Attorney Geng Luhong’s Case (1)

[Title] Case Involving Li Moumou on Suspicion of Contract Fraud

[Keywords] Criminal / Contract Fraud / Not Guilty Defense / Conviction with Exemption from Punishment

【Key Points of the Ruling】

The actor did not engage in any deceptive conduct during the signing and performance of the contract. There is no concealment, and Where the party has the actual capacity to perform, even if the contract is not fully performed, it should be treated as a general common-law contract dispute and should not be deemed to constitute... Contract fraud crime 。

[Basic Facts of the Case]

On July 3, 2015, the defendant Li Moumou was placed under criminal detention by the Haicheng Public Security Bureau on suspicion of fraud. On July 31, 2015, the Haicheng Public Security Bureau released him on bail pending further investigation. Subsequently, on November 2, 2016, the Haicheng People's Court decided to arrest him. The Haicheng People's Procuratorate filed a public prosecution against the defendant Li Moumou with Indictment No. Hai Jian Gong Su Xing Su (2016) No. 244, charging him with the crime of contract fraud. According to the indictment, from June 27 to August 23, 2014, in the Dongfang Silk Market in Shengze Town, Wujiang District, Suzhou City, Jiangsu Province, the defendant Li Moumou, lacking any actual capacity to perform the contract, impersonated the general manager of Liaoning Haicheng Moumou Moumou Trading and Distribution Co., Ltd. and, using the alias “Li Kai,” verbally agreed with the victim Lei Moumou to enter into a contract. Employing a payment-on-delivery arrangement, Li Moumou defrauded Lei Moumou six times by having Lei Moumou deliver a total of 40,985 meters of various colored honey-coated white fabrics and 270T Chunyafang fabrics to him. After receiving the goods delivered by Lei Moumou, Li Moumou fled and went into hiding. According to the price appraisal conducted by the Haicheng Price Certification Center, the value of the various colored honey-coated white fabrics and 270T Chunyafang fabrics totaled RMB 337,172.5. The Haicheng People's Procuratorate argues that, with the intent of illegal possession, the defendant Li Moumou obtained property from the other party during the signing and performance of the contract, involving an especially large amount. His actions violate Articles 224(1), (3), (4), and (5) of the Criminal Law. The facts of the crime are clear, and the evidence is solid and sufficient; therefore, he should be held criminally responsible for the crime of contract fraud.

【Judgment Result】

First Instance: 1. The defendant, Li Moumou, is convicted of the crime of contract fraud and sentenced to five years of imprisonment, together with a fine of RMB 50,000; 2. The illegally obtained proceeds of the defendant, Li Moumou, shall continue to be recovered and returned to the victim.

Second instance: Revoke the original judgment and remand for a new trial.

After remand for retrial in the first instance: The defendant, Li Moumou, was convicted of contract fraud and sentenced to five years of imprisonment, together with a fine of RMB 50,000. Second, the illegally obtained proceeds of the defendant Li Moumou shall continue to be recovered and returned to the victim.

Second trial after remand for retrial: The defendant Li [Name] To commit a crime Contract fraud Crime, exempt from criminal prosecution. Penalty.

[Lawyer’s Perspective]

In this case, the charges against Li Moumou for alleged contract fraud are based on unclear facts and insufficient evidence.

First, the defendant did not have the subjective intent to illegally possess the property and did not act with the subjective intent of contract fraud.

According to the provisions of China’s Criminal Law, the subjective element of the crime of contract fraud can only be intent, and the perpetrator must have the purpose of illegally appropriating public or private property. If the perpetrator does not possess the aforementioned fraudulent intent subjectively but, due to various objective reasons, is unable to perform the contract or repay the debts owed, such conduct cannot be prosecuted as contract fraud. If the defendant does have the subjective intent to commit fraud, he or she will invariably employ means of concealing the truth to hide genuine information and clues about the goods purchased, thereby preventing the other party from locating him or her and achieving the goal of illegally appropriating the goods.

But in this case, The defendant contacted the victim, Lei Moumou, using a genuine mobile phone number and WeChat account. And The defendant The fact that the goods were delivered to Nantai Prison for processing, that both finished and semi-finished garments made from the fabrics involved in the case were all accounted for before and after the incident, that the defendant did not sell them off at a low price for personal gain or squander the proceeds, that the defendant’s mobile phone remained in normal use throughout, and that there was no concealment whatsoever—all these circumstances clearly demonstrate: Li Moumou did not subjectively have the intent to illegally possess property, nor did he intentionally deceive or defraud others of their assets. From the perspective of judicial practice, if a party does not engage in any deceptive conduct during the signing and performance of a contract, even if the contract is not fully performed, the matter should be treated as a contractual dispute rather than being classified as fraud.

II. According to the... Criminal Law Article 224, which defines and outlines the circumstances of the crime of contract fraud, when compared with the facts of this case, clearly indicates that this is a typical contract dispute. Therefore, the defendant, Li Moumou, did not commit the crime of contract fraud.

An economic contract dispute arises when a party, though genuinely intending to perform or substantially perform the contract, fails to fully fulfill its obligations due to certain reasons, or when one party deliberately breaches a specific provision of the contract during performance, thereby causing losses to the other party and giving rise to a dispute over the rights and obligations agreed upon in the contract.

