The real estate tycoon at the center of a US$12.46 billion fraud case has been sentenced to death, a penalty which appears to have appeased an outraged Vietnamese public but may not be enough to stem rising concerns about the health of the financial system.
Truong My Lan, chairwoman of Van Thinh Phat Holdings Group, was sentenced to death on April 11 by the Ho Chi Minh City People’s Court.
The trial gripped the Vietnamese public, not least because the staggering pilfered sums were often delivered in lowly Styrofoam boxes, a common household item often reused to grow pesticide-free “clean” vegetables in Vietnamese homes.
Lan was convicted for using her influence at the local Saigon Commercial Bank (SCB) to orchestrate a scheme involving 916 false loan applications and the embezzlement of over 304 trillion dong ($12.46 billion) from SCB between 2018 and 2022 – a sum larger than the capitalization of most Vietnamese banks.
In her confession, Lan admitted to paying a bribe of $5 million in cash to Do Thi Nhan, the former head of Inspection and Supervision Department II under the State Bank of Vietnam. The money was reportedly concealed within three Styrofoam boxes.
The case likely only scratches the surface of endemic systemic corruption in Vietnam, where bribery is known to be deeply ingrained in the Communist Party-dominated political and economic systems.
(In another well-publicized case, Phan Van Anh Vu, nicknamed “Vu nhom”, the former chairman of Bac Nam 79 Construction JSC, reportedly also used Styrofoam boxes to transfer a $4 million bribe to Nguyen Duy Linh, a former high-ranking official in the Ministry of Public Security.)
The scale of the alleged corruption in the Van Thinh Phat case has sent shockwaves through Vietnam’s already fragile financial system, prompting the State Bank of Vietnam to funnel nearly $24 billion in “special loans” into SCB as of early April, according to news reports.
The losses to SCB, estimated at 498,000 billion dong ($20.1 billion), has raised the specter of bank runs, similar to the panic that gripped depositors at Asia Commercial Bank (ACB) in 2012 after the arrest of tycoon Nguyen Duc Kien for corrupt practices.
Memories of that chaotic episode underscore the enduring vulnerability of Vietnam’s financial system, confidence in which can be rocked by rumors true or false.
The State Bank of Vietnam’s past interventions, including its 2015 takeover of three failing banks, namely CB Bank, Ocean Bank, and GP Bank), were seen by some at the time as designed to prevent broad economic and financial collapse.
With deposit insurance capped at a meager 125 million dong (approximately $5,000) per person, SCB’s failure could have a contagion effect as deposit holders question the health of other Vietnamese banks.
Fragile house of cards
Indeed, the Van Thinh Phat case has exposed lingering systemic weaknesses in Vietnam’s financial sector. Weak regulatory oversight and a lack of transparency has created fertile ground for corruption to flourish.
Powerful individuals with vested interests often exploit loopholes and manipulate the system for personal gain. This not only undermines public trust in financial institutions but also discourages foreign investment, thus hindering economic growth.
The national conversation surrounding the Van Thinh Phat trial suggests a growing public desire for deep reform. The very fact that such large-scale corruption can be exposed and brought to trial offers a certain glimmer of hope.
The Styrofoam box, once a symbol of Vietnamese resourcefulness, may yet become a catalyst for change – transformed from a vessel for moving ill-gotten gains into a vehicle for greater transparency and accountability.
The road to reform, to be sure, will be arduous. Entrenched networks of powerful individuals benefitting from the corrupt status quo will inevitably resist change.
Furthermore, cultural norms that emphasize personal connections and a certain deference to authority have created an environment where speaking out against corruption carries grave risks to whistle blowers.
Despite the challenges, Vietnam has a unique opportunity to leverage the public outrage generated by the Van Thinh Phat case to push for meaningful governance and banking reforms.
Strengthening regulatory frameworks, promoting greater transparency in financial institutions and fostering a culture of whistleblowing will be crucial. International cooperation in areas like anti-money laundering can also play a vital role.
The fight against corruption in Vietnam is far from over. The Van Thinh Phat trial has exposed the problem’s breadth, depth and enormity. Whether it will be leveraged to create a more just, resilient and accountable system, however, is yet to be seen.
Well done, Vietnam! If this happens in Western “democracies”, She,ll probably “forced’ to resign with a big fat bonus.
Nicely written article. Straight to the point.
Hopefully she’s not just a scapegoat for high-level politicians who involved/benefited but got a slap in the hand (resignation/scotch free). My speculation for which they do not trial any high level politicians is because they do not want to taint the “good” image of the party.