April 28, 2014 / 11:56 PM / 4 years ago

U.S. mistrial declared against executive in Chinese reverse merger case

NEW YORK, April 28 (Reuters) - A U.S. judge declared a mistrial on Monday in a case brought by the Justice Department against a former executive at a Chinese company accused of misappropriating corporate funds after a reverse merger.

U.S. District Court Judge Richard J. Leon of the District of Columbia granted the mistrial in the fraud case against Chao Jiang, former vice president of China North East Petroleum Holdings, after a jury deadlocked on charges against him, according to defense counsel and court records.

Jiang was among the first executives at a Chinese reverse merger company to face criminal charges since a U.S. crackdown began in 2011 against suspected fraud at Chinese companies that entered the U.S. capital markets through backdoor mergers with U.S. shell companies. The U.S. Securities & Exchange Commission has pursued dozens of civil cases.

Jiang was on trial in Washington over the misuse of $1.2 million from the oil exploration company, formed in 2004 through a reverse merger with a U.S. shell company.

The company, which was delisted from the New York Stock Exchange in 2012, told investors it planned to use funds from a stock offering for general corporate purposes and to repay prior corporate debt.

But, prosecutors said, Jiang and the company’s chief executive wired $1.2 million of the proceeds to family members who used the money to buy a home, jewelry and a car.

The government also accused Jiang of falsely testifying that no family members received more than $500 from the company, even though some $965,000 had been wired to his father.

Michael Li-Ming Wong, who represents Jiang, said he was gratified his client had not been convicted.

“Any time you’re facing the full force of the Justice Department, the SEC and the U.S. Attorney’s office, that is tough,” Wong said.

It is unclear if Jiang will be tried again. A spokesman for the Justice Department declined comment.

The case is USA v Hongjun et al, U.S. District Court, District of Columbia, 13-cr-00152. (Reporting By Karen Freifeld; Editing by Cynthia Osterman)

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