The real estate tycoon who masterminded the world’s largest bank fraud is desperately trying to get a huge payout.
HANOI: A Vietnamese real estate tycoon is desperately trying to raise $US9 billion ($A14 billion) to escape the death penalty for masterminding the world’s largest bank fraud.
Truong My Lan, 68, was sentenced to death earlier this year for defrauding Saigon Commercial Bank (SCB), Vietnam’s fifth-largest bank, of US$12.5 billion ($19.4 billion).
This week, a Vietnamese court upheld her death sentence but commuted it to life in prison, saying her life could be saved if she repaid 75 percent of the embezzled assets, more than $9 billion.
Lang was convicted of embezzling $US12.5 billion at his first trial in April, but prosecutors said the total losses from the scam were as high as $US27 billion ($A42 billion), equivalent to about 6 per cent of the country’s GDP in 2023.
She appealed the outcome of the month-long trial, but a Ho Chi Minh City court on Tuesday ruled there was “no reason” to reduce her sentence.
Her husband, Hong Kong billionaire Chu Lap-kee, had his sentence reduced from nine to seven years.
Tens of thousands of people who had invested their savings with Standard Chartered lost their money, shocking the communist nation and sparking rare protests from victims.
Zhang Meilan (right) has been sentenced to death. Image source: AFP
A race against time
Lan, who founded property development group Van Thinh Phat, previously told the court that the “quickest way” to repay the stolen funds was to “liquidate SCB and sell our assets to repay the SBV (State Bank of Vietnam) and the people”.
“I am heartbroken that state resources have been wasted,” Ms Lan said last week, adding that she was “extremely embarrassed to be accused of this crime”.
Her defense team argued that she had already repaid the money needed to reduce her sentence.
The court acknowledged that Lan had handed over more than 600 pieces of family property to the court, but the exact value of these properties was unclear.
Her lawyers argued that while she was sentenced to death, it would be difficult for her to sell her assets for the best price.
Lawyer Nguyen Huy Thiep told the BBC: “The total value of her assets actually exceeds the required compensation.
“However, selling these assets requires time and effort, as many of the assets are real estate and take time to liquidate. Zhang Meilan hopes that the court will create the most favorable conditions for her to continue to receive compensation.”
They also noted that it would likely be years before Lan was executed anyway, which is by lethal injection in Vietnam.
Truong My Lan and her husband Eric Chu Nap Kee. Photo credit: X
Harbor, luxury houses
Ms Lan owned only 5% of Standard Chartered on paper, but at trial the court concluded she effectively controlled more than 90% of the bank through her family, friends and employees.
In April, the former chief inspector of the National Bank was sentenced to life imprisonment for accepting a $5 million bribe to ignore SCB’s financial problems. The court upheld the original sentence on Tuesday.
In April, the bank said it had injected funds into SCB to stabilize its business, but did not disclose the amount. According to Reuters, documents show that the Central Bank of Vietnam injected $US24 billion ($A37 billion) in “special loans” into SCB.
Lan and Van Thinh Phat own assets including a shopping mall, a port and luxury residential complexes in the commercial hub of Ho Chi Minh City.
Lan was among dozens of defendants, including senior central bank officials, arrested in a nationwide anti-corruption campaign dubbed “the incinerator” that has implicated scores of Vietnam’s elite officials and businessmen.
In addition to Lan, 47 other defendants appealed for commutation of sentence.
Last month, Lan was sentenced to life imprisonment for money laundering in a separate case.
ho Chi Minh City, Vietnam. Image source: iStock
“Similar problems are common’
Analysts said the multibillion-dollar fraud exposed systemic flaws in the country’s banking sector and warned that similar cases could happen again.
Vietnam is plagued by corruption. In the latest global corruption index released by Transparency International, Vietnam ranks 83rd out of 180 countries.
But the scale of Lan’s crimes is unprecedented.
Banking experts worry that other damaging allegations lurk in the financial sector of this fast-growing economy, which is seen as a favoured destination for foreign investors seeking an alternative to China.
“SCB is not an isolated problem, but a disease of the entire economy,” banking expert Bui Kien Thanh told AFP.
Vietnam’s financial system “lacks strict state regulation,” he said.
“Similar problems are prevalent in society, so Vietnam needs to study and solve this problem before other problems arise.”
Experts say a key systemic weakness lies in the regulation of the corporate bond market, where companies borrow money from investors.
The massive fraud has shocked the communist country. Image source: AFP
Considering suicide
In most developed markets, bonds are issued through independently regulated brokers based on a full prospectus, rated by a rating agency, and traded on a stock exchange.
However, Standard Chartered Bank sold the bonds directly to retail customers through its branches in a misleading manner, and its staff received weeks of training to falsely assure customers that their funds were safe and that the investment risk was low.
Tens of thousands of people invested their savings in bonds and lost everything when banks collapsed and needed to be bailed out by the authorities, with some even contemplating suicide.
Most Vietnamese corporate debt has no credit rating at all, and local ratings agency FiinRatings said the country had no credit-rated corporate bonds in the years before Lan’s arrest.
By comparison, the average for the ten members of the Association of Southeast Asian Nations (ASEAN) is about 50).
According to state media reports, a judge at Lan’s original trial asked police to investigate the role of staff from the world’s three largest accounting firms that audited Standard Chartered – Ernst & Young, Deloitte and KPMG.
None of the three responded to AFP’s request for comment.
Mr Tan said all levels of Vietnam’s financial sector – from grassroots employees to regulators – lack training on financial markets, related risks and regulatory obligations.
If Lan repays 75% of the debt, she can avoid the death penalty. Image source: AFP
‘Tough question’
The trial court found that Lan used her position to direct Standard Chartered bank executives to withdraw cash from the bank and transport the equivalent of US$4.4 billion (A$6.8 billion) by truck to her own home and the offices of Van Thinh Phat Real Estate.
“They don’t question the paperwork .. they just ask, how can we do it? How quickly can we get it done?” said Khuong Huu Loc, an economist at the US-based agency.
“The whole system is a game based on collusion,” he added. “The problem is, it got so bad, [but] people let her continue because you don’t want to open Pandora’s box.”
Vietnam has stepped up its anti-corruption efforts since the scandal broke.
But UNSW emeritus professor Carl Thayer warned that foreign investors fear anti-corruption efforts are “having a chilling effect on national bureaucracies and slowing down processes”, and officials worry that any decisions made could lead to their motives being questioned.
Even so, he said the revelations in the case mean Vietnam “will have to take extraordinary measures to effectively audit the banking system”.
Mr Loc said that even if there is no treasure as large as the SCB waiting to be discovered, “it is possible that a smaller version exists”.
“What is the question?”