Rags-to-riches story proceeds to prison as Beijing pursues anti-corruption campaign
China's richest convict begins term
BEIJING // The career of Huang Guangyu was the stuff of business legend: a man from a poor background who through perseverance and commercial acumen became the richest man in the world's most populous nation. After starting with a bank loan of a few thousand dollars, Huang built up the Gome electronics retail chain until it had about 1,300 branches across China.
But this multibillion-dollar rags-to-riches tale has collapsed with the ultimate fall from grace, as Huang has been handed a 14-year jail term and fined tens of millions of dollars for corrupt practices including bribery and illegal share trading. While the humbling of Huang, 41, has been spectacular, analysts said it was not surprising in a country where many of the business elite end up on the wrong side of the law.
"This is a show that the Chinese government is very serious about the anti-corruption campaign and they are doing something," said Bo Zhiyue, a senior research fellow at the East Asian Institute of the National University of Singapore. "People are not happy about what is going on in society and among government officials." Marie Jiang, an analyst in Shanghai for the research organisation JLM Pacific Epoch, said: "Chinese people are getting used to this kind of issue. Those people who have been listed as the richest men, often a large percentage of these people have issues later.
"China has not very strict regulations and it's easy for some people to take good advantage of opportunities to do illegal things." According to the China rich list published by the Hurun Report, Huang was China's richest man in 2004, 2005 and 2008 with wealth estimated at as much as US$6.3 billion (Dh23.14bn). Also known as Wong Kwong-yu, Huang was born in the southern province of Guangdong, left school at 16 and made his fortune after moving to Beijing and founding Gome as a small shop with his brother in 1987.
Huang was arrested in November 2008 and stepped down as the chairman of Gome early last year, but remains a major shareholder. Other senior officials were also accused as part of the case. China's official Xinhua news agency quoted a court statement saying that, in addition to his jail term, Huang was fined 600 million yuan (Dh322.5m) and had 200m yuan of assets seized. Huang was convicted of illegal trading valued at HK$822m (Dh386.9m) between September and November in 2007.
He was also convicted of earning more than 309m yuan from insider trading between April and September in 2007 in stocks of Beijing Centergate Technologies, which is based in Shenzhen, with a total value of 1.41bn yuan. The court said that between 2006 and 2008, Huang bribed or prompted others to bribe five government officials with 4.56m yuan in cash and properties, Xinhua reported. Gome was also fined 5m yuan and Huang's other firm, Pengrun, was fined 1.2m yuan after the companies paid bribes personally instigated by him or made on his orders.
"The amount won't materially affect the company's business operations or financial position," Gome said yesterday. "The court's decision eliminated most of the uncertainties that have been surrounding Gome," it said. Gome rose 0.9 per cent to close at HK$2.31 in Hong Kong trading. The stock has fallen 18.1 per cent this year. Ren Xianfang, an analyst at IHS Global Insight, said corrupt practices of the kind carried out by Huang were "not uncommon" among China's top business people.
"Maybe it's because of some deficiency in the institutions - I mean the institutional systems that put in place oversight of government issues and business people," Ms Ren said. "In terms of government contracts and contract making, these processes are very opaque." While the government has been making "large efforts" to crack down on this kind of behaviour, Ms Ren said it was difficult to say whether this would be successful.
"It's very hard to predict because we haven't seen any radical changes in terms of these institutions. I wouldn't be so optimistic," she said. Gome appears to have recovered from the trauma of having its then chairman arrested, Ms Jiang said. Its arch-rival, Suning, announced an aggressive expansion programme after Huang's arrest as it aimed to take over as China's largest electronics chain. "Now Gome has new directors and it seems to me it's already normal," Ms Jiang said. "[Huang's jailing] is not related with how its business is doing. Its business is pretty good."
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