Midea Expects Losses From USD148 Million Fraud Case to Be Manageable
Yicai Global
DATE:  Jun 30 2017
/ SOURCE:  Yicai
Midea Expects Losses From USD148 Million Fraud Case to Be Manageable Midea Expects Losses From USD148 Million Fraud Case to Be Manageable

(Yicai Global) June 30 -- After suffering from a financial fraud case, appliance maker Midea Group Co. [SHE:000333] said on its WeChat account yesterday that the main persons involved are being, or have been, arrested and that the firm has recovered some of the entrusted funds, is working to recoup more and the total losses from the case are expected to be manageable.

The Foshan-based firm said that fraud risks emerged in its internal control checks of USD148 million (CNY1 billion) in trust product purchases made by its subsidiary, Hefei Midea Refrigerator Co., in March 2016 and May 2016 and that they were reported to the security authorities immediately. Midea Group has comprehensively audited its other commissioned financial products and did not find any similar problems.

Midea Group did not publicly disclose this incident at the time. After being reported by the group, the case was accepted by the Supreme People's Court of Anhui Province. Media outlets have recently disclosed details and progress of the case.

The case has not been closed, sources related to Midea Group said yesterday. The company cannot give more detailed information, as doing so might affect the case's resolution, they said.

Internet media previously reported that Hefei Midea received a guarantee letter from the Agricultural Bank of China's Chengdu Wuhou Branch and through Caitong Asset's and Bohai Trust's channels lent CNY700 million to three enterprises. Prior to the formal lending, Midea Group conducted internal validation and approval of the deal.

Hefei Midea employees went to Chengdu to conduct due diligence and Midea Group transferred the money to Hefei Midea. Two months after the loan was made, Midea found out that the bank's letter and borrowers' credit information were forged.

Around this time, another CNY300 million of Midea Group's funds met a common fate in a case involving Chongqing Bank's Guiyang Branch.

Midea Group did not mention if it was directly involved in the mismanagement incident.

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Keywords:   MSCI,Fraud