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Huang Yifan, reporter of Economic Observer In 2016, Western Resources (600139.SH) divested all its equity in Gansu Yangba Copper Co., Ltd. (hereinafter referred to as "Yangba Copper").

After Shi Chuming acquired the equity of Yangba Copper, Shi Chuming and his brother Shi Yunkun caused Yangba Copper to be auctioned off by the court due to personal debts and guarantees. Subsequently, Que Wenbin reported the case to the public security organs on the grounds of being defrauded.

"There is something else going on here," Yang Yingxia said after providing reporters with several documents on August 11. Yang Yingxia provided reporters with a criminal judgment issued by the People's Court of Kang County, Gansu Province on August 26, 2021 (hereinafter referred to as the "Criminal Judgment"). This criminal judgment shows that Shi Chuming actually held the shares of Yangba Copper on behalf of Que Wenbin, the former actual controller of Western Resources.

Thus, starting with Western Resources' sale of Yangba Copper, a controversial "fraud case" was implicated. The above criminal verdict shows that on August 26, 2021, the Kang County People's Court found Shi Yunkun, Wang Hui, and Shi Chuming guilty of fraud due to the Yangba Copper equity issue and sentenced them to 15 years, 14 years, and two years in prison, respectively, with two years and six months of probation.

Yang Yingxia told reporters that Wang Hui is still appealing.

The proxy holding behind the 181 million yuan transaction

On December 29, 2016, Western Resources and natural person Shi Chuming signed the "Yangba Copper Rights Transfer Agreement", agreeing to transfer its 100% equity in Yangba Copper to Shi Chuming at a transfer price of RMB 181 million.

According to the agreement between the two parties to the transaction, the above-mentioned equity transfer price shall be paid in one lump sum. Shi Chuming shall pay the equity transfer price of RMB 181 million in one lump sum within 3 working days after the effectiveness of this agreement.

Regarding the major buyer Shi Chuming, Western Resources emphasized that the board of directors had conducted necessary due diligence on his basic situation and his ability to execute the transaction.

According to the announcement of Western Resources, Shi Chuming is the legal representative of Shenzhen Weilida Fund Management Co., Ltd. (hereinafter referred to as "Weilida Fund"); Chairman of Shenzhen Weilida Shiqiao Technology Industry Research Institute Co., Ltd. and the legal representative of Anhua Kechuang Technology Investment Co., Ltd. Western Resources emphasized that there is no relationship between the company and Shi Chuming.

However, according to the materials provided by Yang Yingxia, the buyer who was able to pay 181 million yuan in cash at one time was not actually Shi Chuming. Que Wenbin was the "buyer" behind the transaction, and the buyer "Shi Chuming" that appeared in the announcement was actually Shi Yunkun.

According to the above-mentioned criminal judgment, it was found through trial that in July 2016, Shi Yunkun impersonated his younger brother Shi Chuming and contacted Que Wenbin, the original actual controller of Western Resources, under the pretext of owning multiple mineral resources. He lied that he was a veteran, an anti-drug hero, and had extensive high-level connections in order to gain Que Wenbin's trust.

According to Que Wenbin in the criminal judgment, "When I negotiated with company personnel about holding shares of Yangba Copper, I did not avoid Shi Yunkun. He proposed that he hold the shares on my behalf, and I agreed. Through Liang Ce's introduction, Xing Yinghong and I cooperated to exchange 180 million yuan of funds and transferred the shares of Yangba Copper to Shi Chuming for holding."

However, why did Que Wenbin choose to divest Yangba Copper from the listed company through "proxy holding"? Why did Que Wenbin trust Shi Yunkun, a stranger he had just met, and hand over the important "proxy holding" operations to the latter? To this day, these are still questions.

The reporter contacted Western Resources' former controlling shareholder Sichuan Hengkang Development Co., Ltd. (hereinafter referred to as "Hengkang Development"), but as of press time, the call was not answered.

