Truong My Lan: the biggest fraud case in Vietnam

Introduction

The case of Ms. Truong My Lan, Chairwoman of Van Thinh Phat Holdings Group Corporation (“Van Thinh Phat”), is one of the most significant corruption scandals in Vietnam’s history. As the head of one of the largest real estate conglomerates in Vietnam, the case impacts the businesses involved and raises concerns within the entire real estate market. As a result, investors and observers closely monitor the situation to assess the long-term effects on this key economic sector.

Truong My Lan and Van Thinh Phat Group

Truong My Lan, born on October 13, 1956, is a Vietnamese of Chinese descent from Ho Chi Minh City, Vietnam. In 1992, she married Mr. Chu Nap Kee Eric, a Hong Kong-based real estate tycoon. Together they founded Van Thinh Phat, a company that initially focused on the restaurant and hospitality industries[1]. By 2007, with a charter capital of VND 6,000 billion, Van Thinh Phat began investing in real estate[2]. After acquiring control of Saigon Commercial Bank (SCB) via share ownership, Truong My Lan transformed SCB into one of the largest commercial banks in Vietnam[3]. Meanwhile, Van Thinh Phat became one of Vietnam’s wealthiest real estate companies, with projects including luxury residential buildings, office towers, hotels, and shopping centers.

On October 8, 2022, Truong My Lan was arrested. Following the investigation, Truong My Lan faced charges including Embezzlement, Violations against regulations on the operation of credit institutions, Bribery, Obtaining property by fraud, Money laundering, and Illegal foreign transport of funds[4].

Method of Performing Illegal Activities[5]:

To carry out illegal activities, Truong My Lan and her accomplices built the “Van Thinh Phat ecosystem”, consisting of more than 1,000 companies. The Van Thinh Phat Group played a central role in the ecosystem, holding shares and controlling all operational activities of the companies while not typically directly engaged with their management.  The ecosystem’s legal entities can be divided into four groups: the Financial Institution Group –the source of funds for the entire ecosystem; the Companies Operating in Vietnam – those in real estate, hospitality, food and beverage, etc., with the objective of obtaining the majority shareholder position in other subsidiaries; the “Shell Companies” in Vietnam– those using their legal status to obtain bank loans, refinance debts, etc.; and the Overseas Companies – those acting as “foreign investors,” investing in Vietnam and managing Ms. Lan’s family assets abroad.

By the time of her arrest, Truong My Lan misappropriated hundreds of trillions of Vietnamese dong[6]. First, by creating numerous fraudulent loans that lacked sufficient legal value from SCB. Second, she issued bonds without collateral. The funds obtained through these means were laundered and illegally transported abroad by Ms. Lan and her accomplices.

         (i) Creating Fraudulent Loans at SCB

In total, SCB disbursed over 2,500 loans to the group of Truong My Lan from 2012 to 2022 and accounted for 93% of the bank’s total loan amount. By 2022, the group of Truong My Lan had 1,284 loans and SCB’s outstanding debt exceeded 27.7 billion USD[7] classified as non-recoverable (nearly 19.8 billion USD[8] in principal and over 7.9 billion USD in interest[9])[10].

Truong My Lan acquired SCB both by purchasing shares and using individuals to hold shares on her behalf to obtain more than 91% ownership of the company[11]. As the majority shareholder of SCB, Truong My Lan appointed individuals with expertise in finance and banking to key leadership positions. Through these positions, she exerted her influence to raise deposits and capital from other sources and directed withdrawals by creating fraudulent loans under SCB for personal purposes.

SCB staff were instructed to conspire with various individuals at appraisal companies and issue legitimate appraisal certificates for Truong My Lan’s loan applications. When necessary to withdraw assets for sale, Truong My Lan directed her accomplices to withdraw collateral from SCB, replacing it with other assets, most of which had considerably lower values than the original collateral.

         (ii) Issuing Fraudulent Bonds

In 2018, SCB was under scrutiny from regulatory agencies, which made it difficult for other companies within Van Thinh Phat to obtain credit from SCB. To resolve these issues, from 2018 to 2020, Truong My Lan, along with key personnel from SCB, Van Thinh Phat Group, and Tân Việt Securities Company (TVSI), used four companies from the group (An Đông Company, Sunny World, Quang Thuận, and Setra) to issue 25 codes of fraudulent bonds, totaling 308 million bonds. This scheme raised capital from 35,824 secondary investors, totaling around 1.2 billion USD[12]. Since the capital was used for purposes contrary to the intended issuance, these companies were unable to repay the bond debt.

         (iii) Money Laundering and Cross-Border Money Transfers

Under Truong My Lan’s instruction, her subordinates schemed to conceal and legitimize the misappropriated funds. Those funds were used for debt repayment, project expenses, and illegal transfers abroad. Such schemes included “liquidating funds” via fraudulent share transfer agreements. Alternatively, she or her subordinates would transfer money to individuals or foreign legal entities for them to use at their discretion; without scrutiny from regulatory or tax authorities.

