Investors in China Beware: Banks Rob Clients of Savings

December 26, 2005 12:00 am Last Updated: December 26, 2005 12:00 am

Bank robberies have occurred in both eastern and western societies; there is nothing unusual about them. However, cases in which banks rob their own clients are perhaps quite unusual and unheard of. But they have happened. A couple of such unusual cases occurred in the domain of “Socialism with Chinese characteristics,” namely today's mainland China, and they were not isolated or accidental cases. Much to the surprise of many, the Chinese authorities have ignored these sorts of cases.

It is said that China offers investors many promising opportunities, though it is not surprising that there are also pitfalls. For those interested in investing in China, Sound of Hope Radio produced a series of programs entitled “The Setups Investors in China Must Beware of.” Dr. Gao Weibang, director of Taiwanese Victims of Investment in China Association, was invited to talk about the setups and pitfalls awaiting investors in China and how to avoid getting caught in them.

Gao Weibang: A bank robbery is a common plot in the frontier movies made in Hollywood. These days in Taiwan a bank robbery or a security service firm robbery might be reported once in a while. But I bet that you have never heard of a case in which a bank robbed its clients of their savings. However, these unusual cases really did happen to Taiwanese investors in China. Five members of my association are connected to cases in which the banks robbed them of their savings. Since the measures the banks adopted were not sophisticated at all, the banks seemed no different from common robbers. The one difference is: robbers would have to flee with the money, while bank directors and staff did not have to run because the clients could do nothing about the banks' criminal behavior.

Reporter: Mr. Gao, your accusation seems so harsh. Could you give us an example of such a specific case?

Gao Weibang: Saving your money in a bank is like pushing a goat into the mouth of a tiger, leaving nothing left over. Mr. Cao, a Taiwanese investor to Beihai city, Guangxi Province, deposited two separate sums of money into the Beihai City branch of the China Construction Bank. On June 17, 1996, he deposited the first sum of 3.5 million yuan (US$0.43 million) and on July 4, 1996, the second sum of three million yuan (US$0.37 million); both of the savings were nine-month fixed deposits with an annual interest of 7.2 percent. Meanwhile, Mr. Cao was given two time “certificates to deposit and withdraw savings,” on which were the stamp of the terminal branch of the China Construction Bank in Beihai, the signature of the bank staff member in charge of the accounts, and the stamp of the director of the terminal branch. But, nine months later, Mr. Cao was unable to withdraw his money with the certificates.

Reporter: I was just thinking that the interest rates were very high. I am amazed that the savings were gone. Did the bank give any reason for not paying the money?

Gao Weibang: The bank denied the existence of the two sums of deposited money and thus refused to return the money. Mr. Cao attempted to negotiate with the bank several times, but the negotiations failed. He had no other alternative but to file a civil lawsuit with the Beihai City Intermediate People's Court. In the court the bank authorities testified that they did not illegally take the savings of their client because the 6.5 million yuan (US$0.8 million) had never been deposited in the bank. Instead, [they said that] Mr. Cao lent the money to two companies through a bank staff member. The bank claimed that these transactions had nothing to do with the bank. Besides, [the bank said that] the certificates owned by Mr. Cao were fake because the stamp of the terminal branch pressed on the certificates was an old one and was therefore invalid. Thus the two certificates were legally invalid. To make it short, the bank claimed that Mr. Cao never saved his money with the bank.

Reporter: If a Taiwanese investor wants to save his money in a bank, how can he judge if the bank stamp is outdated? How can he know that the stamp is invalid? If Mr. Cao wanted to lend money to the two companies, why did he bother to lend out his money through the bank? Why did he bother to lend out his money through unfamiliar bank staff? Was Mr. Cao familiar with the directors of the two companies?

Gao Weibang: The money was indeed deposited into the bank. Mr. Cao did not know the directors of the two companies. Nor did he have any financial link with the two companies or with their directors. Besides, the two companies have written acknowledgements of the debt to the bank. How could the bank shirk away from its responsibilities?

Reporter: Could the bank purposefully deceive its client into paying for the debt because its bank loan had turned into a bad debt?

Gao Weibang: Mr. Cao did not know if the bank really lent money to the two companies; that was the interior business of the bank, and none of his business. But the court judged that the two companies, with their whereabouts unknown, should jointly return to Mr. Cao the 6.5 million yuan and its interest, 40 percent of which would be paid by the bank. It clearly indicated that the bank could shy away from its responsibility and return only 40 percent of the total money. Reporter: Only the court of the Chinese Communist Party (CCP) could deliver such a ridiculous verdict. The legal system of the CCP is truly hideous.

Gao Weibang: Mr. Cao had to file a lawsuit with the Guanxi Province Supreme People's Court and to spend more money bribing the court officials. On October 10, 2002, much to his excitement, the court delivered a favorable verdict, stating that the bank had to return the 6.5 million yuan plus the interest and a fine for violating the contract. Besides, the bank was supposed to return the legal fees that Mr. X had paid the court for the two cases. This was the final judgment, with no more objection nor appeal to a higher court allowed.

