Dismal story of Hua Lu's asset-stripping finally revealed

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.