Vietnamese banks protest after prosecutors call for $266 million to be returned at fraud trial

By Hai Duyen   January 25, 2018 | 08:13 pm PT
Pham Cong Danh is accused of stealing the money from his own bank and using it to secure loans with three other lenders.

The Vietnam Banks Association (VBA) lodged a complaint on Thursday regarding a request made by prosecutors at an ongoing banking fraud trial in Ho Chi Minh City.

At the trial of former chairman of Vietnam Construction Bank (VNCB) Pham Cong Danh, prosecutors on Wednesday requested the court to order Sacombank, BIDV and TPBank to return more than VND6.1 trillion ($270 million) to Construction Bank (formerly VNCB).

Danh is alleged to have used the amount to secure loans from the three banks, which then legally seized the money when the loans defaulted. However, prosecutors argued that Danh had illegally obtained the money by stealing from VNCB, so it must be returned. It should be down to Danh and his accomplices to repay the three banks, prosecutors said.

Pham Cong Danh at the ongoing trial. Photo by VnExpress/Quynh Tran.

Pham Cong Danh at the ongoing trial. Photo by VnExpress/Quynh Tran.

In a letter sent to the prime minister, government agencies and the People's Court of Ho Chi Minh City, the VBA said its members, including Sacombank, BIDV and TPBank, are deeply concerned by the negative impact the prosecutors' request could have on credit institutions.

"The retrieval of over VND6.1 trillion as requested by the Procuracy will cause the banks difficulties and impede their activities," the letter stated.

It stressed that the State Bank's audit into the transactions had concluded that BIDV, Sacombank and TPBank's seizure of the money used by Danh was in accordance with regulations.

Additionally, the VBA said it is not the banks' responsibility, nor is it within their capabilities, to verify the source of a customer's money before seizing it when their loan defaults.

According to the association, incidents such as this could lead to multi-billion dong deals and transactions being disputed, increasing the risks for credit institutions and causing customers to lose trust. This would heavily damage the banking sector's stability, Vietnam's investment environment and the country's ability to attract foreign investment.

The VBA has therefore asked related authorities to consider the prosecutor's request carefully before making a decision.

The ongoing trial in Ho Chi Minh City is the second into Danh's wrongdoings at VNCB and is focusing on the alleged fraud he commited at other banks.

According to the indictment, Danh and other bankers from VNCB secretly withdrew money from clients' savings accounts and used the cash to secure loans from other banks, pay off debts or to deposit into their own accounts.

Out of the money stolen from VNCB, Danh used VND6.1 trillion to secure loans from Sacombank, BIDV and TPBank for his ghost companies. As these companies were unable to pay off the loans, the three banks seized this money, which prosecutors consider a loss for VNCB.

Prosecutors have proposed a 20-year sentence for Danh. However, as he has already been sentenced to 30 years in prison (the maximum allowed by Vietnam's Penal Code) for stealing over VND9 trillion from VNCB at a trial in September, his combined sentence would still be 30 years.

The proposed sentence for Tram Be, a former deputy chairman of Sacombank, is 5-6 years in prison. Be has been charged with abusing his position to evade banking regulations in order to help Danh borrow VND1.8 trillion from Sacombank.

Of this money, Danh spent VND1.7 trillion on paying debts at another local bank for six companies that he owned, and deposited the rest in a personal account.

The trial is expected to run until February 7.

The banking sector and state energy giant PetroVietnam are at the center of Vietnam’s sweeping corruption crackdown that has ensnared scores of high-ranking officials, including Dinh La Thang, a former member of the Communist Party’s decision-making Politburo who headed PetroVietnam from 2006 to 2011.

Thang was sentenced to 13 years in prison on Monday for economic management violations, while his subordinate, the runaway oil executive Trinh Xuan Thanh, received a life sentence for embezzlement.

Thanh is also standing trial this week for a second embezzlement charge, for which prosecutors have proposed another life sentence. Thang is also set to stand trial again for his role in the infamous multi-million-dollar graft case at OceanBank, for which he faces up to 20 years in prison.

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