In April 2024, Vietnam witnessed the sentencing of Zhang Meilan, formerly the country's wealthiest woman, to death for her involvement in a massive financial fraud case. This case is potentially the largest in world history, involving over $4 billion, approximately 10% of Vietnam's GDP. The scandal also triggered a significant anti-corruption movement, exposing corruption within the Vietnamese Politburo.
Zhang Meilan's Rise to Power
Early Life and Business Ventures
Born in 1956 in what is now Ho Chi Minh City, Zhang Meilan began her entrepreneurial journey at age 16, selling cosmetics and hair products with her mother. During this time, Vietnam was struggling with poverty, the aftermath of the Vietnam War, and hyperinflation. Despite these challenges, Zhang Meilan developed crucial skills in negotiation and resource management, which would prove vital in the gray market environment of Vietnam.
Seizing Opportunities in a Developing Economy
In 1986, Vietnam initiated its economic reform. In 1991, at 35, Zhang Meilan founded Wansheng Trade Company, capitalizing on the influx of foreign investment, particularly from South Korea, Taiwan, and Hong Kong. Vietnam's GDP per capita was only $100 at the time, highlighting the country's vast potential for growth. Wansheng Trade Company flourished alongside Vietnam's burgeoning economy, taking advantage of favorable foreign investment laws and attracting multinational corporations. Zhang Meilan expanded into managing LG operations in Vietnam and venturing into the catering and hotel industries.
Real Estate Dominance
Following the 1997 Asian financial crisis, Zhang Meilan seized the opportunity to participate in the renovation of Ho Chi Minh City. Her adeptness at interpersonal relations and navigating government connections allowed her to acquire landmark projects like Saigon Times Square and Windsor Hotel, establishing her as a real estate mogul. Although the specific means are unknown, it is believed that significant gray market transactions were involved. Her projects became widespread throughout the city, eventually encompassing over 1,000 real estate endeavors.
The Financial Fraud Scheme
Control of Saigon Commercial Bank (SCB)
After establishing herself in the foreign trade and real estate sectors, Zhang Meilan turned her attention to banking. In 2011, she orchestrated the merger of three struggling banks to form Saigon Commercial Bank (SCB). Although Vietnamese law restricted individual ownership to a maximum of 5% of a bank's shares, Zhang Meilan circumvented this regulation by using over 70 agents to hold shares on her behalf, ultimately controlling over 85% (later exceeding 90%) of SCB.
Illegal Lending Practices
Zhang Meilan used SCB as her personal piggy bank. She established over 1,000 shell companies, ostensibly involved in various sectors, to borrow money from the bank. Using undervalued land from her Wanshengfa Group as collateral, she artificially inflated its value to secure loans. This process was facilitated by her control over SCB. Between 2012 and 2022, 93% of SCB's total loans, exceeding $4.3 billion (11% of Vietnam's GDP in 2022), were directed to these shell companies.
Embezzlement and Bribery
While initially cautious with repayments, Zhang Meilan ceased returning funds to SCB after 2018, instead transferring them overseas via shell companies, embezzling an estimated $1.2 billion. She also directed her driver to withdraw vast sums of cash (equivalent to $4 billion) for personal use, bribery, and storing it in her basement. SCB attracted depositors by offering high interest rates, becoming one of Vietnam's largest private banks with assets exceeding $3 billion by 2022.
Bond Fraud
In the latter half of 2018, Zhang Meilan resorted to issuing fraudulent company bonds through four companies, raising over 300 trillion Vietnamese Dong, with at least 42,000 investors affected. The funds were then directed to her own businesses or personal accounts.
Corruption and Collusion
Zhang Meilan's scheme was not without detection, requiring extensive bribery to maintain. This included a $5.2 million bribe to the director of the Vietnam National Bank's Supervisory Bureau, resulting in a life sentence for the director. Zhang Meilan also engaged in charitable activities to improve her public image, such as funding Vietnamese Chinese education and donating millions during the COVID-19 pandemic. Her operations were protected by powerful figures like former Ho Chi Minh City secretary Li Qinghai, a member of the Central Political Bureau. This case exemplifies the widespread corruption and collusion prevalent in Vietnam's finance and real estate sectors during its rapid development phase.
The Downfall and Aftermath
Arrest and Trial
In October 2022, Zhang Meilan was arrested for bond fraud, triggering market panic. The Vietnamese stock market plunged, and SCB faced a bank run, forcing the Central Bank of Vietnam to inject $2.4 billion to maintain operations. The subsequent trial involved 86 defendants, including Zhang Meilan and numerous officials from the Central Bank of Vietnam.
Sentencing and Asset Recovery
In April 2024, Zhang Meilan was found guilty of embezzlement, bribery, money laundering, and fraud, receiving a death sentence. Her husband and niece received prison sentences of nine and 17 years respectively. However, the court offered a reduced sentence to life imprisonment if she actively cooperated and compensated for at least three-quarters of the damages. Efforts are underway to sell and auction her assets to recover the stolen funds.
Anti-Corruption Movement and Economic Impact
Zhang Meilan's case is a pivotal moment in Vietnam's ongoing anti-corruption movement, led by former Secretary-General Ruan Fu-chung since 2013. This movement aims to address the country's corruption issues, which have hindered foreign investment despite its economic potential. While attracting foreign direct investment, the anti-corruption campaign has also caused hesitation among officials, slowing down decision-making processes. The case highlights the delicate balance between combating corruption and maintaining economic progress.
Contributing Factors to Collapse
Several factors contributed to Zhang Meilan's downfall, including the government crackdown and the economic downturn of 2022, marked by a decline in Ho Chi Minh City's housing prices. This price drop weakened her core real estate holdings, exposing her fraudulent practices. The rush to sell assets at a discount to save her life makes asset recovery difficult, as other capital investors take advantage of the situation. Whether Zhang Meilan can secure enough money to save herself remains to be seen.
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