Global Times: BOC Gets 200m USD of Indemnity from a Cheating Company

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Last updated at: (Beijing Time) Sunday, July 28, 2002

Global Times: BOC Gets 200m USD of Indemnity from a Cheating Company

On the morning of July 12, 2002, the head office of the Bank of China (BOC) received a long-expected facsimile, on top of which were written these big characters: We've won!

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On the morning of July 12, 2002, the head office of the Bank of China (BOC) received a long-expected facsimile, on top of which were written these big characters: We've won!

The facsimile was sent from New York, USA, by the New York Branch of BOC. After sending the facsimile, leaders and employees of the branch as well as the lawyer heaved a deep sigh of relief, thus dispelling the vexation pent-up in their hearts for as long as one and a half year.

It was at 5:30 p.m. local time when Chinese-American judge Chen Zhuo-guang with the federal court in the South District of New York read out the 13-page-long court verdict, ruling that Zhou Qiang and other defendants had been charged with committing the crimes of "swindling". It was finally determined that the volume of the defendants' debts was over US$35.45 million, an amount of US$1.45 million more than that of debts stated in the indictment of BOC. In accordance with the American federal Organic Law on cheating, manipulation and bribery, the actual amount of indemnity Zhou Qiang and other defendants had to pay was three times greater than the volume of debts, this, plus the punitive fine of nearly US$100 million, the actual amount of indemnity would exceed US$200 million.

After a decision was passed on the case, both sides present gave different shows. Deputy General Manager Huang Yangxin of BOC New York Branch excitedly reported this to the head office of BOC in Beijing and told the reporters that he was "very satisfied", "gaining a complete victory". Whereas the chief defendants, Zhou Qiang and his wife Liu Ping turned pale, and left the court without uttering a single word.

While accepting an interview with reporters on July 12, Huang Yangxin said the adjudication made by the jury the day before showed that the fraudulent conducts of defendant Zhou Qiang and others were very evident, adding that the jury's judgment was quick and accurate. Although the defendant's lawyer lodged an appeal right at the court, the opportunity for the defendants to win the suit was utterly slim because relevant evidence provided by BOC was quite adequate, said Huang Yangxin.

On January 18, 2002, the monetary supervision office under the US Finance Department and the People's Bank of China (PBOC) respectively conducted thorough investigations into the case of the (rule-breaking operation" by the former management of the New York Branch of the BOC between 1991-99, they finally decided to fine BOC New York Branch US$10 million.

The event of punishment by a fine pushed BOC New York Branch onto the exposure platform and at the same time drew the attention of various circles to the "fraudulent conduct" as stated in the report on the punishment. The financial circles in New York noticed that a year before the fine, that is, in February 2001, the New York Branch of BOC brought an action against the couple of Zhou Qiang and Liu Ping as well as over 20 people including Yang Zhongqi, credit clerk with the former BOC New York Branch and NBM and several other companies under their control.

Internal and External Collusion in Cheating Loans

What are Zhou Qiang and Liu Ping, and what tricks have they played? Zhou Qiang was originally a clerk with the Jiangsu Five-Metals Company in charge of foreign trade. In 1989, he was sent to work in the Los Angeles-based Jinmei Company, the Jiangsu company's subsidiary in the United States. Soon after he arrived in the United States, he took advantage of the opportunity offered by an anti-China high tide in America to break away from the Jiangsu Five-Metals Company and got a green card.. Soon afterwards, the Jiangsu Five-Metals Company discovered that Jinmei Company was cheated and suffered great losses. An investigation conducted by the Jiangsu company showed that the fraudulent case had something to do with Zhou Qiang. However, because of China's unfavorable diplomatic environment at that time, with the green card, Zhou Qiang had left the Jiangsu Five-Metals Company, thus making it impossible to carry on the investigation further. Because the Jiangsu company failed to obtain evidence proving Zhou Qiang's participation in the fraudulence, in the end the company could not but left the matter unsettled. Zhou Qiang escaped the punishment. Before long, he opened a firm in New York with a sum of money of unknown source. In 1991, Zhou Qiang got married with Liu Ping who opened a restaurant in China Town in New York. Since then they had begun to carry out their scheme to cheat the BOC New York Branch out of loans.

Zhou Qiang was aware that relying on his strength, it was not easy to get loans from the strictly managed BOC unless he opened up another new road. So, he began to forge "close ties" with the level of some managers of the BOC New York Branch. Every week he invited these managerial personnel to dinners, or invited them to participate in his "family feasts". Of course, in addition to dinners, nobody knew what private deals had been stricken between them. Nevertheless, many local Chinese knew that Zhou Qiang could get loans which they could not get at ordinary time; when loans were due or overdue, BOC would send people to come to dun payment of the debts, but payment of Zhou Qiang's loans could be deferred year after year. In 1996, BOC New York Branch issued a US$15 million one-year loan to NBM wherein Zhou Qiang served as its president. But thereafter, Zhou raised the demand for deferred payment of this sum of loans every year and got the approval of the said Branch, this continued up to 1999. Among the original managers of the BOC New York Branch, Yang Zhongqi was no doubt Zhou Qiang's "sworn brother". Yang not only helped Zhou Qiang get conveniences to various kinds of loans and preferential interest rates, he also abused his official capacity to help Zhou Qiang fake various documents, enabling Zhou to use these documents to further cheat other companies. Once, Zhou Qiang mortgaged his plushy mansion worth US$3 million in New York to the BOC New York Branch for a loan. Soon afterwards, Zhou Qiang again mortgaged this sumptuous house to another company and cheated it out of a loan of US$2 million. In doing so, what Zhou Qiang relied on was the document carrying the signature of Yang Zhongqi who voluntarily turned BOC New York Branch as the first beneficiary of the luxury mansion into a subordinate beneficiary. In addition to employing such means of repeatedly mortgaging objects given as a pledge, Zhou Qiang and his wife also ganged up with others (most of them were their parents, brothers and sisters) to open many phony companies, then they forged trading contracts among these companies as mortgage for the loans. During the decade from 1991 to 2000, Zhou Qiang and others had gained loans worth over US$80 million from the BOC New York Branch.

Zhou Qiang and others must hand the indemnity to the BOC New York Branch as soon as possible, because, according to related laws of the United States, it is fully possible for the said Branch, after winning the lawsuit in the civil procedures, to institute a criminal procedure against Zhou Qiang and his wife, Zhou Qiang is likely to be put in jail.

Prospect of BOC Looks Promising

The BOC New York Branch was founded in November 1980 having Los Angles Branch and another branch under its jurisdiction. By the end of 1996, New York Branch had a total asset value around US$2.5 billion, loans granted US$1 billion and deposits nearly US$800 million. The New York Branch presently has a payroll of nearly 300 employees, a fairly influential among the 25 overseas agencies of the Bank of China. As one of the four major State-owned banks, the Bank of China is applying for issuing and listing stocks in Hong Kong in August, but the court case had for a while cast a strong shadow over the stock issuance and listing of the Bank of China. .In the opinion of the financial circles of New York, the case ended with a verdict of complete victory for the Bank of China, this, plus the rise of BOC's ranking among global banks from 18th last year to 11th this year has created a favorable atmosphere for Bank of China's first stock issuance and listing.

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