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| Supermarket Chain Boss Gets Life in Prison for Fraud |
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Wu Weidong, the former chief executive of the bankrupt supermarket chain PriceSmart China, was sentenced to life in prison yesterday for contract fraud and withdrawal of capital contributions. During the first verdict passed down yesterday by Beijing No 1 Intermediate People's Court, seven other high-ranking managers from the corporation were also sentenced, ranging from 29 months to 16 years in prison. The case was held up after an initial hearing last October, with judges pouring over the complex evidence. Launched in 1997, PriceSmart China grew to a 41-store chain by 2004. But the brisk expansion left the corporation with heavy debts. To meet increasing financial demands, senior managers illegally diverted 105 million yuan (US$13 million) of registered capital from five stores including PriceSmart's Xinjiang and Harbin branches between 2002 and 2004, according to the court. They also faked contracts to defraud 16.35 million yuan (US$2.1 million) from a Beijing bank. Debates have been intense during the initial trial with lawyers of some defendants claiming their clients were simply following owner Liu Wuyi's orders. Liu, the founder of PriceSmart China, fled China in March 2005 following PriceSmart's collapse, and is still at large. A Beijing native, Liu obtained authorization from US PriceSmart to set up the brand in China in 1997. But the Chinese chain was not foreign-funded. The US conglomerate did not provide any investment or operational guidance and only received authorization fees from the Chinese company. According to sources with the corporation, Liu used the US firm's authorization to enjoy the preferential policies offered to overseas retailers. PriceSmart's fast growth was based on unsound fundraising including bank loans and debts to suppliers, which damaged the corporation's cash flow, leading to its eventual collapse in 2004. Wu, one of the defendants and successor to Liu as chief executive, revealed in court that the company at one point had a debt of 2 billion yuan (US$250 million), despite its entire fixed assets totaling only 600 million yuan (US$75 million). (China Daily March 21, 2007) |
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