Chen Jiulin
Encyclopedia
Chen Jiulin
Chen Jiulin ( was born on October 20, 1961 and is the former Managing Director and CEO of China Aviation Oil (Singapore) Corporation Ltd (CAO). During his leadership CAO’s net asset worth
increased from US$176,000 to US$150,000,000, an increase of 85,200%. The market cap rose to 1.1 billion US dollars, which was 5,022 times the original value. Due to these incredible accomplishments, Chen Jiulin became a business legend and was named “The King of Aviation Oil ”.
In 2004 CAO suffered huge losses due to oil. Chen Jiulin was forced to leave the company and was arrested by the Singapore
police
. In March 2006, the Singapore
court sentenced Chen Jiulin to four years and three months imprisonment
. Chen Jiulin served 1035 days in Singapore prison
and was released on January 20, 2009.
, Hubei Province. His birthplace was so remote that even after obtaining high fame, he had from time to time ask for directions when driving back home from Wuhan
.
During his childhood he showed a strong entrepreneur
ial spirit and self-confidence
amongst the other rural children and he realized that knowledge is the key to the future. He was eager to learn and was adored by his teachers, with whom he still maintains good relationships. In October 1981 he resigned from a bank where he had built up a stable life, in order to concentrate on the preparations for the college entrance exams and he was admitted to Peking University
in 1982. In the Oriental Studies Department he attended Vietnamese
classes, but learned English at the same time. After that he successfully obtained a master's degree
in Private International Law from China University of Political Science and Law
, a master’s degree in Business Management from The National University of Singapore
and a PhD in Civil and Commercial Law from Tsinghua University
.
, where he served as a translator
and gained experience in the aviation
business. After a reform the organization was divided in five parts and Chen Jiulin was assigned to work with Air China
and in 1990 joined a Sino-German joint venture named Aircraft Maintenance and Engineering Co. Ltd. Beijing
where he worked as an assistant to foreign experts. In 1993 he joined China Aviation Oil Supply Corporation and participated in the construction and negotiations of Hong Kong
’s new airport
. After that he worked as the Chinese chief negotiator for South China Bluesky Aviation Oil Co., Ltd., Tianjin International Petroleum Storage and Transportation Co., Ltd., and other large project. All of them are the large Sino and foreign Joint Venture projects. CAO’s predecessor – China Aviation Oil Transport (Singapore) Private Ltd., was also built up by Chen Jiulin.
During the Asian financial crisis in 1997, CAO’s parent seconded Chen Jiulin to take over the helm of CAO in Singapore – CAO (Singapore) Ltd., where he served as Managing Director, and CEO. CAO was established in 1993 and after suffering from losses during the first two years, it remained dormant for another two years. When Chen Jiulin took control over the company, he only had US$219,000 and the company was quickly falling into red numbers at the end of 1997. In order to turn it around, Chen Jiulin gradually monopolized the imported aviation oil market in China, increasing the company’s purchasing and transportation power by taking the measures of participating in the tendering of China imported jet fuel
, followed by bulk purchasing
, centralized transportation and other methods.
Besides the significant improvements at CAO under Chen Jiulin’s leadership, the company also planned and led a series of Mergers & Acquisitions. Through these actions Chen Jiulin has set up a good example for Chinese enterprises that have the intention to venture overseas.
When Shanghai
Pudong airport opened its doors in 2002, its future was still unknown. Chen Jiulin purchased a 33% stake in the Aviation Fuel Supply Company of Shanghai Pudong International Airport on July 23, 2002, for a consideration of RMB370 million. This company made the profit of RMB 600 million in the second year and maintained such profit
every year up to now . The return on investment to this company is still the main source of profit for CAO. On July 31, 2002 CAO acquired a stake of 5% in CLH (Spain) for 100 million Singapore Dollars. As of January 24, 2007, after the divestment
of this equity, CAO gained a total of 400 million Singapore Dollars in addition to sharing profit from 3 millions to 10 millions per year.