Contract fraud refers to the act of fabricating facts or concealing the truth during the conclusion or performance of a contract, with the intent of illegally appropriating property from the other party, and involving a relatively large amount of money. Specifically, any of the following circumstances—where the perpetrator, with the intent of illegal appropriation, defrauds the other party of property in a relatively large amount during the process of concluding or performing a contract—constitutes the crime of contract fraud:

(1) Signing contracts using a fictitious entity or by impersonating another person;

(2) Using forged, altered, or invalidated bills or other false property certificates as security;

(3) Lacking actual performance capacity, the party induces the other party to continue signing and performing the contract by first fulfilling a small-value contract or partially performing the contract;

(4) Fleeing after receiving goods, loans, advance payments, or security property from the opposing party;

(5) Obtaining the other party’s property by other deceptive means.

This case is a typical dispute over an economic contract, and the defendant, Li Moumou, did not engage in conduct that meets the legal definitions outlined in items (1) through (5) above.

First, the defendant Li Moumou had the actual capacity to perform: The defendant’s failure to pay for the goods was due to the victim’s delay in delivering the fabric for over a month, which prevented Li Moumou from processing the garments on time, resulting in a buildup of inventory and a lack of cash flow. Consequently, Li Moumou was temporarily unable to make payment to Lei Moumou, and he also informed Lei Moumou of this situation. Moreover, during this period, Li Moumou’s bank account still had a balance, and he owned a gray Chevrolet car as well as 69 pieces of machinery and equipment belonging to the Dashiqiao City [Company Name] Garment Manufacturing Co., Ltd., which he actually operated, with a total value of 207,530 yuan.

Second, the defendant, Li Moumou, did not engage in any act of impersonating the position of “General Manager of Liaoning Haicheng Moumou Moumou Trading and Distribution Co., Ltd.” nor did he sign contracts under the false pretense of being “Li Kai.” Liaoning Haicheng Moumou Moumou Trading and Distribution Co., Ltd. was contracted for management by Li Moumou. The “Contract for Contractual Management” signed between him and the company’s legal representative, Li Huajie, stipulates as follows: “During the contract period, the contractor shall bear full responsibility for the company’s operational management within the scope permitted by national laws and regulations and shall exercise all powers related to production, operation, and management.” Therefore, during the contract period, the defendant effectively controlled Liaoning Haicheng Moumou Moumou Trading and Distribution Co., Ltd. and held the authority and responsibilities of a general manager. Moreover, from September 23 to October 2, 2013, Li Moumou himself traveled to Russia as the General Manager of Liaoning Haicheng Moumou Moumou Trading and Distribution Co., Ltd. to participate in a clothing trade fair organized by the Department of Foreign Trade and Economic Cooperation of Liaoning Province. Thus, the defendant did not commit fraud against Lei Moumou by impersonating the general manager of Moumou Company.

Regarding the portion of the purchase contract entered into in the name of Li Kai: Li Kai has been the name used by Li Moumou from childhood to adulthood. Later, his father, Li Xuku, changed Li Kai’s name to Li Moumou and also updated the household registration book. Subsequently, Li Moumou continued to use the name Li Kai in everyday life. Li Kai’s name was not fabricated or made up on the spot by the defendant when purchasing goods from Lei Moumou; rather, it was a nickname that the defendant had consistently used throughout his life—in both personal and professional settings—from childhood to adulthood. And The defendant used the name Li Kai when signing the aforementioned “Contract for Contractual Management.” Therefore, the defendant did not intentionally use a false name to enter into a contract with Lei Moumou and thereby fraudulently obtain goods. There is no evidence to suggest that the defendant fraudulently obtained goods from Lei Moumou by impersonating Li Kai.

Once again, Li Moumou did not engage in any “evasive behavior.” By examining the monthly communication and consumption records of Li Moumou’s mobile phone from September 2014 to June 2015, as well as the testimonies of other witnesses, it is clear that Li Moumou never experienced prolonged phone disconnections, shutdowns, or situations where he became unreachable. Moreover, when summoned by the public security authorities, Li Moumou actively and proactively cooperated with the investigation; there is no evidence to suggest that he fled after receiving goods from Lei Moumou.

Finally, Li Moumou did not engage in any conduct of “obtaining property by other means”: Li Moumou did not use any method to fraudulently obtain goods from Lei Moumou, and thus there was no such thing as “obtaining property by other means.” The “other methods” referred to in the above-mentioned provisions may only be applied if explicitly provided for under other laws; otherwise, it is impermissible to arbitrarily impose a subjective presumption of guilt.

This case should have been a typical contract dispute, yet the defendant was accused by the procuratorate of allegedly committing contract fraud. After accepting the mandate from Li Moumou’s family at the second-instance stage, we first thoroughly reviewed the case files and actively communicated with the Intermediate People’s Court of Anshan City. As a result, the Intermediate People’s Court of Anshan City issued a ruling to remand the case back to the People’s Court of Haicheng City for a new trial, thereby securing for our client the opportunity to be retried and achieving a significant preliminary victory.

After the case was sent back for retrial, we began by examining the constituent elements of the crime of contract fraud and the distinctions between contract fraud and ordinary contract disputes. Based on a comprehensive review of all evidence in the case, we elaborated in detail our view that Li Moumou did not commit the crime of contract fraud. Nevertheless, the People’s Court of Haicheng City still handed down a guilty verdict, sentencing Li Moumou to five years’ imprisonment for contract fraud. After the case was appealed to the Intermediate People’s Court of Anshan City, we continued to maintain Li Moumou’s innocence defense. During this period, we communicated repeatedly with the judge, presenting our arguments and viewpoints. Ultimately, the Intermediate People’s Court of Anshan City issued a judgment acquitting Li Moumou while exempting him from punishment.

The highlight of this case is that, after two years of relentless effort and persistence across three stages—the second trial, the first trial following remand for retrial, and the second trial after another remand for retrial—we ultimately secured a verdict of conviction with no sentence imposed for the defendant.