US-based fugitive Chinese tycoon named in Interpol red notice faces litigation in the US, China

5 June 2017 12:59pm

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20 April 2017. By Toh Han Shih.

A Chinese tycoon who is wanted by the Chinese government and has become a fugitive in the US faces litigation in the US and China. Guo Wengui, also called Miles Kwok, is being sued by a hedge fund in a US court, while a Chinese property firm he controls, Beijing Zenith Holdings, faces a lawsuit in a Chinese court.

Yesterday, the controversial tycoon was interviewed live by the Voice of America, or VOA, but the US-based broadcaster abruptly cut short the interview. In it, Guo made unproven corruption allegations against several top Chinese leaders.

The High Court of Hunan Province has agreed to hear a lawsuit against Zenith by Founder Securities, a Shanghai-listed brokerage, Zenith announced on the Shanghai Stock Exchange website on April 19. On April 18, Founder Securities received a letter from the Hunan High Court, which said the court had agreed to hear the case, because it met the legal requirements. Founder Securities is suing Zenith for 161.96 million yuan ($23.5 million) and is asking the court to suspend Zenith's rights as its second largest shareholder.

Zenith became Founder Securities' second largest shareholder with a substantial minority stake in August 2014, through a transaction in which Founder Securities wholly acquired another Chinese brokerage, Minzu Securities, from Zenith. However, from Aug. 5, 2014 until Aug. 19, 2015, Zenith actually controlled Minzu, despite being fully owned by Founder Securities, the lawsuit alleges.

Founder Securities' lawsuit alleges that in late 2014, Minzu illegally entrusted 2.05 billion yuan with a Chinese trust company to invest those funds, of which 1.74 billion yuan has not been returned. From these funds, 161.96 million yuan of dividends were illegally given to Zenith in July 2016, the lawsuit alleges. Zenith could not be reached for comment.

At a press conference by the Chinese Foreign Ministry on April 19, ministry spokesman Lu Kang confirmed that Interpol, at the request of the Chinese government, has issued a so-called red notice on Guo. An Interpol red notice is a request to locate and provisionally arrest someone pending extradition, but cannot compel any country including the US to arrest that person.

In a response on his Twitter account yesterday, Guo labelled this as a "suicidal act" by unnamed senior Chinese executives who were afraid he might expose their alleged corruption. Guo tweeted that he no longer has Chinese citizenship and this action only increased his resolve to "struggle till the end with the bad guys."

Separately, a hedge fund, Pacific Alliance Asia Opportunity Fund, has sued Guo in a court in New York City, claiming he owed $88 million, Forbes reported. The hedge fund is domiciled in the Cayman Islands and managed by Pacific Alliance Investment Management, which has an office in Hong Kong. Pacific Alliance Investment Management declined to comment.

According to the US lawsuit, one of Guo's companies borrowed money from the fund in 2008 and a debt of $45 million was transferred in 2009 to another company he controlled, Shiny Times Holdings. Last year, the fund demanded payment of the outstanding balance — which had reached $82 million — and moved to liquidate Shiny Times in a British Virgin Islands court. Guo had guaranteed the debt, the fund said.

In the VOA interview, Guo made unsubstantiated allegations against senior Chinese officials and their relatives. These officials include China's anti-corruption czar, Deputy Prime Minister Wang Qishan; Meng Jianzhu, the Secretary of the Central Political and Legal Affairs Commission, which oversees China's police and judicial organs; and Fu Zhenghua, one of the most senior police officials leading China's anti-corruption campaign. VOA reporters said VOA has not verified Guo's allegations, which it said do not represent VOA's views and that the VOA is not responsible for his allegations. A VOA reporter said VOA will give the targets of Guo's allegations a chance to defend themselves. MLex has not verified Guo's allegations.

A few years ago, Fu ordered the detention of Guo's relatives and employees, Guo said. Using Guo's relatives and employees as hostages, he extorted money from Guo and compelled him to help Fu's investigations of Wang and the family of Wang's wife, the Yao clan, Guo alleged. Guo also alleged that Fu asked him to help his investigation of a Yao family member and his alleged involvement in a Chinese airline.

Guo also alleged he gave some Chinese officials evidence incriminating Meng.

In 2015, Caixin, a Chinese financial news outlet, published allegations of impropriety against Guo, who disputed those allegations. Caixin stood by its allegations and to date has not been punished for them.

	Eliot Gao