[Typical Case] Commentary on the Case of Chen and His Company for the Crime of Illegally Absorbing Public Deposits

I. Summary of the Case Facts

To address the financial difficulties faced by “Company A,” the defendant Chen registered and established “Company B” in 2014. Group A holds a 51% stake in Company B (Company A is owned by Chen). At the instruction of the defendant Chen, the defendant Lei was put in charge of managing the entire operations of Company B. Using newspapers and other media outlets, Company B widely publicized its activities to the public and, through affiliated companies and shell companies controlled by Company A, concocted fictitious financing projects to solicit deposits from an unspecified number of individuals. From August 2014 to July 2015, under the arrangements made by the defendants Chen and Lei, senior executives and department heads at Company B assigned their staff members according to each department’s respective duties, collectively soliciting funds from a total of 3,546 individuals, amounting to 650,720,000 yuan. As of July 6, 2016, Company B still owed principal totaling 309,435,000 yuan to 1,072 investors. Specifically, the defendant Chen and Lei collectively absorbed public deposits amounting to 650,720,000 yuan; the defendant Li absorbed public deposits amounting to 514,650,000 yuan; the defendant Gao absorbed public deposits amounting to 586,350,000 yuan; the defendant Wang absorbed public deposits amounting to 578,460,000 yuan; the defendant Jiang absorbed public deposits amounting to 297,190,000 yuan; the defendant Wu absorbed public deposits amounting to 642,700,000 yuan; and the defendant Zhang absorbed public deposits amounting to 126,440,000 yuan. After undergoing first-instance, second-instance, retrial first-instance, and retrial second-instance proceedings, the court ultimately sentenced Chen to seven years and six months of imprisonment.

II. Summary of Case Defense Strategies

1. Focus primarily on the procedural issues in this case.

(1) The first-instance judgment made no reasoned explanation or commentary on the numerous serious procedural errors alleged by the appellant Chen and his defense counsel regarding the charge of illegally absorbing public deposits; instead, it simply brushed over the issue in a single, cursory sentence.

(2) During the retrial of this case, the appellant Chen and his defense counsel raised the following serious procedural issues regarding the crime of illegally absorbing public deposits:

A. No financial regulatory authority has determined that Company B’s operations have disrupted the financial order; instead, the public security authorities made their own determination, and the case-filing procedure was seriously flawed, resulting in all evidence lacking the “three characteristics.”

B. The defendant company A and company B in this case do not have a hierarchical relationship. The omission of company B as a party to the case has made the proceedings extremely unfair and has prevented the facts of the case from being fully clarified.

C. This case fails to identify the affiliated companies—the true beneficiaries toward whom the investors in this case are directing their grievances.

D. This case overlooked the guarantee company, which charged exorbitant guarantee fees yet has not been held criminally or civilly liable in any way.

2. Carefully analyze the issues related to the evidence and factual findings in this case.

First, Company B submitted a complete set of application materials to the Provincial Government’s Financial Office. After undergoing a rigorous review process organized by the Provincial Government’s Financial Office and passing the stringent examination procedures, Company B was approved and established. Moreover, during its operation, Company B is subject to strict regulatory oversight. The entity responsible for carrying out the relevant activities in this case—Company B—is duly licensed in accordance with the law!

Second, in this case, key evidence—the original “Judicial Expert Opinion”—contains incomplete and unauthorized examination items that exceed the expert’s authority. In many instances, the experts improperly substituted their own conclusions for judicial rulings, arbitrarily determining that the case involved “disguised absorption” activities. The expert opinion also arbitrarily concluded that “Chen, Duan, and Lei personally misappropriated funds.” Furthermore, the expert opinion arbitrarily asserted that Company B engaged in “self-financing” and “fictitious project financing” practices. By exceeding its authorized scope, the expert organization directly rendered the four original “Judicial Expert Opinions” lacking the three essential characteristics of admissibility as evidence.

Once again, the “Expert Opinion Report” issued during the supplementary investigation further clarified the flow of funds raised. With regard to most of the funds that flowed in, the aforementioned “Expert Opinion Report” concluded that “it is impossible to verify whether the funds originated from financing raised through Company B’s platform.”

Finally, the funds raised in the case have been largely repaid by the defendant company A.

The first-instance judgment failed to conduct a thorough investigation into the funds already refunded, nor did it perform a detailed verification. Instead, it hastily concluded with the perfunctory statement: “The funds should be recovered according to law, and after recovery, they should all be distributed proportionally to the investors.” This not only left the appellant unjustly accused but also created endless complications for subsequent refund procedures!

3. The key focus is on whether the act constitutes a crime.

This case raises the following serious procedural issues regarding the crimes of bribery committed by non-state personnel and fraudulently obtaining loans:

(1) The crime of bribing non-state personnel is incorrectly under the jurisdiction of the public security organs.

(2) The public prosecution and trial jurisdiction seriously violated the law, resulting in a grave procedural violation involving concurrent jurisdiction by two grassroots procuratorates and grassroots courts.

(3) Convicting the appellant Chen using a criminal judgment that has already taken effect from another court seriously deprives the appellant Chen of his procedural rights.

(4) If omitted crimes are discovered, they shall be corrected by the original trial court; the Xishan District Procuratorate and Trial Court have no authority to interfere.

Moreover, given the bank’s knowledge of the situation, the appellant Chen could not possibly be found guilty of fraudulently obtaining a loan.

(1) The bank was aware of the true purpose of the loan in question and was not deceived.

(2) The bank is aware of the condition of the collateral for the loan in question and has agreed to replace the collateral.

Although the bank was aware that the procedures were non-compliant, aware of the intended use of the loan, and aware of the status of the collateral, Company A and Chen did not constitute the crime of fraudulently obtaining a loan. The fact that Company A obtained the bank’s consent to replace the collateral also means that there is no causal link between the false documents and the acquisition of the loan. Under these circumstances, the appellant clearly did not commit the crime of fraudulently obtaining a loan.