Downfall of a Vietnam's Real Estate Tycoon: Truong My Lan Sentenced to Death for Massive Banking Fraud

On the afternoon of April 11, 2024, the Ho Chi Minh City People's Court delivered a landmark ruling that will reverberate through the highest echelons of Vietnam's business world.

Truong My Lan, the 68-year-old former chairwoman of the Van Thinh Phat Group, was sentenced to death on three combined counts: embezzlement of assets, bribery, and violation of regulations on lending in the operations of credit institutions.

The verdict capped a highly anticipated trial that laid bare the staggering scale of Lan's crimes and their devastating impact on Vietnam's banking system.

According to the court, Lan's actions caused a loss of over VND 677,000 billion ($27 billion) to Saigon Commercial Joint Stock Bank (SCB), a financial institution she had effectively commandeered through her web of control.

"Defendant Truong My Lan is the real owner and controls more than 91.5% of SCB shares," the court declared, rejecting Lan's claims of only holding a 15% stake. "The investigation also determined that the people who held a combination of more than 75% of the shares at SCB all admitted to acting on behalf of Truong My Lan."

Lan's Elaborate Scheme

The court's detailed account of Lan's crimes painted a picture of a sprawling and meticulously executed scheme.

Starting in 2012, Lan and her accomplices systematically siphoned funds from SCB through a series of tactics, including selecting and placing personnel in key positions at SCB, establishing specialized lending and disbursement units within SCB, creating thousands of "ghost companies" to obtain loans.

They also colluded with appraisal firms to inflate the value of collateral assets, generated false loan documents to withdraw funds, bribed and influenced officials in state agencies to overlook their violations.

"Defendant Lan directed the creation of false loan documents for 304 customers with 368 loans, with a total outstanding balance of more than VND 132,000 billion ($5.28 billion)," the court found.

"Applying the principle of benefiting the defendant, Truong My Lan's actions caused damage to SCB of more than VND 64,600 billion ($2.58 billion), after deducting the value of the collateral assets of the loans," it added.

The court also determined that between January 1, 2018, and October 7, 2022, Lan directed the creation of 916 false loan applications to withdraw and appropriate SCB's money, resulting in an outstanding principal of over VND 415,600 billion ($16.62 billion) and interest of VND 129,300 billion ($5.17 billion).

Bribery and Obstruction of Justice

Lan's crimes extended beyond the theft of vast sums of money. The court also found her guilty of bribery, a charge that shed light on her efforts to conceal the bank's troubles from authorities.

"While SCB was being inspected, Truong My Lan met and discussed with Head of the inspection team Do Thi Nhan (former Director of the Inspection Department, Bank Supervisor II, State Bank of Vietnam), directed Vo Tan Hoang Van (General Director of SCB) to give Do Thi Nhan $5.2 million USD to hide the situation at SCB," the court revealed.

The jury assessed that these payments to the inspection team and bank supervision officials were intended to "conceal and not fully report the violations so that SCB would not be put under special control, leading to Truong My Lan and accomplices illegally withdrawing and using SCB's money, causing especially great damage to SCB."

Lan's Downfall and Consequences

The court's verdict was unequivocal in its severity, reflecting the gravity of Lan's crimes. In addition to the death sentence, she was ordered to pay a staggering almost $30 billion in compensation to SCB.

"Regarding civil liability, defendant Truong My Lan appropriated, causing damage of more than $27 billion, equivalent to the outstanding balance of 1,284 loans," the court stated. "The defendants should have fully compensated, however, the nature of the lost money was that defendant Truong My Lan used and directed the use, and the other defendants followed defendant Lan's instructions to commit the violations."

The court's ruling also extended to Lan's co-conspirators, 84 in total, who were sentenced to prison terms ranging from 3 years suspended to life imprisonment for their roles in the scheme.

The Wider Implications

The Truong My Lan case has broader implications for Vietnam's ongoing efforts to strengthen its financial system and combat corruption. The scale of the fraud uncovered at SCB has highlighted the vulnerabilities in the country's banking regulations and the need for more robust oversight mechanisms.

"This case underscores the importance of transparency and accountability in the financial sector," said an economist at the Vietnam National University who asked to remain anonymous. "It's a wake-up call for policymakers to review and enhance the regulatory framework to prevent such large-scale abuses from occurring in the future."

The verdict may also prompt a re-evaluation of Vietnam's approach to corporate governance and the role of major shareholders in shaping the direction of financial institutions. Experts have called for increased scrutiny of beneficial ownership structures and stronger checks and balances to prevent individuals from wielding unchecked power. 

The amended Law on Credit Institutions represents a significant step forward in addressing this challenge. 

Effective July 2024, the law implements a crucial change: reducing the maximum institutional shareholding from 15% to 10%. A similar decrease applies to combined shareholder and related party limits, dropping from 20% to 15%. Individual ownership remains capped at 5%, but a critical shift towards transparency emerges.

Banks are now required to disclose all shareholders holding 1% or more, along with their clearly defined related parties. This annual disclosure mandate, implemented during shareholder meetings, aims to cultivate a more transparent and stable banking landscape.

However, leading experts keep a wait-and-see attitude as they agree that the implementation of the law, among others, holds the key. As the country grapples with the fallout from this landmark case, the focus will be on ensuring that the lessons learned are translated into meaningful reforms to safeguard the integrity of Vietnam's financial system and protect the interests of the public.