Company claims employee embezzled $6.2M in profits

Admits using employee as ‘strawman shareholder’ in establishing companies on Saipan

A China-based corporation claims that a Chinese businessman, who alleged that he was detained in China for 22 months caused by political influence exerted by his former business partners on Saipan, was only its employee and was indeed indicted in China for embezzling $6.2 million in corporate profits earned from his management of a company on Saipan.

Jilin International Economic and Technical Corp., through counsel Samuel Mok, disclosed that in March 2014, the Jilin Province Dehui People’s Procuratorate issued a decision not to pursue the criminal prosecution of Wanzhong Yu in light of his purported transfer of his shares in the Saipan-based Universal Group Development to Jilin International.

Mok said this is because, among other reasons, of the fact that Yu had agreed to cooperate in transferring shares and returning corporate assets.

Mok said that last May 6, Jilin International requested reinstatement of the criminal prosecution against Yu for embezzlement from the People’s court of Chang Chun City in light of his reneging on his promised cooperation and the numerous misrepresentations made in his cross-claims and during his default judgment hearing testimony.

Mok made such disclosure about Yu in Jilin International’s lawsuit against Yu filed on Wednesday in the U.S. District Court for the NMI.

Last March, U.S. District Court for the NMI Chief Judge Ramona V. Manglona issued a default judgment in favor of Yu and against businessmen Mingnan Jin and Jinwei Guo in connection with a separate but related lawsuit. Yu was awarded $125,699.60 in damages.

In the new lawsuit, Jilin International is suing Yu for declaratory and injunctive relief, embezzlement, conversion and constructive trust, and breach of fiduciary duty.

In Jilin International’s lawsuit, Mok asked the court to issue a declaration that Yu is not a legitimate shareholder, director or officer of Universal Group Development.

Mok requested the court to declare that Jilin International is the true owner and corporate parent of Universal Group Development.

Mok asked the court to preliminarily and permanently enjoined Yu from taking any actions as the purported shareholder, director or officer of Universal Group, including accessing $225,000 currently deposited into the federal court’s trust account representing the contents of a business savings held by Universal Group.

Mok requested the court to impose a constructive trust on the corporate property and assets of Universal Group in favor of Jilin International.

Mok asked the court to hold Yu liable to pay damages to Jilin International.

In Jilin International’s emergency motion also filed on Wednesday, Mok asked the court to issue a temporary restraining order to stop Yu from taking any action on behalf of Universal Group as its purported shareholder, director and officer, including the withdrawal of funds from this court.

According to Mok, Jilin International was originally a state-owned corporation that was authorized by the Chinese State Trading Department from 1986 to 1995 to establish and operate businesses on Saipan.

Mok said Jilin International operates subsidiaries all throughout Asia in a wide variety of industries.

Specifically, Mok said, Jilin International was the parent company and owner of three subsidiary companies established on Saipan called JCC, J&S, and Universal Group Development.

Mok said in order to comply with Saipan law regarding establishment of corporations and to ensure the Saipan companies would be approved by the CNMI government, Jilin International decided to assign shares to certain employees of Jilin International.

Mok said these employees were nominal shareholders in that they did not pay for their shares and were only listed as shareholders on paper.

In 2003, Mok said, Yu submitted a proposal to Jilin International seeking to make Universal Group an independent private company.

He said that in 2004, Yu purchased three new vehicles on behalf of Universal Group and registered them in his own name.

The lawyer said that in 2005, Jilin International held a corporate meeting wherein the decision was made to restructure the company by converting Jilin International from a state-owned corporation to a private enterprise.

In the same meeting, Mok said, Yu’s prior submitted proposal to make Universal Group an independent private company was rejected by Jilin International Board of Directors.

During this same meeting, Mok said, Jilin International approved and accepted the bid of Gaoweida Investment Co. Ltd., as the initial private investor of Jilin International through its legal representative, Mr. Guo Jinwei.

Mok said Jinwei Guo paid $20 million toward his purchase of Jilin International from the Chinese government.

