China Focus: Fundraising default investigated after C. China suicides

Police are investigating an illegal fundraising scheme that defaulted on paying millions of yuan to around 3,500 people in central China's rural Henan Province, after two of its clerks committed suicide under pressure from angry villagers.

The Henan Haochen Investment and Guarantee Company allegedly raised 200 million yuan (about 32 million U.S. dollars) from members of the public in Xiping County, promising them six times more interest than local banks.

Police say the firm was certified as a guarantee company, which are usually formed to protect the assets of an organization, but was not certified to raise money from the public.

Four people from the company have been arrested and its assets have been seized, according to the county police department.

The case came to light after the suicides on April 24 and May 2 of two locals who worked parttime persuading fellow villagers to invest in the scheme. One jumped into a well while the other hanged himself at home.

At least two more of the 40 such clerks in Xiping have shown signs of stress since the Haochen company began skipping interest payments in December.

"I have a debt of 2 million yuan on my back. My scooter, wheat harvest and everything else of value have been taken by those who lost money through my actions," said Wu Jincheng, one of the clerks.

"My wife has cancer, but I can't afford treatment. My son and daughter put all their money into the scheme and lost it. My family is on the brink of collapse, and I just want to die," he told Xinhua.

Haochen promised depositors an average monthly interest rate of 1 percent, and the clerks expected 20 yuan commission for every 10,000 yuan invested per month. The company had been operating well and paying the promised interest until December, Wu said.

Wu started working for the company in 2011, shortly after it began operating the same year. At peak times, he made 4,000 yuan a month in commission.

Many villagers have lost their life savings. Bed-ridden Wu Pangen sank his disability compensation of almost 200,000 yuan into the scheme. An 80-year-old couple lost 3,500 yuan.

"The villagers believed in me, and now what can I do?" Wu Jincheng asked, breaking down in tears several times while telling reporters his story.

An anonymous Xiping County official responsible for policing fundraising told Xinhua that scams once targeted only wealthy urbanites but are increasingly reaching their tentacles into the pockets of the rural poor.

"In this case, almost all the victims were farmers. They lack financial nous. They were easily duped and now they are bankrupt," he said.

Wu Jincheng was assured the company was operating legally: "I was shown their official documents and fancy offices. Everything looked absolutely normal to me. They had a sign reading 'keep away from illegal fundraising' at the entrance."

Many people have blamed shoddy supervision for the troubles.

"Different types of financial companies fall under the supervision of different government bodies. Some are covered by the banking regulatory agency, which is usually understaffed at a local level, and others by industrial and commercial bureaus, in which few members of staff have financial knowledge," said local entrepreneur Li Changjie. Endi