Legal wrangles land top ICBC official in the dock

A senior executive of the nation's largest State-owned commercial bank is involved in a two-front battle with the law.

Zhang Hongli, senior executive vice-president of Industrial and Commercial Bank of China Ltd, is suing his personal bank over investment losses. At the same time, he is being sued by a former employer over the cross-border transfer of $3.9 million.

Zhang, his wife and the trustees of his family investment trust are suing Singapore-based DBS Group Holdings Ltd. The plaintiffs said their investment vehicle lost millions of dollars on complex foreign-exchange products and they did not understand the risks involved.

Lawyers for DBS have argued that Zhang and his wife were sophisticated investors and his wife steered the investment decisions.

"DBS takes the plaintiffs' allegations very seriously. DBS is of the position that the claims made by Zhang and his wife are without merit and will not succeed. DBS is confident the claims will be dismissed. The case is now pending a verdict from the judge," DBS said in a statement to China Daily.

In another case that has attracted much wider attention, Deutsche Bank AG, Germany's largest lender and Europe's biggest investment bank, sued Zhang over the transfer of $3.9 million from its Hong Kong branch to an offshore bank account of a company named Harperskille Ltd at the China Merchants Bank's branch in Shenzhen.

Before joining ICBC in April 2010, Zhang worked for 10 years at Deutsche Bank, where he held various senior management titles, including chairman of Deutsche Bank (China) Co Ltd.

The German bank filed the lawsuit in Hong Kong on Aug 8. In court papers, the bank alleged that Zhang induced it to transfer the money and breached his contract. It is seeking damages of $6.3 million, including the principal and interest of more than $2.3 million.

The court documents did not give further details and Deutsche Bank declined to comment.

Zhang said his actions were in line with bank regulations and the law. He said the dispute would be resolved through legal means and it is not related to ICBC, Beijing-based Caixin Media reported.

Deutsche Bank told ICBC about the suit before filing the case in Hong Kong, and ICBC reported the case to the China Banking Regulatory Commission, a source familiar with the matter told Caixin Media.

It is unusual to see cases like this on the public stage because foreign banks typically make great efforts to build connections with Chinese officials to win contracts from State-owned enterprises. Analysts said the money transferred could be commissions sent to a third party for helping Deutsche Bank get a deal.

Upon Zhang's appointment as vice-president of ICBC, the German bank said in a press release: "Chinese authorities have been in close liaison with Deutsche Bank in relation to this appointment, which is the first senior management position at a major Chinese bank to be filled externally by an executive from a foreign bank."

Michael Cohrs, then head of global banking at Deutsche Bank, said that Zhang "has made a valuable contribution to the development of the bank's franchise in China and our global banking platform in Asia Pacific".

The US Securities and Exchange Commission has been investigating investment banks operating in China over the hiring of relatives of officials or giving them money in return for business, the New York Times said in a recent report.

By depicting the money transfer as Zhang's personal act, the German bank is trying to get around any US investigation, analysts said.

Timeline: Zhang's career

· May 2010

Senior executive vice-president of Industrial and Commercial Bank of China Ltd

· October 2004

Head of Asia-Pacific at Deutsche Bank Global Banking, and chairman of Deutsche Bank (China) Co Ltd

· March 2001

Head of Greater China Operations for Deutsche Bank Investment Banking, vice-chairman of Deutsche Bank Asia and chairman of Deutsche Bank China

· June 1998

Executive director of Goldman Sachs Asia and chief representative of Goldman Sachs (China) LLC's Beijing office

· July 1994

Director and head of the China operations of Schroders Plc

· July 1991

Financial manager at the headquarters of Hewlett-Packard Development Co LP

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