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Vạn Thịnh Phát fraud case

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Vạn Thịnh Phát case
Part of Blazing Furnace
DateOctober 8, 2022 (2022-10-08)[a] – present
(2 years)
Also known asVạn Thịnh Phát Major Case
ThemeCorruption
Organised byTrương Mỹ Lan
Outcome
Inquiries
  • 86 defendants (phase 1)[1]
  • 34 defendants (phase 2)
Charges
List of charges
  • Phase 1:
    • Bribery
    • Accepting bribes
    • Violating regulations on banking activities, other activities related to banking operations
    • Embezzlement of assets
    • Abuse of position and power while performing official duties
    • Lack of responsibility causing serious consequences
    • Abuse of trust to appropriate property
  • Phase 2:
    • Money laundering
    • Fraud to appropriate property
    • Illegal transportation of currency across borders
TrialPeople's Court of Ho Chi Minh City
Verdict
  • 1 death sentence
  • 4 life sentences
  • 81 sentences ranging from 3 to 20 years in prison
Damage₫677 trillion (US$27 billion)

The Vạn Thịnh Phát case, referred to by the People's Court of Ho Chi Minh City, Vietnam, as the Trương Mỹ Lan and accomplices case,[2] is an economic corruption scandal involving the Vạn Thịnh Phát Group joint-stock company. Vạn Thịnh Phát, under the leadership of billionaire Trương Mỹ Lan for over 10 years, defrauded Sai Gon Joint Stock Commercial Bank (SCB).

The Vạn Thịnh Phát scandal was explosed during the anti-corruption Blazing Furnace campaign initiated by General Secretary Nguyễn Phú Trọng. The total damage of the case amounts to ₫677 trillion (equivalent to US$27 billion) through ₫1 quadrillion (equivalent to US$44 billion) in fraudulent disbursements via SCB loan documents, making it one of the largest economic scandals in Vietnam's history; it surpassed the 1 Malaysia Development Berhad scandal in Malaysia, making it also the largest corruption scandal in Southeast Asia.[3] Many senior officials, including presidents, are involved. A total of 86 people have been charged.[4]

According to the People's Court of Ho Chi Minh City, the trial of the case will be conducted in two phases, with the first phase closely following the Vạn Thịnh Phát case and focusing on investigation, prosecution, and trial to recover assets; the second phase will be related to corporate bonds. The first phase trial took place from March 5 to April 11, 2024, with the participation of 200 lawyers and 86 defendants, of which 7 were absent. After the trial, Trương Mỹ Lan was sentenced to death in the first instance; 4 accomplices received life sentences and other defendants received sentences ranging from 3 years of suspended sentence to 20 years in prison. Trương Mỹ Lan's husband and niece received jail terms of 9 and 17 years, respectively.[5]

Background

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Trương Mỹ Lan, born on October 13, 1956, is a Chinese-descended Vietnamese businesswoman born in Saigon, Republic of Vietnam (now Ho Chi Minh City, Vietnam). Before becoming the owner of a major corporation in Vietnam, she sold cosmetics at Ben Thanh Market, Ho Chi Minh City, with financial support from her mother.[6] In 1992, she married Hong Kong businessman Chu Lap Co. Together, they founded Vạn Thịnh Phát Group, initially focusing on trade and business, restaurants, and hotels in the aftermath of the Đổi Mới reforms.[7][6][8]

In 2007, Vạn Thịnh Phát established two entities: Vạn Thịnh Phát Investment Group and An Dong Investment.[7] After acquiring SCB Bank through shareholding control, SCB became one of the largest commercial banks in Vietnam by asset size. At the same time, Vạn Thịnh Phát became one of the wealthiest real estate companies in Vietnam with a series of projects including high-end residential buildings, offices, hotels, and shopping centers.[6]

The Times Square Investment joint-stock company has frontages on Nguyen Hue Walking Street and the Union Square shopping, which is a hotel complex with four frontages; it was owned by Vạn Thịnh Phát. The Times Square Investment building (26–36, District 1, Nguyen Hue) is chaired by Chu Lap Co. This building is used as collateral for loans at SCB Bank. Building number 19–25 is the headquarters of SCB Bank.[9] Despite owning a large amount of assets, little information about her or her family is known.[10]

Burning Furnace campaign

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General Secretary Nguyễn Phú Trọng.
General Secretary Nguyễn Phú Trọng, who initiated the Burning Furnace Campaign.