Reporter: He spent more than three years and finally got justice. But you said that no Taiwanese businessman can find justice!

Gao Weibang: That's right. And that happened in this case as well. Although the Guanxi Province Supreme People's Court finally judged that Mr. Cao would win the case, the bank again didn't care and still didn't return the money. Mr. Cao appealed with the Beihai City Intermediate People's Court for enforcement. A point to keep in mind is that the Beihai City Intermediate People's Court once judged against Mr. Cao, so the appeal for enforcement wasn't paid attention to. However, the court secretly told Mr. Cao that if he would share half his money with them, they would make efforts to enforce the verdict of payment. Of course, Mr. Cao refused, and the case was delayed for another year.

Reporter: He had to give them half the money that was to be returned to him in order for them to enforce jurisdiction? That's 3.25 million yuan (US$0.4 million), which is equivalent to about 13 million Taiwan dollars. They have such a big stomach! It is not surprising to hear that it costs such a large amount of money to engage in a lawsuit in Mainland China.

Gao Weibang: It is very expensive to engage in a lawsuit in Mainland China. The administration fee of the first judgment and the second judgment is 53,795 yuan (US$6,661), the lawyer fee is normally four percent of the money to be compensated, but eight percent for Taiwan businessmen. At least, that is what my lawyer asked of me. Moreover, there is no way to estimate the sum of other fees, such as activity fees and “public relations fees” used to bribe.

The Corrupted Judicial System Enforces Justice only after Receiving Money

Reporter: The Intermediate Court can deny the Supreme Court's final judgment; it disobeys and doesn't enforce it until they are paid half of the money. Where is the authority of the Chinese Judicial System?

Gao Weibang: The Chinese judicial system is not only corrupt but also messy. It has lost its authority a long time ago. The case was delayed for more than one year. On January 15, 2002, Mr. Cao received a copy of a “Notice of Deferment of Enforcement”. The comments on the notice said that although the Supreme Court had made its judgment and the judgment should have been enforced, the Beihai branch of the Chinese Construction Bank was annoyed and had lodged a compliant to the People's Supreme Court. The Supreme Court decided to recheck the case, requesting the Beihai City Intermediate People's Court to defer enforcement for three months. In fact, before the Beihai City Intermediate People's Court received the “Notice of Deferment of Enforcement”, it hadn't enforced the law for more than 15 months.

Reporter: Didn't you say the Supreme Court's judgment was final and could not be appealed again?

Gao Weibang: If you are a Taiwanese businessman or some other powerless groups in society, an appeal is not allowed after the final judgment. You have to know that in China, “power” is greater than “the law”. People with power frequently violate the law. This copy of the “Notice of Deferment of Enforcement” reveals an important message: people with higher power had already become involved with this. So the Supreme Court's attitude had to change completely, and a case for compensation was turned into a case of a deposit receipt dispute. The final judgment was rechecked. The Intermediate People's Court was never investigated for delaying enforcement of the final judgment. This is the justice of the CCP. You tell me whether it is absurd or not!

Reporter: Now I can understand the terror of the CCP's judical system, and can understand the true reason why there are no Taiwanese businessman who can demand justice.

Gao Weibang: There is a saying in mainland China: “The big cat eats the plaintiff and then eats the defendant, with a condom in his pocket for later.” It shows that in the law officer's heart there is no right or wrong, the plaintiff and defendant are treated equally for extortion. After wining and dining, they will receive sexual service, as they have to be prepared at any time to avoid being infected with a venereal disease.

Last year Mr. Cao came to me and asked me if I knew any influential high level officials of the CCP. I believe that high-level CCP officials don't do favors; they still need the people above them to maintain their own power. They will not prevent those above them from acquiring wealth. At that time, I suggested Mr. Cao hold a press conference. Mr. Cao said, “That's absolutely impossible. My company is still in mainland China and is managed by my son. If I hold a press conference, it will affect the company and the security of my son.”

Six and a half million yuan, which is about 26 million Taiwan dollars, was eaten by the bank like this, the victim has no justice at all. I really hope someone can stand up to speak out for them.

Taiwanese Businessman Seeks Bank Deposits But is Threatened by Police

Gao Weibang: I'm now talking about a case of another Taiwanese businessman who was swindled of his money.

In 1995, Mr. Peng invested in in four factories in Dongguan City, Guangdong Province, factories making models, electrical wire, electronics, and electric machinery. He hired over 1000 workers. Among them was Liang Zhong, the manager of model factory, a 27-year-old mainland youth who looked smart, enthusiastic, and caring. Mr. Peng particularly liked him. On September 19, 1996, Mr. Peng, along with Liang and his brother came to Zhenjiang City, Guangdong to get down to business. Under the mediation of the Liangs, he transferred 7 million yuan ($0.87 million) and deposited it in the Mazhang office of the Chikan Branch of the Zhenjiang Bank of China. This is a huge amount of money. Mr. Peng was reminded that if he wanted to withdraw money he had to notify the bank several days prior to his arrival. After half a year, the company needed to use the money. Mr. Peng called the bank and asked them to get cash; however, the bank told him it would be difficult for bankrolling and asked him to deposit for another half year.

