China fines Deloitte a record $30.8 million in Huarong case
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Ministry of Finance of China imposed penalties on Deloitte Touche Tohmatsu (the Chinese division of Deloitte) for numerous violations during the audit of China Huarong Asset Management in 2014-2019. As punishment, the Ministry of Finance closed the Beijing office of the auditor for three months and imposed a fine of 212 million yuan ($30.8 million). This is an unprecedented amount for the Chinese regulator, which is 25 times higher than the total amount of fines issued by the Ministry of Finance to consulting companies for the whole of 2022.
Chinese authorities launched an investigation into Huarong and its then-leader Lai Xiaoming in April 2018. Later he was expelled from the Communist Party for numerous serious violations of party discipline and the laws of the country, including giving and receiving bribes, and embezzlement of state property. In August 2020, Lai Xiaoming appeared in court. He was accused of accepting bribes of 1.79 billion yuan ($277.3 million) and illegally receiving public funds of 25.13 million yuan. In January 2021, Lai Xiaoming was found guilty and sentenced to death. The sentence was carried out on January 29, 2021.
Huarong itself failed to release its 2020 financial report in the spring of 2021, causing its dollar bonds to plummet in price. The Chinese authorities had to intervene in order to save one of the country’s largest asset management companies from collapse. As a result, the government ordered the country’s banks to provide loans to Huarong in the amount of $6.6 billion.
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