Hong Kong fraud investigators have charged a director of a state-owned company's subsidiary for allegedly conspiring to defraud a number of banks of HK$45 million. Zhang Kang-ping, a director of Ringo Trading Limited, faces two charges of conspiracy to defraud banks by obtaining letter of credit (L/C) facilities with bogus business transactions.

False documentation

The charges brought by the Independent Commission Against Corruption (ICAC) in December allege that Zhang conspired with two other businessmen by submitting to several banks' fictitious documents to support bogus business transactions, in order to apply for L/C facilities.

As a result, Société Generale, Dao Heng Bank, Liu Chong Hing Bank and Standard Chartered Bank issued over HK$45 million in total in credit facilities to a number of companies allegedly controlled by the two other businessmen.

The false documents seemed to show a history of genuine commercial transactions between the Ringo businesses on the one part and Chang Xing Enterprises Limited, KFI Technology (HK) Limited and Wealth Base Trading Limited on the other.

Banks and businesses duped

Documentation relating to these transactions led the banks to release in excess of HK$42 million to the other businesses. Zhang is also accused of dishonestly causing two Ringo businesses to utilise credit facilities, in the form of L/Cs, from the banks.

The ICAC's interest in Ringo arose out of a separate investigation into a corruption report in which a company director was alleged to have accepted bribes in a business transaction. The corruption allegation was found to be unsubstantiated. However, ICAC investigation uncovered the L/C fraud.

Two more charged in Guangnan fraud

In January 2000, ICAC charged two more people in two separate cases connected with multi-million credit frauds involving Guangnan (Holdings) Limited.

Kam Lan-ying, a director of Highdone Company Limited, and Li Pun-kin, a former director of Pearly Gold (Holdings) Limited, respectively faced seven and eight counts of conspiracy to defraud, involving HK$254 million credit facilities in total.

In the first case, Kam Lan-ying was alleged to have conspired with others to defraud Fuji Bank, Nanyang Commercial Bank Limited, Hang Seng Bank Limited, Bank Brussels Lambert S.A. and HSBC.

She was accused of dishonestly causing Guangnan and one of its subsidiaries, Shun Wing Trading Limited, to apply for and utilise credit facilities from the banks under seven L/Cs by submitting false documents to the banks. The documents apparently showed a series of genuine transactions between Guangnan and Shu Wing. Kam was alleged to have caused the banks to release about $134 million in total to Highdone under the L/Cs.

Conspiracy

In the second case, Li Pun-kun was alleged to have conspired with others to defraud Bayerische Vereinsbank AG, Kredietbank Limited, Rabobank, Sanwa Bank Limited, First National Bank of Boston, Dao Heng Bank Limited and Bank of Nova Scotia by similar fraudulent means.

It was alleged that the false documents submitted by Li purportedly showed commercial transactions for crude oil between Pearly Gold, Guangnan and its subsidiary Victory Land Limited. As a result, the banks released about $120 million in total to Pearly Gold under eight L/Cs.

Including the two defendants, a total of 27 people have been charged for alleged scams related to Guangnan and its subsidiaries, involving approximately HK$2,000 million worth of L/Cs in total.

The views in this article are those of the author and not necessarily those of ICC or the other partners in DC-PRO.