In 2001, CAO negotiated with Keppel Corporation
, the largest shareholder of Singapore Petroleum Company
(SPC), to purchase SPC. But at that time, CAO was not strong enough to purchase SPC alone and therefore they asked two Chinese corporation
s to act in concert. Unfortunately, the neither of the Chinese companies coperated and CAO had to purchase SPC alone, but the two Chinese corporations acted unfavorably, which finally led to a failed transaction when CAO had the chance to buy 77% of the stocks of SPC for S$1 per share.
On August 18, 2004, CAO announced that they had successfully bought 88 million shares of SPC (20.6% of the total equity
) for S$4.12 per share, but during a shareholder
’s meeting this acquisition was vetoed by CAO’s parent company. CAO even had to pay 30 million U.S. Dollars to an Indonesia
n business as compensation to cancellation of the contract.
On 25 June 2009, PetroChina
bought over SPC at the price of S$ 6.25 per share. According to released data at that time, CAO as a China state-controlled company could have saved approximately 10.1 billion RMB for China if CAO’s first acquisition mentioned above was successful.
Under the leadership of Chen Jiulin, CAO changed from a pure oil trading business to an investment company
that combines industrial, engineering
, and energy trading aspects. On December 6, 2001, CAO was successfully listed on the Singapore stock market. In September 2004 the net asset was worth more than 150 million US Dollars, which was 852 times more than the original worth, and their market cap exceeded 1.1 billion US Dollars, which was 5022 times the initial investment from China. CAO also has an excellent track record and received numerous honors, including being twice Singapore’s “most transparent” listed company. The development of CAO was summarized and applied as a case study
for the MBA education of the National University of Singapore
. It was also regarded as a successful case of a Chinese state corporation by “Qiu Shi” magazine, a core magazine of the Chinese Communist Party. In 2003, Chen Jiulin was selected as the “New Asian Leader” by the World Economic Forum
(which is renamed “Young Global Leader” now) and in the same year he received the title of the “Distinguished Alumni of Peking University
”.
But in the first qurter of 2004, the Company made losses trading options. Then in October 2004, in an attempt to turn the tide, CAOHC, CAO’s parent, which owned 75% of the stocks of CAO, decided to sell 15% of their stocks, to raise 111 million US Dollars to satisfy the demand for margin call
s ( The action of selling the vendor’s shares was later blamed on the parent company by media and accused of concealing a public investment deficit and “insider’s trading
”, but this also led to the imprisonment of Chen Jiulin, since he was sentenced for four years.)
However, the international oil prices kept rising and losses expanded. On October 26, 2004, because of the awful pressure from Merm (Mutsui Energy Risk Management) CAOHC ordered CAO to begin closing its options positions when the oil market price was US$55.65, the highest price of the year. At the end of November, the international oil prices fell to $46.00/barrel and the average oil price was US$ 43/barrel for the month of December 2004. The average price of CAO’s total options position was US$ 48/barrel. CAO should have the opportunity to gain by hedging when the market price
fell below US$ 48/barrel. Unfortunately by that time all the options were already closed due to the pressures from the counterparties of CAO and the decision to cut loss made by CAOHC, the parent company
of CAO.
One of the major reasons for CAO’s loss was due to a shortage in capital, which CAOHC once firmly promised to support CAO but finally changed its mind. An internationally renowned agency commented that CAO could have made profit from its options position if someone supported it for only 50 million U.S. Dollars.
When CAO incident leaked out, it drew the international media’s attention. In Singapore this incident was considered the most serious financial event since the bankruptcy
of Barings Bank
in 1994 and once again the market debated whether the Singapore financial control authorities had a dereliction of duty
. In China this incident once again exposed the management problems of Chinese state corporations.
On June 7, 2005 five CAO executives, including Chen Jiulin, were charged. A few days later, Chen Jiulin was baled out by raising 2 million Singapore Dollars (about 1.2 million U.S. Dollars) as a bail. On March 21, 2006, the subordinate court
of Singapore sentenced Chen Jiulin to four years and three months imprisonment and fined him for 335,000 Singapore Dollars.
Several Chinese and international business magazines and other media wrote that Chen Jiulin was an “abandoning soldier”, which is a terminology in the Chinese chess and has the meaning of scapegoat
. Some people believe that there must be many unknown inside facts about the CAO incident.
On June 22, 2010, insiders from China Gezhouba International Engineering Co., Ltd.
