HANOI, Vietnam (AP) — Real estate tycoon Truong My Lan faces the death penalty in a trial that began Tuesday for allegedly defrauding him of $12.5 billion — nearly 3% of the country's GDP in 2022 and Vietnam's biggest financial fraud case of all times.
The 66-year-old chairman of real estate company Van Thinh Phat is alleged to have used “thousands of ghost companies,” paid bribes to government officials and violated banking regulations, according to a government document. She is accused of illegally controlling the Saigon Joint Stock Commercial Bank between 2012 and 2022 and thereby embezzling $12.5 billion, the document continues.
Another 85 people are being prosecuted in this connection, including a former State Bank of Vietnam official who is accused of accepting $5.2 million in bribes. Lan was arrested in October 2022 and could receive the death penalty if found guilty.
She was escorted to court by authorities around 7 a.m. Her husband Eric Chu Nap-kee, who works in real estate in Hong Kong, was also summoned, state media VN Express reported. VTP was among Vietnam's richest real estate companies and its projects include luxury residential buildings, offices, hotels and shopping malls.
Lan's arrest is among the most high-profile in an ongoing anti-corruption campaign in Vietnam that has gained momentum since 2022. Thousands of officials and executives were investigated as part of the so-called Blazing Furnace campaign. It reached the highest echelons of the Vietnamese government in January 2023 with the resignation of former President Nguyen Xuan Phuc and two deputy prime ministers over “political responsibility” for corruption scandals during the pandemic.
But analysts added that anti-corruption efforts have also dampened Vietnam's economic prospects and made foreign investors nervous, at a time when the Southeast Asian country is positioning itself as an ideal location for companies looking to shift their supply chains away from China .
The extent of Lan's alleged fraud was surprising, said Linh Nguyen, senior analyst at consulting firm Control Risks. According to VN Express, Lan is accused of disbursing $44 billion in loans to herself and her allies between 2012 and 2022, and documents related to the case weigh 6 tons.
“More than 3% of GDP is very large,” Nguyen said, adding that it also raises questions about whether other banks and companies “have done the same thing (and simply not been detected”).
According to a report by the ISEAS-Yusof Ishak Institute in Singapore, the anti-corruption campaign has also led to Vietnam's bureaucracy sagging and “officials fearing investigations and shirking their responsibilities.” The clearest evidence of this is the slow spending on public investments. As of October 2023, just over 55% of the annual budget had been spent, with $10.19 billion due to be paid out within 35 days, state media Vietnam News reported. These are funds needed for development projects ranging from bridges to highways to airports. If they are not issued on time, there will be long delays.
Nguyen said investors – particularly in the banking, finance and real estate sectors – are now much more cautious. “Right now it’s more of a wait and see approach with investors,” she said.
Vietnam's real estate sector has been hit particularly hard – an estimated 1,300 real estate firms have pulled out of the market in 2023, developers have offered discounts and gold as gifts to attract buyers, and even though storefront rents in Ho Chi Minh City have fallen by a According to the state media, many people are still empty in the city center.
Weak global demand and slowing public investment caused Vietnam's economic growth to slow to 5.05% last year compared to 8.02% in 2022, according to government data.
In November, Communist Party General Secretary Nguyen Phu Trong, Vietnam's top politician, said the fight against corruption would “continue in the long term.” Around that time, Vietnamese authorities said they were investigating two additional cases related to Lan's real estate company involving money laundering abroad through real estate.