KUALA LUMPUR (Nov 20): PPB Group Bhd’s (KL:PPB) 18.8%-owned associate Wilmar International Ltd is embroiled in another major fraud case.

Its subsidiary Yihai (Guangzhou) Oils & Grains Industries Co Ltd (Guangzhou Yihai) was found guilty on Wednesday of contractual fraud by a Chinese court — the Huaibei Intermediate People's Court.

In a first-instance ruling, the court ordered it to be jointly liable with Yunnan Huijia Import and Export Co Ltd to pay RMB1.88 billion (RM1.1 billion) in compensation to state-owned Anhui Huawen International Trade Co Ltd. The court also imposed a fine of RMB1 million on Guangzhou Yihai.

The verdict stems from the conviction of Guangzhou Yihai’s former general manager for bribery. He was alleged to have been bribed to assist Yunnan Huijia in committing fraud against Anhui Huawen, resulting in him being sentenced to 19 years in prison and fined RMB2.8 million.

Wilmar's subsidiary strongly denies the allegations and plans to appeal.

Guangzhou Yihai asserted that Yunnan Huijia, by bribing executives and employees of Anhui Huawen, fabricated transactions which resulted in losses to Anhui Huawen, and is now attempting to implicate Guangzhou Yihai and shift responsibility for such losses to Guangzhou Yihai.

Guangzhou Yihai maintained that it neither participated in nor had knowledge of the fraud, stressing that all cargo transfers were verified with Anhui Huawen, with procurement prices above market rates, thus yielding no improper gains.

In a statement Thursday, Wilmar said Guangzhou Yihai intends to appeal against the judgement as it is of the view that the first-instance judicial proceedings, factual determinations, adoption of evidence, and application of law were erroneous.

As the case will be appealed, the judgement is not yet in effect. Consequently, the fine imposed on Guangzhou Yihai is not required to be paid pending the outcome of the appeal, according to Wilmar.

“Since the case will be appealed and the ultimate liability of Guangzhou Yihai for Anhui Huawen’s losses remains undetermined, the financial impact of the Judgement on the Wilmar group and the company is uncertain,” Wilmar added.

This new legal battle in China comes after Wilmar lost its final appeal in a graft case related to cooking oil export permits in 2021 in Indonesia. PPB had earlier said that the group could face a potential impact of up to RM600 million in a worst-case scenario should Wilmar lose this appeal in Indonesia's Supreme Court. 

PPB derives almost 75% of its earnings from Wilmar, despite only owning an 18.8% stake.

PPB’s share price closed down 46 sen or 3.97% to RM11.14 on Thursday, giving the group a market capitalisation of RM15.85 billion.