On 26 June 2024, the Supreme People’s Court of the People’s Republic of China (“SPC”) published five typical cases of financial fraud by listed companies, state-owned companies, and private enterprises. The fraudulent acts include public transfers of listed companies, major asset restructuring of listed companies, and issuing false audit reports to defraud bank loans. These five typical cases all involve intermediaries. This reflects the SPC’s trial principle of pursuing the principal offender and fighting the accomplices in financial fraud cases as it has raised the consequences of intermediaries’ failure to perform their gatekeeper duties to the level of affecting market investment confidence and national financial security. The publication has a certain demonstration for the trial of similar cases in the future. The courts at all levels in China will tend to define the duty of care and scope of responsibility of all parties based on the principle of proportionate responsibility and determine that major shareholders, actual controllers, and intermediaries bear corresponding proportions of civil joint and several liability and criminal liability.
Typical Case One: Investors v Chang A Co., Ltd., Dong A Securities Co., Ltd., Da A Accounting Firm –In this civil case, a listed company committed financial fraud and violated its information disclosure obligations. Meanwhile, the securities company that provided underwriting services to the listed company and the accounting firm that issued the audit report failed to perform their duties diligently. Considering that the underwriting sponsor, accounting firm, and the insiders such as the controlling shareholders and actual controllers of the listed company have different ways of understanding the true financial situation of the listed company, and there are differences in the subjective faults of the listed company’s fraud, the court ordered the listed company to bear all compensation liability for investors’ losses, and the securities company and the accounting firm to bear proportional joint and several liability according to the degree of their fault.
On 28 November 2014, Chang A Co., Ltd (“Chang A”) issued a public transfer statement on the National Equities Exchange and Quotations of Small and Medium Enterprises. The lead underwriter for the public transfer was Dong A Securities Co., Ltd. (“Dong A Securities”), and the accounting firm was Da A Accounting Firm (“Da A Accounting”). From 2014 to 2016, Chang A fabricated a lending business and transferred funds to the company controlled by the controlling shareholder of the company, resulting in a total of RMB 189.5 million of funds occupied by related parties, of which RMB 87.5 million was not repaid when due. From 2015 to 2016, Chang A provided guarantees for 16 external loans for the companies controlled by the actual controllers of the company without the approval of the board of directors and the shareholders’ meeting, with a total guarantee amount of RMB 77.3 million. Because the annual report audit projects of Chang A in 2014 and 2015 executed by Da A Accounting were not fully implemented in risk assessment procedures, confirmation procedures, and control testing procedures, and the content of the working papers was inconsistent with the actual situation, the Jiangsu Securities Regulatory Bureau took regulatory measures against Da A Accounting through regulatory talks. Investors filed lawsuits against Chang A, Dong A Securities, and Da A Accounting.
After the trial, the Jiangsu Provincial High People’s Court and the Nanjing Intermediate People’s Court held that Chang A failed to disclose the occupation of funds and external guarantees of related parties, Dong A Securities and Da A Accounting were negligent in issuing false information disclosure documents, and all of them should bear corresponding compensation liability. When Da A Accounting was engaged in relevant audit projects, in addition to the failure to implement risk assessment procedures, confirmation procedures, and control testing procedures, it directly used the original content of the template when preparing working papers, did not modify it according to the actual situation, and did not perform due diligence when issuing audit reports, which was a fault. Dong A Securities did not pay special attention to the business that Chang A may be suspected of related transactions in the sampling survey, did not conduct sufficient due diligence on this, and did not combine the information obtained in the due diligence process to carefully check and conduct necessary investigations and reviews on the important contents of the professional opinions issued by securities service institutions in the information disclosure documents, which was also a fault. Based on this, the court ruled that Chang A should compensate investors for all losses, and Da A Accounting and Dong A Securities should bear joint and several liabilities within the range of 10% and 5%, respectively.
Typical Case Two: Investors v. Zhong A Co., Ltd., Zhao A Securities Co., Ltd., Rui A Accounting Firm – In this civil case, the court clarified that in securities trading, whether a securities service institution is diligent and responsible should be judged based on its respective scope of work and professional field, whether it has fulfilled its verification and validation obligations by relevant laws, regulations and industry norms, and whether it has ordinary duty of care or special duty of care. For the civil compensation liability for securities false statements borne by securities service institutions, the scope of compensation they should bear should be determined by comprehensively considering factors such as the nature of their behavior, the degree of fault, and the causal force between them and investors’ losses. The judgment in this case reasonably defines the standard of duty of care and the scope of legal liability of each party and determines that the securities company and the accounting firm bear corresponding proportions of joint and several liability.