Corruption in Vietnam grew during the tenure of Prime Minister Nguyễn Tấn Dũng.[11] In 2016, the Communist Party of Vietnam began implementing the anti-corruption campaign known as the "Burning Furnace", initiated by General Secretary Nguyễn Phú Trọng.[11][12] The campaign intensified in 2022.[10] The Burning Furnace campaign led to the resignation of many senior government officials, including Vietnamese Presidents Nguyễn Xuân Phúc and Võ Văn Thưởng,[11][13] and started thousands of prosecutions.[12] Economic figures were also affected by this campaign.

In March 2022, Trịnh Văn Quyết, the chairman of the FLC Group and its subsidiary, Bamboo Airways, was arrested for stock market manipulation.[14] Nearly a month later, Đỗ Anh Dũng, the chairman of the Tân Hoàng Minh Group, was arrested for fraud and appropriation of assets.[15] Similarly, in April, the chairman of Tân Hiệp Phát Group, Vietnam's largest private beverage producer, Trần Quý Thanh, was also arrested for embezzlement.[16] During March and April, the chairmen of three major corporations in Vietnam were consecutively arrested for violations.[b] However, there have been many allegations that the campaign is being used for political purposes to vie for internal power, a claim rejected by the Vietnamese Ministry of Foreign Affairs.[17]

Violations process

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Times Square Building of Vạn Thịnh Phát Group.
Times Square Building of Vạn Thịnh Phát Group in 2024.

In 1992, Trương Mỹ Lan and her husband Chu Lập Cơ founded Vạn Thịnh Phát Limited Liability Company, operating in the fields of commerce and business, restaurants, and hotels.[7] In 2007, with a charter capital of 6,000 billion VND, Vạn Thịnh Phát began investing in the real estate sector. Subsequently, she established many subsidiaries and affiliated companies with capital amounting to thousands of billions of VND, such as An Đông Investment Joint Stock Company (9,000 billion VND), Times Square Vietnam Investment Joint Stock Company, Saigon Peninsula Group Joint Stock Company (18,000 billion VND), VTP Group Holdings (6,000 billion VND), and VTP Group Holdings (12,800 billion VND).[18] At the end of 2019, Vạn Thịnh Phát Group increased its charter capital to 13,000 billion VND through issuing shares to domestic shareholders.[19] During its development, this Group has built an ecosystem with a scale of more than 1,000 enterprises.[20] The subsidiaries of this Group can be divided into four main categories: Financial institutions group – this group is considered the most important as it is the source of funds for the entire "Vạn Thịnh Phát ecosystem"; Group of companies operating in Vietnam – most companies in this group operate in real estate, restaurants, hotels, etc., with large charter capital to attract investment and hold controlling shares in other subsidiaries; Group of "ghost" companies in Vietnam – these companies use legal entities to invest capital, borrow bank loans, and refinance debts; and Group of overseas companies – these companies act as "foreign investors" investing in Vietnam and are used to manage Mrs. Lan's family assets abroad.[20][21]

Among them, Saigon Commercial Joint Stock Bank (SCB) is one of the companies in the Financial institutions group within this "ecosystem".[20] According to the 2010 Law on Credit Institutions in Vietnam, an individual cannot own more than 5% of the charter capital of a credit institution,[22] Therefore, in 2011, Trương Mỹ Lan used her relatives and close friends to collect 80–90% of the shares of three banks: Đệ Nhất Bank (Ficombank), Vietnam Tin Nghia Commercial Joint Stock Bank (TinNghiaBank), and Saigon Commercial Joint Stock Bank (SCB). At that time, Trương Mỹ Lan held 81.43% of SCB's shares under the names of 32 shareholders; 98.74% of TinNghiaBank's shares with 36 shareholders, and 80.46% of Ficombank through 24 shareholders. From January 1, 2012, these three banks were merged into Saigon Commercial Joint Stock Bank (SCB), and Trương Mỹ Lan continued to have 73 shareholders hold 85.61% of the shares. By January 1, 2018, the number of shares she held in this bank had reached 91.54%.[21] Mrs. Lan used the bank's operations to raise capital to meet the business needs of the Groups, subsidiaries, and affiliated companies she owned, creating fake loan documents from SCB Bank and embezzling the money for personal use. To carry out this act, Mrs. Lan also bribed many officials in the Vietnamese government.[21][23] Additionally, Mrs. Lan bribed many appraisal companies such as: Thiên Phú Appraisal Company; MHD Appraisal Company Limited; Tầm Nhìn Mới Appraisal Company Limited; DATC Real Estate Consulting Services Joint Stock Company; EXIM Appraisal Joint Stock Company. [24]

