to seize control of Shanghai Bading by attempting to replace the company's legal representative and obtaining the company seals. They failed as their application to the State Administration of Industry and Commerce to change the company representative was blocked by Ding Gang.
In early 2010, Ding Yu instructed Ding Gang to obtain 600 million yuan from Shanghai Bading to invest in a mainland project, the court order said. Ding Gang refused, claiming Shanghai Bading did not have the funds, and also refused to disclose the company's records to Ding Yu. 'Suspecting Ding Gang had misappropriated assets of Shanghai Bading and realising his relationship with Ding Gang had broken down, Ding Yu instructed Ding Xiao Hong to take urgent steps to retain control over Shanghai Bading,' the order said.
Justice Au-yeung found that Ding Yu's claims of risk of asset 'dissipation and mismanagement' at Shanghai Bading were credible.
Ding Yu alleged 274 million yuan (HK$324.72 million) was transferred from Shanghai Bading in 2006 to companies owned by Ding Gang to settle debts. These companies were de-registered shortly after receiving the money, said the judgment.
Ding Yu had alleged unauthorised funds from Shanghai Bading were injected into three companies in Huizhou city, Guangdong province, which were then transferred to Ding Gang, who used the money to buy property in Huizhou and Shenzhen.
Ding Gang admitted ordering some of the fund transfers but denied they were illegal.
Ding Gang controls many companies and has nominees to whom he can transfer funds of Shanghai Bading, said Justice Au-yeung. 'Given the corporate governance, there are genuine doubts as to the integrity and propriety of the accounts, which warrant the appointment of a receiver.'
But the judge added: 'Unilateral and wrongful acts on the part of Ding Gang would be difficult to discover.'