Death penalty for businessman in $12.5 billion fraud case highlights Vietnam's corruption crisis

CNN
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The death sentence handed down to the real estate tycoon in a $12.5 billion financial fraud case is the latest punishment imposed by Vietnam in the Southeast Asian country's sweeping anti-corruption campaign.

Thursday ruled against Truong My Lanthe former head of real estate developer Van Thinh Phat Holdings Group, comes on the heels of the resignation of two chairmen in just over a year, departures linked to separate allegations of wrongdoing.

Analysts say the sheer scale of Lan's misconduct has alarmed public opinion in a country that has long projected an image of authoritarian stability, and raised concerns among foreign investors, the main driver of Vietnam's booming economy.

Her trial, which began last month, has been shown publicly in state media, a change of course in a country where information is usually tightly controlled. Lan, in her late 60s, was convicted of bribery, violating banking rules and embezzlement, and sentenced to death, although her family indicated they would appeal.

Investigators said she and her accomplices embezzled more than 304 trillion dong ($12.5 billion) from Saigon Joint Stock Commercial Bank (SCB), which it effectively controlled through dozens of agents despite rules that strictly limit large shareholdings in lenders, Reuters reported. .

Lan's actions resulted in VND677 trillion ($27 billion) in damage to SCB Bank, one of the country's largest privately owned commercial banks. according to State-owned VN Express International.

The agency quoted judges of the Ho Chi Minh City People's Court as saying that she “was the mastermind of a long-term scheme and committed organized and sophisticated crimes, causing irreversible consequences.”

The scale of the fraud was said to be equivalent to about 3% of Vietnam's economy. In comparison, Malaysia's long-running state fund 1MDB scandal that began in 2009, described as one of the world's largest financial crimes, involved the looting of about $4.5 billion.

According to Reuters, state media reported that 84 defendants in the case received sentences ranging from three years' probation to life imprisonment. They include Lan's husband, Eric Chow, a Hong Kong businessman who was sentenced to nine years in prison, and her niece, who was sentenced to 17 years.

Over the past year, Vietnam's ruling Communist Party has uncovered staggering levels of embezzlement and fraud as part of its ongoing anti-corruption campaign, which began in 2016 and has resulted in hundreds of party members being investigated.

Last month, one of its senior leaders was forced to resign. At a meeting on March 20, the Chinese People's Volunteers accepted the proposal resignation President Vu Van Thuong, for “abuses that left a bad mark on the reputation of the Communist Party,” a phrase generally understood by analysts to indicate links to corruption.

Although widely considered ceremonial, the presidency is one of the three highest positions in Vietnam's political hierarchy after the Secretary-General of the Communist Party of Vietnam, currently Nguyen Phu Trong.

Thong, a party veteran, is stepping down after only about one year in office Once I pledged To resolutely “continue” the fight against corruption, he became the fourth member of the 18-person Politburo to resign in recent years.

He joins his ill-fated predecessor nguyen Xuan Phuc, He was forced to resign in January 2023 after accusations of wrongdoing, as were Deputy Prime Ministers Pham Binh Minh and Vu Duc Dam, who left the same month due to their involvement in separate scandals related to the authorities' handling of the COVID-19 pandemic.

Tight media censorship means that details of their cases are rarely made public. The steady stream of departures shows the Vietnamese Communist Party is sending a “strong message” that no one is above the party's rules, said Le Hong Hiep, a senior fellow at the Singapore-based ISEAS Yusuf Ishak Institute.

Heap said in a webinar in April that the government's anti-corruption campaign “imposed credibility” and showed “a real effort by the remaining political leaders to tackle difficult problems.”

The campaign is “about power, control and succession,” said Hong Le Thu, deputy director of the Asia Program at the International Crisis Group.

General Secretary Trong, the architect of the anti-corruption campaign, “was serious about purity, ideology and leadership in the party and was concerned about power and authority.” [the] “There is a possibility that the next generation of leaders could be driven by their own interests or other motives that could weaken the party,” she told CNN.

Vietnam shares some similarities with its neighbor China, which also has a one-party system that does not tolerate dissent. But unlike China under leader Xi Jinping, who has consolidated power to a level not seen in decades, the Chinese People's Volunteers are governed by “four pillars”: the secretary-general, the president, the prime minister, and the speaker of the House of Representatives.

Governments in both countries have spent the past decade or so pursuing anti-corruption campaigns. In both cases, critics also suspect that accusations of wrongdoing are a tool for political purges.

