Chinese Character

Billionaire battles madhouse

Family turns against leather tycoon – declaring him insane

Billionaire battles madhouse

Wang: his family drives him crazy

“Harmony within family is the basis of success in any undertaking,” reckons a Chinese idiom. In theory, those words should resonate with someone like Wang Min, the chairman of Far East Leather Group.

However as he stepped out of the courts in his hometown, Pingyang county, in Zhejiang province last week, there were no signs of harmony, or hopes of reconciliation within the family of China’s ‘King of Leather’.

“I can’t see any prospect of settlement with them [my family],” Wang noted. He described the court case as “the battle for truth, as well as a fight for life.”

Born in February 1966 to well educated parents – his father was a party official – Wang was the middle child. He had an elder sister, an elder brother, and two younger brothers.

In his early twenties, Wang worked as a technician in a local TV station, but the ‘Wenzhou entrepreneurial spirit’ inspired him to start a small advertising firm at the age of 25.

Before long, he discovered another opportunity, this time in the leather business. He bought advanced machinery, enabling him to improve the quality of leather products made in Wenzhou, bringing the local industry to a new level of sophistication. He then set his sights on international trade, and opened a sales office in the southern metropolis of Guangzhou.

More than 10 years later, his firm had grown to become the largest pig leather producer in the world, selling products to more than 60 countries, and generating annual sales of over Rmb2 billion ($292 million). Since 2002, its core business has repeatedly made the list of the country’s top 500 companies. At its height, Far East was said to be responsible for 60% of the world’s pig leather trade.

Over the years, Wang brought his siblings into the company. Wang himself managed the trading business in Guangzhou, while his younger brothers, Wang Huai and Wang Chu, focused on managing the production sites in Wenzhou. His sister Wang Ping took charge of the finances while his parents helped by managing logistics. His elder brother Wang Wei was the only member of the family who stuck with his government job.

“The more the business grew, the more I needed help. I was quite traditional in thinking – one would rather fight next to his brothers and father in a war,” he told New Express Daily, quoting the old sentiment to trust in your own blood. In 1998, Wang distributed shares in the company among the three siblings who helped him with the business, as well as his mother.

All was well until around 2005, when events took on a soap opera-like feel. Wang decided to hire professional advisers to review his business, in the hope of introducing changes and improving corporate governance. During this review, Wang discovered that his brothers had invested in gelatine and property businesses behind his back, and over Rmb50 million worth of funds were unaccounted for.

The following year Wang hired lawyers to review the assets of the five companies within the Far East Group. Wang was shocked to learn that substantial stakes in three separate companies, had all been transferred to his siblings. Wang took the case to the police, accusing his siblings of embezzlement.

In late 2006, Wang Huai wrote a 2000 word letter of apology, with the signatures of his mother Cai Aihua, sister Wang Ping and younger brother Wang Chu. Subsequently, the family agreed to a redistribution of shares – Wang Min remained the group chairman with a 30% stake and an ultimate veto right over key decisions; his siblings were each given 20% stakes, and his mother 10%. Wang was touched by the reconciliation and annulled the police report in January 2007.

But less than two months later, when he travelled back to Wenzhou for a board meeting, his family forcibly admitted him to a mental hospital. His wife came to his rescue two days later, with an army of bodyguards. Wang has since severed all relations with his family.

“The minute I was released from the hospital, I came to realise that family ties, when put to the test by money, are really fragile. I lost my faith completely,” Qianjiang Evening News quoted Wang as saying.

Last April, Wang inadvertently discovered that his younger brother Wang Huai had applied for the latest type of national identity card on his behalf, with Wang Huai’s own photo on it. Wang took the Pingyang county public security bureau to court, and won. The identity card was invalidated. In the mean time, Wang also sued two bureaus under the Pingyang county government, in relation to the 2006 share transfer; the cases are still pending.

Just a few months later, Wang found – from court filings – that there were two different copies of his original identity card in circulation. Wang sued the county public security bureau for negligence a second time. The case opened last week. Wang Huai was named a ‘third person,’ or connected person, in the proceedings.

Wang Huai has maintained his innocence, saying that his elder brother was always aware that other versions of his ID existed. Meanwhile, the Wang parents, who are now in their 70s, have taken sides with the other Wang siblings. They have posted articles on the internet accusing Wang Min of being ‘the villain taking pre-emptive actions against his victim.’

Wang’s struggle is not uncommon. “As China’s economy undergoes a transformation, family infighting of all forms is to be expected. This is a common phenomenon,” said Wang Xianqing, a professor at Guangdong University of Business Studies.

“There are many family businesses (like Wang’s) in China, especially in Wenzhou,” added Chen Zhi, deputy secretary general of Wenzhou Chamber of Commerce. Chen, who knows Wang Min personally, said Wang realised change was necessary in the family business because “things were heading downhill”.

However, he never expected that his efforts to reform his business would turn out to be such an ordeal.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.