CHINA: Southern exec arrested in brokerage fallout

Publisher Name: 
The Standard, Hong Kong

A top executive with China's biggest airline has been arrested for economic crime, an executive with the carrier's parent said Monday, as the fallout from a major brokerage's failure widened.

A spokeswoman for the airline's parent, China Southern Air Holding Co, said the arrest of Peng Anfa was related to the group's US$133 million (HK$1.037 billion) investment loss connected with failed Hantang Securities. "He was involved in that failed investment, and charges placed against him were of an economic nature,'' she said, without elaborating and declining to be identified.

China Southern Airlines Co, the listed unit of the mainland's top carrier by fleet size, said Monday that "Peng Anfa was arrested by legal authorities in connection with allegations of unlawful acts.''

Financial problems were discovered during the latest audit of accounts at the parent firm, sources said in July.

The funds that were lost had been held by Hantang Securities, which was seized in September 2004 by the China Securities Regulatory Commission as part of an ongoing effort to clean up the mainland's troubled brokerage sector.

Peng is also deputy general manager of the carrier's state parent. The spokeswoman said the group was preparing an official statement to remove him from that position.

China Southern Air Holding joins a spate of firms, most of them domestically listed, to fall victim to problems in China's brokerage sector.

Earlier this year, China shut its fifth-largest brokerage, China Southern Securities, as Beijing takes drastic steps to revamp its shaky financial sector. More recently it bailed out No2 brokerage Galaxy Securities.

China Southern's listed unit has proposed removing Peng from his board position, it said in an announcement carried by major financial newspapers.

The accusations were of a personal nature unrelated to the company, the statement said, adding they would have no impact on the airline's operations.

Peng, also a pilot for China Southern, received no payment for serving on the board and was remunerated solely for the hours he flew for the airline, state media reported.

Last week, a Chinese court gave a suspended death sentence to the former chief of the Bank of China's Hong Kong arm on charges of corruption. Liu Jinbao headed the Bank of China Hong Kong when it listed in July 2002 and had been accused of embezzling 7.72 million yuan (HK$7.41 million), the official Shanghai Securities News reported in July.

AMP Section Name:Corruption