In 2014, Zhong A Co., Ltd. (“Zhong A”) implemented a major asset reorganization and purchased 100% of the equity of Zhong A Technology Co., Ltd. (“Zhong A Technology”) held by Shenzhen A Investment Co., Ltd. through a non-public offering of shares. On 25 April and 8 August 2014, Rui A Accounting Firm (“Rui A Accounting”) issued an audit report to audit the financial statements of Zhong A Technology and its subsidiaries; on 8 August 2014, it issued a profit forecast report to review the profit forecast made by Zhong A Technology. On 10 June 2014, Zhao A Securities Co., Ltd (“Zhao A Securities”) issued an independent financial advisor report on the major asset reorganization, promising that it had fulfilled its due diligence obligations following laws and regulations and the provisions of the China Securities Regulatory Commission (“Commission”), and considering that the reorganization report complies with relevant regulations, and the information disclosed is true, accurate and complete, and there are no false records, misleading statements or major omissions. On 31 May 2019, Zhong A announced receiving an administrative penalty decision from the Commission due to a finding of false statements of securities. In November 2013, Zhong A Technology did not win the bid, but Zhong A did not re-compile and provide the profit forecast report promptly, resulting in serious inaccuracy in the evaluation conclusion and seriously inflated valuation of the placed assets. In 2013, Zhong A Technology recognized project revenue according to the percentage of completion method without meeting the conditions for revenue recognition, resulting in an inflated operating income of RMB 50 million in 2013, and the audited financial report contained false records. The investors sued and requested that Zhong A, Zhong A Technology, Zhao A Securities, Rui A Accounting, and others be ordered to jointly compensate for their losses.
After the trial, the Shanghai High People’s Court and the Shanghai Financial Court held that Zhao A Securities needs to conduct prudent due diligence on the restructuring activities and fully verify the authenticity, accuracy, and completeness of the listed company’s application documents. If the opinions issued by Zhao A Securities adopt the professional opinions of other institutions or personnel, they should still be carefully checked. In this case, Zhao A Securities did not have sufficient evidence to show that it had carefully checked the actual progress of the project involved in the case, and it did not take effective actions to correct it in time after knowing the true situation of the project. Rui A Accounting did not provide evidence to prove that it implemented the necessary audit procedures in the project involved in the case, and lacked due attention and necessary data review on the actual start of the project, construction progress, completion progress, etc. Therefore, although Zhao A Securities and Rui A Accounting were not subject to administrative penalties, they were not diligent in the major asset restructuring involved in the case, resulting in serious inflation of asset pricing and false records in relevant information disclosure. Taking into account the nature of their behavior, the degree of fault, the causal force between their behavior and investors’ losses, and other factors, it is determined that Zhao A Securities shall bear joint and several liabilities for the civil liability of false statements of Zhong A’s securities within the range of 25%, and Rui A Accounting shall bear the joint and several liabilities within the range of 15%.
Typical Case Three: a criminal case of Xiamen A Accounting Firm and Chen A Liang providing false certification documents –In this case, Xiamen A Accounting Firm (“Xiamen A Accounting”) issued false audit reports to obtain illegal profits. The reports were used by related companies to defraud banks of loans, causing huge economic losses to the banks, and constituting the crime of providing false certification documents. Xiamen A Accounting and its directly responsible personnel were sentenced to criminal penalties of fines and fixed-term imprisonment, respectively.
Xiamen A Accounting is controlled and operated by Chen A Liang, who does not qualify as a certified public accountant. Xu A Guo is the nominal executive partner of Xiamen A Accounting, and He A Zheng serves as a certified public accountant and receives remuneration. From 2015 to 2017, Xiamen A Accounting, without the certified public accountant auditing and reviewing the audited company’s operating conditions, financial data, accounting vouchers, etc., adopted the means such as Chen A Liang making it himself and signing it on behalf of Xu A Guo, forging the signature of the certified public accountant, or Xu A Guo and He A Zheng signed the blank report and Chen A Liang then stamped it, to issue false audit reports and obtain illegal benefits. Xiamen A Accounting adopted the above methods to issue the 2014 and 2015 audit reports for Xiamen A Industry and Trade Co., Ltd., the 2015 audit report for Xiamen A International Trade Co., Ltd., and the 2016 audit report for Xiamen A Trade Co., Ltd., and Chen A Liang charged fees ranging from RMB 2,000 to 5,000. The above-mentioned company used false audit reports and other materials to defraud banks of loans, and the overdue amount reached more than RMB 490 million.
