The Chinese tycoon who bought New York’s Waldorf Astoria hotel has been sentenced to 18 years in prison for fraud and embezzlement.
Tycoon jailed for 18 years for $10 billion fraud
The ex-chairman of financial conglomerate Anbang Insurance Group, Wu Xiaohui, has become the first major entrepreneur jailed in Beijing’s sweeping crackdown on risky financing.
His company came under the spotlight in the US for a string of attempts to acquire trophy American properties. Its murky financial backing and political connections spooked lawmakers last year following reports of a proposed partnership between Anbang and Kushner Companies, the family firm of White House Senior Advisor Jared Kushner.
A Chinese court on Thursday found Wu guilty of swindling investors out of more than $10 billion from 2011 to 2017 by forging financial statements and disclosing false information, the state-run Xinhua news agency reported.
The businessman was also accused of embezzling more than $1.6 billion of Anbang’s income from insurance premiums, the report said, citing the No.1 Shanghai Intermediate People's Court.
The court ruled that $1.7 billion worth of Wu’s assets would be confiscated.
The Chinese state took over operation of Anbang in February, citing the criminal prosecution against its former boss.
The Chinese government is increasingly concerned that binge borrowing and overseas dealmaking is draining its foreign reserves and putting the domestic economy under threat.
Before a crackdown kicked in last year, Anbang had risen to prominence for its aggressive overseas acquisitions.
With more than $300 billion in assets, it has pursued high-profile takeovers including the $1.95 billion purchase of the Waldorf Astoria hotel in 2014.
In 2016, Anbang offered $14 billion to buy Starwood Hotels, before pulling out and leaving the deal to Marriott.
Wu also held talks with Jared Kushner over a property project in Manhattan, which ended last year amid an outcry of potential conflicts of interest involving the US president, Kushner’s father-in-law.
During Wu’s one-day trial in March, the once high-flying businessman at first contested the charges, but reversed course in his closing statement to plead guilty and express his regrets.
Ether Yin, a partner at advisory firm Trivium China, said Chinese financial companies like Anbang had long been raising money by selling high-yielding investment products to retail investors.
The downfall of Wu was a signal that the risky fundraising would no longer be tolerated by the Chinese government, Yin said.
“It is a clear message to the whole financial sector,” he said. “You should not use borrowed money to make investments, otherwise you will face severe punishment.”
A number of other financial giants in China have also quit their global shopping sprees.
The aviation-to-financial services conglomerate HNA Group has sold more than $13 billion of its assets this year to repay its debts, according to Bloomberg. It last month filed plans to sell its $6.5 billion stake in Hilton Worldwide.
Dalian Wanda, which owns AMC Entertainment and Hollywood studio Legendary Entertainment, also recently disposed of some of its overseas and domestic projects to repay bank loans.