The prosecution alleged that K and three others, using their positions, misappropriated RMB 1.6 billion of trust company funds for personal use, and that K and Y obtained RMB 2 billion by fraud in the negotiation and performance of contracts with the trust company.

Issues

Whether the elements of contract fraud — intent to possess unlawfully, and deception in the conclusion or performance of a contract — were established; and whether the movement of funds amounted to misappropriation rather than an authorised transaction.

Outcome

Li Xiaohua acted for K. The defence demonstrated that the transactions were documented, approved within the institution and commercially motivated, and that no intent to possess unlawfully could be inferred. The court found both charges against K not established.

Note

In financial-sector prosecutions the case usually turns on the approval trail: who authorised what, on which documents, and whether the funds were intended to return.