A KEY figure named in the multi-million dollar lawsuit brought by bankers Lehman Brothers against a mainland group connected to two of China's most powerful companies is missing. The deputy general manager of China International United Petroleum Chemicals (Unipec), Yin Jian, who is alleged to have arranged the company's foreign exchange contracts with Lehman Brothers, is no longer with the company. Attempts to discover his whereabouts have failed, and the company appears unsure whether Mr Yin is still in China. Lehman has brought an action against Unipec, claiming it is owed US$44 million (HK$340 million) for failing to pay for losses on foreign exchange dealings. Unipec is a joint venture between China National Petrochemical Corporation (Sinopec) and China National Chemicals Import & Export Corporation (Sinochem), two of the largest trading groups in the mainland and which dominate its oil industry. In a separate action, the bankers are claiming Minmetals International Non-Ferrous Metals Trading Company owes the bank US$53.5 million, also for losses in foreign exchange markets. Civil summonses have this week been taken out against both companies in New York. Yesterday, Unipec hit back at Lehman Brothers and declared that it would fight the case, blaming the losses on Lehman's own systems. 'The losses suffered by Lehman Brothers have arisen as a result of that company's failure to employ due diligence in the conduct of its business and are not the responsibility of Unipec,' the company said. 'Any proceedings commenced by Lehman Brothers in New York or elsewhere will be defended vigorously.' Unipec claimed the losses suffered by Lehman were the result of foreign exchange and swap transactions undertaken by Lehman with 'certain parties' in Hong Kong who were not connected by either Unipec in Beijing or Unipec's Hong Kong office. Unipec said: 'The transactions appeared to have been undertaken by Lehman Brothers without any proper credit-control management and without any reference to relevant regulations. 'As a result, Lehman Brothers have made significant losses.' As these could not be recovered from their Hong Kong counterpart, Unipec continued, the bank had decided to go after 'high profile' Chinese companies who were 'presumably perceived by Lehman as having deep pockets'. The 'certain parties' were not identified by Unipec, but could refer to the missing Mr Yin. However, evidence filed with the complaints submitted to the New York courts indicate Mr Yin was not alone in running Unipec's foreign exchange position, and that Jiang Yunlong, the president and chief executive officer of Unipec, played a leading role in the transactions. The complaint claims that on several occasions Mr Jiang met officers of the bank's subsidiaries which did the deals, Lehman Brothers Commercial Corporation and Lehman Brothers Special Financing. The meetings discussed Unipec's transactions and the need to satisfy Unipec's collateral obligations to the bank. During these discussions, and in later correspondence, Mr Jiang acknowledged Unipec's obligations, Lehman Brothers has told the New York Court, and has submitted letters backing their claim. Documents filed in New York show transactions carried out under Mr Yin's instructions between June 1992 and February 1993 netted Unipec profits of US$55 million. The run of profits came to end in February this year. The Federal Reserve Board's move to raise interest rates sent the dollar reeling and Unipec's unrealised losses on its greenback positions began to soar. Worried Lehman executives began to issue margin calls against Unipec - part of standard foreign exchange market practice to prevent banks becoming too exposed to clients' positions. The complaints allege that, despite separate calls in May, June and July, Unipec made only partial payments which were not enough to satisfy the company's contractual obligations. By this time, Mr Jiang had stepped in to take control of Unipec's foreign exchange deals, and, says Lehman Brothers, was offered a variety of solutions to the group's mounting problems. But, despite 'numerous' representations from Mr Jiang that money would be transferred, no further payments were received, alleges the bank. Frustrated at the lack of action by Unipec, Lehman Brothers put a stop-loss order on the Chinese group's account - which would limit losses by triggering sales when the dollar reached a predetermined level. Mr Jiang agreed to this and, for a while, the markets swung Unipec's way and the dollar strengthened in June, but the recovery only slightly dented the outstanding losses. Further attempts by Lehman to protect its position were rejected by Mr Jiang, the bank told the court. And, on July 27, he wrote to the bank's subsidiaries warning them they would 'bear the consequences' for any losses incurred as a result of stop-loss orders. One day later, the stop-loss was triggered and Lehman liquidated the position, leaving Unipec owing US$22.8 million. In a separate swap agreement which Lehman terminated on the same day, Unipec was left owing the bank US$29 million. The claim shows that, after realising some of the funds available, Lehman was left with a deficit of almost US$44 million. The bank claims that had it not acted to close out Unipec's positions, the losses would have been much larger.