Reporter: Sounds like there was a problem.

Gao Weibang: Exactly. On October 25, 1997, i.e., one year after making the deposit, Mr. Peng went to the Zhanjiang Bank of China for withdrawal. The deputy general manager of the branch office told him that there was no account under his name in the computer system, and there was no deposit with such an amount, either. The Bank's explanations were: Mr. Peng had already reported the loss of his deposit booklet. As a result, the Bank of China had reissued a deposit booklet for him, and using the new deposit booklet, Mr. Peng had withdrawn all of the money. The subsequent investigation revealed that the signatures on the application form for renewing the deposit booklet as well as on the withdrawal slip were all fabricated ones. For once, the Bank had tried to hinder the withdrawal using the excuse of “difficulty in capital allocation”. In the end, the Bank argued that Mr. Peng had withdrawn all of the deposit, and refused to return the money.

For a personal deposit as big as 7 million yuan, it was surely a large amount for the Zhanjiang Branch. How could someone dare to pretend to be Mr. Peng and report the loss of the deposit booklet? Furthermore, for a key customer like Mr. Peng, how could the clerk at the Bank of China fail to recognize him? The line manager also failed to cross-check the identity of the pretender, if he did even exist. These are simply lies.

Reporter: Even if it was really a fraudulent withdrawal by someone, the bank should have taken full responsibility. How could they use the fraud as an excuse and repudiate the debt?

Gao Weibang: There is more. On December 30, 1997, the manager of the mold shop, Liang Zhong, brought to Dongguan three police officers in charge of public security in Zhanjiang. They kidnapped Mr. Peng for eight hours in the name of fraud investigation. They faked a testimony and demanded Mr. Peng to sign on it. When they were about to take Mr. Peng away, some security officers dispatched by the Dongguan Public Security Bureau sealed off the scene. The Dongguan officers demanded Mr. Peng be released; however, the Zhanjiang officers refused to cooperate. Instead, the Zhanjiang officers threatened to kill the hostage as if they were kidnappers. Both sides refused to budge. At last, the Zhanjiang officers had to release Mr. Peng because the Dongguan officers and firearms were ten times more numerous. Before the Zhanjiang officers left, they kept intimidating Mr. Peng: “If you dare to file any other petitions, we will bury you alive!” On the second day, Mr. Peng hurriedly fled to Taiwan. He did not dare to go to China again.

Reporter: Public security officers kidnap a Taiwanese businessman, and threaten to bury him alive! With these sort of things happening, who dares to stay in China any longer?

Gao Weibang: Yes, you are perfectly right. In June 1999, Mr. Peng asked a county representative of the Chinese People's Political Consultative Conference (CPPCC) to file a civil action at the Intermediate People's court of Zhanjiang. The lawsuit got dragged on, and no court session was ever called. Two years later, the county representative of the CPPCC was murdered in an arranged car accident.

On October 20, 1999, Liang Zhong brought a false charge against Mr. Peng, claiming that he had invested 600,000 Hong Kong dollars in the mold shop, and that Liang should be entitled to 30 percent of the profit, 1.83 million yuan ($0.23 mllion). We all know the relationship between Liang Zhong and Mr. Peng is no more than one of employment. They were not investment partners. Moreover, it is explicitly stipulated in China's Foreign Economic Contract Law that no Chinese citizens are allowed to be shareholders with their foreign enterprise company. Also, Liang's was totally baseless; in it he said the mold shop's annual profit of the value of its capital. This was simply a daydream of Liang's—he wanted to take 30 percent of the profit.

Reporter: What happened in the end?

Gao Weibang: Two months later, the court announced the verdict. Although it is illegal that Chinese citizens become shareholders of the mold shop, the judge said, “Liang is an investor behind the curtain.” Despite the fact that no documents could be presented to prove Liang's investment, the judge said, “it was an oral agreement.” Therefore, the judge decided Liang's investment was a reality, and Mr. Peng would have to pay off 1,467,704 yuan ($181,740) within three days. In addition, Mr. Peng's bank deposit was frozen, and an equivalent value of Mr. Peng's assets was seized. As a result, four factories of Mr. Peng's were closed down by government order, causing more than 1,000 people to become unemployed.

Reporter: Mr. Peng's case dragged on for three years. He was threatened with being buried alive, and the county representative of the CPPCC who tried to help him was murdered. On the other hand, the false accusation against Mr. Peng was adjudicated and enforced within two months. How awful the jurisdiction in mainland China is!

Gao Weibang: It has been eight years since Mr. Peng's case occurred. He is not prepared to give up that easily. Several times, he attempted to work through retired generals or political figures in Taiwan who have good relationships with the Chinese Communist regime. He also resorted to his personal relationship with China's state security and military police as well as lawyers on both sides of the Taiwan Strait. However, all of his attempts have been in vain. He has just wasted more of his money.