After the trial, the Intermediate People’s Court of Xiamen City and the People’s Court of Siming District, Xiamen City held that Xiamen A Accounting constituted the crime of providing false certification documents. Chen A Liang, as the actual controller and operator of Xiamen A Accounting, undertook the audit business involved in the case at a low price in the name of the firm. When the registered accountants of the firm did not audit and verify the operating conditions, financial data, accounting vouchers, etc. of the audited company, Xu A Guo and He A Zheng were arranged to cooperate in issuing false audit reports, and the profits obtained belonged to the firm. It caused the credit bank to make a wrong judgment, granting the loan enterprise a credit line that was inconsistent with the actual operating conditions and issuing loans. The huge amount of loans could not be recovered after the due date. Chen A Liang is the directly responsible supervisor, Xu A Guo and He A Zheng are other directly responsible persons, and their behaviors have also constituted the crime of providing false certification documents. Based on this, Xiamen A Accounting was sentenced to a fine of RMB 400,000 for providing false certification documents; Chen A Liang was sentenced to two years and six months in prison and a fine of RMB 100,000; Xu A Guo was sentenced to one year and ten months in prison, suspended for two years, and a fine of RMB 80,000; He A Zheng was sentenced to one year and eight months in prison, suspended for two years, and a fine of RMB 70,000.
Typical Case Four: A criminal case of Lin A Guo providing false certification documents –In this case, to meet the client’s high valuation demand, Lin A Guo borrowed the qualifications of other asset appraisal institutions to issue an appraisal report with inflated value. As a result, the appraisal subject was expropriated at a premium of more than 100%, causing significant losses to state-owned assets. The court not only punished Lin A Guo but also punished intermediary organizations such as Asset Appraisal for violating regulations and issuing false reports and opinions.
In 2020, a state-owned investment company needed to collect a building for which the government provided a financing guarantee due to the financing problem of its subsidiary.In October 2020, the legal representative of the subsidiary, Zeng A Rong, found the Putian branch of Fujian A Asset Appraisal Company (“Fujian A”) to evaluate the building. The price after the initial evaluation was more than RMB 60 million yuan, but Zeng A Rong asked to increase the evaluation price to more than RMB 80 million. After negotiation, the two parties determined that the evaluation price would not exceed RMB 80 million, and the evaluation would be undertaken by Fujian A. On 28 October 2020, Fujian A participated in the bidding for the evaluation and won the bid. After winning the bid, Lin A Guo of Fujian A repeatedly instructed Dai A Quan of the same company to increase the evaluation price by fabricating data according to the requirements of Zeng Arong and Lin A Qin, the person in charge of the Putian Branch. Later, Dai A Quan made an evaluation report with a market price of RMB 78.821 million, which was submitted by Lin A Guo to Fujian A for review. After review, Fujian A found that the appraisal price was too high. Lin A Guo coordinated with the person in charge of the company many times. In the end, the company still used two affiliated appraisers to pass the qualification review and issued an appraisal report with a market price of RMB 78.821 million without verifying the data materials and on-site inspection. On 12 January 2021, the local government expropriated the building based on the above appraisal report, and the total compensation price was RMB 78.25 million, which has been used to repay financing, loan principal and interest, etc. After being appraised by the local Development and Reform Commission, the market price of the building based on 10 October 2020 was RMB 38.404155 million. The appraisal report of Fujian A was seriously falsified, causing huge losses to state-owned assets.
After the trial, the Intermediate People’s Court of Putian City, Fujian Province, and the People’s Court of Licheng District, Putian City held that Lin A Guo, knowing the actual survey and evaluation price, still colluded with others to fabricate data, refer to false examples, etc., and intentionally provided false certification documents. His behavior constituted the crime of providing false certification documents. Based on this, Lin A Guo was sentenced to two years imprisonment and a fine of RMB 30,000 for the crime of providing false certification documents.
