The trial of Mr Wu Xiaohui, the former chairman of Anbang Insurance Group, for alleged economic crimes started in Shanghai yesterday, according to a statement from the Shanghai No. 1 Intermediate People's Court.
Prosecutors accuse Wu of defrauding investors of CNY65.25 billion (US$10.38 billion) and of misusing his position to enrich himself, reports AFP. The funds were transferred to companies he personally controlled for investment overseas, to pay down debts, or "personally squandered," the court said on an official social-media account. The court also was told that Anbang had sold investment products that exceeded allowable fund-raising amounts by a CNY723.9 billion.
Allegations contested by Wu
But Wu is contesting all charges against him.
"The accused Wu Xiaohui said that he did not understand the law and did not know that these actions constituted crimes," the court said.
The court case opened a month after the Chinese government took over control of the insurer and announced that Wu would be been prosecuted for economic crimes, as Beijing cracks down on big-spending conglomerates and financial risk.
The court gave no indication when the trial would conclude, but such proceedings are often wrapped up within a day, especially in sensitive cases that the government does not want dragged out. Verdicts usually are issued days or weeks later.
The government's swoop on Anbang was its most aggressive move yet to rein in politically-connected conglomerates like Anbang that grew rapidly and launched a wave of splashy multi-billion-dollar overseas investments fuelled by debt. The Chinese government has made cleaning up financial risks a top national priority.
Wu's situation marks a startling fall from grace for a man who reportedly married a granddaughter of the late Chinese leader Deng Xiaoping which is a sign that even political connections won't guarantee immunity.
Acquisitive private companies such as Anbang, HNA, Fosun and Wanda were in the vanguard of an officially-encouraged surge in multi-billion-dollar overseas acquisitions that netted everything from European football clubs to foreign hotel chains and movie studios. But authorities have become increasingly alarmed by the conglomerates' murky webs of subsidiaries and debt and their potential threat to China's economy.
The four firms are referred to as "grey rhinos" –plodding financial beasts that could charge quickly, with damaging systemic results. In response, the government has for more than a year implemented ever-tighter controls to curb excessive debt and "irrational" investments overseas.
Established in 2004, Anbang grew rapidly from a property insurer into a financial services powerhouse, making waves in 2014 by buying New York's landmark Waldorf Astoria hotel for US$1.95 billion. In 2015, it bought US insurer Fidelity & Guaranty Life for US$1.6 billion and, later, insurers in South Korea and the Netherlands. It also made a failed US$14 billion bid for the Starwood hotels chain.
Wu was detained for questioning last June, two months after the former CIRC chairman Xiang Junbo was taken away and stripped of his post for “severe disciplinary violations”.