Defense Case for Zhu Moumou, Suspected of the Crimes of Illegally Absorbing Public Deposits and Misappropriating Funds

Keywords: Crime of misappropriation of funds; Crime of illegally absorbing public deposits

Handling Attorney: Geng Luhong

Basic Facts of the Case:

The defendant, Zhu Moumou, controlled two companies: Jiangsu Moumou Century Co., Ltd. and Moumou Tianxia Co., Ltd. In April 2017, on behalf of Moumou Tianxia Co., Ltd., he signed an agreement with Beijing Moumou Century Co., Ltd., investing 20 million yuan to acquire a stake in its subsidiary, Liaoning Moumou Century Co., Ltd., and jointly operating the sports lottery business in Liaoning Province (handled separately in another case). From February to July 2017, Zhu Moumou, together with Zhang Mou, Han Moumou, and Huang Moumou—the actual controllers of Shanghai Moumou Co., Ltd. and Jia Moumou Co., Ltd.—agreed to use the guise of a public welfare sports community service station project to attract channel distributors from Jia Moumou Co., Ltd. to make investments. On July 10, 2017, on behalf of Liaoning Moumou Century Co., Ltd., he signed a cooperation agreement with Shanghai Moumou Co., Ltd. and, together with Yang Mou, Zhang Mou, Han Moumou, Huang Moumou, and others, held project promotion meetings in Shanghai, Shenyang, Suzhou, and other cities, publicly advertising that investing in lottery stations would enable station managers to earn commissions, and that investing in “black card” membership lottery pools would guarantee stable and risk-free profits. Through these efforts, he solicited funds from unspecified members of the public, including channel distributors from Jia Moumou Co., Ltd., totaling 207 million RMB. Of this amount, 59 million RMB was transferred into Industrial and Commercial Bank of China accounts specifically designated for station manager investments. In June 2017, the defendant Zhu Moumou instructed the company’s cashier, Chen Moumou, to transfer 27 million RMB from the account of Liaoning Moumou Century Co., Ltd. to other companies under his control as well as to his daughter’s personal bank accounts, to repay personal debts, pay security deposits, and cover personal expenses. Additionally, he transferred 5 million RMB to the corporate account of Beijing Moumou Century Co., Ltd. at the Bank of Beijing, to pay a security deposit to Beijing Moumou Century Co., Ltd.

The prosecution argues that the defendant, Zhu Moumou, along with others, violated state laws and regulations on financial management. Despite knowing full well that they had not obtained approval from the relevant state authorities and were therefore unauthorized to raise funds from the general public, they still actively engaged in disguised illegal absorption of public deposits, thereby disrupting the financial order. The amount involved was substantial. Furthermore, taking advantage of their official positions, they colluded with others to misappropriate funds belonging to their organization for personal use, again involving a substantial amount. Therefore, they should be held criminally responsible for the crimes of illegally absorbing public deposits and misappropriating funds.

The defense counsel argued that the defendant, Zhu Moumou, did not commit the crime of misappropriation of funds and firmly maintained an acquittal defense. In the first-instance judgment rendered by the People’s Court of Heping District, Shenyang City, Zhu Moumou was convicted of illegally absorbing public deposits and sentenced to eight years’ imprisonment; he was also convicted of misappropriating funds and sentenced to seven years’ imprisonment. As a result of concurrent sentencing for multiple crimes, the court imposed a total sentence of 13 years’ imprisonment. After appeal, the Shenyang Intermediate People’s Court in the second instance ruled to overturn the original judgment and remand the case for retrial. Following the retrial, the People’s Court of Heping District, Shenyang City, found Zhu Moumou guilty of illegally absorbing public deposits and sentenced him to eight years’ imprisonment, along with a fine of RMB 500,000. The charge of misappropriating funds, as alleged by the prosecution, was not established, and Zhu Moumou was acquitted on that count.

