The billionaire property queen on death row in Vietnam

Nobody is untouchable as the Communist Party’s anti-corruption drive ensnares a growing roll call of the wealthy and powerful.

The police arrived early for the start of Truong My Lan’s second trial. The disgraced Vietnamese real estate mogul had already been convicted of masterminding a $12.3 billion fraud back in April, and sentenced to death by lethal injection. Five months later, outside the People’s Court in the heart of Ho Chi Minh City, officers set up a huge TV screen and arranged blue plastic stools under a giant tarpaulin so people could watch the live stream of the second act, whatever the weather. Sure enough, the crowds came.

By the time Lan, once one of wealthiest people in Vietnam, and her 33 co-defendants appeared in court at 8:15 a.m., scores of onlookers were in place. Many held bonds issued through Lan’s property empire and had seen their investments all but wiped out. A handful waved the documents in the air as they pushed against police and demanded to be let into the court complex. Across the street, a few bystanders wore T-shirts with slogans insisting that the central bank make them whole — an unusually public protestation in a one-party state with no local, independent media and where human rights organizations are constrained.

Both the police and onlookers were out in force again Thursday, when the court found Lan guilty on charges of money laundering, fraudulent appropriation of assets and illegally transporting about $4.5 billion across the border. She received a life sentence. Lan has contested some of the charges in both trials, but Vietnamese court proceedings don’t require defendants to enter specific pleas.

Lan is just one of the high-profile targets of the Communist Party’s escalating anti-corruption campaign. Designed to show the masses that the system can be trusted and boost the country’s appeal to overseas investors, it’s ensnared a growing roll call of the rich and powerful — including three deputy prime ministers and two presidents — as well as tens of thousands of small-fry officials. The roughly decade-long drive is popular with many Vietnamese people and foreign stakeholders who applaud efforts to tackle a culture of endemic graft.

But the opaque nature of many investigations and the resignation of high-level government officials on vague charges makes many suspicious that the crackdown is also tied to political infighting. It’s also weighing on the economy. Bureaucracy has slowed to a crawl, as pen-pushers fearful of being swept up in police investigations slow-walk approvals of legal documents. Financing for real estate projects is now difficult. Meanwhile the sheer scale of Lan’s case, and the willingness of inspectors to take bribes to look the other way, raises questions about the government’s ability to protect the stability of the financial system.

“The ongoing anti-corruption campaign risks paralyzing businesses,” said Huong Le Thu, Deputy Director of the Asia Program at the International Crisis Group. “It could be a double-edged sword.”

Vietnam’s Ministry of Foreign Affairs didn’t respond to an email seeking comment.

Once a poor country known mainly as a maker of sneakers and T-shirts, Vietnam is now a rising economic star with a population of roughly 100 million. As Western companies scramble to find manufacturing alternatives to China, billion-dollar factories for global electronics suppliers are rising up from former rice paddies. Foreign investors pledged to invest a record $39.4 billion into the country in 2023.

It already manufactures half of Samsung Electronics Co.’s smartphones, and AirPods are rolling off the assembly lines of Apple Inc.’s key suppliers Luxshare Precision Industry Co. and GoerTek Inc. Apple’s Tim Cook and Nvidia Corp.’s Jensen Huang are just two of many global business leaders to visit recently. International tourism is booming, with wealthy foreigners drawn to the country’s picture-postcard beaches, burgeoning fine-dining scene and ancient temples.

But Vietnam’s political and regulatory system hasn’t kept pace with the rapidly expanding economy and an explosion in individual wealth. Petty, and not so petty, graft is a routine part of life, from traffic police bribes to bureaucrat payoffs to ensure smooth property transactions. The late Communist Party chief Nguyen Phu Trong made rooting out such profiteering his signature policy. He dubbed the campaign a “blazing furnace” that nobody could avoid.

Trong died in July, but his successor President To Lam was his former minister of public security and primary enforcer. The 67-year-old was found guilty by a German court last year of personally aiding in the violent kidnapping of a Vietnamese fugitive in a Berlin park. (The Vietnamese government rejects that characterization, saying the businessman who later confessed to embezzlement on TV turned himself in.) And he’s made it clear the crusade will continue, telling a briefing in August that it will go on with “a motto of non-stop and no prohibited areas.”

“Sometimes it feels like it can be manipulated as a political tool”

Lan’s second trial was under his watch. Aside from the staggering sums involved — three times as much money as the 1MDB scandal and $4 billion more than crypto entrepreneur Sam Bankman-Fried’s fraud case — Lan’s case stands out because so much evidence is being aired in public via the state-run media. Most of those ensnared over the years have simply slid out of public view, and in cases involving senior officials, the government typically offers only vague and sparsely worded accounts of their wrongdoing. That opacity makes the system ripe for exploitation and seeing who will and won’t survive has become something of a blood sport. The new president himself was the subject of social media outrage when in 2021, at the same time he was overseeing various probes, he was filmed in London being hand-fed a gold-leaf-encrusted steak by a celebrity chef.