Typical Case Five: a criminal case of Ding A Lu providing false certification documents –In recent years, the court has actively explored the procedures and mechanisms for corporate criminal compliance, actively participated in the compliance rectification initiated by the procuratorate in the pre-trial stage, and fully utilized the system of leniency for confession and acceptance of guilt. During the trial of this case, the court explored and improved a more flexible and convenient compliance rectification model. The county court suggested that the county third-party management committee organize administrative departments, professionals, lawyers, etc. to conduct on-site inspections, listen to rectification reports, promote compliance rectification of the company involved, and conduct evaluation and acceptance. The court implements the criminal policy of combining leniency with severity and applies probation to the defendant based on compliance rectification.
Nanyang A Asset Appraisal Office (“Nanyang A”) was established in 2000. In May 2016, when Hu A Shuai defrauded a loan, he commissioned Nanyang A to conduct an asset appraisal of the seedlings he planted and used for mortgage loans. As the appraiser of Nanyang A, Ding A Lu did not conduct an investigation and verification, and only issued an appraisal report based on the data provided by Hu A Shuai, stating that 509 acres of seedlings were planted and worth RMB 36.9726 million. After the third-party supervision company pointed out that the data in the appraisal report did not conform to the actual situation through on-site actual calculations, Ding A Lu issued an appraisal report with a seedling value of RMB 31.8186 million by reducing the quantity and increasing the price according to the actual on-site calculations of the third-party supervision company. On 31 May 2016, Tanghe County A Credit Union issued a loan of RMB 4.9 million to Hu A Shuai based on the appraisal report. As of the time of the incident, there was still a principal of RMB 4.33 million that had not been recovered. According to the evaluation, the market value of the seedlings involved in the case was RMB 2.6345 million. Nanyang A returned RMB 15,000 of illegal income. The People’s Procuratorate of Tanghe County initiated compliance rectification procedures against Nanyang A. After Nanyang A completed the compliance rectification task, the People’s Procuratorate of Tanghe County made a decision not to prosecute.
After the trial, the People’s Court of Tanghe County, Henan Province held that Ding A Lu intentionally provided false certification documents. His behavior constituted the crime of providing false certification documents. Ding A Lu surrendered himself and pleaded guilty, and Nanyang A returned the illegal gains. Ding A Lu actively participated in the compliance rectification of his company and completed the rectification tasks. He can be given a lighter punishment according to the law. Based on this, Ding A Lu was sentenced to one year and six months in prison for the crime of providing false certification documents, suspended for two years, and fined RMB 10,000.
Typical Case One: Investors v Chang A Co., Ltd., Dong A Securities Co., Ltd., Da A Accounting Firm –In this civil case, a listed company committed financial fraud and violated its information disclosure obligations. Meanwhile, the securities company that provided underwriting services to the listed company and the accounting firm that issued the audit report failed to perform their duties diligently. Considering that the underwriting sponsor, accounting firm, and the insiders such as the controlling shareholders and actual controllers of the listed company have different ways of understanding the true financial situation of the listed company, and there are differences in the subjective faults of the listed company’s fraud, the court ordered the listed company to bear all compensation liability for investors’ losses, and the securities company and the accounting firm to bear proportional joint and several liability according to the degree of their fault.
On 28 November 2014, Chang A Co., Ltd (“Chang A”) issued a public transfer statement on the National Equities Exchange and Quotations of Small and Medium Enterprises. The lead underwriter for the public transfer was Dong A Securities Co., Ltd. (“Dong A Securities”), and the accounting firm was Da A Accounting Firm (“Da A Accounting”). From 2014 to 2016, Chang A fabricated a lending business and transferred funds to the company controlled by the controlling shareholder of the company, resulting in a total of RMB 189.5 million of funds occupied by related parties, of which RMB 87.5 million was not repaid when due. From 2015 to 2016, Chang A provided guarantees for 16 external loans for the companies controlled by the actual controllers of the company without the approval of the board of directors and the shareholders’ meeting, with a total guarantee amount of RMB 77.3 million. Because the annual report audit projects of Chang A in 2014 and 2015 executed by Da A Accounting were not fully implemented in risk assessment procedures, confirmation procedures, and control testing procedures, and the content of the working papers was inconsistent with the actual situation, the Jiangsu Securities Regulatory Bureau took regulatory measures against Da A Accounting through regulatory talks. Investors filed lawsuits against Chang A, Dong A Securities, and Da A Accounting.