Case Highlights: The central issue in this case is whether the crime of misappropriation of funds committed by Zhu Moumou has been established. This issue hinges on the interpretation and application of the crime of misappropriation of funds. The perpetrator of the crime of misappropriation of funds must be an employee of a company, enterprise, or other organization. In this case, although the prosecution accused the defendant of committing the crime of misappropriation of funds, it failed to provide sufficient and conclusive evidence demonstrating that the defendant, Zhu Moumou, was indeed an employee of Liaoning Moumou Century Company. Therefore, the prosecution’s charge against the defendant, Zhu Moumou, does not meet the subject-matter requirements for the crime of misappropriation of funds.

The legal interest protected by the crime of misappropriation of funds is the lawful property of the entity. In this case, the funds allegedly misappropriated by the prosecution have already been defined as illegal proceeds derived from the unlawful absorption of public deposits; therefore, they should no longer be considered the lawful property of the entity and thus fall outside the scope of the legal interest protected by the crime of misappropriation of funds. The prosecution’s indictment contains the following paradox: If the funds involved in the misappropriation were lawful property of the entity, they would not qualify as illegal proceeds from the unlawful absorption of deposits; yet if these funds are indeed illegal proceeds from the unlawful absorption of public deposits, they would no longer constitute the legal interest infringed upon by the crime of misappropriation of funds.

From a formal perspective, there does appear to be an act of misappropriation. However, based on the evidence in the case, it can be confirmed that the misappropriated funds were not the company’s own property but rather originated from illegally solicited public deposits. The act of misappropriation was merely a subsequent use of funds after the illegal solicitation of public deposits; therefore, it should not be subject to double evaluation. Consequently, the mere existence of an act of misappropriating funds does not necessarily constitute the crime of misappropriation of funds. It is also necessary to examine whether the perpetrator is a qualified subject and whether the funds actually belonged to the company. Only by making such careful assessments can we clearly delineate the boundary between guilt and innocence, thereby laying a solid foundation for a successful defense of innocence.

Typical significance: This case not only demonstrates an accurate grasp and proper application of the constitutive elements of the crime of misappropriation of funds, but also offers profound insights into how to distinguish among different criminal acts in judicial practice, avoid double jeopardy, and safeguard the legitimate rights and interests of the parties involved. By thoroughly analyzing the constitutive elements of the crime of misappropriation of funds—particularly the identification of the perpetrator and the nature of the funds—this case clearly delineates the boundary between the crime of misappropriation of funds and the crime of illegally absorbing public deposits. It underscores that in cases involving economic crimes, it is essential to strictly differentiate between lawful property and illegally obtained proceeds, thereby preventing the same sum of money from being simultaneously used as a constituent element of multiple crimes and avoiding any form of double jeopardy against the defendant.

The trial process of this case demonstrates the judicial authorities’ rigorous examination of the facts and their thorough grasp of legal application. Through the second-instance court’s ruling and remand for retrial, the erroneous judgment of the first-instance court was ultimately corrected, ensuring both judicial fairness and efficiency. At the same time, this case provides valuable references and lessons for the adjudication of similar cases.

Lawyer's Insights (Optional): In handling complex cases involving multiple charges against the defendant, the defense attorney’s professional competence and strategic choices are of paramount importance. Before taking on a case, the defense attorney should thoroughly study the relevant laws, regulations, and judicial interpretations, accurately grasp the constituent elements and applicable conditions of each charge, and precisely identify the key points of contention during the defense process. The attorney must carefully review all evidence materials provided by the investigating authorities, including documentary evidence, physical evidence, and witness testimonies. By comparing and analyzing the relationships among different pieces of evidence as well as identifying any inconsistencies or contradictions, the attorney can uncover evidentiary leads and defense strategies that favor the defendant, thereby presenting compelling defense arguments. Moreover, the attorney should anticipate the prosecution’s line of reasoning, identify potential weaknesses in the prosecution’s logic, and develop targeted countermeasures to effectively address these vulnerabilities, thus safeguarding the defendant’s legitimate rights and interests to the greatest extent possible.