Former Chinese officials swindled in Ponzi scheme

Want China Times, Staff Reporter 2014-01-25

A contract signed by an investor in the company. (Internet photo)

An illegal fundraising company in China lured over 20 retired senior officials from the country's Ministry of Foreign Affairs for its advisory group and used their names to raise money from among hundreds of retired diplomats, with a total of 150 million yuan (US$24.8 million) being raised over the past decade.

Guangzhou's Southern Weekly reported that the the Xin Lu Yuan Company attracted former diplomats by offering high interest rates, assisted by the reputations of those in the advisory group which included the former assistant to the deputy foreign minister, the former deputy secretary-general of the United Nations and former Chinese ambassadors.

Some officials reportedly lost their entire savings in the scam operated by the company's owner Zhang Zhouming, who only had a junior high school degree. The fraud finally came to an end after a decade when Zhang was arrested in 2012.

Liu Zhirong, who traveled to more than ten countries during his career as a diplomat, said he deposited 550,000 yuan (US$90,000) with Xin Lu Yuan for a promised monthly interest rate of up to 6%.

The firm claimed that it owned six mines in China and overseas and more than 1,000 acres of forest. It also claimed that it planned to go public on the Hong Kong Stock Exchange and the Nasdaq.

It is reported that each "adviser" could earn a bonus of 500 yuan (US$83) for introducing a new investor in the company. The bonus was raised to 2% of the raised funds.

Liu did not think much before depositing his money because of the introduction and recommendations made by his former colleagues. "I thought it should not have been a problem because many retired colleagues also invested," Liu said, adding that he had not received any of the interest agreed in the contract since 2008.

Yu Mingsheng, a former ambassador to Jamaica and one of the advisers to the illegal company, refused to comment on the matter.

Zhang, 46, was arrested in 2012 and accused of raising funds illegally.

The case has involved more than 1,700 investors from across Beijing, Tianjin, Shandong and Hebei, who lost around 2.6 billion yuan (US$430 million).

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