Taizinai's ousted boss held for fund theft, reports say
Li Tuchun, the founder of bankrupt Wall Street-backed dairy company Hunan Taizinai Group, has reportedly been detained by mainland authorities.
Media reports carried on Xinhua's website yesterday said Li, who was removed as Taizinai's chairman by its liquidators this month, was being held by police under suspicion of embezzling government funds.
But a person close to Taizinai's insolvency proceedings called the allegations of embezzling public money bizarre, given that it is not a state-owned company. The person also said Li repeatedly clashed with Hunan politicians who are now running the dairy firm.
Taizinai, once the mainland's leading producer of yoghurt-based health drinks, collapsed into provisional liquidation in April, owing banks including Royal Bank of Scotland Group and Citigroup 3 billion yuan (HK$3.42 billion).
London-based buyout house Actis, Goldman Sachs and Morgan Stanley bought a US$73 million stake in Taizinai in early 2008 and now face losing their entire investments.
Officials in Zhuzhou, Hunan, seized control of the company early last year, taking it upon themselves to stabilise a business that had suffered from the previous year's earthquakes and milk scandal, as well as some serious overexpansion by Li.
A report by accountants Deloitte, issued in late 2008 and before Taizinai was taken over by the government, accused Li of falsifying accounts and wasting company money. But as the dairy firm is not a state-owned enterprise this was not government cash.
After the company was seized, Li continued to claim he was in charge. He announced to Hong Kong broadcaster Phoenix in April that Taizinai creditors should deal directly with him.
The Economic Observer, in a report on Monday, said police suspected Li of organising 'creditors' protests' at Taizinai. About 40 people employed by a building firm owed money by the company occupied its Hebei plant and kidnapped the general manager late last month.
Wen Dibo, a senior Zhuzhou official managing Taizinai, said he knew nothing about Li's alleged arrest.
A person with direct knowledge of the situation said Li was being held in Beijing, which is where his family lives. Li did not answer his mobile phone.
When asked to clarify if Li was detained in the capital, an officer at the Beijing Municipal Public Security Bureau's business crime investigation department said: 'It is not a yes. And it is not a no.'
Mainland authorities often do not publicise details of criminal probes. When Wong Kwong-yu, the former chairman of Gome Electrical Appliances Holding, was arrested in late 2008, official media said he was being investigated for 'share price manipulation'.
Deloitte's report, obtained by this newspaper, said Taizinai had falsely stated a net profit of 245.2 million yuan for 2007, when it really lost 30 million yuan.
It revealed Taizinai had 240 cars for management use, when it needed a maximum of 40, and members of Li's family and government officials were idle employees living off the company.
Li also built plants across the mainland that people involved with the company have said were unnecessarily large for Taizinai. These included several factories at its Hunan base in the style of Roman temples, clad with marble. Li built an office for himself whose frontage was an exact replica of the Gate of Heavenly Peace in Tiananmen Square.
Before his troubles began, Li was a celebrated entrepreneur. In 2007, he planned to launch Taizinai in Hong Kong or New York.
Taizinai was wound up in the Cayman Islands, where it is legally headquartered.
Borrelli Walsh, the company's liquidator, declined to comment.
Additional reporting by Eric Ng
