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Scandal probe shakes realty mogul's empire
( 2003-06-06 09:47) (1)

The business empire of Shanghai real estate mogul Zhou Zhengyi seems shaky after he was reported to be under police surveillance for his suspected involvement in financial irregularities.

While the stock market performance of several businesses belonging to 42-year-old Zhou is on the wane, some of his other operations in the city have shown signs of being hit hard following the disclosure of Zhou's scandal in late May.

Construction of the Xinlipu Finance Tower, located in the bustling Huangpu District, has been suspended for several days, though only two storeys of the top-class 19-storey-in-design office building have been finished.

A major investor in the project, due to be completed in January, 2004, is Shanghai Nongkai Development Group, Zhou's flagship business that is under investigation for its questionable operations, as city government spokeswoman Jiao Yang confirmed earlier this week.

A-shares of Daying Modern Agricultural Holdings Co Ltd, a listed unit in Zhou's complicated lineup of subsidiaries, were among the biggest decliners in Shanghai yesterday, dropping 4.12 per cent to close at 9.31 yuan (US$1.01) following another 5.27 per cent slide on Tuesday. Share trading of the firm suspended on Wednesday.

Similarly, A-shares of Shenzhen-listed Xuzhou Construction Machinery Group, in which Zhou supposedly holds dominant shares, plunged 9.96 per cent to close at 12.20 yuan (US$1.47) Thursday.

Share trading of another Shanghai-listed firm under Zhou's command, property developer Shanghai Hainiao Enterprise Co Ltd were suspended for the past two days pending the release of important statements.

Even the A Mao Stews, a local restaurant based in which Zhou started making his fortune in 1994, has been closed with a sign hanging on the door to solicit new tenants.

"We haven't seen Zhou's car for quite a few days," said a security guard at Nongkai's 17-storey office building, where its many subsidiaries are also located, although a receptionist there insisted that "everything goes on as normal in Nongkai" and denied earlier reports that Nongkai's offices were raided on Tuesday by investigators to seize the company's financial data.

But local banks have started to look into their loans to Zhou's company and subsidiaries.

All these look like a domino effect that could collapse the business reign of Zhou, reputed as Shanghai's richest man with a personal wealth of US$320 million according to last year's Forbes ranking.

Known as Chau Ching-ngai in Hong Kong, Zhou has reportedly been confined to his home since May 26 as he is suspected of illegal financial dealings, stock manipulation and tax fraud.

Together with 19 other involved people, Mao Yuping, Zhou's wife and the chairman of Hong Kong-listed Shanghai Merchants Holdings Ltd, was also questioned by Hong Kong's Independent Commission Against Corruption, though she was later freed on a bail, according to reports from Hong Kong.

Apart from the ongoing financial scandal, Zhou is also under fire from a large number of residents in the local Jing'an District, some of whom filed a suit in late May as they were moved to make way for one of his massive property projects in Shanghai.

The real estate tycoon allegedly obtained 43,000 square metres of land free from the district government but failed to offer the affected residents a proper compensation or relocation plan after moving out of their old residence.

The Jing'an District People's Court, which handled the case, has not given its ruling on the dispute.

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