A once high-flying Chinese mogul has fallen hard.
A court in Shanghai has sentenced Anbang Insurance Group chairman Wu Xiaohui, known for high-profile overseas acquisitions including the Waldorf Astoria, to 18 years in prison for financial fraud and related crimes. His punishment comes months after the Chinese government abruptly seized control of the conglomerate over fears of insolvency in a move that illustrated how quickly Beijing can take down corporate giants that run afoul of the party.
According to Chinese state media outlet Xinhua (link in Chinese), Wu pleaded guilty to charges of illegal fund-raising and embezzlement. In addition to the prison sentence, the government will also confiscate 10.5 billion yuan ($1.65 billion) from Wu. Representatives for Anbang Insurance did not reply immediately to Quartz’s request for comment.
Under Wu, Anbang Insurance was one of China’s most aggressive buyers of overseas businesses, most notably luxury properties. In 2014, the company purchased the Waldorf Astoria for $1.95 billion. Over a year later it purchased Strategic Hotels & Resorts from Blackstone, which gave it control over 16 hotels including the JW Marriott Essex House in Manhattan. Its life insurance business was weighing an initial public offering and the group was recruiting at Harvard, telling students, “We must win the first battle and every battle thereafter as we are representing Chinese enterprises going global.”
Yet Anbang’s more recent acquisitions failed, in part due to growing concerns about the conglomerate’s shareholding structure, a key focus of his trial (link in Chinese). In the midst of Anbang’s overseas acquisition spree, while company documents listed many of Wu’s family members as Anbang shareholders, Wu himself was not (paywall).
The lack of clarity about the company’s shareholding structure was one of the reasons why Anbang’s bid to purchase Starwood Hotels and Resorts fell apart in 2016. Another deal to invest $400 million in a property owned by the family of Jared Kushner also fell through. In its report on the sentencing, Xinhua adds that Wu deliberately concealed his shares in Anbang’s various entities.
Yet Wu’s true downfall has occurred in the span of roughly one year, as Chinese regulators grew increasingly concerned about systemic financial risk and capital outflows. In July 2017, Wu was abruptly detained by Chinese authorities. His capture followed reports in Chinese media outlet Caixin that noted the low market share of its insurance products and questioned the origins of its cash pools. At the time of their publication, Anbang called Caixin’s reports “libelous.”
In February, the China Insurance Regulatory Commission (CIRC) announced that a government-led work group had seized control of Anbang’s assets for one year—effectively placing the Waldorf Astoria and all of Anbang’s other properties under the control of Beijing. In a March hearing, the court accused Wu of using falsified financial statements to raise money for investment and debt repayment.
Wu’s sentencing and the government takeover of Anbang will likely heighten Washington’s scrutiny towards acquisitions involving overseas Chinese buyers—even as capital outflow controls in China might slow the pace of such deals. Last week, SkyBridge Capital, the hedge fund owned by former Trump administration spokesman Anthony Scaramucci, announced it would terminate its planned sale to HNA, another Chinese company with an opaque ownership structure and large roster of overseas assets.