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China appliance chain Gome sues jailed founder
Published on: 2010-08-06
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HONG KONG — China's biggest appliance retailer is suing its founder and former chairman for damages after he was jailed for bribery and other crimes.

Gome Electrical Appliances Holdings Ltd. started legal proceedings on Thursday against Huang Guangyu in the High Court of Hong Kong, the company said in a statement to the Hong Kong Stock Exchange.

Huang, also known as Wong Kwong Yu, built Gome into China's biggest appliance retailer and was estimated in 2008 to be worth $6.3 billion. In May, he was sentenced by a Beijing court to 14 years in prison for insider trading, bribery and other crimes.

"The arrest and later conviction of Mr. Wong for various economic crimes caused a great deal of uncertainty for the company," the statement said. Gome continues to be affected, particularly in its ability to raise fresh capital, it said, without specifying the amount of damages being sought.

The claim for damages centers on a buyback by Gome of its own shares that Huang allegedly planned and breach of trust. The Hong Kong's Securities and Futures Commission is investigating whether Huang diverted money from a Gome share buyback between January and February 2008 to repay a personal loan. Regulators say that caused Gome and its shareholders to lose 1.6 billion Hong Kong dollars ($207 million).

Huang's wife, Du Juan, is under investigation and Hong Kong has frozen their assets there.

Huang was detained by Chinese authorities in November 2008 and resigned as Gome's chairman the following year. He was charged with paying 4.6 million yuan ($675,000) in bribes to five officials and insider trading of Gome shares worth 1.4 billion yuan ($204 million), Chinese state media said. Earlier reports said he was accused of paying bribes to win regulatory approval for Gome's stock market listing in Hong Kong.

Accusations of bribery, tax evasion and the collusion of corrupt officials in financial abuses are common in China. Successful businesspeople often are linked to Communist Party figures and prosecutions can be prompted by political struggles, though it is unclear what triggered Huang's case.

Huang, born in poverty, started out as a teenage clothing trader and his success story seemed emblematic of China's three-decade-old economic boom.

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