(Gezhouba International) said that Chen Jiulin will be assigned as the vice president of Gezhouba International. The Gezhouba International official website has add Chen Jiulin into its management team introduction. However, the public query the qualification of Chen's serving as the vice president of a state-owned enterprise
reagain, as the "State-owned Assets Law" claims that nationalized business' directors, supervisors and senior managements may not serve as directors, supervisors and senior managemen perpetually if he has caused major losses of state assets before. Obviously Chen's almost leading to the bankruptcy
of CAO belong to "heavy losses".
Ma Junju is a professor at the School of Law, Tsinghua University, a distinguished professor of Southern University of Finance and Economics and he was professor and Dean of Law School in Wuhan University, professor of China University of Political Science and Law. Professor Ma is an expert in Civil Law, Commercial Law and Environmental Law.
Prof. Ma said, as far as he knows, Chen Jiulin was not involved in economic crimes like encroachment of property, misappropriation of property or sabotage of social economic order. Chen made mistakes in the process of running CAO’s operations, but there was no personal motivation for the crime. Thus, what he did could not constitute a crime. Eventually, CAO succeeded in being restructured and it got through the adversity, becoming the largest China-based enterprise and the 4th largest listed company in Singapore. And this achievement has a vital link and relation to the foundation laid by Chen Jiulin. Furthermore, Chen’s resignation demonstrated his loyalty to the country and his responsibility to the company.
However, Chen Jiulin was sentenced to four years and three months in prison by the Singaporean Court. Prof. Ma expressed his doubts on the sentence. He said, as a Chinese civil law scholar, he does not have sufficient knowledge, and he is not in a position to comment on Singaporean laws and court judgment, but he has his doubts. For instance, whether an oral presentation to Deutsche Bank can be used as evidence to identify deception? Whether the sale of shares of China National Aviation Fuel Corporation to save the company is fully considered as an act of a legal person? Similarly, the disclosure of the loss could only be made by the consensus of all Board members. In the whole process, to what extent should Chen bear the due legal responsibility?
Chen Jiulin ( was born on October 20, 1961 and is the former Managing Director and CEO of China Aviation Oil (Singapore) Corporation Ltd (CAO). During his leadership CAO’s net asset worth
Net asset value
Net asset value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended or mutual funds because shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net...
increased from US$176,000 to US$150,000,000, an increase of 85,200%. The market cap rose to 1.1 billion US dollars, which was 5,022 times the original value. Due to these incredible accomplishments, Chen Jiulin became a business legend and was named “The King of Aviation Oil ”.
In 2004 CAO suffered huge losses due to oil. Chen Jiulin was forced to leave the company and was arrested by the Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
police
Police
The police is a personification of the state designated to put in practice the enforced law, protect property and reduce civil disorder in civilian matters. Their powers include the legitimized use of force...
. In March 2006, the Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
court sentenced Chen Jiulin to four years and three months imprisonment
Imprisonment
Imprisonment is a legal term.The book Termes de la Ley contains the following definition:This passage was approved by Atkin and Duke LJJ in Meering v Grahame White Aviation Co....
. Chen Jiulin served 1035 days in Singapore prison
Prison
A prison is a place in which people are physically confined and, usually, deprived of a range of personal freedoms. Imprisonment or incarceration is a legal penalty that may be imposed by the state for the commission of a crime...
and was released on January 20, 2009.
Early life
Chen Jiulin was born in Baolong Village of Xishui County, Huanggang CityHuanggang, Hubei
Huanggang City is a major municipality in eastern Hubei Province, China. It is situated to the north of the middle reaches of the Yangtze River and is bounded in the north by the Dabie Shan mountain range....
, Hubei Province. His birthplace was so remote that even after obtaining high fame, he had from time to time ask for directions when driving back home from Wuhan
Wuhan
Wuhan is the capital of Hubei province, People's Republic of China, and is the most populous city in Central China. It lies at the east of the Jianghan Plain, and the intersection of the middle reaches of the Yangtze and Han rivers...
.