After the trial, the Jiangsu Provincial High People’s Court and the Nanjing Intermediate People’s Court held that Chang A failed to disclose the occupation of funds and external guarantees of related parties, Dong A Securities and Da A Accounting were negligent in issuing false information disclosure documents, and all of them should bear corresponding compensation liability. When Da A Accounting was engaged in relevant audit projects, in addition to the failure to implement risk assessment procedures, confirmation procedures, and control testing procedures, it directly used the original content of the template when preparing working papers, did not modify it according to the actual situation, and did not perform due diligence when issuing audit reports, which was a fault. Dong A Securities did not pay special attention to the business that Chang A may be suspected of related transactions in the sampling survey, did not conduct sufficient due diligence on this, and did not combine the information obtained in the due diligence process to carefully check and conduct necessary investigations and reviews on the important contents of the professional opinions issued by securities service institutions in the information disclosure documents, which was also a fault. Based on this, the court ruled that Chang A should compensate investors for all losses, and Da A Accounting and Dong A Securities should bear joint and several liabilities within the range of 10% and 5%, respectively.
Typical Case Two: Investors v. Zhong A Co., Ltd., Zhao A Securities Co., Ltd., Rui A Accounting Firm – In this civil case, the court clarified that in securities trading, whether a securities service institution is diligent and responsible should be judged based on its respective scope of work and professional field, whether it has fulfilled its verification and validation obligations by relevant laws, regulations and industry norms, and whether it has ordinary duty of care or special duty of care. For the civil compensation liability for securities false statements borne by securities service institutions, the scope of compensation they should bear should be determined by comprehensively considering factors such as the nature of their behavior, the degree of fault, and the causal force between them and investors’ losses. The judgment in this case reasonably defines the standard of duty of care and the scope of legal liability of each party and determines that the securities company and the accounting firm bear corresponding proportions of joint and several liability.
In 2014, Zhong A Co., Ltd. (“Zhong A”) implemented a major asset reorganization and purchased 100% of the equity of Zhong A Technology Co., Ltd. (“Zhong A Technology”) held by Shenzhen A Investment Co., Ltd. through a non-public offering of shares. On 25 April and 8 August 2014, Rui A Accounting Firm (“Rui A Accounting”) issued an audit report to audit the financial statements of Zhong A Technology and its subsidiaries; on 8 August 2014, it issued a profit forecast report to review the profit forecast made by Zhong A Technology. On 10 June 2014, Zhao A Securities Co., Ltd (“Zhao A Securities”) issued an independent financial advisor report on the major asset reorganization, promising that it had fulfilled its due diligence obligations following laws and regulations and the provisions of the China Securities Regulatory Commission (“Commission”), and considering that the reorganization report complies with relevant regulations, and the information disclosed is true, accurate and complete, and there are no false records, misleading statements or major omissions. On 31 May 2019, Zhong A announced receiving an administrative penalty decision from the Commission due to a finding of false statements of securities. In November 2013, Zhong A Technology did not win the bid, but Zhong A did not re-compile and provide the profit forecast report promptly, resulting in serious inaccuracy in the evaluation conclusion and seriously inflated valuation of the placed assets. In 2013, Zhong A Technology recognized project revenue according to the percentage of completion method without meeting the conditions for revenue recognition, resulting in an inflated operating income of RMB 50 million in 2013, and the audited financial report contained false records. The investors sued and requested that Zhong A, Zhong A Technology, Zhao A Securities, Rui A Accounting, and others be ordered to jointly compensate for their losses.
After the trial, the Shanghai High People’s Court and the Shanghai Financial Court held that Zhao A Securities needs to conduct prudent due diligence on the restructuring activities and fully verify the authenticity, accuracy, and completeness of the listed company’s application documents. If the opinions issued by Zhao A Securities adopt the professional opinions of other institutions or personnel, they should still be carefully checked. In this case, Zhao A Securities did not have sufficient evidence to show that it had carefully checked the actual progress of the project involved in the case, and it did not take effective actions to correct it in time after knowing the true situation of the project. Rui A Accounting did not provide evidence to prove that it implemented the necessary audit procedures in the project involved in the case, and lacked due attention and necessary data review on the actual start of the project, construction progress, completion progress, etc. Therefore, although Zhao A Securities and Rui A Accounting were not subject to administrative penalties, they were not diligent in the major asset restructuring involved in the case, resulting in serious inflation of asset pricing and false records in relevant information disclosure. Taking into account the nature of their behavior, the degree of fault, the causal force between their behavior and investors’ losses, and other factors, it is determined that Zhao A Securities shall bear joint and several liabilities for the civil liability of false statements of Zhong A’s securities within the range of 25%, and Rui A Accounting shall bear the joint and several liabilities within the range of 15%.
