Dong Zhengqing, former president of China's sixth largest brokerage, went on trial for insider trading in this south China city on Friday, denying all charges and his earlier confession with police.
Dong was accused of tipping off the Guangfa Securities' reverse-merger listing on the Shenzhen Stock Exchange (SZ) to his younger brother Dong Dewei and former classmate Zhao Shuya, who were tried in the same case at Tianhe District Court in Guangzhou.
The three defendants denied their culpable confessions in court,saying they made those statements under intimidation and inducement by police.
The brokerage went public on reverse merger of the Yan Bian Road, a SZ-listed stock on June 2, 2006.
The market speculation on the Guangfa Securities' back-door listing drove up the Yan Bian Road stock, which hit 11 limit-ups at the bourse between March and June 3. The share price rose from 2.86 yuan (0.4 U.S. dollars) to 8.06 yuan during the period.
Dong insisted in court that he was not involved in the listing procedure. On June 2, 2006, he was on business trip to southern Yunnan Province.
He said that the listing was conducted by two of his partners. He only got to know the listing during his trip. Before it, the company had had several other choices for the reverse merger.
Dong reasoned that since he was not involved in the trade, there was no way that he could have tipped it off as early as in February, 2006, when his relatives began to make purchases of the Yan Bian Raod stock.
Dong Dewei and Zhao Shuya were charged for profiteering 50 million yuan and 1 million yuan, respectively, from selling the stock afterwards.
Both of the two denied in court that they bought the stock after a tip-off from Dong, as they had previously confessed in police interrogations.
Dong Dewei said in court that he foresaw the potential of the Yan Bian Road stock early in February, 2006, and made several purchases of the stock, or 14.57 million shares in total at 70 million yuan to his personal account without consulting his brother.
The court heard the testimonies of several Guangfa executives, who said that though the former president Dong did not conduct the trade in person, he played the pivotal role in key decision-makings.
A court source said that the defendants' withdrawal of their former confessions made the case more complicated and prolonged the trial.
The Guangdong provincial government launched investigations on Dong and his relatives involvement in the back-door listing in June, 2007. Dong was arrested by police later in July.
Source: Xinhua
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