The 'rich vein of money' that lay within a subsidiary of China Southern Airlines was used in a letter-of-credit fraud scheme that generated $28 million, a court heard yesterday. Prosecutor Graeme MacKay also told the Court of First Instance the scheme was uncovered when the airline inquired in May 1999 why its subsidiary, Nan Lung Travel and Express (HK) Ltd, had lost millions through loans to Hong Kong Textiles Exchange. Nan Lung managing director Tse Ching-ng, 80, and the company's assistant general manager, Zhong Guosong, 41, have pleaded not guilty to conspiracy to defraud between January 1, 1997 and November 20, 1998. Cheng Kin-ping, 58, and Malinda Lam Wah-lam, 51, who had sole control over Hong Kong Textiles Exchange, have also denied the charge. Cheng and Lam have also denied one count of procuring entries in a record of a bank by deception and one count of conspiracy to deal with property knowing or believing it to represent proceeds of an indictable offence. Mr MacKay told the court the husband and wife team, Cheng and Lam, approached the two employees of Nan Lung, who agreed that the travel company would lend them money by entering into transactions using letters of credit. But the parties knew no goods were going to be bought from Hong Kong Textiles Exchange by Nan Lung, and misled the banks into giving them credit, he said. The court was told the money from the letters of credit was used by Cheng and Lam to reduce heavy debts incurred by their other companies. The trial before Mr Justice Pang Kin-kee continues on Monday.