Behind the auction of Yangba Copper for debt repayment

After Shi Chuming "nominally" obtained the equity of Yangba Copper, on October 10, 2017, the Intermediate People's Court of Baoji City, Shaanxi Province issued an execution order, freezing Shi Chuming's 100% equity in Yangba Copper.

According to people familiar with the matter, the freezing of Shi Chuming's 100% stake in Yangba Copper was related to another debt dispute involving a businessman named Wang Hui and Shi Yunkun.

"Wang Hui had been a member of the Baoji Municipal Committee of the Chinese People's Political Consultative Conference and was involved in some steel trading business." Yang Yingxia told reporters, "Shi Yunkun owed Wang Hui some money, and Shi Yunkun never paid it back, which led to some subsequent events."

According to the criminal judgment provided by Yang Yingxia, on November 3, 2015, Baoji Bagang (Group) Metal Materials Co., Ltd. (hereinafter referred to as "Baoji Bagang"), which was actually controlled by Wang Hui, sued Shi Yunkun, Yunnan Weilida and Weilida Fund for a private loan dispute. On December 21, 2015, after mediation by the Baoji Intermediate People's Court, Shi Yunkun and others returned 23.0053 million yuan and interest, and the case was settled through mediation.

However, Shi Yunkun did not fulfill the repayment obligations specified in the mediation agreement.

Yang Yingxia told reporters that Wang Hui searched the Internet and found the announcement of Yangba Copper Industry taken over by Shi Chuming, so he went to find Shi Yunkun to find out the situation and asked Shi Yunkun to pay back the money.

On March 21, 2017, Shi Chuming and Wang Hui signed an "Execution Guarantee Commitment", using Shi Chuming's 100% equity in Yangba Copper to guarantee the debt between Wang Hui and Shi Yunkun, with a total guarantee amount of 65 million yuan. Subsequently, in October 2017, the aforementioned 100% equity in Yangba Copper was frozen.

In addition, according to the criminal judgment, on February 2, 2018, Wang Hui and Shi Yunkun negotiated to transfer Wang Hui's 25% equity in Yunnan Weilida Geophysical Survey Co., Ltd. to Shi Yunkun at a price of 10 million yuan. The transfer agreement was signed by Shi Chuming, and the Yangba Copper shares under Shi Chuming's name were used as collateral for the transfer.

On April 1, 2018, Wang Hui sued Shi Chuming for a share transfer dispute, demanding payment of the transfer fee and interest. The Baoji Intermediate People's Court ruled that Shi Chuming pay 10 million yuan in share transfer fees and interest.

On July 17, 2018, Wang Hui applied to the Baoji Intermediate People's Court for an appraisal and auction of 100% of Yangba Copper's equity. Subsequently, 100% of Yangba Copper's equity was auctioned, and Baoji Bayi Steel accepted Wang Hui's commission and won the bid on November 30, 2018 at a total price of 50.57814 million yuan, with the debt offsetting the auction proceeds.

At this point, Wang Hui acquired 57.56% of the shares of Yangba Copper, and Baoji Bagang acquired 42.44% of the shares of Yangba Copper.

Leading to the "fraud case"

After Wang Hui acquired the equity of Yangba Copper, Que Wenbin and Hengkang Development reported the case to the Kang County Public Security Bureau.

According to Que Wenbin's statement in the above-mentioned criminal judgment, at the end of 2017, after he discovered that Yangba Copper was frozen by the Baoji Intermediate People's Court, "I asked Shi Yunkun what was going on. He said that the court was messing around and he would solve it immediately. After that, I kept asking him, and he kept saying that it had been solved, and kept pushing it off until Yangba Copper was auctioned off by the court."

On September 23, 2019, Shi Yunkun was arrested by the Kang County Public Security Bureau on suspicion of fraud, criminally detained on September 24 of the same year, and arrested on October 28 of the same year. Wang Hui was arrested by the Kang County Public Security Bureau on August 27, 2020 on suspicion of fraud, criminally detained on August 28 of the same year, and arrested on September 29 of the same year with the approval of the Kang County People's Procuratorate.

