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24 scammers lose appeal, back in jail
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10:23, June 18, 2009

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 28 jailed for $245m pyramid scheme
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Twenty-four people have lost a high court appeal over their involvement in one of the country's largest pyramid schemes, in which more than 20,000 people were defrauded of 1.68 billion yuan ($246 million).

The criminal mastermind, Zhao Pengyun, 37, from Shenyang, Liaoning province was jailed for 15 years and fined more than 300 million yuan after the Beijing municipal high people's court yesterday upheld a March ruling by the Beijing municipal No.2 intermediate people's court.

He was found guilty of illegal management for organizing the scheme that promised victims high returns for investment in forestland.

Four of the 28 defendants had criminal sentences quashed or reduced after they handed over information about the syndicate's activities or returned large amounts of illicit money, the high court announced.

Zhao's 23 criminal associates received sentences between 1 and 15 years and fines between 200,000 and 70 million yuan.

The Yilin Wood Company, which Zhao established with a criminal associate in April 2004, collected about 1.68 billion yuan in revenue until it was reported to police in May 2005. Most of the cash was spent on luxury items like houses, cars, jewelry and antiques.

Authorities yesterday said they would trace any remaining assets in order to compensate victims, who come from 11 provinces and municipalities, including more than 16,000 people in Beijing.

In an advertisement for the scheme, victims were told that if they invested 55,500 yuan in a 1 ha forest plot they would receive 228,000 yuan within seven years. That this was in-line with the plot's rising value and represented a 58.7 percent annual rate of return, the scammers said. Victims who bought a lot of forestland were promised sales representative positions and entry into the pyramid scheme.

If they then sold 2 ha of forestland, the sales representatives were promised a promotion to sales manager. Four levels were included in the scheme and the more senior the position, the more money the person stood to make. The company signed contracts to buy more than 64,400 ha of forest and sold more than 28,200 ha until May 2005.

The court was told that five high-level managers received more than 10 million yuan and 18 senior managers were paid more than 1 million yuan in commission. Huang Jinhui, training center senior manager, received more than 50 million yuan in commission over two years.

Meanwhile, the Beijing Lawyers Association said it would handle liquidation of the forestland ahead any of compensation payouts for victims. They have established registration offices in Beijing, Chongqing, Shenyang, Shanghai and Guangzhou to receive victims and verify documents including purchase contracts and receipts.

Qiu Baochang, dean of the Beijing-based Huijia law firm, said that in cases of illegal fundraising, the most important effort for authorities is to retrieve as much of the lost money as possible, and always punish the perpetrators severely.

"Cases involving pyramid schemes must be handled in a way that promotes social stability, as they often involve a large number of people and a lot of money," Qiu told China Daily.

Source: China Daily




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