Bloomberg News

Vietnam’s Corruption Crackdown Shown in Vinalines Trial

December 13, 2013

Prosecutors are seeking the death penalty for two former Vietnam National Shipping Lines executives who went on trial yesterday for embezzlement as the government seeks to clamp down on corruption.

The People’s Court of Hanoi charged Duong Chi Dung, the former chairman of Vinalines, as the state-owned company is known, and Mai Van Phuc, its former general director, with embezzling 10 billion dong ($474,000) each, according to an indictment by the Supreme People’s Procuracy. Prosecutors are seeking death sentences for the two men.

The trial is the latest high-profile case as the government seeks to curb corporate graft. Vietnam is trying to reform a banking system weighed down by Southeast Asia’s highest rate of bad debt and turn around an economy that grew at the slowest pace since 1999 last year. The central bank governor vowed last year to crack down on violations by groups of shareholders opposing bank reforms.

“The trial is just the latest is a series of efforts to address grand corruption in a high profile manner,” said Jonathan London, assistant professor at the City University of Hong Kong’s Department of Asian and International Studies. “The fundamental concern is that long prison sentences and even death sentences will be handed down without any major changes in the opaque institutions and practices that encourage grand and petty corruption in the first place.”

Floating Dock

The defendants allegedly falsified technical specifications of a 43-year-old, non-functional floating dock and overpaid for it, causing a loss of about 367 billion dong for the state, according to the indictment. The defendants allegedly embezzled a total of 28 billion dong, it said.

Dung, Phuc and two other defendants, Tran Huu Chieu, the former deputy general director, and Tran Hai Son, the former director of a unit, were charged with embezzlement and “intentionally violating state regulations on economic management, causing serious consequences.”

Two other Vinalines employees, three customs officers and an officer with the Vietnam Register office were charged with mismanagement. Prosecutors today recommended prison terms of as much as 30 years for the defendants. The verdicts and sentencing are expected tomorrow.

The floating dock was made in Japan in 1965 and resold to two owners before Vinalines bought it, the indictment shows. Dung approved a Vinalines plan to buy the dock for $9 million from a Singaporean broker, which had bought it from a Russian owner for only $2.3 million, the indictment said. The broker then gave a company operated by Son’s sister $1.67 million by creating a fake contract, it said. Son later gave cash to Dung, Phuc and Chieu, according to the documents.

Vietnam Manhunt

Dung, wearing a white shirt and blue jacket, said in court yesterday that he did not give guidance in the purchase of the dock and only approved what Phuc, the general director, proposed. “My relationship with Phuc was not good,” he said in court. Dung also denied that Son gave him the embezzled money.

Dung was arrested in September last year after a manhunt lasting more than three months. He was initially charged with mismanagement, an offense for which the most severe sentence is 20 years in jail.

Dung fled in a panic after being tipped off about the arrest warrant, he said in court today. “I just thought that I must run away from Hanoi, the further the better,” he said.

He flew to New York and was denied entry. He then went to Cambodia, where he was arrested, he said in court yesterday.

Before his arrest warrant was issued, Dung headed the Vietnam Maritime Administration under the Ministry of Transport. He was suspended from the post in May 2012.

Death Sentences

Vietnamese courts held 278 corruption trials this year while the state inspectorate uncovered 80 new fraud cases involving state funds, according to a government report last month that did not give comparable figures for previous years.

The People’s Court of Ho Chi Minh City sentenced Vu Quoc Hao, the former general director of Agribank Financial Leasing Co. No. 2, and Dang Van Hai, the former chairman of a construction company, to death in a fraud trial on Nov. 15. Hao was charged with embezzling $25 million of state property.

Former executives at Vietnam Shipbuilding Industry Group, or Vinashin, were imprisoned for as much as 20 years in March last year after a probe into the company’s near collapse in 2010 under $4 billion of debt. The company is being renamed Shipbuilding Industry Corp., or SBIC, the transport ministry said Oct. 31.

This week, two former executives of the May 1 Construction and Service Co. were convicted of fraudulent appropriation of property and sentenced to life in prison, Vietnam News reported Dec. 10. Le Hoa Binh, the former chairman, and Nguyen Thi Kim Thoa, who was vice chief executive officer and chief accountant, were convicted of fraud for taking 800 billion dong ($38 million) from more than 460 individuals. Former CEO Nguyen Manh Cuong was sentenced to 17 years in prison in the case.

The government needs to do more to address fundamental problems in its clean-up of state-owned enterprises, said Adam Sitkoff, executive director of the American Chamber of Commerce in Vietnam.

“Corruption and conflict of interest issues are embedded in the fabric of the state-owned enterprise sector,” he said. “Without addressing fundamental governance issues, progress will remain challenging and the continued misallocation of resources continues at a time when Vietnam needs to be making wiser decisions about capital outlays and business strategy.”

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net


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