The head of one of the mainland's leading steel plants caused his firm to lose nearly 50 million yuan (HK$46.5 million) by selling goods to a factory where his son was a manager, when he knew that it was going bankrupt.
Li Zhida was general manager of steel company Bengang, the largest steel firm in northeast Liaoning province, with annual output of three million tonnes and 140,000 workers. It has A shares listed in Shenzhen.
Between June 1995 and February 1996, Mr Li signed contracts to sell 32,000 tonnes of rolled steel, worth 80 million yuan, to the Benxi Liyuan Steel Pipe factory, where his son worked as head of sales and later general manager, the Legal Daily reported yesterday.
His son's name was Li Tiegang, which means Iron and Steel Li.
The Liyuan plant was in financial difficulties and paid only about 30 million yuan for the steel. On November 21, 1996, a court in Benxi declared the plant bankrupt, relieving it of its debts and leaving the father's plant 49.83 million yuan short of what it was owed.
Mr Li senior approved the sales knowing that the plant was in trouble and despite the fact that it could not pay for what it had already purchased.