The founder of Bain Capital portfolio company GOME Electrical Appliances Holdings has been sentenced to 14 years in prison on insider trading and bribery charges.
Huang Guangyu, who resigned as company chairman in January last year but remains the company's largest shareholder with a 34 percent stake, was also fined a record RMB600 million (€72 million; $87.8 million). His wife was also jailed on insider trading charges.
According to a statement released by Hong Kong-listed GOME, a company subsidiary has also been fined RMB5 million by the Beijing Second Intermediate People’s Court in relation to a bribery offence committed between 2006 and 2008 when Huang was chairman.
The statement said the fine did not have any “substantive adverse impact on the operation and financial condition of the company”, which has “sufficient funds to support its operation” and a “reasonably sound and stable” capital structure. The conclusion of the case had seen the “uncertainties” surrounding the company “greatly reduced”, the statement noted, although it said the firm was consulting with its lawyer on the possibility of lodging an appeal.
Sustainable corporate development and corporate governance improvements would be a key focus going forward, the statement added.
In June 2009, Bain beat several other private equity suitors to pay $223 million in convertible bonds for a potential 12.8 percent stake in GOME. An open share offer launched at the same time subsequently diluted Bain's stake to 9.8 percent, but clauses in the deal give Bain the option to eventually convert to a stake of up to 23.5 percent in the company. Its current holding is 10.8 percent according to a company report.
Other shareholders in the company include JP Morgan Chase and Morgan Stanley, which hold 9.75 percent and 7.38 percent respectively.
Huang was originally detained by authorities in November 2008, but that has not prevented him from involving himself in GOME's affairs. Last week saw Bain's three board members, Jonathan Zhu, Ian Reynolds and Wang Li Hong, fail to get reappointed at the company's annual general meeting when two key shareholders voted against them.
Though an emergency meeting of the GOME board later reinstated the Bain professionals, media reports laid the blame for the ousting at the door of Huang-controlled affiliates and shareholders Shinning Crown Holdings and Shine Group. Had the Bain representatives not been reinstated, the company would have been forced to pay Bain a $352 million penalty fine, it told the Financial Times.
Set up in 1987, GOME is one of the largest retailers of electrical appliances and consumer electronics in Mainland China and Hong Kong.
Bain did not respond to requests for comment by press time.