Chinese dairy giant Yili says disgraced former boss sheltered by public officials

State-owned Chinese dairy company Yili Group publicly accused its former president, Zheng Junhuai, of embezzling public funds and defaming the company on Wednesday, saying he was protected for more than a decade by his close ties to government officials.

The company said it submitted a report on Tuesday to the Central Leading Group for Inspection Work appealing “for justice”.

Yili made the claims in a statement published on Weibo, China’s Twitter-like service, as well as on its official website immediately after a journalist and a blogger were sentenced in Hohhot, in the Inner Mongolia autonomous region, for suggesting in March that Yili’s current president, Pan Gang, was involved in corruption and had been taken away by the authorities. Yili had denied these claims at the time, calling them rumours.

In the statement, Yili accused Zheng of being behind a series of “defamation attacks” spanning a decade. It claimed the attacks started after Zheng and his unnamed protector embezzled 240 million yuan (US$34.5 million) in public funds.

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In 2004, Zheng and four other company managers were arrested. Two years later, Zheng was sentenced to six years in prison for embezzling 16.5 million yuan. Yili’s statement claims that because of the “protection” he enjoyed, the malpractice went mostly overlooked. It also claimed that because of Zheng’s connections, he was not held in prison and went home whenever he wanted during his sentence.

Yili claims that because of his sudden arrest, Zheng was unable to transfer most of the embezzled funds to his accounts and for more than 10 years, the company claims, Zheng and some officials from Inner Mongolia pressured Yili’s management, asking them to transfer the money.

The Yili statement said a procurator had allegedly told Pan Gang that an official from the Supreme People’s Procuratorate required the company to cooperate in “transferring the funds to his account”, something the Yili management refused to do.

The letter went on to allege that, after several failed attempts, Zheng started contacting journalists and other writers to present himself as a victim and began name-calling and defaming Yili managers.

Yili claims two rumoured attacks caused the company share price to slump – one in 2011, and another in March 2018, when former journalist Liu Chengkun and WeChat writer Zou Guangxiang began to “spread rumours”.

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After one such round of “rumours” on March 24, Yili’s share price dropped, wiping more than 6 billion yuan (US$959.6 million) off the value of the company, causing panic among staff, investors and dairy farmers, the company’s letter said.

The South China Morning Post has previously reported that Liu was accused of writing a series of “fictional” stories, which, while not naming either Yili or Pan, featured descriptions that bore striking resemblances to the company and the individual.

Based on Liu’s work, Zou made claims online that Pan had been detained upon his return to China from the United States, from where he had been supposedly running Yili for the previous six months.

The arrest of Liu and Zou sparked a national outcry over Beijing’s ever-tightening grip on free expression online.

“We ask for justice as well as public attention, hoping for a thorough investigation and public prosecution of Zheng’s crimes, as well as for the truth to be revealed to the public,” the Yili statement said.

The South China Morning Post was unable to contact Yili or the Heilongjiang Red Star Group, where Zheng is now president, on Wednesday.