Trương Mỹ Lan's cash flow after withdrawing from SCB Bank.[25]

  Transfers out of SCB system (72.6%)
  Cash withdrawals (15.6%)
  Repayment of old loans at SCB (10.9%)
  Internal transfers within SCB (0.9%)

Through the above method, from 2012 to 2022, Trương Mỹ Lan disbursed many fictitious or legally insufficient loans totaling more than 1 million billion VND from SCB Bank. As of October 2022, the total irrecoverable debt had reached 677,000 billion VND, and after deducting secured assets, the damage she caused was 498,000 billion VND. Among these damages, Trương Mỹ Lan is accused by the investigation agency of embezzling SCB's assets worth more than 304,000 billion VND along with 129,000 billion VND in interest and incurred costs.[23] In total, Lan and her accomplices created 2,500 loans at SCB Bank, disbursing 1,066,000 billion VND[c] accounting for 93% of the total loans granted by the bank. Compared to Vietnam's GDP in 2022, this amount is equivalent to 10.7% of the economy.[9] Lan's disbursed amount was even three times the capital for constructing Long Thanh Airport and seven times the capital for constructing 12 North-South Expressway projects.[25] After the loans were disbursed, Lan directed her subordinates to transfer money from the disbursed company to the accounts of non-existent legal entities or individuals. When needed, Lan would transfer money across subsidiaries within the "Vạn Thịnh Phát ecosystem". To withdraw cash externally, Lan instructed employees to falsify documents to legitimize cash withdrawals through SCB Bank and used cars to transport money to her private residence at Sherwood, 127 Pasteur, District 3, Ho Chi Minh City, or the headquarters of Vạn Thịnh Phát Group. According to the investigation agency, from February 2019 to September 2022, the amount transported by drivers was 108,000 billion VND along with 14.7 million USD (equivalent to 355 billion VND).[26] During its operations, through SCB Bank, many documents were approved despite not meeting the conditions for transferring money abroad and transferring money from abroad back to Vietnam. Vạn Thịnh Phát Group used 12 companies established and registered in Vietnam and 11 companies established abroad to carry out this process of transferring and receiving money. From 2012 to 2022, a total of 78 money transfer transactions were conducted with a total amount of 1.5 billion US dollars (equivalent to 35,361 billion VND) and 152 transactions received back to Vietnam with a total amount of more than 3 billion US dollars (equivalent to 71,368 billion VND). Thus, the total amount of money transferred and received reached 4.5 billion US dollars (equivalent to more than 106,730 billion VND). The cross-border money transfer operations were assigned by Mrs. Lan to Trịnh Quang Công, Nguyễn Phương Anh, and Chiu Bing Keung Kenneth.[27][28]

Vạn Thịnh Phát's bond debt to investors.[29]

  An Đông (80.9%)
  Quang Thuận (4.9%)
  Setra (6.5%)
  Sunny World (7.8%)

Additionally, in 2018, Mrs. Lan selected four companies, including An Đông Company, Quang Thuận Company, Sunny World Company, and Setra Company, to issue bonds and raise money from the public amidst Vạn Thịnh Phát Group's prolonged difficulties and bad debts. These companies raised a total of 30,800 billion VND through bond sales, then legitimized the cash flow for eight subsidiaries of Vạn Thịnh Phát Group by repurchasing these bonds from the four companies. Sunny World's bond packages were marketed by Saigon-Hanoi Commercial Joint Stock Bank (SHB), while the remaining bonds were sold through contracts signed by TVSI Securities Company. The cash flow from bond sales was then transferred to SCB Bank. Specifically, An Đông Company had 30,738 investors purchase bonds totaling 25,300 billion VND, including 24,969 billion VND that could not be repaid; Sunny World Company issued 24 million bonds worth 2,400 billion VND, including 1,600 billion VND that could not be repaid; Quang Thuận Company issued 15 million bonds worth 1,500 billion VND that could not be repaid to 2,649 investors; and Setra Company issued 20 million bonds worth 2,000 billion VND in debt to 2,431 investors. Within two years, Vạn Thịnh Phát Group embezzled 30,000 billion VND from more than 35,000 investors.[29][30]