During his childhood he showed a strong entrepreneur
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...
ial spirit and self-confidence
Self-confidence
The socio-psychological concept of self-confidence relates to self-assuredness in one's personal judgment, ability, power, etc., sometimes manifested excessively.Being confident in yourself is infectious if you present yourself well, others will want to follow in your foot steps towards...
amongst the other rural children and he realized that knowledge is the key to the future. He was eager to learn and was adored by his teachers, with whom he still maintains good relationships. In October 1981 he resigned from a bank where he had built up a stable life, in order to concentrate on the preparations for the college entrance exams and he was admitted to Peking University
Peking University
Peking University , colloquially known in Chinese as Beida , is a major research university located in Beijing, China, and a member of the C9 League. It is the first established modern national university of China. It was founded as Imperial University of Peking in 1898 as a replacement of the...
in 1982. In the Oriental Studies Department he attended Vietnamese
Vietnamese language
Vietnamese is the national and official language of Vietnam. It is the mother tongue of 86% of Vietnam's population, and of about three million overseas Vietnamese. It is also spoken as a second language by many ethnic minorities of Vietnam...
classes, but learned English at the same time. After that he successfully obtained a master's degree
Master's degree
A master's is an academic degree granted to individuals who have undergone study demonstrating a mastery or high-order overview of a specific field of study or area of professional practice...
in Private International Law from China University of Political Science and Law
China University of Political Science and Law
China University of Political Science and Law is a university in Beijing, People's Republic of China. Its law school is considered one of the best in China. In 2009, The Ministry of Education ranked CUPL 2nd among top law schools in China. CUPL has two campuses, one in Haidian, which is the...
, a master’s degree in Business Management from The National University of Singapore
National University of Singapore
The National University of Singapore is Singapore's oldest university. It is the largest university in the country in terms of student enrollment and curriculum offered....
and a PhD in Civil and Commercial Law from Tsinghua University
Tsinghua University
Tsinghua University , colloquially known in Chinese as Qinghua, is a university in Beijing, China. The school is one of the nine universities of the C9 League. It was established in 1911 under the name "Tsinghua Xuetang" or "Tsinghua College" and was renamed the "Tsinghua School" one year later...
.
Career
After graduating from Peking University, Chen Jiulin was employed by the Civil Aviation Administration of ChinaCivil Aviation Administration of China
The Civil Aviation Administration of China , formerly the General Administration of Civil Aviation of China , is the aviation authority under the Ministry of Transport of the People's Republic of China. It oversees civil aviation and investigates aviation accidents and incidents...
, where he served as a translator
Translation
Translation is the communication of the meaning of a source-language text by means of an equivalent target-language text. Whereas interpreting undoubtedly antedates writing, translation began only after the appearance of written literature; there exist partial translations of the Sumerian Epic of...
and gained experience in the aviation
Aviation
Aviation is the design, development, production, operation, and use of aircraft, especially heavier-than-air aircraft. Aviation is derived from avis, the Latin word for bird.-History:...
business. After a reform the organization was divided in five parts and Chen Jiulin was assigned to work with Air China
Air China
Air China is the flag carrier and one of the major airlines of the People's Republic of China. Based in Beijing Capital International Airport, Air China is the world's 10th largest airline by fleet size. The airline ranked behind its main competitors China Southern Airlines and China Eastern...
and in 1990 joined a Sino-German joint venture named Aircraft Maintenance and Engineering Co. Ltd. Beijing
Beijing
Beijing , also known as Peking , is the capital of the People's Republic of China and one of the most populous cities in the world, with a population of 19,612,368 as of 2010. The city is the country's political, cultural, and educational center, and home to the headquarters for most of China's...
where he worked as an assistant to foreign experts. In 1993 he joined China Aviation Oil Supply Corporation and participated in the construction and negotiations of Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
’s new airport
Airport
An airport is a location where aircraft such as fixed-wing aircraft, helicopters, and blimps take off and land. Aircraft may be stored or maintained at an airport...
. After that he worked as the Chinese chief negotiator for South China Bluesky Aviation Oil Co., Ltd., Tianjin International Petroleum Storage and Transportation Co., Ltd., and other large project. All of them are the large Sino and foreign Joint Venture projects. CAO’s predecessor – China Aviation Oil Transport (Singapore) Private Ltd., was also built up by Chen Jiulin.
