Wilmar China unit convicted of fraud; to appeal against judgement

A subsidiary of Wilmar International has been found guilty of contract fraud by a Chinese court and ordered to jointly bear losses amounting to 1.88 billion yuan (S$345.6 million).

The unit was sued by the public prosecutor in January 2024 as an “accomplice” in contract fraud related to palm oil trades between state-owned enterprise Anhui Huawen and a privately owned counterparty, Yunnan Huijia Import & Export Co. The alleged fraud led to a 5.2 billion yuan loss for Anhui Huawen.

The judgement was handed down on Wednesday (Nov 19) by the Intermediate People’s Court of Huaibei City against Guangzhou Yihai, a subsidiary of Wilmar’s Shenzhen-listed arm, Yihai Kerry Arawana (YKA). YKA is 89.99 per cent owned by Wilmar.

In a bourse filing released the same day, Wilmar stated that the unit intends to contest the court’s decision, asserting that its factual determinations, adoption of evidence and application of law were “erroneous”.

The judgement

According to the first-instance criminal judgement, Guangzhou Yihai was found guilty of “contract fraud as an accessory” and fined one million yuan.

The court also ruled that Guangzhou Yihai must jointly bear the around 1.9 billion yuan in losses incurred by the victim, state-owned enterprise Anhui Huawen, alongside Yunnan Huijia.

Additionally, a former general manager of Guangzhou Yihai, Liu Degang, was sentenced to 19 years’ imprisonment and fined 2.8 million yuan. He was found guilty of contract fraud and bribery by a non-state employee, and the court ordered his illicit gains confiscated.

The conviction of Guangzhou Yihai is based on an allegation that it had assisted Yunnan Huijia and certain persons behind Yunnan Huijia, in committing fraud against Anhui Huawen.

“Erroneous” ruling

Wilmar and YKA have rejected the judgement. YKA stated that it would “fully support” its subsidiary’s appeal.

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The group argued that the fraud was perpetrated by Yunnan Huijia, which allegedly bribed senior executives and staff at Anhui Huawen to fabricate transactions. Wilmar’s position is that Yunnan Huijia is attempting to implicate Guangzhou Yihai to shift responsibility for the losses.

“Guangzhou Yihai neither participated in nor had knowledge of any fraudulent activities, nor did it engage in any acts of assistance,” a statement from YKA read.

The company also noted that it previously commissioned seven criminal law experts who unanimously concluded that the subsidiary’s actions did not constitute a crime.

Financial uncertainty

Wilmar noted that as the case is being appealed, the judgement has not yet taken effect, and the fine is not currently payable.

It added that because the ultimate liability remains undetermined pending the appeal, the financial impact on the company is currently uncertain. YKA stated that its operations remain normal.

Shares of Wilmar closed on Thursday at S$3.29, S$0.03 or 0.9 per cent lower.

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