Mok said that in a related case before the federal court, Yu had falsely claimed under penalties of perjury that he had paid for his share and that he had been coerced into transferring his shares and resigning from Universal Group after being tortured and imprisoned.

Mok said Yu could not have been forced to give up his shares because he never owned them in the first place as he was just an employee of Universal Group assigned to Saipan by Jilin International to act as a “manager” of Jilin’s operations until his pre-November 2013 removal/retirement.

Mok said that in March 2007, Jilin International appointed Jinwei Guo as its chairman of the Board of Directors.

Mok said Yu submitted his signed resignation from Jilin International in September 2007.

In his letter, Yu states he is applying for retirement because of his age and poor health so he could “retire and enjoy my old age of life.”

Mok said that despite retiring, Yu came back to Saipan in October of 2007 and held a meeting of the three Saipan companies including Universal Group wherein he told the gathered employees that he strongly disagreed with Jilin International’s decision to remove him as the Saipan branch manager.

Mok said despite tendering his resignation as president of Universal Group, which was subsequently accepted by Jilin International, Yu continued to act as president of Universal Group against the wishes of Jilin International’s shareholders and directors who were mostly situated in China.

Mok said that on May 20, 2012, an arrest warrant was issued by the Jilin Province Police Department for Yu on the charge of “official embezzlement.”

Yu was detained pursuant to the arrest warrant while he was traveling in China.

Mok said that in 2013, an indictment was issued against Yu by the Jilin Province People’s Procuratorate.

Mok said that in 2014, the Dehui People’s Court issued a statement that Yu had told the court that he did not “intend” to encroach upon Jilin International’s assets and that he was willing to cooperate in returning corporate assets belonging to Jilin International.

Mok said based on this new development, the Dehui People’s Court indicated it was contemplating withdrawing the criminal case against Yu.

Mok said that in November 2013, Yu executed an affidavit wherein he transferred the 440,000 shares in the Saipan companies (JCC, J&S, and Universal Group Development) to Jilin International chairman and primary shareholder Jinwei Guo.

Mok said Yu reneged on his promise of cooperating by writing a letter to the Oleai Branch of the First Hawaiian Bank requesting that the business savings account belonging to Jilin International through Universal Group be “frozen” so that no one else other than himself could access the monies.

Mok said the subject bank account containing $224,558.71 was subsequently frozen by the bank based solely on Yu’s letter.

In the separate lawsuit, Universal Group, through counsel Mok, sued Yu for conversion and First Hawaiian Bank for breach of contract.

Universal Group alleged that Yu and the bank have blocked the company from gaining access to its $225,000 of its own funds from a business savings account.

Yu, through counsel Mark Scoggins, then filed a cross-claim, alleging he was wrongfully detained in China for 22 months caused by political influence exerted by his former business partners. Yu named Jin and Guo as defendants in his cross-claim.

According to court records, following his near-total victory in the lawsuit, Yu went about reasserting his control over Universal Group. He passed a resolution affirming his status as a director in May 2016 and the directors passed a resolution affirming Yu as president at the same time.

In his role as president, Yu fired Mok on Universal Group’s behalf on April 21, 2016. Attorney Tiberius Mocanu and the law firm of Stephen J. Nutting are now counsel for Yu and Universal Group.

Mok questioned his termination as counsel for Universal Group.

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Ferdie De La Torre | Reporter
Ferdie Ponce de la Torre is a veteran journalist who has covered all news beats in the CNMI. Born in Lilo-an, Cebu City in the Philippines, De la Torre graduated from the University of Santo Tomas with a bachelor’s degree in journalism. He is a recipient of many commendations and awards, including the CNMI Judiciary’s prestigious Justice Award for his over 10 years of reporting on the judiciary’s proceedings and decisions. Contact him at ferdie_delatorre@saipantribune.com

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  • Tradesman

    Lucky man, in his own country this charge warrants the death penalty.

  • Juanita Mendiola

    Business as usual, as usual…LOL! Let us bring in more investors like these. They are great for THEIR economy.

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