Posted on 06/25/2004 8:25:42 AM PDT by TigerLikesRooster
Fraud rampant at ICBC
Pamela Pun
Fraud at Industrial and Commercial Bank of China (ICBC), the country's largest lender, is rampant with staff and customers conspiring to obtain as much as 17 billion yuan (HK$16.03 billion) in illegal loans, an audit has found.
The National Audit Office studied the books at the bank's headquarters in Beijing and just a handful of branches around the country.
In a report to the Standing Committee of the National People's Congress, Auditor General Li Jinhua has listed numerous irregularities to secure money for land, property, cars and simply cash. In one case, at a sub-branch in Shanghai, a customer named only as Yao Kangda secured 71 million yuan to speculatively buy 128 apartments.
The audit, supposedly to initiate reforms in preparation for an eventual international listing, follows a report at the beginning of this year into thousands of state-owned enterprises with financial irregularities linked to the bank. That report identified fraud totalling about 67 billion yuan.
The latest audit may have exposed only the tip of the iceberg. It investigated just 21 branches. The Industrial and Commercial Bank has 28,300 branches and 100 million customers.
Li's audit cites cases where companies and individuals seemingly hoodwinked bank staff with phoney documents to obtain loans. There were numerous cases where staff and customers conspired on false documentation.
A Beijing branch issued 791 million yuan for car loans, 96.5 million yuan of which was found to have been obtained by four car distributors using fake documents.
In Foshan, Guangdong, a private businessman identified only as Feng obtained loans of 7.42 billion yuan from the bank's Nanhai sub-branch using 13 interconnected firms and fabricated financial statements.
The report says an unknown number of bank staff were involved and some of the money was transferred to private saving accounts, withdrawn in cash or illegally remitted overseas.
Li said the bank appeared to be particularly at risk when lending for property and cars.
He said the acceptance of bills was chaotic, with some companies using fake contracts, tax invoices and various worthless documents to obtain loans. For example, a trading firm in Luoyang in northern Henan province colluded with bank staff to ``package'' bank acceptance bills with face a value of 492 million yuan for a company in the port city of Dalian in 2002.
However, a senior China economist at HSBC, Qu Hongbin, said last night that although the problem was bad the transparency of the audit report shows Beijing's desire to reform China's banking system.
``The government is more open than before. At least it does not want to hide the problems,'' Qu said.
He said that although the big mainland banks still have a lot to do, they have been making progress over the past few years.
ICBC has assets of four trillion yuan - 20 per cent of the country's total financial assets. It plans an initial public offering in 2006.
Also audited were China Life's books (before it was restructured into a joint stock company) and the Bank of Communications. China Life was found to have illegally used insurance premiums to invest in projects and to build its own offices using 2.48 billion yuan.
The insurer was also found to have used 2.37 billion yuan gained by unfair competition such as changing premium rates on its own, excess refunding on returning premiums and operating an illegal insurance agency.
Elsewhere, the Jinzhou branch of the Bank of Communications, in Liaoning province, conspired with local courts to fabricate documents, which were submitted to the bank's headquarters to write off ``non- performing loans'' totalling 221 million yuan against 175 enterprises. But the borrowers knew nothing of this action and some of them continued to pay their bank debts while the pledged assets of others were converted into cash by the bank. The money was deposited into the branch's ``private coffer''.
Amazingly, the local court collected 853,000 yuan in charges for the fake lawsuits and deposited that money in a private account.
Ping!
Well, if you have a nation where everyone is a crook, and all the transactions are dishonest, what happens? Can everyone get rich anyway?
I agree. Nobody knows for sure, but a Communist totalitarian government is basically incompatible with a free enterprise system. At some point there may be a huge breakdown, such as happened in the Soviet Union or, for that matter, in Japan and much of Asia in 1987.
China: Enron with nukes.
A Potemkim audit and a Potemkin punishment will ensue. The PRC needs to maintain the falsely justified confidence of all the bootlicking Western business people who keep telling themselves that the road to riches lies in the Middle Kingdom.
Unbeknownst to them though its going to take a decade to work out the bugs, if they are dilligent and start now...
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