Defense case for Li, accused of the crime of illegally issuing loans and the crime of improperly issuing financial instruments.

Keywords: Crime of Illegally Issuing Loans, Crime of Illegally Issuing Financial Instruments, Corporate Crime

Counseling Attorneys: Geng Luhong, Jia Jiayu

Basic Facts of the Case: The People's Procuratorate of Sujiatun District, Shenyang City, charged that between 2014 and 2018, the defendant Li, as the General Manager of the Tianjin Branch Business Department of a certain bank, violated laws and regulations including the Commercial Bank Law of the People's Republic of China and the General Rules on Loans. Under the direct or indirect instructions of Zhang, the President of the Tianjin Branch of the same bank, and Han, the Assistant President (both handled in separate cases), Li implemented reverse-process approvals. Despite knowing full well that the borrowers were shell companies, had provided false financial information, and had fabricated trade backgrounds (thus altering the intended use of the loans) and thus failing to meet loan eligibility criteria, Li failed to conduct due diligence on the borrowing enterprises and failed to review the loan application materials. Instead, Li approved credit loans (acceptance bills) for several companies actually controlled by Wan, who was also handled in a separate case. After being approved by Zhang, the President of the Tianjin Branch, Han, the Assistant President, Liu, the Deputy President, and Su, all handled in separate cases, Li disbursed loans or issued bank acceptance bills to the companies actually controlled by Wan, resulting in overdue payments.

The prosecution argues that the defendant, Li, as a bank employee, violated regulations by issuing bank acceptance bills for others, an act of particularly serious nature. Such conduct constitutes a violation of Article 188 of the Criminal Law of the People’s Republic of China. Furthermore, as a bank employee, the defendant Li also violated state regulations by granting loans to others in exceptionally large amounts, thereby constituting another violation of Article 186 of the Criminal Law of the People’s Republic of China. Therefore, the defendant Li should be held criminally responsible for the crime of illegally issuing loans and the crime of improperly issuing financial instruments. It is recommended that the defendant Li be sentenced to a fixed-term imprisonment of eight to ten years and fined for the crime of illegally issuing loans, and that he be sentenced to a fixed-term imprisonment of eight to nine years for the crime of improperly issuing financial instruments, with the sentences to be served concurrently.

The defense counsel argued that the defendant, Li,’s actions constituted only the crime of illegally issuing loans. In this case, whether the final loan disbursement took the form of a bank-accepted bill or a working-capital loan was beyond the defendant’s control. The criminal object and legal interests infringed upon by the defendant were both the legality of financial lending itself; therefore, multiple charges should not be imposed concurrently. If bank staff, in the course of issuing loans, accepting bills, issuing guarantees, or issuing letters of credit, simultaneously commit the crimes of fraudulently obtaining loans, illegally issuing loans, improperly issuing financial instruments, or unlawfully accepting, paying, or guaranteeing bills, they shall be strictly punished according to the provision prescribing the heavier penalty. Ultimately, the court adopted the defense counsel’s arguments and ruled that Li was guilty only of the crime of illegally issuing loans, sentencing him to four years and six months’ imprisonment and a fine of RMB 100,000.

Case Highlights:

The crime of illegally issuing loans infringes upon the legal interest of maintaining the orderly management of bank loan disbursements. The corresponding harm arises when borrowers fail to perform or are unable to perform their obligations to repay principal and interest, thereby creating a risk that the bank’s outstanding loan funds may not be recovered.

The crime of illegally issuing financial instruments infringes upon the legal interests protected by the banking system—the orderly management of the issuance of letters of credit, guarantees, bills, certificates of deposit, and creditworthiness certificates. The corresponding harm arises when the bank’s credit is misappropriated, and the perpetrator fails to or is unable to fulfill their obligation to pay the funds needed to restore the bank’s credit standing. As a result, the bank is compelled to advance funds to cover the shortfall, thereby exposing itself to the risk of financial loss.

In this case, whether the loan is extended via a working capital loan or via a bill of acceptance, the legal interest infringed upon is always the orderly management of bank loan disbursements. The resulting harm is that the enterprise actually controlled by Wan Moumou is unable to repay the principal and interest on the loan, thereby leaving the bank’s outstanding loan exposure unrecoverable. The evidence in the case—specifically, the “Maximum Credit Agreement” and the “Notification of Beneficiary Information for Actual Loan Disbursement”—sufficiently demonstrates that the bill-of-acceptance business is merely a specific form or means through which the Tianjin Branch of a certain bank extended loans to the enterprise involved in the case. Therefore, the Tianjin Branch of that bank was, in reality, extending loans under the guise of issuing bills of acceptance. Under this business model, the illegal issuance of financial instruments and the unlawful extension of loans both infringe upon the same specific legal interest, and the resulting financial losses are identical. The dual external manifestations—namely, the illegal issuance of financial instruments and the unlawful extension of loans—do not give rise to multiple layers of social harm. A comprehensive assessment indicates that treating this conduct as the crime of unlawfully extending loans is entirely sufficient to protect the relevant legal interests.

Typical significance:

This case involves the application of two criminal offenses in the realm of financial crimes: the crime of illegally issuing loans and the crime of improperly issuing financial instruments. In judicial practice, the crime of illegally issuing loans is relatively common, whereas the crime of improperly issuing financial instruments is comparatively rare. As a result, both prosecutors, judges, and lawyers are largely unfamiliar with this particular offense. Moreover, no similar cases could be found in judicial rulings for reference. To address this gap, the defense counsel purchased numerous books on financial crime defense in an attempt to locate relevant discussions on the crime of improperly issuing financial instruments. Unfortunately, all the materials on financial crime defense available—including those specifically addressing the crime of improperly issuing financial instruments—provided only brief descriptions of the offense’s elements, lacking any in-depth analysis or scholarly exploration. Under these circumstances, the defense counsel was left with no choice but to rely on their own legal expertise, combined with the evidence presented in the case, to arrive at a comprehensive understanding that aligned with the original intent of the legislation. Consequently, the defense counsel mounted a not-guilty plea based on this interpretation, and the court ultimately accepted the defense’s arguments, resulting in a successful acquittal. This case holds significant instructive value for guiding the legal community in handling similar cases in the future.

Lawyer's Insights (Optional): During the defense, I conducted an in-depth analysis of the subjective and objective elements of the crime of illegally issuing loans and the crime of improperly issuing financial instruments, as well as the legal interests harmed by each of these crimes. I also carried out a comprehensive study based on the specific facts of the case. Ultimately, the court adopted my defense arguments and, against the backdrop of the prosecution’s recommended sentence of approximately 15 years, sentenced Li to only four years and six months of fixed-term imprisonment. This outcome fully demonstrates the fairness and reasonableness of the law. This case has not only given me a deeper understanding of the complexities involved in financial crimes but has also provided valuable experience and guidance for future defenses in similar cases.