National

Regional

Taiwan, HK, Macao

Special Coverage

Focus

Society

Profiles

5 on trial for 'fundraising'

By Cao Li (China Daily)
Updated: 2009-01-21 07:45

SHANGHAI: A gang of alleged swindlers raised 850 million yuan ($124 million) illegally in the past 10 years, causing a loss of 160 million yuan to 165 people, Shanghai No 1 Intermediate People's Court was told yesterday.

Though the prime suspect is still at large, five accused, who stood trial yesterday, claimed they were "unaware" of the fraud.

Fu Xiuchun, 56, one of the accused, said in court that her brother-in-law, Chen Lihan, approached her in 1997 and told her that he had invested in a taxi firm and was making good money.

"He told me that those who invest in the company receive superior monthly returns," Fu said.

Fu purchased more than 120 taxis from Chen and later directly from the prime suspect Zou Peijie in the last 10 years. She received about 8,000 yuan every month from each of her cabs.

"I never thought it was a fraud until Chen told me in January 2008 that Zou had fled," she said.

Chen Lihan, 68, the first defendant, said Zou's daughter was a student in his daughter's class and that's how he came to know Zou. "She (Zou) claimed to work for a travel agency under Shanghai Qiangsheng Group and told me I could make 8,000 yuan per month if I invested 80,000 yuan in her company.

"I started with an investment of 40,000 yuan," Chen said.

By the end of 2007, Chen had bought more than 170 cabs from Zou and even introduced the scheme to his family and friends.

Xia Hengzhen, 56, one of the suspects, said she made a profit of about 200,000 yuan from her investment.

Fu claimed to have made a profit of more than 1 million yuan, which she used to purchase a house.

Li Zhengfang, the fourth defendant, said he purchased six properties and two cars from the money he made after investing in the company.

In a decade, more than 850 million yuan was collected through the scheme.

Chen, alone, had collected 796 million yuan from 119 investors and could not pay back 139 million yuan to 55 of them. None of the investors ever received the taxis they had paid for.

Chen said he gave all the money he collected to Zou, who allegedly fled to the US in December 2007 and is still at large.

Suo Jianguo, a lawyer and a member of the financial study department of Shanghai Bar Association, said: "Illegal fund-raising always promises high returns. And people get greedy and invest blindly," he said.

"At the same time, small and medium sized companies always face difficulty in receiving a loan from the bank, which, as I have perceived, has become the bottleneck in China's development," he said.

Statistics available with the People's Bank of China show that there is 950 billion yuan worth of black money, which is not deposited in banks, circulating in the country.

If China is asking more and more people to start their own businesses, with an aim to create more jobs for the increasing number of university graduates and laid off professionals in the wake of the global financial crisis, flexible rules with regard to loans must be drafted, Suo said.

"The central bank and public security bureau launch crackdown on illegal fund-raising once in a while. But that is not a permanent solution to the problem."

(China Daily 01/21/2009 page4)