Article

Facts On Mar. 1, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ICBC Rizhao Branch for an L/C of RMB 17.76 million. When the L/C expired, the bank deducted margin and interest of the L/C to pay the Defendant’s other debts in this bank, but the RMB 17.76 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On Mar. 7, 2014, in the absence of a real deal, the Defendant use keeping accounts as an excuse and asked Rizho Longsheng Food Co., Ltd. to sign a contract with the Rizhao Jin Xilai Economic and Trade Co., Ltd.. Meanwhile, the subsidiary corporation of the Rizhao Jin Xilai Economic and Trade Co., Ltd. made an application to CCB Rizhao Branch for an L/C of RMB 11.9 million. On Sep. 5, 2014, the subsidiary corporation signed a fake contract with the Rizhao Taiyun Electric Power Co., Ltd. and applied RMB 8 million loan in this bank for the purpose of paying back the L/C expiration money. The loan has never been returned.

On Mar. 21, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 16.8 million. When the L/C expired, the bank deducted margin and interest RMB 6.82261067 million of the L/C, but the RMB 9.97738933 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On Apr. 21, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 16.227 million. When the L/C expired, the bank deducted margin and interest RMB 6.59950417 million of the L/C, but the RMB 9.62749583 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On May. 23, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 16.173 million. In order to pay back the L/C expiration money, the Rizhao Jin Xilai Economic and Trade Co.. Ltd. applied for documentary loan RMB 8.89 million which has never been repaid.

On Jul. 15, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 8.204 million. When the L/C expired, the bank deducted margin and interest RMB 3.72650639 million of the L/C, but the RMB 4.47749361 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On Jun. 18, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Shandong Yunian International Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 21 million. When the L/C expired, the bank deducted margin and interest RMB 12.79264 million of the L/C, but the RMB 8.20736 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On Aug. 15, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Jinan Puhai Economic and Trade Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 29 million. When the L/C expired, the bank deducted margin and interest RMB 15.30997 million of the L/C, but the RMB 13.69003 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

On Aug. 21, 2014, in the absence of a real deal, the Rizhao Jin Xilai Economic and Trade Co., Ltd. and the Rizhao Maris Trading Co., Ltd., which were two companies controlled by the Defendant, signed a contract. The Rizhao Jin Xilai Economic and Trade Co.. Ltd. made an application to ABC Rizhao Branch for an L/C of RMB 41 million. When the L/C expired, the bank deducted margin and interest RMB 21.2288775 million of the L/C, but the RMB 19.7711225 million, which was paid by the bank for the Defendant and expected him to repaid later, has never been returned.

Legal Analysis:

Legal Issue(s): Weather the Defendant should be sentenced loan cheating, bill acceptance crime and financial bill crime or not?

Legal Rule(s): Art. 175, Criminal Law of the People’s Republic of China:Whoever, for the purpose of making profits through transferring loans, fraudulently obtains credit funds from a banking institution and transfers the funds to another at usury shall, if the amount of illegal gains is relatively large, be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also be fined not less than one time but not more than five times the illegal gains; if the amount involved is huge, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined not less than one time but not more than five times the illegal gains.

Art. 52, Criminal Law of the People’s Republic of China: The amount of any fine imposed shall be determined according to the circumstances of the crime.

Art. 53, Criminal Law of the People’s Republic of China: A fine may be paid in a lump sum or in installments within the time limit specified in the judgment. If a fine is not paid upon the expiration of that time limit, the payment shall be compelled. If a person is not able to pay the fine in full, the People's Court shall demand the payment whenever it finds the person has property for execution of the fine. If a person has true difficulties in paying because of an irresistible disaster, the fine may be reduced or remitted according to the circumstances.

Art. 61, Criminal Law of the People’s Republic of China: When sentencing a criminal, a punishment shall be meted out on the basis of the facts, nature and circumstances of the crime, the degree of harm done to society and the relevant provisions of this Law.

Art. 64, Criminal Law of the People’s Republic of China: All money and property illegally obtained by a criminal shall be recovered, or compensation shall be or dered; the lawful property of the victim shall be returned without delay; and contrabands and possessions of the criminal that are used in the commission of the crime shall be confiscated. All the confiscated money and property and fines shall be turned over to the State treasury, and no one may misappropriate or privately dispose of them.

Disposition – for each legal issue: The Court brought a verdict in favor of the Public Prosecutor that the Defendant was guilty of loan cheating, bill acceptance crime and financial bill crime.

Holding & Reasoning for each issue: According to the Art. 175, Criminal Law of the People’s Republic of China, the Defendant used many companies which controlled by himself, cheated the victims out of loans, bill acceptances and L/C through the method of fake contracts. The victims experienced significant losses due to the Defendant’s crime. The defendant should be investigated for his criminal responsibility according to the law.

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The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of the ICC or Coastline Solutions.