“They created a system of internal agencies that carry out purges, investigations and arrests of corrupt officers, but they don’t really have strong accountability mechanisms,” said Nguyen Khac Giang, a visiting fellow at Singapore’s ISEAS-Yusof Ishak Institute. “Sometimes it feels like it can be manipulated as a political tool to push against rivals.”

Rags-to-Riches

Before her arrest, Lan was a Vietnamese rags-to-riches icon, affectionately known as Madam Lan. She got her start in the 1980s selling make-up and hair accessories from her family’s stall inside Ho Chi Minh City’s Ben Thanh Market.

It was a time of rapid change. After the war, the country had reunified under communism, but it was financially ruined, internationally isolated and heavily dependent on Russia. In 1986, the party embarked on a rapid series of market reforms and the private sector went from officially contributing almost nothing to the economy to generating around 46% of the country’s gross domestic product in 2023. At the same time, graft became normalized for front-line civil servants seeking to subsidize low wages, and even teachers and medical professionals sought cash to ensure good grades or preferential treatment. On a grander scale, state officials used their authority to secure contracts for family members, or make policy decisions that favored well-connected companies.

In this febrile environment, Lan and her husband, Hong Kong businessman Eric Chu, saw the opportunity to snap up property and land cheaply. In the early 1990s, she founded Van Thinh Phat Co., which became one of Vietnam’s premium real estate companies. Most of the retailers crammed into Ben Thanh Market never met Lan and view her ascent into the capitalist stratosphere as a modern Vietnam fairytale. The humid and musty venue is just a short walk from the Reverie Saigon Hotel, Lan’s crown jewel, which boasts gold-plated elevators, chandeliers and suites costing thousands of dollars a night.

It’s unclear how deep Lan’s connections were to high-level government officials, but in May, the Communist Party said it had punished former Politburo member and Ho Chi Minh City Chairman Le Thanh Hai by discharging him of all party duties for unspecified violations tied to the use of land, investment, planning and development of projects connected to Lan’s real estate company. Hai hasn’t commented on the allegations. Rumors also persist about Lan’s links to other prominent figures also now disgraced.

In retrospect, despite her celebrated philanthropy and presence on business delegations to China, there were early signs all was not right. In 2005, she was sued by Indonesian businessman Ted Sioeng, once prominent enough to sit next to Bill Clinton at a fundraising dinner, for the return of $6 million he’d put into two projects. He later withdrew his complaint and the case was eventually settled. Sioeng couldn’t be reached for comment. In 2014, Duong Chi Dung, the former chairman of a state-owned shipping company, testified in another trial that he helped Lan pay a $1 million bribe to a senior official in relation to a port project. It’s unclear whether she was ever investigated over the claim but there was no public punishment or reprimand. Her lawyer declined to comment.

By 2022, the focus of the anti-corruption drive had expanded to the real estate industry. That April, police detained the chairman of hotel developer Tan Hoang Minh Group on fraud charges, alleging money raised from bond issuances hadn’t been properly used. He got seven years in jail. The prime minister then ordered the finance ministry and central bank to review corporate bond issuances by property firms as part of a sweeping probe of the sector, leading to a widespread funding crunch.

On Oct. 8 that year, police announced Lan’s arrest in connection with an investigation into the issuance and trading of bonds. The news whipsawed society. Scores of panicked clients of Saigon Commercial Bank, then the nation’s fifth-largest lender, pushed through the doors of its branches to pull cash out of accounts the Monday after the announcement.

The bank run lasted for days, ending only when the state effectively took control of the lender. While all deposits were guaranteed, the roughly 36,000 bondholders who allegedly invested some $1.2 billion through four companies linked to Lan have been left in limbo, wondering whether they’ll ever see their money again.

“I have never seen such a case of this magnitude”

The bond irregularities turned out to just be the start. Just over a year later in November 2023, police laid out their full findings. A 300-page court summary detailed how Lan’s VTP had built an ecosystem of more than 1,000 businesses, which included groups of “ghost companies.” These were used to secure loan deals and register for collateral to withdraw money from SCB. Once the loans were approved, the money was either transferred to their bank accounts or directly picked up in cash. More than a dozen government inspectors were ultimately convicted of taking bribes to ignore issues.

“I have never seen such a case of this magnitude, not only in the tremendous size of losses but the calamity it caused in society,” said Hanoi-based economist Nguyen Tri Hieu, general director at Toan Cau, a research institute for finance and real estate. “And the question remains whether the systemic shortcomings have been corrected or if the previous ways of doing things are still going on.”

Stasis Strikes

Persuading spooked foreign investors that none of this turmoil changes anything for them is something that all Vietnamese factions agree on as the country tries to make the journey from frontier to emerging market status.

In March, the Communist Party’s Central Committee announced that President Vo Van Thuong had resigned after taking responsibility for violating “regulations,” without giving any further detail. His predecessor had resigned over a series of corruption scandals a little over a year earlier. Ted Osius, president and chief executive officer of the US-Asean Business Council and a former US ambassador to Vietnam, had a meeting scheduled with Prime Minister Pham Minh Chinh just as the news about Thuong’s resignation broke. Waiting with a delegation of around 40 American business representatives including those from Boeing Co., Coca-Cola Co. and Meta Platforms Inc., they had no idea whether the prime minister would show up.