Typical Case Three: a criminal case of Xiamen A Accounting Firm and Chen A Liang providing false certification documents –In this case, Xiamen A Accounting Firm (“Xiamen A Accounting”) issued false audit reports to obtain illegal profits. The reports were used by related companies to defraud banks of loans, causing huge economic losses to the banks, and constituting the crime of providing false certification documents. Xiamen A Accounting and its directly responsible personnel were sentenced to criminal penalties of fines and fixed-term imprisonment, respectively.
Xiamen A Accounting is controlled and operated by Chen A Liang, who does not qualify as a certified public accountant. Xu A Guo is the nominal executive partner of Xiamen A Accounting, and He A Zheng serves as a certified public accountant and receives remuneration. From 2015 to 2017, Xiamen A Accounting, without the certified public accountant auditing and reviewing the audited company’s operating conditions, financial data, accounting vouchers, etc., adopted the means such as Chen A Liang making it himself and signing it on behalf of Xu A Guo, forging the signature of the certified public accountant, or Xu A Guo and He A Zheng signed the blank report and Chen A Liang then stamped it, to issue false audit reports and obtain illegal benefits. Xiamen A Accounting adopted the above methods to issue the 2014 and 2015 audit reports for Xiamen A Industry and Trade Co., Ltd., the 2015 audit report for Xiamen A International Trade Co., Ltd., and the 2016 audit report for Xiamen A Trade Co., Ltd., and Chen A Liang charged fees ranging from RMB 2,000 to 5,000. The above-mentioned company used false audit reports and other materials to defraud banks of loans, and the overdue amount reached more than RMB 490 million.
After the trial, the Intermediate People’s Court of Xiamen City and the People’s Court of Siming District, Xiamen City held that Xiamen A Accounting constituted the crime of providing false certification documents. Chen A Liang, as the actual controller and operator of Xiamen A Accounting, undertook the audit business involved in the case at a low price in the name of the firm. When the registered accountants of the firm did not audit and verify the operating conditions, financial data, accounting vouchers, etc. of the audited company, Xu A Guo and He A Zheng were arranged to cooperate in issuing false audit reports, and the profits obtained belonged to the firm. It caused the credit bank to make a wrong judgment, granting the loan enterprise a credit line that was inconsistent with the actual operating conditions and issuing loans. The huge amount of loans could not be recovered after the due date. Chen A Liang is the directly responsible supervisor, Xu A Guo and He A Zheng are other directly responsible persons, and their behaviors have also constituted the crime of providing false certification documents. Based on this, Xiamen A Accounting was sentenced to a fine of RMB 400,000 for providing false certification documents; Chen A Liang was sentenced to two years and six months in prison and a fine of RMB 100,000; Xu A Guo was sentenced to one year and ten months in prison, suspended for two years, and a fine of RMB 80,000; He A Zheng was sentenced to one year and eight months in prison, suspended for two years, and a fine of RMB 70,000.
Typical Case Four: A criminal case of Lin A Guo providing false certification documents –In this case, to meet the client’s high valuation demand, Lin A Guo borrowed the qualifications of other asset appraisal institutions to issue an appraisal report with inflated value. As a result, the appraisal subject was expropriated at a premium of more than 100%, causing significant losses to state-owned assets. The court not only punished Lin A Guo but also punished intermediary organizations such as Asset Appraisal for violating regulations and issuing false reports and opinions.