During the Asian financial crisis in 1997, CAO’s parent seconded Chen Jiulin to take over the helm of CAO in Singapore – CAO (Singapore) Ltd., where he served as Managing Director, and CEO. CAO was established in 1993 and after suffering from losses during the first two years, it remained dormant for another two years. When Chen Jiulin took control over the company, he only had US$219,000 and the company was quickly falling into red numbers at the end of 1997. In order to turn it around, Chen Jiulin gradually monopolized the imported aviation oil market in China, increasing the company’s purchasing and transportation power by taking the measures of participating in the tendering of China imported jet fuel
Jet fuel
Jet fuel is a type of aviation fuel designed for use in aircraft powered by gas-turbine engines. It is clear to straw-colored in appearance. The most commonly used fuels for commercial aviation are Jet A and Jet A-1 which are produced to a standardized international specification...
, followed by bulk purchasing
Bulk purchasing
Bulk purchasing is buying products in large quantities at a lower price per item, or unit price, than is available for smaller quantities. Wholesale is selling or related to selling goods in large quantities for resale to the consumer. Retailing is buying products in bulk at wholesale, and selling...
, centralized transportation and other methods.
Besides the significant improvements at CAO under Chen Jiulin’s leadership, the company also planned and led a series of Mergers & Acquisitions. Through these actions Chen Jiulin has set up a good example for Chinese enterprises that have the intention to venture overseas.
When Shanghai
Shanghai
Shanghai is the largest city by population in China and the largest city proper in the world. It is one of the four province-level municipalities in the People's Republic of China, with a total population of over 23 million as of 2010...
Pudong airport opened its doors in 2002, its future was still unknown. Chen Jiulin purchased a 33% stake in the Aviation Fuel Supply Company of Shanghai Pudong International Airport on July 23, 2002, for a consideration of RMB370 million. This company made the profit of RMB 600 million in the second year and maintained such profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
every year up to now . The return on investment to this company is still the main source of profit for CAO. On July 31, 2002 CAO acquired a stake of 5% in CLH (Spain) for 100 million Singapore Dollars. As of January 24, 2007, after the divestment
Divestment
In finance and economics, divestment or divestiture is the reduction of some kind of asset for either financial or ethical objectives or sale of an existing business by a firm...
of this equity, CAO gained a total of 400 million Singapore Dollars in addition to sharing profit from 3 millions to 10 millions per year.
In 2001, CAO negotiated with Keppel Corporation
Keppel Corporation
The Keppel Group of Companies includes Keppel Offshore & Marine, Keppel Integrated Engineering, Keppel Energy, Keppel Telecommunications & Transportation and Keppel Land, among others....
, the largest shareholder of Singapore Petroleum Company
Singapore Petroleum Company
Singapore Petroleum Company Limited is a Singaporean oil company. SPC is involved in the exploration and production of petroleum, refining, trading and petroleum product distribution.- History :...
(SPC), to purchase SPC. But at that time, CAO was not strong enough to purchase SPC alone and therefore they asked two Chinese corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s to act in concert. Unfortunately, the neither of the Chinese companies coperated and CAO had to purchase SPC alone, but the two Chinese corporations acted unfavorably, which finally led to a failed transaction when CAO had the chance to buy 77% of the stocks of SPC for S$1 per share.
On August 18, 2004, CAO announced that they had successfully bought 88 million shares of SPC (20.6% of the total equity
Equity (finance)
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
) for S$4.12 per share, but during a shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
’s meeting this acquisition was vetoed by CAO’s parent company. CAO even had to pay 30 million U.S. Dollars to an Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
n business as compensation to cancellation of the contract.
On 25 June 2009, PetroChina
PetroChina
PetroChina Company Limited is a Chinese oil company and is the listed arm of state-owned China National Petroleum Corporation , headquartered in Dongcheng District, Beijing. It is China's biggest oil producer, and was the world's most valuable company by market value as of September 28th 2010...
bought over SPC at the price of S$ 6.25 per share. According to released data at that time, CAO as a China state-controlled company could have saved approximately 10.1 billion RMB for China if CAO’s first acquisition mentioned above was successful.
