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5 arrested in Shenzhen for 100 mln swindle
(Shenzhen Daily)
Updated: 2005-06-17 14:28
Shenzhen police arrested five people for allegedly swindling 100 million yuan (US$12 million) from 300 companies in the past four years, the Shenzhen Evening News reported Thursday.
The five were senior managers of Buji-based Hengtian Communications Equipment Co., which allegedly owed suppliers nearly 1 billion yuan.
The case had been thought to be an ordinary economic dispute, but police suspected the company was swindling suppliers after seeing it buy more telephone parts than needed on credit before selling telephones at prices about seven yuan lower than costs and not paying the bills.
Police said the company made huge profits because it didn't pay its suppliers so they only had to charge buyers at the manufacturing costs.
Police began to investigate Hengtian in June 2004 after receiving a report from an electronic supplier from Xi'an.
They found that the company, registered in 1997, had all the required legal documents and licenses. It began to default payments to suppliers after 2001.
Police also found the company, which had a monthly output of only 40,000 units, ordered enough parts to produce 200,000 telephones each month. Its telephones were sold at 17 to 18 yuan, much lower than the average cost of 24 to 25 yuan.
Some 43 suppliers took Hengtian to court from 2002 to May 2004. The company was then ordered to pay back 4.3 million yuan, but only 370,000 yuan was paid, mostly paid in goods priced 50 percent higher than market value.
Most of the victims of the swindle were Shenzhen suppliers, and some had gone bankrupt because of the payment default.
Police urged companies to check their potential buyers' tax receipts, reputation and turnover before selling goods on credit.
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