(Accompanies SPECIAL REPORT: The power struggle behind China's corruption crackdown)
By David Lague and Charlie Zhu
PERTH/HONG KONG May 23 (Reuters) - Former managers and staff at Liu Han's Australian operations were dumbfounded when the Chinese tycoon went on trial last month for leading a murderous, mafia-style gang.
In 2009 when Liu, 48, launched a bid to take control of Moly Mines, executives then running the Perth-based company ordered background checks. Their findings could not have been more different: Liu was best known in China as a philanthropist in his native Sichuan province.
One story stood out. Amid the devastation near the epicentre of the 2008 Sichuan earthquake, a school Liu had helped build remained standing and all of its students had escaped unharmed. In contrast, many other shoddily built classrooms, so-called "tofu schools", had collapsed, killing thousands of children. Liu also donated generously to reconstruction and relief efforts.
For Moly Mines, Lieu's philanthropy enhanced his credibility as an investor in Australia. "No one said he was a criminal", says Collis Thorp, then chief operating officer of Moly Mines and a veteran of Western Australia's booming mineral sector.
After opening negotiations with Liu, the Australian executives also learned he had global ambitions. Liu wanted Moly Mines to become the platform for an international commodity trading house. The company was sitting on a massive molybdenum deposit, thought to be the second biggest in the world, in Western Australia's mineral rich Pilbara region.
Molybdenum provides strength, heat tolerance and corrosion resistance in a range of specialized steel alloys for industrial and military use and is seen as a strategic commodity. Liu said he could arrange financing from Chinese banks to build and operate mines on the deposit.
Neither Moly Mines nor Australian regulators say they turned up any findings about Liu that would threaten the deal. In late 2009, Liu's privately-held Sichuan Hanlong Group won approval from the Australian government, paying $140 million for 52 per cent of Moly Mines and providing the company with a $60 million loan. Hanlong also pledged to secure $500 million in funding to develop the deposit.
For Moly executives, one unnerving fact did emerge from Liu's past: someone had tried to kill him. In 1997, Liu narrowly escaped an assassination attempt in his hometown of Guanghan when a gunman fired two shots at him but missed, according to reports in the official media of court cases in China. Liu's Australian managers and advisors say they assumed the failed hit explained why the Chinese tycoon always traveled with a bodyguard.
With Hanlong in control of Moly Mines and looking for more investment targets, Liu was a regular visitor to Perth and other state capitals.
To his local staff, the head of the biggest privately held group in Sichuan appeared to be a stereotype of a cashed-up mainland tycoon - one former employee noted a diamond-encrusted, custom-made Franck Muller watch on his wrist.
When Liu entertained, he routinely ordered the most expensive French wines, spending more than $12,000 on a bottle of wine in Sydney, according to former staff. One former manager recalls Liu spending $100,000 on wine in one meal.
And, he was passionate about cars. Liu boasted that he had a fleet of 80 luxury vehicles, according to staff from his Chinese and Australian companies. A former executive at one of Liu's companies said the tycoon owned a Lamborghini SuperVeloce China, a limited edition sports car specially designed for wealthy Chinese buyers with a distinctive orange stripe through the middle of the body.
Liu's greatest passion was gambling, his Australian and Chinese staff say, staying at the tables until dawn and then sleeping until mid-day. He was a regular at Crown casinos in Perth and Melbourne. He sometimes complained when he lost heavily, but always claimed he recovered his losses on subsequent visits. In Perth, he often stayed in Crown's presidential suite, former staff and advisors say.
At his trial, Liu admitted losing $128 million in Macau, $15 million in the United States, $9 million in Singapore and about $1 million in Australia, according to prosecutors. "I was unwilling to leave gambling tables, either when I was winning or losing money," Liu testified, according to official reports of his trial. "If I win, I want to win more. If I lose, I want to recover my losses. I would only leave when I lost all my chips."
Australian executives who visited him on business trips to Chengdu, where the Hanlong group has its headquarters, and other cities in China, say Liu's routine typically involved short meetings followed by long lunches or dinners in private rooms at restaurants or hotels. "There would be lots of people running around and lots of courses," says John McEvoy, Moly Mines' former chief financial officer, who traveled in China with Liu.
To former Moly Mines staffer, mainland-born Xu Chuanmei, Liu appeared to be intelligent, well-educated and avoided business jargon in his Sichuan-accented Chinese. Liu speaks little or no English and always used an interpreter while overseas.
"He likes to put things in a simple way," she says, adding that Liu often travelled with his own supplies of Sichuan food and condiments.
Eventually, Liu's plans for Moly Mines were frustrated as stubbornly low molybdenum prices undermined the viability of the company's deposit. Most of the executive team at the company when Hanlong took control have since left or been replaced.
A more equivocal picture of the Chinese tycoon began to emerge after Liu made takeover bids for two other Perth-based companies, Sundance Resources and Bannerman Mining . The Australian Securities and Investments Commission, Australia's corporate regulator, investigated executives at Liu's Australian subsidiary, Hanlong Mining Investment, for insider trading linked to the failed bids. One of the executives, Calvin Zhu Boshi, a Shanghai-born Australian citizen, pleaded guilty and in February last year was jailed for 15 months.
In an affidavit filed in the Supreme Court of New South Wales ahead of his sentencing, Zhu said shortly after he joined Hanlong Mining in 2010, fellow executives had described Liu Han as a "warlord".
"In Chinese culture, that means Liu Han is a powerful business person; he is successful in business, politics and the underworld," Zhu said in his affidavit.
Being part of Liu Han's executive team gave Zhu entrée to a high-flying lifestyle of business or first class air travel, top hotels and the best restaurants. In Hong Kong, he and colleagues stayed at VIP rooms at Hong Kong's Shangri-La Hotel and the Ritz Carlton in Beijing, he said in his affidavit. "Although everything was paid by Hanlong, I felt money was no object," he said. "I wielded money and power and I felt like I was really starting to become somebody important."
With a fellow executive, Zhu regularly spent over $3,000 a day on food and drink, he said. While in Beijing, a colleague bought two luxury cars for them to drive, an Audi Q7 and an Audi S5. "We were always chauffeured in Mercedes', Range Rovers and sometimes in Rolls Royces," Zhu said in his affidavit.
However, Zhu began to fear for his safety when he decided to confess to illegal trades and cooperate with the investigation into other Hanlong Mining executives. Zhu pleaded guilty to trading shares and derivatives in the Sundance and Bannerman bids. He also pleaded guilty to insider trading during stints with two earlier employers. Zhu admitted he made more than $370,000 in profit from insider dealing. Gains from the Sundance and Bannerman trades were transferred to Hong Kong bank accounts.
In his affidavit, he said Liu Han had assistants in Australia who had connections with underground figures linked to casinos and loan sharks. Zhu said he hoped that the Sundance takeover bid succeeded so that Liu would not be so angry with him. "As long as I do not get Han Liu into any trouble, I do not think he will come after me," he said in his affidavit.
Zhu needn't have worried about his safety. Within a month of the Australian starting his sentence, Liu Han himself was in custody. He is awaiting the verdict, expected on Friday, on charges of murder, gun-running, fraud, extortion, illegal gambling and a string of other offences. (Editing by Bill Tarrant)