No 1 stock scandal case heard
( 2002-06-12 09:59 ) (1 )

The largest price manipulation case in China, involving more than 5.4 billion yuan (US$653 million) of funds gathered from more than 100 companies and individuals was heard on Tuesday by Beijing's No 2 Intermediate People's Court.

The Shenzhen China Venture Capital Co case, which is expected to last three days, marks the country's first manipulation case involving the price of stocks. The case is expected to bring about new regulations for the stock market, according to Bao Lei, an official with the court, on Tuesday.

According to China's criminal law, manipulators of stock prices can be sentenced up to five years in prison.

China Securities Regulatory Commission is usually in charge of dealing with inside trading scandals.

The two main suspects of the case -- Lu Jianxin (known as Lu Liang) and Zhu Huanliang from Shenzhen China Venture Capital Co -- have absconded. The duo, along with Shanghai Huaya Co, allegedly raised more than 5.4 billion yuan (US$653 million) between December 1998 and January 2001, -- under the names of different companies, from over 100 financial institutions, companies, and individuals in 20 provinces and municipalities around the country.

The huge amount of money, according to the court, was then placed into more than 1,500 stock accounts nationwide and used by the two suspects to manipulate the price of shares of listed Shenzhen China Venture Capital Co. The two suspects later gained huge profits by manipulating the stock price.

The court sentenced on Tuesday two collaborators and representatives from Shanghai Huaya Co but did not say whether the final verdict would be announced after the three-day hearing.

China Securities Regulatory Commission launched a severe crackdown on financial market corruption earlier this year by intensifying the probe into price manipulation in the stock market.

The China Venture Capital Co case, after its exposure last year, triggered panic amongst investors, which resulted in the company's stock slumping by more than 10 per cent in five days.

The handling of cases in the Chinese market by the China Securities Regulatory Commission "is very opaque," compared with the openness of the Enron case in the United States, said Hu Shuli, a famous economist and managing editor of Caijing Magazine.