The deputy general manager stole 1.24 million yuan (about HK$1.16 million) from the company to speculate in the stock market, while the assistant to the general manager stole 1.44 million yuan for his mistress to trade stocks and another 1.39 million yuan to buy an expensive apartment. The official press last week published for the first time the story of how managers of Dalian Hua Lu, one of the biggest state firms in northeast China's most prosperous city, stripped its assets for their own profit and drove it into bankruptcy, throwing 3,000 workers onto the street. So far, more than 40 people, including senior and middle managers of Hua Lu and officials of the city's tax bureau and banks who took part in the scam, have been arrested, with many of them sentenced to prison and with 12 years the longest term. The scam ran between 1995 and 1998, by which time the managers had run up debts of 1.07 billion yuan, nearly three times the value of the company's assets of 330 million. The firm went bankrupt in 1999, leading to the dismissal of its entire workforce, but the news only came out last week after the completion of two years of criminal investigation and the sentencing of some of those involved. The Chinese say that the asset-stripping done at Hua Lu is a depressingly common story in state companies whose managers misuse their power to shift assets into personal accounts or private companies they control. They can get away with it because, as managers of large state firms, they have a high official status, usually enjoying good connections with officials of the government, the police and the judiciary of their city, enabling them to quash any investigation. In addition, they benefit from the fact that the state is in the middle of restructuring the factories it owns, closing some, selling others or turning them into stock-holding companies. This atmosphere of change and reorganisation provides corrupt managers with a good backdrop to steal state assets and blame losses on antiquated equipment, a bloated workforce and historical debts due to having to pay obligations for former workers. The losers are the workers who are deprived not only of their jobs but also the work unit on which they were counting to pay pensions and medical benefits in their old age. Hua Lu was set up in the 1980s through a merger of several companies, said an official of the Dalian city economic and trade commission. It was enlarged in 1992 through a second merger with Dalian Television Plant. The new entity, a traditional state firm owned by 'the whole people' and not a stockholding firm, produced colour televisions and video cassette recorders under the Xing Hai label, a brand well known in northeast China. In its first three years, the company prospered, more than tripling its 1992 assets of 90 million yuan to 330 million yuan by 1995, before it started to go into the red in 1996, and running up debts of 1.07 billion yuan by 1998. In 1999, it was declared bankrupt and its workforce laid off. Another Dalian firm, which makes television tubes, acquired the land, factory buildings and equipment of the company but took on none of the workers. According to an account of the scandal published in the Legal Daily last week, the main culprits numbered 18, comprising three senior and seven middle managers and eight officials of the tax bureau and banks that the firm dealt with. One deputy general manager, Liu Kai, stole 1.24 million yuan to speculate in stocks. Another deputy general manager, Tian Baoyong, and Yu Weiguo, an assistant to the general manager, stole 1.3 million in cash. The discrepancy between the accounts of the firm at the bank and the real accounts amounted to 240 million yuan, including 30 million kept in private accounts by different departments of the company, 10 million stolen by staff in the sales department, 1.17 million in the name of a trading company owned by a dozen members of the staff and 1,000 television sets that were never registered. During the nights before the firm was declared bankrupt, staff drove cars into the plant and loaded them up with colour televisions and VCRs, before they could be included in the official inventory. Hua Lu's workers are bitter and angry at what their managers did to them. Now without a work-unit they are condemned to live on a monthly allowance of 221 yuan which the city government is supposed to pay them. They ask why it was that the annual audit of Hua Lu between 1996 and 1998 failed to uncover this theft of money involving many departments and dozens of people, and why the institutions that are supposed to stop fraud did nothing before it was too late.