Five things to know about Vietnam’s multi-billion-dollar fraud case involving property queen Truong My Lan

[HO CHI MINH CITY] The trial of Vietnam’s biggest fraud case began on Tuesday (Mar 5), with real estate tycoon Truong My Lan taking centre stage. Along with 85 accomplices including top bank officials, she is accused of bribery and embezzlement that led Saigon Commercial Bank (SCB) to suffer staggering losses of 415 trillion dong (S$22.6 billion).

The high-profile hearing at the People’s Court of Ho Chi Minh City is set to be held over nearly two months up to Apr 29.

The charges against the 67-year-old – chair of the country’s real estate empire Van Thinh Phat (VTP) – range from bribery and violating bank regulations to embezzlement of 304 trillion dong from SCB – a bank she controlled and had “power to direct, operate, and essentially manipulate all operations”, according to reports on a government website.

The 304 trillion dong sum is said to be equivalent to 3 per cent of Vietnam’s 2022 gross domestic product.

1. From make-up to mogul

Truong My Lan had humble beginnings, starting out as a cosmetics salesgirl at 16. Her big break came when she married Hong Kong businessman Eric Chu and embarked on the restaurant and hotel scene.

In the early 90s, the Truong family set up VTP, which claimed to be Ho Chi Minh City’s first private enterprise. In a short time, it built itself into a conglomerate with interests in high-end hotels, malls, restaurants and luxury residential properties in prime land across Vietnam’s southern economic hub.

The group’s crown jewels are the Times Square mixed-use complex and the Union Square mall situated in the bustling District 1 – Ho Chi Minh City’s central business district.

Authorities have so far confiscated millions of dollars in cash, luxury cars, yachts and properties from Lan and her alleged partners in crime, and frozen 1.8 trillion dong in their bank accounts. 

2. Fake it till you make it 

Lan allegedly used a thousand shell companies to fake documents to siphon money out of SCB and acquire shares in the bank. 

She illegally controlled the bank by holding between 85 to 91.5 per cent of SCB’s shares from 2012 to October 2022. Her reasoning to the police, as reported by local newspaper VnExpress, was that she had to become a shareholder to ensure the successful merger of three private banks into SCB back in 2011. 

Through Lan’s “manipulation”, SCB coughed up loans to Lan and her allies worth over one quadrillion dong – some 93 per cent of the bank’s total deposits and equivalent to nearly 11 per cent of Vietnam’s GDP in 2022. Another astounding accusation was that Lan’s personal driver ferried S$6 billion in cash between VTP offices and Lan’s home.

3. Junk bonds

Lan and her accomplices are also said to have misappropriated over 30 trillion dong from more than 40,000 investors who bought bonds issued illegally by fake companies linked to VTP. Those notes were sold to buyers through SCB in 25 bond batches between 2018 and 2020.

Vietnam authorities have affirmed that any monies recovered from the scam will be returned to the victims.

4. Web of deceit

Those accused include 45 key executives from the bank, 15 former officials of the State Bank of Vietnam, three officers from the Government Inspectorate, and one former officer from the State Audit Office.

The government inspectors were allegedly paid off by Lan to sweep violations under the rug. 

One of the most high-profile defendants is Do Thi Nhan, a former State Bank official accused of accepting US$5.2 million in bribes, deemed the “biggest bribe ever” in the country. Five of the accused are on the run, according to local reports, and may be tried in absentia.

Lan’s Hong Kong husband Eric Chu, who was detained in Vietnam last year, also stood trial on Tuesday. He reportedly offloaded his property ranging from a hotel to luxury apartments in Hong Kong at fire-sale prices last year amid his spouse’s legal troubles. 

5. Fallout

Since Lan’s arrest in 2022, the scandal has rippled through the country. Investigations soon ensnared more and more corrupt officials and influential business figures. SCB suffered a brief bank run as depositors panicked over the shocking allegations.

The case prompted a policy-driven crackdown on crooked financing practices among local property developers. 

Confidence of home buyers, lenders and investors has been hammered, chiefly among bond investors, sparking turmoil in Vietnam’s property market.

Liquidity woes have stalled more than 1,200 property projects in Vietnam, according to BMI, a unit of Fitch Solutions, in a note issued in January.

In addition, concerns over the ongoing probe have also led to government officials delaying the process of legal paperwork, causing a virtual halt in the nation’s bond and real estate markets.