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January 15, 2010

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Home » Metro » Society

Trial starts over US$42m loan

ZHOU Yuejin, former vice chairman of the Shanghai Federation of Industry and Commerce, went on trial yesterday for allegedly using false trade contracts to obtain a fraudulent 290 million yuan loan (US$42 million) from the Shanghai branch of the Agricultural Bank of China.

Liu Yongjun, deputy general manager of Zhou's company, Shanghai Golden Source International Economic and Trade Development Co Ltd, was also named as a defendant.

The hearing is scheduled to last two days at the Shanghai No. 1 Intermediate People's Court.

Zhou, 52, denied the accusation at yesterday's hearing. He said the trade was real and he himself was a victim.

Prosecutors alleged that Zhou conspired with Yuan Bairen, legal representative of Zhejiang Zongheng Group, to swindle loans from the bank in early 2008.

Prosecutors said the group signed false trade contracts, involving 335 million yuan worth of chemical raw materials, with Golden Source in June 2008.

Golden Source then bought 500 million yuan in trade insurance from China Export and Credit Insurance Corp for the so-called trade.

Golden Source applied for a 290 million yuan loan from the bank, saying it needed liquid capital to buy raw materials and using the insurance policy as warranty.

The money was later transferred to Zongheng.

The money didn't save Zongheng, however, which declared bankruptcy at the end of 2008. As a result, neither Zongheng nor Golden Source could repay the loan.

When the insurance company was about to make compensation to the bank, it discovered it was a false trade and reported to police.

Zhou said in the hearing that he was also a victim of Zongheng's bankruptcy.

He said he had long cooperated with Zongheng and had never suspected the trade would fail.


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