Furthermore, her accomplices were assigned to create fraudulent contracts to transfer funds abroad for debt repayment (the trade of shares, capital contributions, consulting services, and loans between Vietnamese and foreign companies). These were all shell contracts managed by individuals within Van Thinh Phat, responsible for transferring loan funds to and from Vietnam via SCB. Most of the activities lacked proper documentation which caused the automated systems to block attempts. However, accomplices from SCB coordinated with authorized personnel at the bank to facilitate the cross-border transactions. As a result, from 2012 to 2022, 21 companies in the Van Thinh Phat ecosystem conducted 78 illegal money transfer transactions abroad totaling over 1.5 billion USD. 152 transactions totaled more than 3 billion USD, violating foreign transfer regulations. Thus, Ms. Truong My Lan and her accomplices illegally transported over 4.5 billion USD[13] across borders[14].

Government Handling Perspective

The Van Thinh Phat Group case marks a significant step in Vietnam’s fight against corruption and economic violations. The government demonstrated its commitment to handling fraud with seriousness, transparency, and adherence to the law to protect the common interests of the economy.

According to the Ho Chi Minh City People’s Court, the trial of the case was as follows:

Phase 1[15]: Investigation, Prosecution, Adjudication to Recover Assets

Prosecution of Truong My Lan and 85 accomplices including 24 government officials for crimes including Embezzlement; Giving brides; Taking bribes; Violations of lending regulations in credit institutions; Violations of banking regulations and other activities related to banking; Abuse of position and authority while performing official duties and Misuse of trust to appropriate assets.

Truong My Lan was sentenced to death by the first-instance trial council of the Ho Chi Minh City People’s Court for the crimes of Violating lending regulations in credit institutions, Embezzlement, and Bribery.

Ms. Lan appealed, and her case is in the appellate process in the High People’s Court in Ho Chi Minh City. The court also sentenced four defendants to life imprisonment, while the remaining defendants received prison sentences ranging from 3 to 20 years.

Phase 2[16]: Corporate Bonds

Prosecution of Truong My Lan and 35 accomplices for crimes including Obtaining property by fraud, Money laundering, and Illegal transport of money across the border. The trial for this phase is set to take place from September 19 to October 19, 2024, with the proposed sentence of life imprisonment for Truong My Lan for all charges.

The handling of the defendant’s assets is being carried out by the state per legal regulations. Specifically, the first-instance court determined that 1,121 asset codes mortgaged at SCB by Truong My Lan are to be transferred to SCB for debt recovery. Additionally, 1,237 remaining properties have been seized. These assets are currently frozen to preserve the investigation process. Once the judgments are decided, these assets will be handled by the state to ensure the defendant’s obligations to relevant parties are fulfilled.

Conclusion

The case of Truong My Lan and the Van Thinh Phat Group is emblematic of corruption within the private sector, characterized by numerous offenses, a wide array of implicated individuals, and staggering financial losses. These actions have been profoundly detrimental to the state and its citizens, leading to losses of around 27.7 billion USD and resulting in severe legal repercussions for countless individuals.

Moreover, the consequences are not limited to property appropriation, they also disrupt economic and civil relations by involving unwitting third parties. The Vietnamese authorities strive to ensure accountability for offenders while allowing businesses to recover and continue their development.


[1] https://vnexpress.net/chu-tich-tap-doan-van-thinh-phat-truong-my-lan-bi-bat-4520410.html

[2] https://vietnamnet.vn/van-thinh-phat-cua-dai-gia-truong-my-lan-khung-co-nao-320128.html

[3] https://hanoimoi.vn/scb-giu-vi-tri-top-5-ngan-hang-co-quy-mo-tai-san-lon-nhat-480169.html

[4] https://tuoitre.vn/bat-chu-tich-tap-doan-van-thinh-phat-truong-my-lan-20221007125447397.htm

[5] Judgment No. 157/2024/HS-ST of the People’s Court of Ho Chi Minh City

[6] For reference, 100 trillion VND is equal to 4,098,360,655.7 USD, based on exchange rate 1 USD = 24,400 VND

[7] original amount is, 677 trillion VND, equal to 27,745,901,639 USD, based on exchange rate 1 USD = 24,400 VND

[8] original amount is, 484 trillion VND, equal to 19,836,065,574 USD, based on exchange rate 1 USD = 24,400 VND

[9] original amount is 193 trillion VND, equal to 7,909,836,066USD, based on exchange rate 1 USD = 24,400 VND

[10] https://xaydungchinhsach.chinhphu.vn/dai-an-van-thinh-phat-truy-to-truong-my-lan-va-85-bi-can-119231215145320997.htm

[11] Article 63 of the Law on Credit Institutions 2024

[12] original amount is 30.081 trillion VND, equal to 1,232,827,869 USD, based on exchange rate 1 USD = 24,400 VND

[13] approximately 106.73 trillion dong

[14] https://dantri.com.vn/phap-luat/21-cong-ty-cua-van-thinh-phat-chuyen-hon-15-ty-usd-ra-nuoc-ngoai-trai-phep-20240606233435939.htm

[15] Judgment No. 157/2024/HS-ST of the People’s Court of Ho Chi Minh City

[16] Decision No. 4904/2024/QĐXXST-HSS of the People’s Court of Ho Chi Minh City

Carlo Fabrizi Carlo Fabrizi

Carlo Fabrizi

Legal Advisor
Carlo Fabrizi, a representative of D’Andrea & Partners Legal Counsel, handles Foreign Direct Investment projects in Vietnam and South China
Riccardo Verzella Riccardo Verzella

Riccardo Verzella

Senior Associate
Riccardo Verzella, a highly qualified Italian lawyer, has been based in Shanghai, China since January 2020.

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