But Chinh walked in only a few minutes late — and with 10 of his cabinet ministers. “The prime minister was doing his usual thing: directing ministers to fix this problem, resolve this problem, do this for the business community,” Osius said. The meeting lasted for nearly two hours. “The message was super clear. There’s this political thing going on, but it’s business as usual.”

Even if investors cannot be confident that their government contacts, however senior, will even be in place next week, Vietnam still has significant appeal. As US-China tensions escalate and tariffs on everything from electric vehicles to syringes mount, Vietnam offers established trade agreements, proximity to existing supply chains and a cheap, young, well-educated labor force. While there is lingering anxiety in the business community about how further investigations could ripple across the economy and what other companies could be caught up, unlike Chinese President Xi Jinping’s anti-graft drive, in Vietnam it’s rare for foreign business people to be picked up.

New leader Lam also embarked on a diplomatic tour to try and drum up more business and project a sense of continuity. In August he met with Xi in Beijing, before visiting the US in September to meet with President Joe Biden and then President Emmanuel Macron in Paris in October. All of the leaders pledged to work closely with Vietnam.

“If you look at how they’re balancing the interests of the two biggest trading partners, China and the US — they are doing actually quite an outstanding job,” said Andreas Vogelsanger, CEO at Asia Frontier Capital (Vietnam) Ltd. “They are really smart in how they integrate themselves into the geopolitical environment.”

There are some signs of progress in the battle against corruption, with the latest Transparency International Corruption Perceptions Index citing Vietnam as one of the most improved countries. Still, one in three companies say they paid “informal charges” last year, according to a recent report by USAID and the Vietnam Chamber of Commerce & Industry. Businesses also complain about inconsistent regulatory interpretation and an unclear legal framework.

“This is a difficult place to do business”

What’s more, the relentless anti-corruption drive has gummed up the wheels of government, creating bottlenecks for capital investment. Disbursements of public investment funds have slowed to a crawl, with less than half of the total appropriated in the first nine months of the year actually spent despite repeated calls by top officials to get things moving.

“This is a difficult place to do business,” said Peter Ryder, Hanoi-based chairman of Indochina Capital, a real estate advisory, investment and development company, who has operated in Vietnam for more than three decades. “But if you can be patient, persistent and persuasive, you can make things happen.”

At the time of her arrest, Lan was renovating an old colonial mansion called Villa le Voile that she’d purchased for $35 million in 2015. It was meant to have opened by now as a dining and cultural destination, but it sits idle with weeds sprouting in the courtyard and a lone security guard stationed inside.

There’s a similar picture of neglect at another signature project of Lan’s south of Ho Chi Minh City: a $6 billion joint venture with Malaysian billionaire Lim Kok Thay’s Genting Group for an office, villa and resort complex with the nation’s first yacht port. The area was a beehive of activity, with a newly paved road enabling construction trucks to access the site and a dike built to prevent tidal flooding. And then everything stopped. Ducks, pigs and chickens now have the run of the 118-hectare (292-acre) site, which juts into the confluence of two rivers.

“Now everything is frozen”

Le Thi Hong’s family sold their rice farm to the luxury venture and were getting ready to move. “But after Lan got arrested, they came back and told us that we can stay,” the 42-year-old said. “Now everything is frozen and we don’t know what will happen next.” Genting didn’t reply to requests for comment.

In her first trial, Lan took a combative approach. There were flashes of temper, disagreements with the judge and attempts to push the blame on subordinates. This time around she was far more emollient. She pleaded to be allowed to sell her property assets, pledging she’d use the proceeds to compensate bondholders. Paying back those who have been financially hurt is perhaps her best chance of avoiding the death penalty. Such sentences are common for drug-related crimes in Vietnam, and the courts have dispensed the death sentence for economic crimes before, including to two former executives of state-owned Vietnam National Shipping Lines about a decade ago and the ex-CEO of Ocean Commercial Joint State Bank in 2017.

“The government wants to send a strong message that everybody should work under the same law, but I think they are also aware that giving the death sentence to her may send a negative signal about the business environment in Vietnam, and they will consider it carefully,” said Le Hong Hiep, a former Vietnam foreign ministry official turned senior fellow with the ISEAS-Yusof Ishak Institute in Singapore. “So it depends on how cooperative she is.”

Lan also frequently made pleas for mercy — including for her chauffeur. His notebooks, detailing how he moved $4.4 billion in cash across the city to Lan’s apartment and office, provided some of the key evidence against his former boss. He was never charged in the first trial, but has been in custody for the past two years.

Lan told the court he was kind, trustworthy and not at all greedy. On Thursday, he was sentenced to two years and a half years in jail, meaning he could be free in about six months with credit for time served. For Lan herself there’s no such hope. Even if her appeal against the death sentence from her first trial succeeds, she’s facing a lifetime behind bars. Tearfully, Lan told the court that she never intended to commit fraud, but was prepared to take responsibility. “I consider this my destiny.”

By Philip Heijmans & John Boudreau – Bloomberg – October 19, 2024