By: Jeff Haham
In an unprecedented legal action that captured global attention, on April 11, 2024, Truong My Lan, a Vietnamese billionaire, was sentenced to death for orchestrating one of the largest bank frauds in history, totaling approximately $44 billion over 11 years. The implications of this ruling sparked global reflection on not only the complexities of international fraud but also a significant inquiry into the administration of the death penalty for financial crimes. In this post, I seek to provide a comprehensible summary of the lead-up and global economic implications of the case.
Truong My Lan rose from humble beginnings as a market stall vendor, selling cosmetics in Ho Chi Minh City with her mother, to become a towering figure in the Vietnamese real estate sector. The Vietnamese Communist Party’s “Doi Moi” economic reform, introducing a focus on the liberalization of the domestic market and private sectors, provoked My Lan to begin buying property. In the wake of the post-1986 reforms, My Lan founded her company Van Thinh Phat Group (VTP) in 1992. VTP has since flourished, acquiring a vast portfolio of prime properties, including luxury apartments, hotels, restaurants, and office buildings. In 2011, the well-established real estate tycoon furthered her portfolio by merging 3 cash-strapped banks to create Saigon Commercial Bank (SCB), which would become Vietnam’s largest commercial bank by assets, with a charter reaching over 20 trillion VND by mid-2021. However, My Lan’s ascent was marked by dubious financial practices and deep entanglements with corrupt elements within the banking sector.
The fraud at the heart of My Lan’s trial involved the Saigon Commercial Bank (SCB), where she was found to have orchestrated a vast scheme using hundreds of shell companies to funnel loans to her businesses, severely impacting the bank’s financial stability. Under Vietnamese Law, an individual is capped at 5% of bank ownership. The total loans drawn by My Lan amounted to a whopping 93% of the bank’s total lending, with allegations that these funds were siphoned off for personal gain, including a withdrawal of 108 trillion VND (weighing about 2 tonnes if the highest possible denomination of bills was used) to store in her basement, and numerous unaccounted real estate investments. My Lan allegedly used self-appointed personnel and proxies to approve the loans and withdrawals. In response to the bank run that ensued, forcing the central bank to take over SCB, new rules were put in place giving the central bank more power to intervene in cases of large cash withdrawals.
The trial was “unprecedented,” as described by David Brown, a retired US state-department official with long experience in Vietnam, not only for its scale but also for its transparency, atypical for the usually secretive Vietnamese authorities. My Lan was tried alongside 84 other defendants in a highly publicized court case involving 10 state prosecutors and about 200 lawyers, 104 boxes of evidence weighing 6 tonnes, and over 2,700 witnesses summoned. This massive legal endeavor highlighted the Vietnamese government’s intent to showcase its crackdown on corruption as part of the broader “Blazing Furnaces” anti-corruption campaign initiated by Communist Party Secretary-General, Nguyen Phu Trong, a conservative ideologue steeped in Marxist theory. The initiative has prosecuted hundreds of senior state officials and public figures in the business sector.
No doubt, an example was sought to be made of My Lan. While 81 other defendants received prison sentences ranging from 3 to 20 years, the decision to impose the death penalty on My Lan, rare for financial crimes in Vietnam, was a proclamation of Vietnam’s assertive stance on clear governance and has sparked widespread controversy. Critics argue that while the sentence underscores the severity of My Lan’s crimes and the government’s commitment to combating corruption, it also poses an array of ethical questions about the appropriateness and extent of capital punishment for white-collar crimes. The case sets a troubling precedent that could influence both domestic and international perspectives on the intersectionality of criminal justice and financial misconduct.
While declaring a commitment to fight corruption is justifiable on a surface level, the “Blazing Furnaces” initiative is inherently paradoxical. Vietnam has vocally pursued the goal of rich country status by 2045, dependent on a technology and knowledge-based economy. Moreso, the end goal is poaching business from its powerhouse neighbor China. In fact, Vietnam has been on a positive trajectory in recent years. Washington was quick to jump aboard, elevating bilateral ties to a Comprehensive Strategic Partnership in September of 2023 during a visit by President Biden to Hanoi, and a March 2024 meeting in Washington D.C. expanding on collaboration in the semiconductor space. Apple has also utilized Vietnam as its third-largest manufacturing hub behind China and Cupertino.
The draconian punishment handed out to My Lan has hindered the further realization of the development. Business in Vietnam has hit a wall, as officials are experiencing “bureaucratic paralysis” out of fear of prosecution, unsure of how to continue operations. On the political level, numerous officials have silently stepped down amidst allegations of “violations and wrongdoings.” Foreign investors have inevitably begun questioning the integrity of the Vietnamese banking sector as a whole, further dampening the country’s economic outlook.
Vietnam had a good thing going, albeit the perception is based perhaps on selective ignorance. It had made itself out as the destination for companies seeking to de-risk supply chains by relocating manufacturing operations from China. My Lan’s ruling now makes it much harder to ignore the risk availment of investing in a country where human rights abuses may be perceived as systemic and pervasive. I say selective ignorance because claims of human rights violations are not novel to the Vietnamese autocracy. The rest of the world, as well as global investors, would most likely be aware of the country’s growth model’s dependence on corruption. In the words of Le Hong Hiep, a senior fellow at the Vietnam Studies Programme at the ISEAS – Yusof Ishak Institute in Singapore, “corruption has been the grease that kept the machinery working. If they stop the grease, things may not work any more.”
