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Vietnam Court to Tackle Massive Real Estate Fraud Case Involving 10% of Vietnam's GDP

Bernie Madoff and Enron executives are rejoicing that their scandals and frauds may soon be eclipsed by one in Vietnam involving nearly 10% of Vietnam's GDP. The international media attention on the fraud trial of Chairwoman Lan has been scant, but as the trial advances and more facts emerge, watch for that to change. On one hand, the case shows Vietnam acknowledges its corruption problem and is doing something about it. On the other, it shows to the world a darker side of Vietnam. Seeing this side could make foreign investors reconsider investments, and at the very least to proceed with more caution than was previously thought required.

On March 5th, the People's Court of Ho Chi Minh City will begin a two-month trial involving Truong My Lan, chairwoman of property developer Van Thinh Phat, and a staggering 85 accomplices. The charges? Stealing a whopping VND304 trillion (i.e., $12.39 billion) from Saigon Commercial Bank ("SCB").

This case promises to be titillating and one of the most riveting in Vietnam's history. Surprisingly, the case is receiving scant attention from the international media. This trial promises to be a landmark event, exposing the inner workings of a massive alleged financial crime and raising critical questions about corporate governance and regulatory oversight in Vietnam. The world will be watching to see how justice is served in this unprecedented case.

Lan held no official executive position at SCB, however she allegedly wielded power behind the scenes, owning a massive 91.5% of the bank's shares through intermediaries. Prosecutors will paint a picture of Lan treating SCB as her personal piggy bank, manipulating bank officials, and exploiting loopholes to finance her real estate empire, Van Thinh Phat.

The alleged scheme involved fake loan applications, cash extraction and cover-ups, and bribery for secrecy. Lan's inner circle, at her direction, bombarded SCB with fabricated loan requests, securing over 2,500 approvals totaling VND1 quadrillion (i.e., $44 billion) between 2012 and 2022. This equates to an astonishing 93% of the bank's total credit issuance, leaving only 7% for regular customers.

Lan allegedly siphoned off funds in cash to avoid scrutiny, and directed officials to disburse loans before completing proper paperwork. As of 2022, she held VND677 trillion (i.e., $27.1 billion) in outstanding "uncollectible" loans from SCB. To keep the scheme under wraps, Lan is accused of bribing Do Thi Nhan, head of the central bank's inspection department with a hefty $5.2 million.

The damages? Lan's actions allegedly inflicted VND64.6 trillion (i.e., $2.59 billion) in losses on SCB, impacting not only the bank but potentially Vietnam's entire financial system. The sum of the fraud, $44 billion, represents a staggering 10.7% of the country's 2022 GDP which totaled $409 billion. As of 2022, Lan was responsible for 1,300 outstanding unpaid loans at the bank, which were worth a total of VND677 trillion. The loans were categorized as "unable to collect."

The Van Think Phat scandal has unsettling similarities to Bernie Madoff's Ponzi scheme and Enron's corporate malfeasance. Like Madoff, Lan allegedly used her control to manipulate financial institutions for personal gain, siphoning billions through fabricated investments and loans. A major difference here is that the fraud being litigated in Vietnam involves far larger sums, relatively speaking, than were involved in either the Enron or Madoff scandal.




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