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A court in Vietnam has sentenced businesswoman Truong My Lan to death for her alleged role in what is seen as the biggest recorded financial fraud in the country. The $12.5-billion scam amounts to around 3% of Vietnam’s 2022 GDP.
Rising from humble origins, Lan went on to establish and chair a major real estate company, which developed major projects such as malls and hotels.
Following a merger of some banks in 2011, she came to exert significant influence in the Saigon Joint Stock Commercial Bank (SCB), from where she allegedly diverted an extraordinarily large sum of money to herself via shell companies.
Lan was sentenced on Thursday (April 11). A member of her family told Reuters that they would continue to fight the case in a higher court. But how was she able to amass such wealth, and what does her prosecution signify in the socialist country? We explain.
Who is Truong My Lan?
Lan, 67, used to sell cosmetics and other goods on the streets of Ho Chi Minh City with her mother. Her fortunes changed with economic reforms called “doi moi” (‘renovation’) in the country.
Vietnam’s communist government began opening up the country’s economy in 1986. According to a report by the BBC, this allowed Lan’s mother to buy land and eventually own a “large portfolio” of hotels and restaurants. The Van Thinh Phat company, established in 1992, became one of Vietnam’s richest real estate firms, the Associated Press reported.
These assets were boosted by Lan’s marriage to Hong Kong investor Eric Chu Nap-kee.
What is the alleged scam?
In 2011, Lan was involved in the merger of the SCB with two other lenders, which was coordinated by the country’s central bank. According to the AP report, she allegedly used the bank as a “cash cow”, and by creating thousands of shell companies, she loaned herself and her allies billions of dollars until 2022.
Rules at that time stipulated that no more than 5 per cent of a bank could be owned by a single individual. Lan is believed to have controlled more than 90 per cent of the bank’s stake through proxies. She also allegedly bribed government officials millions of dollars to keep a lid on the scam.
State media outlet VnExpress reported that charges of bribery, violating banking regulations and embezzlement were levelled against Lan. Through the SCB, she and her accomplices allowed 2,500 loans that resulted in losses of $27 billion, VnExpress said.
“Top global firms Ernst & Young, KPMG and Deloitte did not flag concerns about the bank in their audits of SCB, Vietnam’s largest commercial bank by assets,” The South China Morning Post said in a report.
The BBC reported the authorities as saying that 2,700 people were summoned to testify, in the trial in which 10 state prosecutors and around 200 lawyers were involved. “The evidence was in 104 boxes weighing a total of six tonnes. Eighty-five others were tried with Truong My Lan, who denied the charges and can appeal,” the report said.
All the defendants, including Lan’s husband and niece, were found guilty by the court. Everyone except Lan received prison terms of varying lengths. The court asked Lan to compensate the bank $26.9 million, which is unlikely to be recovered.
Is the verdict unusual?
The court said Lan’s actions “not only violate the property management rights of individuals but also pushed SCB into a state of special control, eroding people’s trust in the leadership of the (Communist) party and state.”
While death sentences are not rare in Vietnam, not many death sentences are awarded for financial crimes, or to women, the AP reported.
The month-long trial is seen as part of the government’s attempts at cracking down on a private sector that has grown significantly in just a few decades, often with the help of corrupt officials within the system. It may also be a bid to reassert the communist party’s centrality within the country.
Nguyen Phu Trong, the communist party’s general secretary and the most powerful person in Vietnam’s politics, launched a crackdown since 2021 that has been termed “Blazing Furnace”. Those targeted under it include two former Presidents.
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