Huang Guangyu, one of China’s wealthiest entrepreneurs and the chairman of the country’s biggest electronics retailer, was detained last week by the police as part of an investigation into stock manipulation involving a relative’s company, according to a report in a Chinese financial magazine.
Shares in Gome Electrical Appliances, the company Huang controls, were halted before trading opened Monday on the Hong Kong stock exchange, pending a company announcement.
In a statement released Monday afternoon, Gome suggested that its chairman, Huang, could not be located.
“Gome management is trying to verify whether our board chairman has been detained,” the company said in its release. “Up to now, we have not received any legal documents from any department about this information.”
The case is the latest reminder that in China, a country where bribery and corruption are widespread, successful entrepreneurs can often come under government scrutiny after they reach the pinnacle of wealth.
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Earlier this month, Forbes listed the 39-year-old Huang, who has been at or near the top of the list of China’s wealthiest individuals for years, as China’s second wealthiest individual, estimating his wealth at $2.7 billion. The Hurun Report, which also tracks wealthy individuals in China, said a few weeks earlier that he was the nation’s richest person, worth about $6.3 billion.
Gome officials insisted the company is in good health, and even released its third-quarter earnings report Monday.
But the controversy surrounding Huang has whiplashed a company that has seen its stock price sink in recent months.
Shares of Gome have been dropping sharply for months, and closed last Friday at about 1 Hong Kong dollar per share, or 13 U.S. cents, down from about 5 dollars in June.
Xinhua News, the official Chinese news agency, said Monday that Huang’s case was being handled by the Beijing police. A spokesman for the Beijing police declined comment Monday evening.
One of the first reports of Huang’s detention appeared Sunday on the Web site of Caijing magazine, a respected business magazine known for its investigative reporting.
The magazine said Huang had been detained on Wednesday as part of a stock manipulation case involving a company controlled by his elder brother, Huang Junqin. The report said shares of the Shangdong Jintai, a manufacturing and drug company, soared last year before nosediving.
Xu Shunfu, board secretary at Shandong Jintai, said in a telephone interview: “About Huang Guangyu, or anything about his brother Huang Junqin, we won’t give any comment now.” Shares in Shandong Jintai were halted before trading Monday in Shanghai.
Two years ago, Caijing reported that the two Huang brothers were being investigated for obtaining illegal loans. But in January of 2007, Gome issued a statement saying that Huang Guangyu had informed Gome that the government had been investigating another company he controlled but had terminated the investigation.
For years, Huang - who also goes by the name Wong Kwong Yu in Hong Kong - has been considered one of the country’s most dynamic young entrepreneurs.
Born in southern Guangdong Province, he is a high school dropout who moved with his brother to Beijing at age 16 and began selling radios and gadgets from a small street-front shop. With $500 seed money, they eventually formed the nation’s biggest electronics retailing chain, a kind of Best Buy of China.
Known as the “price butcher,” Huang has turned Gome Electrical Appliances into a nationwide company with more than $6 billion in sales last year.
In an interview in 2006 with the Chinese media, Huang said his company could compete head-on with foreign retailers entering the Chinese market.
“We are not afraid of foreign retailers’ competition,” he said.
Chen Yang contributed research from Shanghai.
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"Huang Guangyu arrested, or missing?" was posted on Monday, November 24th, 2008 at 11:11 am.