Under the leadership of Chen Jiulin, CAO changed from a pure oil trading business to an investment company
Investment company
An investment company is a company whose main business is holding securities of other companies purely for investment purposes. The investment company invests money on behalf of its shareholders who in turn share in the profits and losses....
that combines industrial, engineering
Engineering
Engineering is the discipline, art, skill and profession of acquiring and applying scientific, mathematical, economic, social, and practical knowledge, in order to design and build structures, machines, devices, systems, materials and processes that safely realize improvements to the lives of...
, and energy trading aspects. On December 6, 2001, CAO was successfully listed on the Singapore stock market. In September 2004 the net asset was worth more than 150 million US Dollars, which was 852 times more than the original worth, and their market cap exceeded 1.1 billion US Dollars, which was 5022 times the initial investment from China. CAO also has an excellent track record and received numerous honors, including being twice Singapore’s “most transparent” listed company. The development of CAO was summarized and applied as a case study
Case study
A case study is an intensive analysis of an individual unit stressing developmental factors in relation to context. The case study is common in social sciences and life sciences. Case studies may be descriptive or explanatory. The latter type is used to explore causation in order to find...
for the MBA education of the National University of Singapore
National University of Singapore
The National University of Singapore is Singapore's oldest university. It is the largest university in the country in terms of student enrollment and curriculum offered....
. It was also regarded as a successful case of a Chinese state corporation by “Qiu Shi” magazine, a core magazine of the Chinese Communist Party. In 2003, Chen Jiulin was selected as the “New Asian Leader” by the World Economic Forum
World Economic Forum
The World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....
(which is renamed “Young Global Leader” now) and in the same year he received the title of the “Distinguished Alumni of Peking University
Peking University
Peking University , colloquially known in Chinese as Beida , is a major research university located in Beijing, China, and a member of the C9 League. It is the first established modern national university of China. It was founded as Imperial University of Peking in 1898 as a replacement of the...
”.
But in the first qurter of 2004, the Company made losses trading options. Then in October 2004, in an attempt to turn the tide, CAOHC, CAO’s parent, which owned 75% of the stocks of CAO, decided to sell 15% of their stocks, to raise 111 million US Dollars to satisfy the demand for margin call
Margin Call
Margin Call is a 2011 American independent drama film, written and directed by J.C. Chandor. The film has an ensemble cast that includes Kevin Spacey, Demi Moore, Paul Bettany, Jeremy Irons, Zachary Quinto, Stanley Tucci, Simon Baker, and Penn Badgley...
s ( The action of selling the vendor’s shares was later blamed on the parent company by media and accused of concealing a public investment deficit and “insider’s trading
Insider trading
Insider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
”, but this also led to the imprisonment of Chen Jiulin, since he was sentenced for four years.)
However, the international oil prices kept rising and losses expanded. On October 26, 2004, because of the awful pressure from Merm (Mutsui Energy Risk Management) CAOHC ordered CAO to begin closing its options positions when the oil market price was US$55.65, the highest price of the year. At the end of November, the international oil prices fell to $46.00/barrel and the average oil price was US$ 43/barrel for the month of December 2004. The average price of CAO’s total options position was US$ 48/barrel. CAO should have the opportunity to gain by hedging when the market price
Market price
In economics, market price is the economic price for which a good or service is offered in the marketplace. It is of interest mainly in the study of microeconomics...
fell below US$ 48/barrel. Unfortunately by that time all the options were already closed due to the pressures from the counterparties of CAO and the decision to cut loss made by CAOHC, the parent company
Parent company
A parent company is a company that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors; the second company being deemed as a subsidiary of the parent company...
of CAO.
One of the major reasons for CAO’s loss was due to a shortage in capital, which CAOHC once firmly promised to support CAO but finally changed its mind. An internationally renowned agency commented that CAO could have made profit from its options position if someone supported it for only 50 million U.S. Dollars.
When CAO incident leaked out, it drew the international media’s attention. In Singapore this incident was considered the most serious financial event since the bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
of Barings Bank
Barings Bank
Barings Bank was the oldest merchant bank in London until its collapse in 1995 after one of the bank's employees, Nick Leeson, lost £827 million due to speculative investing, primarily in futures contracts, at the bank's Singapore office.-History:-1762–1890:Barings Bank was founded in 1762 as the...
in 1994 and once again the market debated whether the Singapore financial control authorities had a dereliction of duty
Dereliction of duty
Dereliction of duty is a specific offense under United States Code Title 10,892. Article 92 and applies to all branches of the US military. A service member who is derelict has willfully refused to perform his duties or has incapacitated himself in such a way that he cannot perform his duties...