According to the criminal judgment, on August 26, 2021, the Kang County People's Court found Shi Yunkun, Wang Hui, and Shi Chuming guilty of fraud and sentenced them to fifteen years, fourteen years, and two years in prison, respectively, with a two-year and six-month reprieve.

The Kang County People's Court held that Shi Yunkun cheated and held shares of other people's companies. When dealing with debts with Wang Hui and others, knowing that he had no execution ability, he instructed Shi Chuming to use the shares held on behalf of others to guarantee his personal debts at the request of Wang Hui. At the same time, he instructed Shi Chuming to purchase a large amount of company shares held by Wang Hui and use the shares held on behalf of others to guarantee the debts incurred by the purchase of shares, which led to the court forcibly executing the shares held on behalf of others to repay Shi Yunkun's debts, causing huge losses to the victims, and the amount was extremely huge.

Regarding Wang Hui, the Kang County People's Court held that Wang Hui was fully aware that the shares of Yangba Copper held by Shi Chuming were held on behalf of others. With the cooperation of Shi Yunkun and the passive participation of Shi Chuming, he used the shares held on behalf of others to guarantee the original debts of Shi Yunkun and others with Wang Hui and to purchase Wang Hui's shares. He artificially created legal facts related to the shares held on behalf of others, and dragged the shares of Yangba Copper held by Shi Chuming into the litigation execution of the case. He ultimately acquired Yangba Copper through compulsory execution, causing huge losses to the victims, in an extremely large amount.

Subsequently, Shi Yunkun and Wang Hui were dissatisfied and filed an appeal. According to the criminal ruling made by the Longnan Intermediate People's Court of Gansu Province in January 2023 provided by Yang Yingxia, the court believed that the original judgment was unclear in facts and insufficient in evidence, so it revoked the criminal judgment of the Kang County People's Court and sent it back to the Kang County People's Court for retrial.

It is understood that in April this year, Yang Yingxia commissioned experts to conduct legal argumentation on the case in which Wang Hui was convicted of fraud. Legal experts believe that Wang Hui, as a creditor, discovered that the equity transfer in the case was announced and registered under Shi Chuming's name, and applied to the court to execute the equity in the name of the debtor, which has factual basis and legal basis. Shi Yunkun, Shi Chuming, and especially Western Resources Company and its actual controller Que Wenbin, who are interested parties in the equity transfer and transfer, have the obligation to explain the substantive and legal situation of the equity holding in the case, and have the right and obligation to raise execution objections and execution objection lawsuits based on this; however, they all adopted a negative and silent attitude in the civil execution procedure, which led to the execution court believing that they acquiesced that the equity in the case was acquired by Shi Chuming, and made a ruling to execute the equity in the case accordingly.

The legal opinion formed by the above-mentioned legal experts shows that since the actual investor in this case falsely announced the transfer of the equity involved and registered it in the name of the proxy holder Shi Chuming, the applicant Wang Hui developed a reliance interest based on the fact disclosed in the announcement, and thus applied to the court to seal and execute the equity involved in the case registered in the name of the person to be executed Shi Chuming. Moreover, during the entire process of sealing and executing the public auction, the stakeholders of the equity involved, Shi Yunkun and Shi Chuming, especially the actual investor, the company involved and its actual controller, "failed" to exercise their rights protection actions, which made Wang Hui convinced that the equity involved in the case belonged to Shi Chuming.

Legal experts said that the equity dispute in the civil enforcement case involved in this case is completely a matter to be resolved by civil litigation. In the process of civil seizure and ruling execution, and even the public auction of the equity involved in the case, the "victim" always refused to exercise rights protection; once the execution was completed, the equity involved in the case was registered in the name of the applicant for enforcement, and the criminal liability of the applicant for enforcement was investigated through reporting the case, and the civil litigation issues were resolved through criminal litigation.

Yang Yingxia told reporters that Wang Hui is still in prison.