The former chairman of a US-based trading company has gone on trial for allegedly swindling 5.63 million yuan (US$740,789) from four Chinese trading companies.

Prosecutors say that since 2005, Yao Maosheng, used letters of credit (L/Cs) to illegally obtain goods from the companies.

No documents

The goods arrived in the US, but the sellers could not obtain proceeds from the L/Cs Yao opened for them because he allegedly refused to release documents the sellers needed to present to their banks.

Clauses in the L/Cs required the seller to present either the original copy of the shipping documents or Yao's signature. The Shanghai court heard that Yao refused to give the original copies or his signature to the sellers.

No obligation

Yao told the court that he was under no obligation to pay because of agreements made outside the L/C documentation.

"All the four companies agreed that I could sell those goods first and then pay them," he told the court.

The former chairman claims trading companies were aware of this method of business. The trial continues.

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