Ouyang Zhongmou is suspected by investigators of fraud involving about $937 million at CEIEC Investigators have arrested the chairman of a major state IT company on suspicion of fraud involving nearly one billion yuan (HK$937 million) just after it cleared the first hurdle towards an overseas listing, an official newspaper reported yesterday. Ouyang Zhongmou, 60, is chairman of the Putian Group, a vast and sprawling state company, whose assets included 16 factories, five listed companies, more than 10 directly owned subsidiaries and 20 joint ventures, with partners such as Nokia and Matsushita, the Economic Observer said. Since he took over as chairman in May 2000, Mr Ouyang has aimed at listing the group abroad and on June 28 received approval from the State Assets Management Commission (SAMC) to set up China Putian Shareholding, the listing vehicle, which he wanted to take to market in the fourth quarter. The crimes for which Mr Ouyang is being investigated relate to the period from 1987 to 1995 when he was general manager of China Electronics Import and Export Corporation (CEIEC). In a report to the standing committee of the National People's Congress on June 25, Auditor-General Li Jinhua said that 984 million yuan was found to be missing from the CEIEC. Between October 1994 and February 1995, the firm illegally provided guarantees to a Beijing and Shandong company for non-existent trade transactions, for which state banks transferred offshore the equivalent of 776 million yuan. All has been lost. In addition, between 1993 and 1995, the firm lent or provided funds totalling 208 million yuan to associated companies in Beijing and Hong Kong, resulting in huge losses to the state. The State Council ordered the police to handle the case and Mr Ouyang was taken in for questioning in late June or early this month. A senior finance officer at CEIEC named Wu was sentenced to life imprisonment in the late 1990s for his involvement in the case. He said that he alone did not have the position to authorise the transfer of such large amounts of money. The Putian Group is a major company under the Ministry of Information Industry and a model in how to re-organise state assets. On June 4, Li Rongrong, director of the SAMC, chose to visit the group on the same day that the government published new regulations on how to manage and supervise state assets. Officials of Putian credit Mr Ouyang with holding the company together and having the energy and drive to reorganise it. Without him, the group would probably have been split into many different companies. It is not clear how Mr Ouyang's arrest will affect the listing and whether it will go ahead.