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People's Daily Online>>China Business

Executives detained in financing probe

By Xie Yu (China Daily)

10:05, February 06, 2012

SHANGHAI - Acting on suspicions of illegal private fundraising, the local public security department on Friday arrested Dong Shunsheng, chairman of a local education group based in Wenzhou, Zhejiang province.

Six executives of Dong's Liren Group, an education company in Taishun county, are being investigated for allegedly using illegal private lending channels to raise billions of yuan worth of capital, county officials confirmed. But exact tallies of the company's assets and liabilities cannot be made at this time, the officials said.

"We received a report from a creditor last December and have been investigating the matter since then," said an official surnamed Hong with the information office of Taishun county government. "Now we are certain the group has big problems raising money, but the size of their debts is still being investigated."

Liren Group was established in 2003 and modeled on a private middle school that Dong set up. By the time of Dong's arrest, Liren Group had diversified its business to include not only education but also real estate and mining investment.

Last November, the company announced that they would stop paying debts in cash, citing "financial difficulties". Instead, it offered to repay creditors via debt-to-equity swaps, through exchanges of property or by trading free school tuition.

The county government has seized the group assets, and local judicial organs are carrying out an investigation.

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