10 stand trial for money grows on trees scam

Written by Writer on Thursday, October 30th, 2008

10 stand trial for money grows on trees scam

2008-10-29 (Beijing Time) China Daily

Ten people accused of running a pyramid scheme have gone on trial at the Baotou intermediate people’s court in the Inner Mongolia autonomous region, the Xinhua News Agency reported Tuesday.

The defendants, whose trials began Tuesday and on Monday, are charged with conning more than 30,000 people out of 1.28 billion yuan ($187 million) by selling them overpriced plots of forestry land.

The court heard that defendant Chen Xianggui set up the Liaoning 1,000 Miles Forestation Co in August 2002.

Over the next five years, he established more than 100 branches in 12 provinces across the country. Co-defendant Liu Yanying was employed as the company’s general manager.

At its height, the firm employed 9,000 salespeople, who sold tracts of land to unsuspecting investors for 26,600 yuan apiece.

Buyers were told the value of the plots was expected to rise to 180,000 yuan within eight years, Xinhua said.

The company also promised to pay back 44 percent of the initial investment each year.

However, when the payments failed to materialize, investors became suspicious and several reported the company to the authorities.

Following an investigation, police uncovered more than 40 similar schemes being run by the company and immediately suspended its operations.

In July, the Inner Mongolia autonomous regional government launched a two-month investigation into the validity of the company’s claims.

It concluded that although the woodland existed, because of its poor location it could never have yielded the dividends offered by the Liaoning firm.

Chen, Liu and eight unnamed associates were subsequently charged with violations of national law, prosecutors said.

A spokesman for the investigators told Xinhua Tuesday that the Inner Mongolian government will “do its best” to minimize investors’ losses.

Full details of how and what repayments might be made will be announced once a verdict in the case has been reached, he said.

A lawyer for the defense, who refused to give his name, said: “Although the trials are now under way, we are not expecting a verdict anytime soon.”