Chinese insurance company founder to spend 18 years in prison for fraud

Team SoOLEGAL 11 May 2018 1:12pm

Chinese insurance company founder to spend 18 years in prison for fraud

Shanghai: Wu Xiaohui, the former chairman of Anbang Insurance Group, who had earned a reputation for ambitiously expanding into hotels, real estate and insurance from Canada to South Korea was sentenced by a Shanghai court to 18 years in prison after he pleaded guilty to fraudulently raising billions of dollars from investors. The court also ordered attachment of assets worth 10.5 billion yuan ($1.6 billion).

Before the fraud broke out the company is said to have on roll 30,000 employees with 35 million clients. From insurance it had diversified into banking, asset management, leasing and brokerage services.

The charge against Wu is that he misled investors while raising money and diverted money for his own use fraudulently. He was accused of concealing the stake he personally owned in companies controlled by Anbang, filed false statements with financial authorities and lured investors by offering rates of return above offered elsewhere. He used more than 100 companies under his control to misappropriate funds worth 10 billion yuan ($1.5 billion) in Anbang's deposits.

He was arrested last year with state owned regulators seizing control of Anbang in February. In March he was shown on state owned TV news channels of admitting guilt though during the trial he had denied any wrong doing. Court sentence was based on facts of the case, the severity of the crime, and its "degree of social harm."

Anbang has received $9.6 billion government bail out with ownership passing on to the government. It will be managed by a committee of officials from China's insurance regulator, central bank and other agencies. They have said interest of policyholders and creditors are secured.

Anbang is not the only fraud to come out in the open, and though insurance sector in China remains largely state controlled, it has still been hit by series of scandals. A top insurance regulator was arrested on the charges of accepting bribe where as other insurance companies have been charged with imprudent investment in stocks and real estate.

Managing these financial risks has become top priority for ruling Communist Party as it has led to                  unprecedented rise in debt and resultant cut in credit rating of China by global credit rating agencies.

Tagged: Anbang Insurance Group   Communist Party of China   Shanghai Court  
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