Notes

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  1. ^ From the time of the arrest of Trương Mỹ Lan.
  2. ^ See sources:[14][15][16]
  3. ^ According to the Supreme People's Procuracy, this amount was calculated using the cumulative method, so only the cash flow from 1,284 loans, including 483,900 billion VND in principal debt, was traced. However, when disbursed, the actual amount was 525,400 billion VND.[25][9]

References

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  1. ^ "Over 70 more individuals indicted in van Thinh Phat fraud case". November 23, 2023.
  2. ^ Judgment 157/2024/HS-ST 2024.
  3. ^ Hutt, David (December 1, 2023). "Vietnam reels from historic €11.4 billion corruption scandal – DW – 12/01/2023". Deutsche Welle. Retrieved October 6, 2024.
  4. ^ Thuần, Đan; Mai, Tuyết mai; Hạnh, Hữu (April 11, 2024). "Toàn bộ mức án của 86 bị cáo vụ Vạn Thịnh Phát" [The entire sentence of 86 defendants in the Van Thinh Phat case]. Tuoi Tre Online (in Vietnamese). Retrieved October 6, 2024.
  5. ^ "Truong My Lan: Vietnamese billionaire sentenced to death for $44bn fraud". BBC News. Bangkok. April 10, 2024. Retrieved October 6, 2024.
  6. ^ a b c Lam Nguyen (March 29, 2024). "Who is Truong My Lan? From market stall to Vietnam's biggest fraud case" [Trương Mỹ Lan là ai? Từ cửa hàng trong chợ đến vụ lừa đảo lớn nhất Việt Nam?]. South China Morning Post. Archived from the original on April 9, 2024. Retrieved April 13, 2024.
  7. ^ a b c Ngọc Lê (October 8, 2022). "Bà Trương Mỹ Lan là ai?" [Who is Trương Mỹ Lan?]. Thanh Niên (in Vietnamese). Archived from the original on March 5, 2024. Retrieved April 12, 2024.
  8. ^ Jonathan Head; Thu Bui (April 10, 2024). "Truong My Lan: Vietnamese billionaire sentenced to death for $44bn fraud" [Trương Mỹ Lan: Tỷ phú Việt bị kết án tử hình vì lừa đảo 44 tỷ USD]. BBC News. Archived from the original on April 11, 2024. Retrieved April 13, 2024.
  9. ^ a b c Nam Anh (November 24, 2023). "Loạt bất động sản "khủng" liên quan đến Vạn Thịnh Phát ở TPHCM" [Series of "huge" real estate related to Vạn Thịnh Phát in HCMC]. Dân Trí Electronic Newspaper [vi] (in Vietnamese). Archived from the original on December 4, 2023. Retrieved April 13, 2024.
  10. ^ a b "Vietnam tycoon Truong My Lan sentenced to death in $12.5bn fraud case" [Vietnamese tycoon Trương Mỹ Lan sentenced to death in $12.5 billion fraud case]. Al Jazeera. April 11, 2024. Archived from the original on April 14, 2024. Retrieved April 14, 2024.
  11. ^ a b c Alex Berry (December 1, 2023). "Vietnam reels from historic €11.4 billion corruption scandal" [Việt Nam chấn động sau vụ bê bối tham nhũng lịch sử 11,4 tỷ euro]. Deutsche Welle. Archived from the original on December 18, 2023. Retrieved April 12, 2024.
  12. ^ a b Ratcliffe, Rebecca (April 11, 2024). "Vietnamese property tycoon sentenced to death in $27bn fraud case" [Trùm bất động sản Việt Nam bị kết án tử hình trong vụ lừa đảo 27 tỷ USD]. The Guardian. ISSN 0261-3077. Archived from the original on April 12, 2024. Retrieved April 13, 2024.
  13. ^ Yoon, John; Doan, Chau (April 11, 2024). "Vietnamese Real Estate Tycoon Sentenced to Death in $12 Billion Fraud Case". The New York Times. ISSN 0362-4331. Archived from the original on April 12, 2024. Retrieved April 13, 2024.
  14. ^ a b Thân Hoàng; Hoàng Điệp (March 29, 2022). "FLC Chairman Trịnh Văn Quyết arrested for stock market manipulation". Tuổi Trẻ Newspaper (in Vietnamese). Archived from the original on September 21, 2023. Retrieved April 12, 2024.
