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China economy

Mystery tycoon Ye Jianming under investigation in China, Czech presidential office says

Shanghai officials told visiting delegation the entrepreneur would no longer be a CEFC shareholder or executive, while a source says he has not been arrested  

PUBLISHED : Tuesday, 20 March, 2018, 8:09pm
UPDATED : Wednesday, 21 March, 2018, 1:08pm

Mystery tycoon Ye Jianming is being investigated by Chinese authorities for “suspicion of violation of laws”, the Czech presidential office said after it sent a delegation to Shanghai to find out more about Ye’s company CEFC Group.

The energy and financial services company, registered in Shanghai, has made sizeable investments in the Czech Republic.

President Milos Zeman’s office said in a statement that it sent the delegation, headed by Zeman’s chief of staff Vratislav Myná, to Shanghai and spoke to municipal officials about the operation following media reports that Ye was under investigation.

The Chinese authorities have not confirmed or denied that Ye – who rapidly built a business empire worth 263 billion yuan (US$42.49 billion) – has been detained, but he has not been seen in public for months. 

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A source familiar with the matter told the South China Morning Post that Ye had not been arrested but was assisting authorities with inquiries. Ye was also trying to keep a low profile.

“He has not been arrested, but he’s helping to answer some questions,” the source said. “He wants to avoid any public attention for a while, so he’s staying out of view at the moment.”

Various sources told the Post earlier that Ye was detained just before the start of the Lunar New Year holiday on February 16.

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According to the Czech presidential office statement from Monday, the Chinese side told the Czech delegation that Ye was being investigated, without elaborating.

It said the delegation also met CEFC China’s team headed by Chan Chauto, who is known as Chen Qiutu in Chinese, and the Czech side was told that Ye would no longer be a shareholder or executive in the company.

The confirmation from the office of Zeman, for whom Ye has served as an “economic adviser”, is the most official statement so far regarding Ye’s situation. 

Separately, CEFC Europe, the Czech unit of CEFC, also said in a statement that it had been informed by “a forthcoming change in shareholder structure” that Ye was no longer a shareholder or executive in CEFC. The Czech unit also said it was withdrawing a request to increase its stake in the J&T Finance Group in Prague.

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Both the presidential office and CEFC Europe noted that CEFC as a company entity was not under investigation.

The rise of Ye and CEFC is an attention-grabbing tale even in China, where rags-to-riches stories are common. Within barely five years, Ye – a merchant from the southeastern province of Fujian – has emerged from obscurity to become head of the country’s fourth-largest oil conglomerate.

Ye has made headlines for his aggressive acquisitions abroad, including a deal to buy an equity stake in Russian oil group Rosneft for US$9.1 billion. Ye and CEFC have been particularly active in the Czech Republic, buying into Czech brewery Pivovary Lobkowicz Group, the Travel Service airline and soccer club SK Slavia Prague.

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CEFC holds a 9.9 per cent equity stake in J&T Finance Group, and the company announced in October that it planned to increase that to 50 per cent. It will be CEFC’s biggest deal in the Czech Republic if it goes through.

The troubles of Ye and CEFC began to emerge in November, when former Hong Kong home secretary Patrick Ho Chi-ping was arrested in New York on charges of conspiring to bribe African government officials through US financial institutions. 

Ho, 68, was leading a life of what he called “civil diplomacy” after retiring from Hong Kong’s public service, heading a think tank called the China Energy Fund Committee, fully funded by CEFC. 

The think tank has special consultative status with the United Nations Economic and Social Council, with access to influential decision makers in UN bodies.

Ho and Senegal’s former foreign minister, Cheikh Gadio, are accused of operating “an international corruption scheme that spanned the globe” since 2014, according to a statement from the US Department of Justice in November. 

The two men allegedly offered a US$2 million bribe to Chadian President Idriss Deby in exchange for “valuable oil rights”, and another US$500,000 to Uganda’s Foreign Affairs Minister Sam Kutesa. The governments of both Chad and Uganda have denied the allegations.

CEFC China also said in a statement after Ho’s arrest that the fund had no ties to CEFC’s commercial activities.

Chinese financial magazine Caixin reported last month that Ye was under investigation, but the article was later pulled from its website. CEFC said afterwards in a statement that the report did not reflect the facts.

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At the same time, the business empire of CEFC is starting to crumble. Shanghai Guosheng Group, a portfolio and investment agency controlled by the municipal government, has taken over the management and daily operations of CEFC China Energy, the Post reported earlier. 

Meanwhile CEFC Shanghai International Group, its main subsidiary, this month pledged close to a fifth of its holding in a Shenzhen-listed unit to back a 800 million yuan loan, in another sign it is under financial strain.

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The Shenzhen-listed unit – CEFC Anhui International Holding – said in a stock exchange filing on Monday it would suspend trading in its shares for up to 10 days pending a major announcement. The firm said on March 1, following reports that Ye was under investigation, that it was not controlled by Ye.

CEFC China Energy is scrambling for funds and ready to pay annual rates of as much as 36 per cent for short-term loans but still cannot find lenders, Reuters reported this month, citing unnamed sources.

State-backed institutions are also moving quickly to take over CEFC’s overseas operations. China Huarong Asset Management has taken a 36.2 per cent stake in CEFC Hainan International, the unit which is acquiring the Rosneft stake.

For the Czech unit of CEFC, state-owned Chinese firm Citic Group is expected to take a 49 per cent stake in CEFC Europe, according to a Czech news site.