In 2020, a state-owned investment company needed to collect a building for which the government provided a financing guarantee due to the financing problem of its subsidiary.In October 2020, the legal representative of the subsidiary, Zeng A Rong, found the Putian branch of Fujian A Asset Appraisal Company (“Fujian A”) to evaluate the building. The price after the initial evaluation was more than RMB 60 million yuan, but Zeng A Rong asked to increase the evaluation price to more than RMB 80 million. After negotiation, the two parties determined that the evaluation price would not exceed RMB 80 million, and the evaluation would be undertaken by Fujian A. On 28 October 2020, Fujian A participated in the bidding for the evaluation and won the bid. After winning the bid, Lin A Guo of Fujian A repeatedly instructed Dai A Quan of the same company to increase the evaluation price by fabricating data according to the requirements of Zeng Arong and Lin A Qin, the person in charge of the Putian Branch. Later, Dai A Quan made an evaluation report with a market price of RMB 78.821 million, which was submitted by Lin A Guo to Fujian A for review. After review, Fujian A found that the appraisal price was too high. Lin A Guo coordinated with the person in charge of the company many times. In the end, the company still used two affiliated appraisers to pass the qualification review and issued an appraisal report with a market price of RMB 78.821 million without verifying the data materials and on-site inspection. On 12 January 2021, the local government expropriated the building based on the above appraisal report, and the total compensation price was RMB 78.25 million, which has been used to repay financing, loan principal and interest, etc. After being appraised by the local Development and Reform Commission, the market price of the building based on 10 October 2020 was RMB 38.404155 million. The appraisal report of Fujian A was seriously falsified, causing huge losses to state-owned assets.
After the trial, the Intermediate People’s Court of Putian City, Fujian Province, and the People’s Court of Licheng District, Putian City held that Lin A Guo, knowing the actual survey and evaluation price, still colluded with others to fabricate data, refer to false examples, etc., and intentionally provided false certification documents. His behavior constituted the crime of providing false certification documents. Based on this, Lin A Guo was sentenced to two years imprisonment and a fine of RMB 30,000 for the crime of providing false certification documents.
Typical Case Five: a criminal case of Ding A Lu providing false certification documents –In recent years, the court has actively explored the procedures and mechanisms for corporate criminal compliance, actively participated in the compliance rectification initiated by the procuratorate in the pre-trial stage, and fully utilized the system of leniency for confession and acceptance of guilt. During the trial of this case, the court explored and improved a more flexible and convenient compliance rectification model. The county court suggested that the county third-party management committee organize administrative departments, professionals, lawyers, etc. to conduct on-site inspections, listen to rectification reports, promote compliance rectification of the company involved, and conduct evaluation and acceptance. The court implements the criminal policy of combining leniency with severity and applies probation to the defendant based on compliance rectification.
Nanyang A Asset Appraisal Office (“Nanyang A”) was established in 2000. In May 2016, when Hu A Shuai defrauded a loan, he commissioned Nanyang A to conduct an asset appraisal of the seedlings he planted and used for mortgage loans. As the appraiser of Nanyang A, Ding A Lu did not conduct an investigation and verification, and only issued an appraisal report based on the data provided by Hu A Shuai, stating that 509 acres of seedlings were planted and worth RMB 36.9726 million. After the third-party supervision company pointed out that the data in the appraisal report did not conform to the actual situation through on-site actual calculations, Ding A Lu issued an appraisal report with a seedling value of RMB 31.8186 million by reducing the quantity and increasing the price according to the actual on-site calculations of the third-party supervision company. On 31 May 2016, Tanghe County A Credit Union issued a loan of RMB 4.9 million to Hu A Shuai based on the appraisal report. As of the time of the incident, there was still a principal of RMB 4.33 million that had not been recovered. According to the evaluation, the market value of the seedlings involved in the case was RMB 2.6345 million. Nanyang A returned RMB 15,000 of illegal income. The People’s Procuratorate of Tanghe County initiated compliance rectification procedures against Nanyang A. After Nanyang A completed the compliance rectification task, the People’s Procuratorate of Tanghe County made a decision not to prosecute.
After the trial, the People’s Court of Tanghe County, Henan Province held that Ding A Lu intentionally provided false certification documents. His behavior constituted the crime of providing false certification documents. Ding A Lu surrendered himself and pleaded guilty, and Nanyang A returned the illegal gains. Ding A Lu actively participated in the compliance rectification of his company and completed the rectification tasks. He can be given a lighter punishment according to the law. Based on this, Ding A Lu was sentenced to one year and six months in prison for the crime of providing false certification documents, suspended for two years, and fined RMB 10,000.