Vietnam’s largest fraud trial begins

Pham Cong Danh and 35 other co-defendants face stiff jail terms if found guilty of fraud

The People’s Court of Ho Chi Minh City is the site of the trial, which will last an estimated three weeks. The case has been referred to as the biggest ever financial crime in Vietnam.

At issue in Danh’s case are intentional violations of the state’s economic management regulations – a total of seven forged withdrawals from 2012 to 2014, which caused lenders a total loss of VND9.133 trillion ($417.03 million).

Danh, prior to becoming VNCB’s CEO, was CEO at Thien Thanh Group, a diversified company established in 1964. Its subsidiaries operate in real estate, hotels, restaurants, tourism, finance, construction materials, and automobiles.

VNCB – formerly known as Trust Bank – had struggled with financial results for quite some time until 2012, when Thien Thanh Group took over. In July 2014, Danh, along with VNCB’s general director Phan Thanh Mai, and VNCB Ho Chi Minh City branch’s director Mai Huu Khuong were arrested on charges of defrauding VND5 trillion ($228.3 million). VNCB was bought out by the State Bank of Vietnam (SBV) the year following for virtually nothing.

According to a 2012 inspection carried out by SBV, VNCB’s equity and accumulated earnings were recorded at -VND2.854 trillion (-$130.3 million) and -VND6.061 trillion (-$276.7 million), respectively. At the end of the year, financial reports showed an accumulated loss of VND8.765 trillion ($400.2 million), a net -VND5.711 trillion (-$260.7 million) in equity.

VNCB’s 2013 financial audit also revealed that an accumulated loss of VND11.348 trillion ($518.17 million) – VND8.293 trillion (-$378.6 million) in equity. At the time of the prosecution, July 26, 2014, VNCB’s equity was reported at -VND18.469 trillion (-$843.3 million), and its total debts added up to VND38.255 trillion ($1.74 billion).

As he held 85 per cent of VNCB’s stakes at the time of these losses, Danh is being charged as the mastermind behind the bank’s widespread fraud. Among the allegations Danh faces are illegitimate contracts to upgrade VNCB’s Corebanking system, which helped him to withdraw VND63.2 billion ($2.88 million) of investors’ money.

He also stands accused of signing sham contracts for VNCB to rent properties, with rental fees of VND581 billion ($26.5 million) used to pay off Thien Thanh Group’s expenses and loans.

In another of his schemes, Danh directed staff at Thien Thanh Group to issue 2,500 corporate bonds – selling VND900 billion ($41.09 million) worth of these to three other companies. VNCB issued the loans to buy the bonds, with the funds afterwards transferred to Danh.

Danh’s actions also targeted specific individuals. In one notable case, he withdrew an unauthorised VND5.49 trillion ($250.6 million) from the account of Tan Hiep Phat’s heiress, Tran Ngoc Bich. The withdrawn funds were deposited at BIDV, Sacombank and TPBank, and were then designated as collateral for 29 companies under Danh.

Danh and his accomplices are also charged with violations of loan regulations at credit institutions. Danh signed off on purchase agreements worth over VND2 trillion ($91.3 million) in construction materials, via loans from VNCB, to settle his debts to various creditors.

Out of the 35 others charged in the case, 20 of them were VNCB employees, and the rest were either CEOs or general managers at Danh’s companies.