Former vice chairman and CEO of China Evergrande Group, Xia Haijun, has been fined and banned for life from the securities market due to involvement in bond fraud and organizing the preparation of false financial reports. Xia Haijun was previously known as “the man whom Xu Jiayin trusted the most” and had held the position of the second most powerful figure in Evergrande for many years.
According to the administrative penalty decision issued by the China Securities Regulatory Commission (CSRC) against Xia Haijun, for the illegal acts of false disclosure in Evergrande Real Estate’s annual reports for 2019 and 2020, Xia Haijun was given a warning and fined 5 million yuan.
In addition, for the fraudulent issuance of company bonds by Evergrande Real Estate, Xia Haijun was fined 10 million yuan. Furthermore, for organizing the preparation of false financial reports, Xia Haijun was subjected to a lifetime ban from the securities market.
Xia Haijun was found guilty of the following illegal activities:
1. The annual reports of Evergrande Real Estate for 2019 and 2020 contained false information.
By prematurely recognizing income, Evergrande Real Estate engaged in financial fraud, with inflated revenue of 213.99 billion yuan in 2019, accounting for 50.14% of the operating income, and inflated profits of 407.22 billion yuan, representing 63.31% of the total profits; in 2020, revenue was inflated by 350.157 billion yuan, accounting for 78.54% of operating income, along with inflated profits of 512.89 billion yuan, making up 86.88% of the total profits.
2. Fraudulent issuance of company bonds by Evergrande Real Estate.
In 2020, Evergrande Real Estate issued a series of bonds, with the issuance dates, amounts, and bond numbers listed. The issuing documents for these bonds referenced the false information in the 2019 and 2020 annual reports, constituting fraudulent issuance.
Xia Haijun, as the then vice chairman and CEO of Evergrande Group, arranged for the preparation of false financial reports, displaying particularly malicious means and severe circumstances, holding direct responsibility as the chief executive officer for the false information in the annual reports of 2019 and 2020.
During the period of the securities market ban, Xia Haijun is prohibited from engaging in securities business at the original institution or holding positions as directors, supervisors, or senior management of listed or unlisted public companies in any other institutions.
Public records show that Xia Haijun was born in Harbin in 1964 and joined Evergrande in 2007.
Xia Haijun was previously known as “the man whom Xu Jiayin trusted the most.” As Xu Jiayin’s right-hand man, he had occupied the position of the second most powerful figure in Evergrande for many years, with Xu Jiayin entrusting him to handle media inquiries during performance meetings. In the entire real estate industry, Xia Haijun is one of the longest-serving professional managers.
Xia Haijun received top-tier salary treatment. In 2017, he topped Forbes’ “Hong Kong-listed Mainland Chinese CEO Compensation List” with a salary of 270 million yuan. According to Evergrande’s annual reports, Xia Haijun’s compensation in 2021 and 2020 still amounted to 202 million yuan and 204 million yuan, respectively.
On July 22, 2022, China Evergrande announced Xia Haijun’s resignation as the company’s executive director and CEO.
On March 18 of this year, Evergrande Real Estate announced that the CSRC proposed a lifelong ban on Xu Jiayin and Xia Haijun from entering the securities market, with Evergrande Real Estate being heavily fined 4.175 billion yuan.
The CSRC’s notice specified three offenses committed by Evergrande Real Estate, Xu Jiayin, among others, including: falsification of annual reports, fraudulent bond issuance, and failure to timely disclose relevant information.
The annual report fraud mainly related to Evergrande Real Estate’s annual reports for 2019 and 2020, with a significant proportion of false income.
Based on the two false financial reports, Evergrande Real Estate issued a total of 20.8 billion yuan in bonds from May 2020 to April 2021. The CSRC believes that these bonds were issued fraudulently.