* Vietnam's banks reel from fraud, bad debt
* Dozens face trial for embezzlement during boom years
* Economists say regulation, oversight remain weak
By Nguyen Phuong Linh
HANOI, April 16 A half-dozen shell companies,
piles of forged documents, tax dodges, illegal stock trades and
19 bank staff unwittingly complicit in embezzlement on a massive
The indictment against Vietnamese tycoon and former banker
Nguyen Duc Kien reads like a "how-to" guide for masterminding
fraud in a country with banking oversight so slipshod it brought
one of Asia's most promising emerging economies to the brink of
The founder of Vietnam's number four private lender Asia
Commercial Bank (ACB), went on trial on Wednesday
accused of a litany of crimes that cost depositors 1.4 trillion
dong ($66.4 million) in one of the country's most high-profile
His is just the tip of the iceberg, one of many going to
trial involving bank executives who stole hundreds of millions
of dollars by exploiting loopholes and lax regulation during
Vietnam's 2003-2007 economic boom, when dozens of banks grew
fast and lent frivolously.
Their weaknesses were exposed when the economy overheated,
revealing Southeast Asia's highest ratio of non-performing
loans, which made credit off-limit for most Vietnamese, plunged
at least 150,000 businesses into bankruptcy and put the brakes
on retail and real estate growth.
Kien faces life in prison if found guilty of tax evasion,
conducting illegal business, "swindling to appropriate assets"
and deliberately violating state laws on economic management.
"I'm innocent, I'm accused unjustly," the silver-haired Kien
said as he stood in shackles before the bench with seven other
accomplices during a closed hearing.
"I request a public trial, as soon as possible, so everyone
can know the truth in this case."
Kien, 50, once owner of former Vietnamese soccer champions
Hanoi ACB, is on trial with ACB's former chairman Tran Xuan Gia
and seven other alleged accomplices, who each face 20 years in
Gia, 75, was Vietnam's minister of investment from 1996 to
2001 and is now in poor health. He did not attend the hearing
and judges agreed to postpone the trial of all nine defendants
early in the afternoon.
The prosecution says Kien committed massive fraud as
chairman of six investment companies permitted only to trade in
gold, which illegally bought stock in ACB, 15.3 percent owned by
Standard Chartered Bank and 7.4 percent owned by
He is also accused of forging documents to defraud top steel
firm Hoa Phat Group of 264 billion dong in shares and
of conspiring to commit fraud with another banker, 36-year-old
Huynh Thi Huyen Nhu.
Nhu was jailed for life in January for co-opting 21
colleagues to steal $190 million of her customers' deposits
while at Vietinbank, Vietnam's biggest partly private
bank. Some 719 billion dong of that money came from deposits by
ACB staff, at Kien's request, according to the indictment.
Fitch Ratings downgraded ACB to negative last year, in part
because of potential losses from "exposure to companies where
Nguyen Duc Kien holds senior positions".
Toxic debt and rampant fraud have dented the image of
Vietnam's fledgling banking sector but economists say it will
struggle to win confidence of investors as long as foreign banks
remain limited to only small stakes.
A single "strategic foreign investor" - an entity with $20
billion of registered capital - can own just 20 percent of a
local bank, within a total 30 percent foreign shareholding.
But experts and foreign bankers say there is little
incentive to invest in, overhaul and re-capitalise Vietnam's
troubled lenders with only small stakes on offer.
Independent economist and former government advisor Le Dang
Doanh said fraud would continue to plague the banking sector as
long as cross-ownership, much of which involves state-run firms,
and weak regulations, were allowed to continue.
"It's all too clear that the Vietnamese banking system
contains many serious problems," he said. "If the laws and
supervision in Vietnam were good, we could have avoided all
($1 = 21,096 Vietnam Dong)
(Writing by Martin Petty; Editing by Jacqueline Wong)