. In China this incident once again exposed the management problems of Chinese state corporations.
On June 7, 2005 five CAO executives, including Chen Jiulin, were charged. A few days later, Chen Jiulin was baled out by raising 2 million Singapore Dollars (about 1.2 million U.S. Dollars) as a bail. On March 21, 2006, the subordinate court
Subordinate Courts of Singapore
The Subordinate Courts of Singapore is one of the two tiers of the court system in Singapore, the other tier being the Supreme Court. The Subordinate Courts comprise the District and Magistrate Courts—both of which oversee civil and criminal matters—as well as specialised family, juvenile,...
of Singapore sentenced Chen Jiulin to four years and three months imprisonment and fined him for 335,000 Singapore Dollars.
Several Chinese and international business magazines and other media wrote that Chen Jiulin was an “abandoning soldier”, which is a terminology in the Chinese chess and has the meaning of scapegoat
Scapegoat
Scapegoating is the practice of singling out any party for unmerited negative treatment or blame. Scapegoating may be conducted by individuals against individuals , individuals against groups , groups against individuals , and groups against groups Scapegoating is the practice of singling out any...
. Some people believe that there must be many unknown inside facts about the CAO incident.
On June 22, 2010, insiders from China Gezhouba International Engineering Co., Ltd.
Gezhouba Group
China Gezhouba Group Company Limited is one of the largest Chinese construction contractors and is based in Wuhan, Hubei.Gezhouba Group is primarily engaged in contract construction of projects...
(Gezhouba International) said that Chen Jiulin will be assigned as the vice president of Gezhouba International. The Gezhouba International official website has add Chen Jiulin into its management team introduction. However, the public query the qualification of Chen's serving as the vice president of a state-owned enterprise
Government-owned corporation
A government-owned corporation, state-owned company, state-owned entity, state enterprise, publicly owned corporation, government business enterprise, or parastatal is a legal entity created by a government to undertake commercial activities on behalf of an owner government...
reagain, as the "State-owned Assets Law" claims that nationalized business' directors, supervisors and senior managements may not serve as directors, supervisors and senior managemen perpetually if he has caused major losses of state assets before. Obviously Chen's almost leading to the bankruptcy
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
of CAO belong to "heavy losses".
Chinese law expert oppugned Singapore Court's sentence
Ma Junju, Chen Jiulin's PhD professor, accepted some reporter's interview in early July, 2010, and oppugned Singapore Court's sentence.Ma Junju is a professor at the School of Law, Tsinghua University, a distinguished professor of Southern University of Finance and Economics and he was professor and Dean of Law School in Wuhan University, professor of China University of Political Science and Law. Professor Ma is an expert in Civil Law, Commercial Law and Environmental Law.
Prof. Ma said, as far as he knows, Chen Jiulin was not involved in economic crimes like encroachment of property, misappropriation of property or sabotage of social economic order. Chen made mistakes in the process of running CAO’s operations, but there was no personal motivation for the crime. Thus, what he did could not constitute a crime. Eventually, CAO succeeded in being restructured and it got through the adversity, becoming the largest China-based enterprise and the 4th largest listed company in Singapore. And this achievement has a vital link and relation to the foundation laid by Chen Jiulin. Furthermore, Chen’s resignation demonstrated his loyalty to the country and his responsibility to the company.
However, Chen Jiulin was sentenced to four years and three months in prison by the Singaporean Court. Prof. Ma expressed his doubts on the sentence. He said, as a Chinese civil law scholar, he does not have sufficient knowledge, and he is not in a position to comment on Singaporean laws and court judgment, but he has his doubts. For instance, whether an oral presentation to Deutsche Bank can be used as evidence to identify deception? Whether the sale of shares of China National Aviation Fuel Corporation to save the company is fully considered as an act of a legal person? Similarly, the disclosure of the loss could only be made by the consensus of all Board members. In the whole process, to what extent should Chen bear the due legal responsibility?