  15. ^ a b Thân Hoàng (April 5, 2022). "Chairman of Tân Hoàng Minh Group Đỗ Anh Dũng arrested". Tuổi Trẻ Newspaper (in Vietnamese). Archived from the original on February 26, 2024. Retrieved April 12, 2024.
  16. ^ a b Thân Hoàng (April 10, 2023). "Chairman of Tân Hiệp Phát Group Trần Quý Thanh and daughter Trần Uyên Phương arrested". Tuổi Trẻ Newspaper (in Vietnamese). Archived from the original on January 22, 2024. Retrieved April 12, 2024.
  17. ^ Khanh Vu; Francesco Guarascio (March 21, 2024). Nick Macfie; William Mallard; Neil Fullick (eds.). "Explainer: Vietnam's president resigns: who's who and what comes next?". Reuters. Retrieved March 21, 2024.
  18. ^ "How "huge" is Vạn Thịnh Phát of tycoon Trương Mỹ Lan?". Trí Thức Trẻ (in Vietnamese). August 9, 2016. Archived from the original on February 29, 2024. Retrieved April 12, 2024 – via VietNamNet.
  19. ^ Trần Anh (July 27, 2020). "Revealing the financial situation of Vạn Thịnh Phát Group". The Leader (in Vietnamese). Archived from the original on June 23, 2021. Retrieved April 12, 2024.
  20. ^ a b c Việt Dũng (December 15, 2023). "Vạn Thịnh Phát ecosystem with more than 1,000 enterprises withdrawing hundreds of thousands of billions of VND from SCB". Lao Động (in Vietnamese). Archived from the original on December 15, 2023. Retrieved April 12, 2024.
  21. ^ a b c Hoàng Yến (November 19, 2023). "Vạn Thịnh Phát case: How did Trương Mỹ Lan "drain" SCB Bank?". Investment Securities (in Vietnamese). Archived from the original on April 13, 2024. Retrieved April 12, 2024.
  22. ^ Nguyễn Phú Trọng (June 29, 2010). "Law No. 47/2010/QH12 of the National Assembly: LAW ON CREDIT INSTITUTIONS". National Assembly of Vietnam (in Vietnamese). Retrieved April 15, 2024 – via Government Electronic Information Portal.
  23. ^ a b Vân Vân; Phan Thương (January 11, 2024). "The huge numbers in the Vạn Thịnh Phát case: 6 tons of documents, nearly 1 million records". Thanh Niên (in Vietnamese). Archived from the original on February 8, 2024. Retrieved April 13, 2024.
  24. ^ Phan Thương; Ngân Nga (March 9, 2024). "Content of the trial of Trương Mỹ Lan on the 4th day: 84 defendants questioned". Thanh Niên (in Vietnamese). Archived from the original on March 27, 2024. Retrieved April 13, 2024.
  25. ^ a b c Phạm Dự (December 16, 2023). "Where did Trương Mỹ Lan withdraw more than 1 million billion VND from SCB go?". VnExpress (in Vietnamese). Archived from the original on January 21, 2024. Retrieved April 14, 2024.
  26. ^ Duy Quang (March 10, 2024). "'Embezzling' more than 1 million billion VND from SCB, what did Trương Mỹ Lan use it for?". Tiền Phong (in Vietnamese). Retrieved April 14, 2024.
  27. ^ Nguyễn Hưởng (July 15, 2024). "Vạn Thịnh Phát case: How did Trương Mỹ Lan transfer more than 4.5 billion USD across borders?". Người Lao Động (in Vietnamese). Archived from the original on July 15, 2024. Retrieved July 15, 2024.
  28. ^ Bùi Trang (July 15, 2024). "Vạn Thịnh Phát case phase 2: What did Trương Mỹ Lan say about transferring 4.5 billion USD across borders?". Pháp Luật Thành phố Hồ Chí Minh. Retrieved July 16, 2024.
  29. ^ a b Thanh Lam (July 15, 2024). "How Vạn Thịnh Phát 'trapped' more than 35,000 bond investors". VnExpress. Archived from the original on July 15, 2024. Retrieved July 15, 2024.
  30. ^ Hồ Nga (July 15, 2024). "Vạn Thịnh Phát case phase 2: The reason why Trương Mỹ Lan had to issue bonds". Vietnam Economic Securities Magazine (in Vietnamese). Archived from the original on July 15, 2024. Retrieved July 15, 2024.

Further reading

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