“Corruption is endemic in Vietnam and is part of the system,” Zachary Abuza, a professor of Southeast Asian politics and security issues at the National War College in Washington, told CNN.

“The Communist Party of Vietnam wants to show that its anti-corruption campaign is successful. But they cannot hide the fact that they deliberately ignored and allowed widespread bribery to occur.

“In Vietnam, the state controls a lot – the economy, access to capital and land, as well as the press.

“People are angry about what is happening in what is supposed to be a classless society.”

The gap between the lifestyles of the average Vietnamese citizen and the lifestyles of senior party officers is a sensitive topic.

last year, A street food vendor has been sentenced to five and a half years in prison To spread anti-state propaganda, after gaining online fame through videos imitating the famous chef Salt Bae.

The videos allegedly refer to an infamous incident in late 2021, when a party delegation led by Public Security Minister Toe Lam was caught on camera enjoying a lavish meal of gold-plated steak at a London restaurant owned by the Turkish chef.

The Chinese People's Volunteers have ruled Vietnam, a country of nearly 100 million people, since its victory in the Vietnam War in 1975, and pride themselves on an image of longevity, national unity and party loyalty.

In recent decades, Vietnam has been hailed as an economic success story. China was once one of the poorest countries in the world, but today it enjoys a thriving economy with a thriving middle class and a growth rate that rivals China's. In fact, the International Monetary Fund expects Vietnam's economy to grow by 5.8% this year, compared to about 4.6% in China.

Companies from Apple (Camel) to intel (you are K(It has already pushed deeper into Vietnam to diversify its supply chains, maxing out many Vietnamese factories and helping fuel a challenging economic expansion Global slowdown.

“Vietnam has an incredibly successful economy in many ways, it is a darling of foreign investors, a great place to do business, and in some ways also a great alternative to China,” Abuza said.

“But the rapid growth and complexity of its economy has clearly outpaced the regulatory capacity of the CPV.”

The recent wave of corruption scandals has had a “surprisingly profound” negative impact on the image of Vietnam, which has attracted many foreign manufacturers from China in recent years, analysts and investors told CNN.

“In general, Vietnam has seen a good economic performance but it is clear that the recent news has shaken investor confidence,” said a wealth advisor at a leading global investment firm in Bangkok, who declined to be named due to the sensitivities surrounding the issue.

“Stock performance has declined and foreign investors are afraid to put their money into Vietnamese companies when cases of corruption and mismanagement emerge,” the investor said.

Abuza said the purged leaders were also the pro-business faces of the country.

He added: “They were (considered) competent, they were trusted and they understood the economic and business concerns and they are still being purged, so foreign investors have every reason to be concerned.”

Government spending in the country has slowed for similar reasons, according to a report by the Yusuf Ishak Institute and ISEAS, citing “public officials’ concern about being investigated and shirking their responsibilities.”

Current leaders insist the latest resignations will have “minimal impact” on the party or the country's image.

Last month, Vietnamese Foreign Minister Bui Thanh Soh said the policy changes were a sign of the effectiveness of the anti-corruption campaign and should be welcomed by foreign investors and the international community.

“The president’s resignation will not affect our foreign policy as well as economic development,” Soh said He told the audience at the Brookings Institution, a nonprofit public policy organization based in Washington.

“If you look at the situation in Vietnam, we have collective leadership. We have collective foreign policy. We decided on economic development collectively,” he said. “If one or two leadership figures resign, it does not change this situation,” he said.

Thong and other fallen leaders have not been seen or heard from in public since their resignation, and state media has not published any reports about them. Their fate remains unclear, given the highly secretive nature of Vietnam's political system.

Abuza said that all eyes will be on the country's next leaders, who may “decide to pursue a stronger fight against corruption.”

Vu Thi Anh Xuan, a prominent politician who has served as vice president since 2021, has taken over as acting president, and a full-time successor has not yet been named.

But Vietnamese political experts said a permanent appointment would not end the instability. Paramount Leader Trong, who will soon turn 80, is likely to remain in office until the next congress in 2026.

Low Hong Hiep, of the ISEAS-Yusuf Ishak Institute, said in an earlier report that former President Thong's resignation is unlikely to be the last, and political infighting is likely to continue until 2026. “In the meantime, investors will have to… “Vietnam's partners must live with the new political reality in the country.”

“People thought the anti-corruption campaign was only within party levels, but increasingly it went beyond that,” Crisis Group's Huong said.

“The recent and increasing arrests and cases involve the corporate world, which has clear links to the party, and prove that it is something much bigger,” she said.

“The feeling is that no one is safe.”