Former Gome chairman Huang Guang Yu in a July 31, 2006, file photo. Photo: IC

By Guo Qiang

China's home appliances retail tycoon and one-time richest man, Huang Guangyu, was sentenced by a Beijing court Tuesday to 14 years in prison, convicted of illegal business dealings, insider trading and corporate bribery.

The sentence, some lawyers say, is a graft warning to the country's private entrepre-neurs.

Huang, 41, founder of Hong Kong-listed Gome Electrical Appliances Holdings Ltd, was also fined 600 million yuan ($87.9 million) and had 200 million yuan worth of personal property confiscated by the Beijing No. 2 Intermediate Court.

Huang, also known as Wong Kwong-Yu, was found guilty of illegally trading HK$ 822 million ($105 million) from September to November 2007.

He was also found to have manipulated stock trading involving the Shenzhen-listed Beijing Centergate Technologies (Holding) Co, in which he holds the major share, to the tune of more than 1.4 billion yuan from April to September 2007. In all, he earned more than 309 million yuan from stock manipulation.

Huang was also accused of offering bribes totaling 4.56 million yuan to an unidentified number of officials.

Gome and the Beijing Pengrun Real Estate Development Company, which used to be controlled and managed by Huang, were fined 5 million and 1.2 million yuan, respectively, for giving bribes, the court statement said.

Gome, one of China's biggest electronics and appliances retailers, with more than 700 stores across the country, said in a statement that the company respects the court's ruling, and the fine won't have a substantial effect on the retailer's business.

Huang's family members and his lawyer, Yang Zhaodong, told reporters that the ruling was more severe than expected.

Yang told the Legal Mirror newspaper Tuesday, "We'll decide whether to appeal after meeting with him in his detention center."

Huang's wife, Du Juan, and one of his business partners, Xu Zhongming, who stood trial late last month, were also convicted of insider trading. Du was given a prison term of 3.5 years and fined 200 million yuan, and Xu got three years with a 100 million yuan fine.

The total fine involving the three defendants is said to be a record, in terms of the amount of fines handed down in a single case, according to media reports.

Ye Gengqing, a Beijing lawyer specializing in business law, told the Global Times that the economic penalty was much harsher than he expected.

"The confiscated assets are illegal income, and the fine is a kind of punishment for his actions, which had interfered with the normal operations of the securities industry," Ye explained.

Song Yixin, a Shanghai-based lawyer specializing in financial law, told the Global Times Tuesday that the trial was China's biggest case of insider trading in terms of the amount of money involved, the penalty handed down and its social influence.

Due to the fact that Huang's business operations cover both markets on the Chinese mainland and the one in Hong Kong, jurisdiction had to be claimed by both judicial organs, Song said.

Under China's Securities Law, stock investors who have suffered from Huang's insider trading can raise civil lawsuits against him and ask for compensation, after the criminal sentence is enforced, Song said Tuesday.

Huang is famous for setting up Gome from almost nothing after dropping out of school.

He topped the China Rich List published by the Shanghai-based Hurun Report in 2008 with an estimated income of 43 billion yuan.

He resigned as Gome chairman in January 2009, shortly after was detained in November 2008 during a police investigation into stock market manipulation. But he is still the largest shareholder, continuing to own about one-third of the company.

After Huang came under investigation, trading of the company's stock was suspend-ed in November 2008, but it resumed in June after Bain Capital, a private equity firm, invested $439 million in the home appliances retailer.

Shares in the retailer were up 0.87 percent Tuesday, closing at HK$2.31.

Official-business collusion

Rising from rags to riches, Huang was also the wealthiest man in 2004 with a fortune of 10.5 billion yuan, and in 2005 with a fortune of 14 billion.

During the investigation against him, official-business collusion came to light, and several senior officials were punished.

"Huang's background and the wide involvement of government officials casts a spotlight on the case," Ye said. "It is an alert to those businessmen with government backgrounds."

And according to the Hurun Report, 19 of 1,330 executives on the rich list in the past decade are in jail or awaiting sentences on bribery charges, Bloomberg reported Tuesday.

The Guangdong-based Time Weekly reported before the sentence that Huang set up a political network by using millions of yuan to bribe more than 1,000 officials at different levels from central government departments, courts to local governments.

Government leaders implicated in Huang's case include the sacked former mayor of Shenzhen, Xu Zongheng, and the former deputy minister of public security Zheng Shaodong, according to media reports.

Mao Shoulong, a professor of administration management at Renmin University of China, noted that the corruption in this case is difficult to detect because the many officials involved are from Huang's hometown, and the bribes made through market operations.

"It calls for tightened anti-corruption efforts, which are expected to improve the country's market system and regulate financial operations," Mao said.

Kang Juan contributed to this story