Friday, January 21, 2011

MASSIVE bank scams are currently being investigated in China.

MASSIVE bank scams are currently being investigated in China. 

http://market-ticker.org/cgi-ticker/akcs-www?post=177673

http://www.theaustralian.com.au/business/chinese-bank-scams-vindicate-local-claims/story-e6frg8zx-1225989865717
They appear similar to a rort that undermined an Australian company's attempts to set up an extensive clean energy business there.
Until now the company, wind energy firm Energreen, has found it difficult to convince its Australian partners, regulatory agencies, diplomatic authorities and the Chinese police that it was the victim of criminal duplicity.
But now, three years later, it has become clearer that the scam that entrapped Energreen was just the tip of an iceberg of phony Chinese funding arrangements worth billions of dollars.
Energreen part-owner Alan Keller, a building engineer based in the NSW Hunter Valley, told The Australian last year that the company had contracts to provide expertise and management on Chinese projects worth about $2 billion.
The company is embroiled in a complex legal case over the issue, with veteran barrister Tom Hughes now leading the Bank of China's defence against Energreen's claim over a $US50 million ($50.6m) promissory note.
Today, Qilu Bank is being investigated over a scandal allegedly involving $227m of forged commercial bank bills, used to provide short-term loans to business, and other forged commercial paper.
The lender, which is 20 per cent owned by Australia's Commonwealth Bank, is based in Jinan, the capital of Shandong province, in northeast China.
Other banks in Shandong, including Huaxia and Citic, are also being investigated, with charges likely to follow, according to Beijing News.
China Business News said auditor PwC found irregularities in Qilu Bank's 2009 financial report, including abnormal credit for some lenders and illegal deposit pledges.
NSW firm Monibrook -- which later failed -- had pledged funding support, but Energreen had insisted on security.
"We were getting a large portfolio of projects together, and we could not continue to fund pre-construction and joint ventures without solid security backing the promise of funding," Mr Keller said.
Chinese facilitators organised by Monibrook to provide security arranged a $US500m instrument from the Industrial & Commercial Bank of China -- the country's biggest bank -- in Jinan.
This took the form of a bank-endorsed promissory note, a form of guarantee rarely called upon and thus widely traded within China in recent years. The headaches begin, however, when the promissory notes are called in -- as happened to Energreen following the failure of Monibrook to deliver the funding that it had promised.
Energreen had received a letter from an ICBC branch in Jinan saying: "We confirm that the bank-endorsed promissory note is fully secured by good, clean, cleared assets of non-criminal origin, and is free of all liens and encumbrances."
It has since emerged that many such notes have been issued in dubious circumstances, without the full knowledge of senior management at the banks involved.
In some cases, bank managers, realising the potentially ruinous costs of meeting such guarantees, have denied all knowledge of their issuance.
"We developed excellent relations in China," Mr Keller said.
"We had no problems working there as engineers. I visited China 24 times in two years and we had four Australian managers working there, with up to 40 local staff."
He said the failure of Energreen's joint ventures, including some with Chinese government agencies, meant that it would prove difficult, if not impossible, for him to conduct business there again, even though this had become a focus for his company's activities.
"If banks do not honour their obligations of full bank responsibility, there can be serious consequences," federal Liberal MP Bob Baldwin, who holds the NSW seat of Paterson, told the House of Representatives in a grievance debate in October 2008. And those consequences included the recipient business being left without payment on presentation of the note.
"The government of Australia must stand behind Australian businesses forced to take public action in the courts on such cases," Mr Baldwin said. "Any business relationship is built on trust."

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