The ‘Yuhuan Family Illegal Storage and Absorption Case’ deriving from the ‘Mother Disgrace Case’ was sentenced publicly according to law by the People's Court of Gaotang County, Shandong Province, on November 14, 2018. Up to now, the development of the case of humiliating the mother still attracts the attention of the vast number of netizens. Individual netizens questioned that Yu Huan and his family have changed from victims of crimes involving mafia-like gangs to defendants of crime of illegally absorbing public deposits as well as expressed the opinion that there is retaliation in attack and retaliation of local government.
Case review:
On April 14, 2016, Su Yinxia, the head of Shandong Yuanda Industry and Trade Co., Ltd. (hereinafter referred to as Yuanda Company), and her son Yu huan, were urged to pay their debts because of the outstanding usury debts. More than ten people restricted their personal freedom in their company's office. During the period, Yu Huan and his mother were extremely insulted, and Yu Huan stabbed four people, one of them who died of hemorrhagic shock. On May 26, 2017, the Shandong Provincial People's Procuratorate informed Yuhuan that the police and civilian police in the case were not suspected of dereliction of duty, but had already imposed party and government disciplinary sanctions on the relevant polices. On June 23, the court of Second Instance sentenced Yuhuan to five years'imprisonment for the crime of intentional injury. On June 29, 2018, the court of Second Instance sentenced 15 debt collectors, such as Wu Xuezhan, for crimes involving mafia-like gangs. On November 14, 2018, the court of First Instance sentenced Su Yinxia and others on suspicion of illegally absorbing public deposits. They are currently in the period of appeal and protest.
Based on the information provided by the media and the content of the official judgment of the People's Court of Gaotang County, our law firm basically believes that it is not unreasonable that Su Yinxia and others constitute the crime of illegally absorbing public deposits.
Su Yinxia and others operate Yuanda Company, Saiya Company and the acquired calls Zhengdian investment company respectively. Zhengdian investment companies, without the approval of the financial management department, publicize to non-specific targets of the society by distributing leaflets and took investors to visit the company, and promised to repay the principal and interest within a certain period of time. It illegally absorbed more than 50 victims'savings, totaling more than 25 million yuan. The savings was mainly used for the production and operation of large companies and the settlement of debts, not for personal possession. Therefore, Su Yinxia and others'criminal acts are applicable to the crime of illegally absorbing public deposits, but not to the crime of fund-raising fraud with ‘illegal possession’ as the subjective requirement. The actions of Su Yinxia and others have developed from private lending to financial crimes in recent years under the environment of market economy which longs a twice-fold story. Their ignorance of the "bottom line" of financing is the main cause.
Yu’s mun moved from one misfortune to another. In her case, there are only two points as follows:
First, Failure to obtain loans through normal channels due to dishonesty. According to media reports, Su Yinxia and Yuanda have borrowed money from individuals, enterprises and banks to solve their business difficulties. Su Yinxia and Yuanda were listed as dishonest persons by the court for failing to fulfill the lawsuit judgment for many times, so they could not obtain loans from banks and other formal channels. Thus, Su Yinxia and Yuanda took the risk to borrow 1.35 million yuan of principal and 10% of monthly interest from Wu Xue who ran the investment company. Unrepayable debts became the fuse of Yuhuan case.
Second, Illegal business model of robbing peter to pay paul. In order to pay off the debts and maintain the operation of the company as soon as possible, Su Yinxia and others illegally absorbed more than 25 million yuan of public deposits through the Zhengdian investment company acquired by Yuanda Company, publicized publicly to non-specific targets of the society and promised to repay the principal and interest without the approval of the financial management agencies.
Therefore, the socialist scale of the governing by law is always fair. Whoever intentionally infringes on the interests of society or individuals will eventually bear the corresponding responsibilities and be punished accordingly. The ‘public power’ is indeed as well as ‘ordinary citizens of society’. Let Su Yinxia and others bear the corresponding criminal responsibility and pay civil compensation to more than 50 victims should be the legitimate act of the judicial organs.
The social problems reflected in the case, the financing difficulties of small and medium-sized enterprises, and the key blood of the private economy in the face of the accident of operation, have not been effectively supplemented. Under the background of excess iron and steel production capacity, Yuanda Corporation, as a private entity mainly engaged in iron and steel materials, has to bear a high risk of default from the point of view of banks and other financial institutions. How to solve the financing problem of small and medium-sized enterprises such as Yuanda Corporation and the like? Comrade Xi Jinping has paid great attention and opinions to the solution of these problems in his important address at the recent ‘Private Economy Symposium’. We are convinced that the problems of ‘rolling curtain door’, ‘glass door’ and ‘revolving door’ will certainly be solved. However, as an operator, we must strengthen our own legal consciousness and to be a not law-blind person and pay more attention to it is the right way as a solution.
As we are sighing and sympathizing at the same time, we encourage operators or investors to be cautious in financing and not to cross the bottom line, especially the three sharp swords hanging over the skull of financial crime regulation - ‘crime of illegal absorption of public deposits’, ‘crime of fund-raising fraud’ and ‘crime of illegal operation’.
Author:Berlin lawyer(Director of Mak & Gu & Tsang Law Firm and Head of Financial and Economic Crime Prevention and Control Section)
