China Resources Group, embroiled in corruption allegations, has been accused of theft and illegal asset transfers in a previously unreported case involving British investors in the Chinese resort island of Hainan

August 5, 2013 4:55 pm

China Resources arm faces theft accusations

By Jamil Anderlini in Beijing

A subsidiary of China Resources Group, the Hong Kong-listed Chinese conglomerate embroiled in corruption allegations, has been accused of theft and illegal asset transfers in a previously unreported case involving British investors in the Chinese resort island of Hainan. Executives of Bloom World, a subsidiary of the China Resouces group that employs 400,000 people and boasts assets worth more than $120bn, are alleged to have forged documents in order to illegally transfer land in 2011 out of a company controlled by Keith Darby, a British real estate developer and former steeplechase jockey. The latest revelations come as a Hong Kong court on Monday began hearing a case against China Resources board members brought by minority shareholders who allege the company massively overpaid for several coal mines in northern China in 2010.The court case has been accompanied by public accusations of “suspected enormous corruption,” levelled by journalists working for Chinese state media and aimed at the company’s chairman, Song Lin, who holds a rank equivalent to vice-minister in China.

Investigators from the Communist Party’s top anti-corruption body have already launched an investigation into the various allegations involving China Resources, according to one person with knowledge of the matter.

On Monday, a spokesman for China Resources directed questions to the China Central Discipline and Inspection bureau, which declined to comment on any ongoing investigations. Song Lin could not be reached for comment.

China Resources is one of the country’s largest state-owned conglomerates, with businesses spanning pharmaceuticals, real estate, power, consumer goods and finance.

In 2006, a British Virgin Islands-registered subsidiary of China Resources called Bloom World established a joint venture with Mr Darby’s company to develop a luxury resort on the tropical resort island of Hainan.

Most of the land was injected into the joint venture by China Resources while Mr Darby’s company provided the bulk of the initial investment of Rmb125m with funds from British investors managed by a subsidiary of South Africa’s Standard Bankbased in Jersey.

Mr Darby’s company held 97 per cent of the joint venture and he was named company chairman while Bloom World held the remaining 3 per cent.

Construction on the resort was halted after British investors missed a payment and in late 2009 Bloom World applied for an arbitration ruling in China.

However, before all legal proceedings were completed, two Bloom World executives allegedly broke into a safe in the offices of the joint venture in March 2011 and stole the company seals. The allegations have been made by Mr Darby in court filings and in police reports seen by the Financial Times.

In China, a company’s seals or “chops” are crucial for doing business as they must be stamped on all official documents and without them a company is unable to carry out the most basic functions, such as accessing its own bank accounts or filing tax returns.

After allegedly stealing the company seals, executives used them to transfer the plot of land from the joint venture to another China Resources subsidiary.

In transferring the land they valued it at less than one-seventh of the price it was valued in the initial deal in 2006, despite a property boom in Hainan that had seen the value of the transferred land increase more than six-fold, according to an appraisal from CBRE.

Bloom World and its executives have not responded to a legal case filed by Mr Darby in a Hainan court at the start of 2012.

The China Resources subsidiary that received the transferred land shares a number of executives with Bloom World, but the recipient company wrote to the court saying it had no knowledge of the case and refused to get involved.

The court appears to have accepted that response and has told Mr Darby’s lawyers that it has been unable to find Bloom World or its executives.

On Monday, Bloom World officials declined to comment.

Mr Darby’s complaints to the police and party officials and attempts to sue Bloom World in Hainan and Beijing have so far mostly been ignored.

Mr Darby, 69, believes his phones and computers are bugged. He says he has received threats and physical intimidation and he says he worries for the safety of his young children and wife, who is a Chinese citizen.

“We have filed more than 20 police reports, legal cases and complaints to government departments in the last two years but so far nobody has paid any attention,” Mr Darby told the FT. He said his efforts to obtain justice in China and Hainan had been frustrated.

After more than two years of legal battles with Bloom World and China Resources, Mr Darby was barred from leaving the country earlier this year by a judge in Hainan after another creditor sued his company for unpaid bills.

Mr Darby insists his company would easily be able to pay those bills if he were able to access its assets but without the official seals the company remains paralysed.

Mr Darby has brought his case to the attention of British Prime Minister David Cameron and other UK ministers and he has been receiving consular support and advice from British officials in China.

China Resources declined to comment further on the case.

(291) China Resources Enterprise:
HKET Li Jianjun, a shareholder and former mainland journalist responsible for raising corruption allegations against the senior management of China Resources (Holdings), submitted incriminating documents to ICAC against CR (Holdings) chairman Song Lin. Li said he holds explosive information regarding the deal that involves ex Premier Wen Jia Bao’s wife and ex vice Premier Wu Yi. Li also said mainland National Audit Office received order from Premier Wen himself to investigate the incident in 2010. Xinhua News Agency reporter Wang Wenzhi has also accused CR (Holdings) officials, including Song, of corruption in a Sina Weibo post.
(291 HK) @ HK$25.25: market cap. US$9,955.3m, daily liquidity US$36.2m. Broker forecasts: 10 buys, 2 holds, 3 sells, 2 5.5x current year P/E, 1.9% yield.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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