Shanghai Electric chief's firms face lawsuit
23 August 2006
The Shanghai government's pension fund management arm is suing two companies controlled by Zhang Rongkun, Shanghai Electric Group's former director, in a move to retrieve about US$433.09 million of the fund, the South China Morning Post reported. The government unit, which oversees more than US$1.38 billion of the city's corporate annuity, is demanding Fuxi Investment and a unit it controls repay US$56.49 million in loans and US$376.60 million in funds they managed for the government since 2002, according to a Fuxi statement yesterday. Mr Zhang founded Fuxi and is the chairman of the company. The Fuxi scandal is believed to be connected to corruption investigations of several senior officials and businessmen in Shanghai, including Zhu Junyi, a director of the city's Labor and Social Security Bureau, who has been removed from his post. Analysts said the government was seeking repayment from Fuxi because it believed the fund was misused to buy toll roads. Fuxi controls two toll-road projects, one in Shanghai and the other connecting Hangzhou and Shanghai. It also holds stakes in Shanghai Electric, one of China's largest makers of power generation equipment, and three reinsurance firms.