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China’s former richest man jailed for 14 years

An appliance retailer who was once China's richest businessman was sentenced to 14 years for insider trading and other crimes Tuesday, the latest in a series of Chinese tycoons jailed for financial offenses.
Image: File photo of Gome founder Huang smiling during a news conference in Beijing
Gome Electronics founder Huang Guangyu smiles during a news conference in Beijing in this 2006 file photo. A Beijing court sentenced Huang, once China's richest person, to 14 years in prison on Tuesday on charges of bribery, insider trading and illegal business dealings. CLARO CORTES IV / Reuters
/ Source: The Associated Press

An appliance retailer who was once China's richest businessman was sentenced to 14 years for insider trading and other crimes Tuesday, the latest in a series of Chinese tycoons jailed for financial offenses.

Huang Guangyu built Gome Electronics into China's biggest appliance retailer and was estimated in 2008 to be worth $6.3 billion. His abrupt fall reflected the uncertain status of entrepreneurs in China, where an economic boom has created dozens of billionaires but complaints of misconduct are widespread.

A Beijing court also convicted Huang of bribing officials and unspecified "illegal operations," said a statement by prosecutors. The ruling was reported by state television on its national midday news, possibly as a warning to other businesspeople. A receptionist for Huang's lawyer, Tian Wenchang, said the defense team would not comment.

Accusations of bribery, tax evasion and the collusion of corrupt officials in financial abuses are common in China. Successful businesspeople often are linked to Communist Party figures and prosecutions can be prompted by political struggles, though it is unclear what triggered Huang's case.

Huang, born in poverty, started out as a teenage clothing trader and his success story seemed emblematic of China's three-decade-old economic boom. He was detained in November 2008 and resigned as Gome's chairman the following year.

Bribery, insider trading charges
Huang was charged with paying 4.6 million yuan ($675,000) in bribes to five officials and insider trading of Gome shares worth 1.4 billion yuan ($204 million), the state-run China News Service said. Earlier reports said he was accused of paying bribes to win approval of Gome's stock market listing in Hong Kong.

One of those officials, a former deputy director of the Ministry of Public Security's economic crime division, Xiang Huaizhu, went on trial in March on charges of taking 1.4 million yuan ($204,000) from Huang, according to earlier news reports. No verdict has been announced.

Huang ranked No. 1 on a 2008 list of China's wealthiest businesspeople compiled by Rupert Hoogewerf, a researcher in Shanghai. Even after his detention, Huang was No. 17 on last year's list with a net worth of $3.4 billion.

A string of prominent Chinese entrepreneurs have been jailed after running afoul of the law.

Mou Qizhong, who also once held the title of China's richest man, is serving a life sentence for bank fraud. Shanghai developer Zhou Zhengyi was sentenced in 2008 to 16 years for bribery, tax receipt forgery and embezzlement.

Such cases highlight China's chronic tax evasion and widespread ties between ambitious entrepreneurs and political figures, said Joseph Cheng, chairman of the Contemporary China Research Center at the City University of Hong Kong.

"Corruption is quite rampant in China and businesspeople in general believe they have to offer bribes to get transactions done," Cheng said. "When political leaders get into trouble, either because of corruption or because of factional struggles, the business groups associated with them tend to get into trouble also."

Others under investigation
Huang might face additional problems. The government said in 2008 he also was suspected of share price manipulation, money laundering, illicit asset transfers and tax evasion. There was no word Tuesday on the status of those accusations.

Hong Kong authorities are looking into whether Huang diverted money from a Gome share buyback to repay a personal loan. Regulators say that caused Gome and its shareholders to lose 1.6 billion Hong Kong dollars ($207 million).

Huang's wife, Du Juan, is under investigation and Hong Kong has frozen their assets there.

State media had celebrated Huang's success as representative of reforms launched by then-supreme leader Deng Xiaoping in 1979 that allowed millions of Chinese to lift themselves out of poverty.

Born in Shantou in the southern province of Guangdong, near Hong Kong, Huang came to Beijing as a teenager and became a clothing trader.

He switched to appliances, jumping on a retailing boom as Chinese families bought refrigerators, televisions and washing machines. Gome has grown to more than 1,100 stores and employs 300,000 people.

Huang also had extensive real estate holdings and dabbled in private equity.

Gome said earlier its chief financial officer, Zhou Yafei, was under investigation but no details of his case have been released.