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Five senior executives manipulated the stock market to send the share prices of their company surging to more than 20 times their true level, a Guangzhou court heard Wednesday.
The case involving Guangdong Yorkpoint Science and Technology Co Ltd (Yorkpoint) is one of the largest stock market scandals to rock the nation.
The five executives are charged with illegally rigging public stock prices.
It is the first case of its kind that Guangdong courts have handled, according to an official from Guangzhou Intermediate People's Court Wednesday.
The court will conduct more discussions with legal experts and lawyers in the near future before issuing a ruling, said the official, who refused to be named.
Yorkpoint was suspected to illegally rigging the company's stock price to boost profits between October 1998 and February 2001.
A large number of individual investors suffered big losses when the scandal was exposed, the court heard.
The stock price of Yorkpoint was only about 6 yuan (US$0.72) per share in September 1998 but rose sharply to 34 yuan (US$4.1) a year later. It hit a high of 126.31 yuan (US$15.2) in February 2000.
Yorkpoint and its four subsidiaries were investigated on suspicion of illegally collecting more than 3.7 billion yuan (US$445.8 million) from purchasing stocks of four Shenzhen listed companies, including itself, during the period.
Yorkpoint even held more than 85 percent of its circulating shares during these years.
But once investigators began scouring the books in late 2000, Yorkpoint's price plummeted to less than 10 yuan (US$1.2).
In the year 2001, Yorkpoint and its four subsidiaries had a total of 449 million yuan (US$54.1 million) of illegal income confiscated and were fined 449 million yuan (US$54.1 million).
Luo Cheng, chairman of Yorkpoint, evaded arrest after the case was revealed.
Yorkpoint was subsequently listed as a special treatment company on the stock exchange because of its financial crisis.
More than 80 individual investors of Yorkpoint plan to file a lawsuit against Yorkpoint and are seeking compensation.
They said they have lost between 30,000 yuan (US$3,615) and 700,000 yuan (US$84,337) each because of the scandal.
However, the law in its current state cannot be used to recover losses caused by price rigging in stock market, legal experts said.
The five suspects who were brought to court Wednesday were Li Hongqing, deputy general manager and financial director of Yorkpoint; Luo Jianzhi, an employee of Yorkpoint's Property Development Section; Cheng Bingfang, manager of Capital Operation Section; and He Xinxiang and Wang Qi, both employees of the company.
Yorkpoint, formerly called Shenzhen Jinxing Co Ltd, went public on the Shenzhen Stock Exchanges in May 1992.
It was mainly engaged in the local food industry prior to 1998.
The company began to develop its networks and electronic science arms in 1999 and was renamed as Yorkpoint Science and Technology Co Ltd.
(China Daily March 27, 2003)
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