France: Chinese billionaire's money laundering conviction shocks Bordeaux as officials found some deals were financed illegally with Chinese government funds ( www.winespectator.com ) Englisch

Haichang Group founder Qu Naijie purchased 27 Bordeaux châteaus in just a few years, but French officials found some of the deals were financed illegally with Chinese government funds

A Paris tribunal has found Qu Naijie, the 63-year-old founder of Chinese corporation Haichang Group, guilty of money laundering, sentencing him to a three-year suspended prison sentence, a €1 million fine and the confiscation of nine of his Bordeaux châteaus, worth an estimated €35.5 million ($38.4 million).

The case has stunned Bordeaux. Qu was one of several wealthy Chinese figures who arrived in the region a decade ago, buying lesser-known châteaus with plans to invest in and market them to the growing Chinese wine market. Now, both Chinese and French authorities have accused him of running a scam.

Diving into the Wine Business

Qu was well-known in Bordeaux. Working with Christian Delpeuch, former president of the Bordeaux trade group Le Conseil Interprofessionnel du Vin de Bordeaux (CIVB) and ex-CEO of the négociant Ginestet, Qu snapped up 27 Bordeaux wineries in four years starting in 2010, spending $67 million. Delpeuch provided expertise on vineyard management.

None of the châteaus were major names in the U.S. market. Qu bought rundown estates whose owners were eager to sell, wineries that had failed to find consumers in Europe or America but could be rebranded to sell more lucratively in the burgeoning Chinese market. At this time, other superwealthy Chinese figures, including Alibaba Group founder Jack Ma, real estate and investment executive Pan Sutong and film star Zhao Wei, were also investing heavily in Bordeaux vineyards.

Qu, who made his fortune in oil trading before diversifying into chemicals, plastics, diamonds, real estate and theme parks, had a far-reaching vision. He sought to tie his hometown, the industrial port of Dalian, with Bordeaux both commercially and culturally. He began construction on an elaborate château-themed residential community in Dalian with a vineyard and a massive cellar to warehouse and sell Bordeaux wine.

The project was announced in 2011 to much fanfare at the Bordeaux Chamber of Commerce and Industry (CCIB), with négociants and city officials from Bordeaux and Dalian in attendance. Qu, who kept a low profile in public, sat in the audience, leaving the photo ops to officials, politicians and consultants.

He also worked to boost wine tourism in Dalian. After witnessing the success of the Hong Kong Wine and Dine Festival, a version of Bordeaux's popular wine festival organized in conjunction with the CCIB, CIVB, the Bordeaux Tourism Office and various wine-related promotional associations, he contacted the CCIB and invited them to do the same thing in Dalian.

China’s Politics Change, Bringing Trouble

The organization began to have problems after the first festival, and the partnership faltered. Other signs of trouble ensued. Delpeuch distanced himself legally from Qu's estates. According to media reports, labor practices at odds with French law emerged. (Delpeuch told Wine Spectator he only consulted on vineyards and was not connected to château purchasing and finance.)

And then the politics in China changed. Xi Jinping became president in 2013 and soon after began a public war on corruption. Arrests, the confiscation of property, disappearances of known figures and executions followed. While the average income of regular Chinese residents had grown during the country’s economic boom, many of those with close ties to the government were accumulating tremendous wealth.

In 2014, China's powerful National Audit Office (NAO) issued a damning report on companies accused of corruption, saying that Haichang Group and another Dalian-based company diverted 268 million Chinese yuan—more than $30 million at the time—of government funds to purchase Bordeaux vineyards. The funds were officially earmarked for foreign investments in science and technology as part of the Chinese government's push to acquire key foreign assets such as commodities, manufacturing and infrastructure to bolster the Chinese economy. The classification of technology includes agriculture.

No arrest or court case was reported in China, but Qu disappeared from public life. Meanwhile, the audit caught the attention of French investigators at the Direction Interrégionale de la Police Judiciaire in Bordeaux.

Their investigators found offshore companies in the British Virgin Islands and a loan from the Chinese bank ICBC in Paris acquired using forged legal documents. They discovered a number of infractions, which allowed them to seize several of Qu's châteaus in 2018. The Central Office for the Repression of Major Financial Crime joined the case. Investigators also zeroed in on Qu's enablers, the people in France who facilitated the acquisitions. (The authorities said there was no evidence of fraud in the winemaking operations at the châteaus.)

A Shell Game

In 2019, the French government's financial prosecutor's office announced their case. Their targets had narrowed to Qu, a winemaker and Exco Ecaf, a Bordeaux accounting firm formerly headed by Pierre Goguet, chairman of the CCIB.

At the tribunal in Paris in February, the French financial prosecutors revealed a complex labyrinth of shell companies in the British Virgin Islands, evidence of money laundering and other infractions. At least some wineries were owned under the name of Qu’s wife.

In addition to Qu, his employee Jian Liu received a suspended 18-month prison sentence and a roughly $54,000 fine for forgery, the use of false documents and fraud. The accounting firm Exco Ecaf was found not guilty of failure to report crimes to government auditors.

Qu's defense lawyer, Maxime Delhomme, said that they will likely appeal the verdict. His clients, Mr. Qu and Mr. Liu, had been dealt bad luck, he said. With the confiscation of the châteaus, they had been "plucked twice."