A merchant charged by Hong Kong's Independent Commission Against Corruption has been convicted for his role in a HK$260 million letter of credit (L/C) fraud.

The fraud involved dozens of L/Cs and was based on non-existent commercial transactions.

Awaiting sentence

Chen Xun was found guilty of five counts of conspiracy to defraud but has not yet been sentenced.

The 75 year old will have to wait until December until the court decides his punishment.

Three banks

During the trial the court heard that between 1994 and 1996 the defendant conspired with others to defraud three banks in Hong Kong - Kincheng Banking Corporation, Kwangtung Provincial Bank and Bank of China.

Chen used three companies to apply to those banks to issue 50 L/Cs payable to Max Rise Industrial Limited.

False documents

The defendant submitted false documents to the banks apparently showing genuine underlying commercial transactions of goods between the three companies and Max Rise to support the L/C applications.

There were no such genuine transactions and the banks were duped into releasing a total of over HK$260 million to Max Rise under the L/Cs.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.