Director arrested in bank scam

By Wang Huazhong (China Daily)
Updated: 2009-05-21 08:20

A bank manager in the eastern Anhui province has been arrested for allegedly forging stamps, illegally operating financial businesses and trading bank credits, officials said Wednesday.

Li Qun, manager of the Tengda office of Agriculture Bank of China's (ABC) Fuyang branch, surrendered to police early this month for failing to repay 165 million yuan ($22 million) "illegally raised" from the public.

That is more than the 100 million yuan earlier reported, according to Xinhua News Agency. A director of the branch, Xu Lin, was also sacked on Monday after Li's surrender, according to China News Radio.

"We discharged Xu Lin for her failure in supervising subordinates. No malpractice was done by Xu nor the bank," Liu Su, Party discipline official of the ABC's Anhui sub-branch, was quoted as saying.

It is unknown where the illegally raised cash has gone.

About 60 people have reported losses to local police. The biggest sum of money lent to Li by a single person was 20 million yuan, the report said.

Sources said Li's family has powerful political connections in Fuyang city - a reason many creditors trusted her.

The report said hundreds of people have been gathering in front of the Tengda office with a banner asking "ABC to give back (their) hard-earned money."

But the bank claimed it did not collude with Li in her "individual conduct of illegal credit business" according to the radio report.

Li also allegedly borrowed money from many local officials, which has sparked public suspicion of the legitimacy of their earnings.

"How could a trade union director have millions of yuan to offer?" a netizen questioned.

Guo Xudong, a lawyer specializing in financial crimes, said creditors could reclaim their money from the third parties, if any, who received part or all of the funds from Li.

Trading of bank's acceptance bills is a legal blindspot in China, according to Guo.

"It is a loop which could continue. Suspects pool deposits from the public, then use those funds to pay banks for acceptance bills the suspects had given out to ex-creditors."

"By doing so, one could temporarily strengthen cash flow, or disappear suddenly with large amounts of creditors' money without paying back the bank's acceptance."