Peng takes his fight to Shenzhen

Armed with a Hong Kong judgment, the Australian businessman seeks to regain $450m worth of assets Australian businessman James Peng is to lobby the same Shenzhen authorities that jailed him for six years to honour a Hong Kong judgment that found he was unlawfully stripped of a $450 million stake in the listed company he founded with Deng Xiaoping's niece. A 10-year battle to regain control of Mr Peng's shares in Shenzhen Fountain Corp, formerly known as Shenzhen Champaign Industrial Corp (SCIC), is to move across the border after the High Court armed the businessman with a potent ruling in his favour, but one it cannot enforce. Mr Peng, kidnapped by Shenzhen authorities from a Macau hotel room in 1993 to be jailed on fraud and corruption charges two years later, is also in line for a major damages payout from Ding Peng, niece of the late paramount leader Deng Xiaoping. The businessman had in early 1993 turned to Ms Ding for help with the Shenzhen authorities over SCIC's affairs, tapping her political connections. However, she used this weakened position to illicitly transfer his 50 per cent shareholding - at the time worth $450 million - to herself and right-hand-man Andrew Zheng, deputy High Court Judge Ian Carlson found. He dubbed the wrongdoing 'as bad as it gets in terms of corporate impropriety'. The Australian businessman believed himself to have fallen foul to 'dark and corrupt forces in high places in Shenzhen' after the success of his company spurred jealousy among influential individuals who felt they should have shared in that good fortune. Mr Peng cited this as a 'highly significant cause' of the investigations by Shenzhen authorities into SCIC's affairs, which began in April 1992. Two months later, the Shenzhen branch of the People's Bank of China and a number of other lenders called in loans they had extended to SCIC and companies owned by Mr Peng. This was taken by the businessman as a deliberate ploy to break his hold on the listed vehicle. In early 1993, he enlisted the help of Ms Ding to resolve SCIC's difficulties in Shenzhen, giving her a 9 per cent shareholding in the listed company as a 'locus to negotiate' with the authorities. However, in August that year, the Shenzhen government ordered a restructuring of SCIC. The following month, Mr Peng was arrested. The Shenzhen government then directed the creation of a new company, Shenzhen Fountain Corp, to succeed SCIC. 'This represented the final nail in the coffin for Mr Peng's shareholding in SCIC. They were totally extinguished and redistributed,' the judge noted. Ms Ding's company China Projects was given 38.235 per cent of Shenzhen Fountain. Mr Peng was released from prison in November 1999 after lobbying by the Australian government. He reactivated his case against Ms Ding, culminating in a High Court trial which ended in favour of Mr Peng last week. The fundamental dispute had been whether Mr Peng orally agreed to dispose of his control of SCIC by giving Ms Ding and her associate control of his shareholding. Mr Peng's case was that he would never have just walked away from his life's work. The judge concluded that the evidence showed there was no such oral agreement. '[It was clear that Ms Ding and Mr Zheng] clearly felt that they could get away with it and deliver a fatal blow to Mr Peng from which they estimated that he would not recover. In doing so they failed to account for his resilience and resoluteness,' the judge ruled. 'I have no doubt that the opportunity to acquire potentially massively profitable shareholdings in any new company must have played a highly significant part in what they did.' Mr Peng is now left with the prospect of persuading the Shenzhen authorities to return his shares after a judge cited 'practical realities' of enforcing any extra-territorial judicial muscle. However, lawyers for the businessman said they would appeal his order which declined to slap an injunction order on the shares. As for the return of the shares, Clifford Chance partner Martin Rogers said the outcome was unclear. TRAIL OF DESTRUCTION 1987 James Peng sets up Yuen Yee, a textile company, at the age of 28. January 1990 Yuen Yee changes name to Shenzhen Champaign Industrial Corp (SCIC), listing on the Shenzhen stock exchange in March 1990, a textiles and property play. April 1992 Shenzhen authorities begin investigations into SCIC. June 1992 Bank of China and other banks call in SCIC loans. March 1993 Ms Ding Peng is approached to help Mr Peng deal with Shenzhen authorities. October 1993 Mr Peng is kidnapped in a Macau hotel room, spirited to Shenzhen. December 1993 Shenzhen government orders creation of new company, Shenzhen Fountain Corp, to succeed SCIC. October 1995 Mr Peng sentenced to 18 years imprisonment for offences of theft and misappropriation. November 1999 Mr Peng released after lobbying from Australian government. January 2004 Judge finds Ms Ding unlawfully transferred Mr Peng's shares to companies owned by her and another.