Yili is facing one trouble after another. Ten days have passed since Guangxiang Finance published a rumor on March 26 that Yili Chairman Pan Gang had lost contact, and the 2017 annual report, which was due on March 31, has yet to be released. Today, media reports say that Yili Group Executive President Zhang Jianqiu gave an interview, directly accusing former Yili Chairman Zheng Junhuai of being the "mastermind" behind the rumors. Connecting these three events, it seems that Yili is not having a smooth year this year. △ Yili Chairman Pan Gang The storm stirred by the "Pan Gang lost contact rumor case" is growing. Yili Group firmly denies that Chairman Pan Gang is under investigation, saying police have "controlled" six people who planned and spread the rumor. The latest news: Yili Group Executive President Zhang Jianqiu gave an interview, directly accusing former Yili Chairman Zheng Junhuai of being the "mastermind." The following is the interview transcript between Beijing News reporter and Zhang Jianqiu: About the rumor incident "This is not the first time rumors have been spread against Yili" Beijing News: How does Yili view the current rumors? Zhang Jianqiu: This is not the first time someone has spread rumors against Yili and its management. There has always been a "mastermind" behind these cases, driving and planning them. Rumors have a huge negative impact on corporate development and image, causing stock prices to plummet and causing heavy losses for shareholders and investors, while the rumor-mongers bear no responsibility. Beijing News: What do you mean by the "mastermind" behind it? Zhang Jianqiu: We believe that this series of rumor cases is closely related to a former executive of Yili Group. It is understood that this former executive once hired a retired cadre from the Inner Mongolia Federation of Trade Unions, a certain Zhang, under the title of assistant to the president, to coordinate government relations externally. In reality, he conducted extensive illegal investigations into Yili's management and their families, using the information obtained to fabricate rumors to control and threaten the management. What we have learned is that in the cases of Zou and Liu, which police are investigating, many of the false rumors from the earlier cases are involved. Beijing News: What do you think is the motive of this former executive? Zhang Jianqiu: This former executive was sentenced for embezzlement of public funds. After being released from prison, he repeatedly planned rumors against Yili and its management through lawsuits, threats, and rumors. He has approached Yili multiple times, asking for money under various pretexts, hoping that the Hohhot municipal government and Yili Group would transfer stocks and assets he obtained illegally to his name. After losing the second-instance trial, he continued to spread rumors, even using fictional stories and jokes to insinuate and mislead the media and the public. About the public accusation "We have endured for over a decade; we cannot endure any longer" Beijing News: We would like to understand the disputes between this former executive and Yili. Zhang Jianqiu: At the time, the CSRC discovered multiple major illegal and criminal cases related to him, but not all were prosecuted according to law in the final trial. The other criminal facts that were not prosecuted or tried left many sequelae for Yili, causing this executive to harass Yili for over a decade. Among the cases of embezzlement of huge amounts of public funds that the CSRC had already investigated, one involved over 600 million yuan, which was reported in detail by Xinhua's Economic Information Daily in 2007. After investigation, the procuratorate finally confirmed that the amount of company funds he embezzled, which he confessed to, was 240 million yuan. The complete case files of his embezzlement of 240 million yuan of public funds, totaling 78 volumes, are stored in the Inner Mongolia Anti-Corruption Bureau. You can interview and learn about the situation there. Beijing News: How was this case handled later? Zhang Jianqiu: The criminal fact of his embezzlement of 240 million yuan of public funds was not prosecuted. Even in the case of embezzling 16.5 million yuan that was tried, he was only sentenced to 6 years, with two commutations in between. Beijing News: Why has Yili chosen to come forward now to accuse him? Zhang Jianqiu: Over the years, Yili has been under pressure from operations while also dealing with the long-term rumors and interference from this former executive. Considering the company's development and social impact, we have endured humiliation and never entangled with him, nor have we ever publicly disclosed these facts. But every time he spreads rumors, Yili's stock price fluctuates significantly, causing huge losses for shareholders and investors, and affecting the development of the company and its employees. This has made us realize that rumors and slander cannot be avoided; honest people can only be bullied. We have endured for over a decade; we cannot continue to endure like this. This time, for the long-term development of the company and the interests of investors, we are determined to make the facts and truth public. Yili and its current management have always been walking in the sunshine. Beijing News: What are Yili's next steps? Zhang Jianqiu: Besides making the truth public, we will also protect our rights according to law. We call on the state and the Inner Mongolia Autonomous Region Supervision Commission and judicial departments at all levels to publicly disclose all investigation files and the flow of all funds involved in the cases according to law, to prosecute the verified case of embezzling 240 million yuan of public funds according to law, and to re-sentence and retry the case of embezzling 16.5 million yuan according to Article 384 of the Criminal Law. Beijing News: Can you reveal who this former executive is? Is this accusation a deliberate decision by the company? Zhang Jianqiu: Zheng Junhuai, former chairman of Yili. Everything we have said today is true, and we are willing to bear all legal responsibility! Where is current Chairman Pan Gang? During the interview, Yili Executive President Zhang Jianqiu revealed that police specially checked Chairman Pan Gang's itinerary on March 26, confirming that Pan Gang was seeing a doctor at the hospital that day, with detailed records of prescribing and picking up medicine. The reporter noticed that Pan Gang's name appeared in the latest guest list for the Boao Forum published by Hainan Daily, confirming that he will attend the Boao Forum opening on April 8. Since the storm broke out, Pan Gang has not appeared publicly, but Yili officials have been refuting rumors through various channels. Late at night, Yili officially released a message saying that on April 4, Yili Group held an important discussion on "sustainability," where Chairman Pan Gang and the group's middle and senior leaders jointly reviewed and approved the 2017 sustainable development work report. The past of former Chairman Zheng Junhuai Zheng Junhuai, now 78 years old, was once the founder of Yili Group and China's "dairy godfather." △ Former Yili Chairman Zheng Junhuai After graduating from Inner Mongolia Normal University at the age of 20, Zheng Junhuai worked in the Inner Mongolia agriculture, forestry, animal husbandry, and fishery system. In the early 1980s, he became the director of the Hohhot Huimin Dairy Factory, developing this small enterprise into the later Yili Group. In 1996, Yili shares were listed, becoming China's first listed dairy company. Niu Gensheng, who later founded Mengniu, was then the deputy general manager in charge of production and sales at Yili. Pan Gang, who joined the Huimin Dairy Factory right after graduation, was only 26 years old and had already been promoted to middle management at Yili. However, the dispersed shareholding structure at the time of Yili's listing planted the seeds for a series of subsequent problems. According to Yili's IPO prospectus, at that time, the largest shareholder, Hohhot State-owned Assets Management Office, held 25.32% of Yili, and the second largest shareholder, Hohhot Leasing Company, held only 6.22%. After Yili's private placement in 2002, Hohhot State-owned Assets' stake fell to 18.71%. Later, these shares were transferred to the Hohhot Finance Bureau, which then transferred some of the state shares to Hohhot Qiyuan Investment. The Hohhot Finance Bureau, as the largest shareholder, saw its stake reduced to 14.33%. Qiyuan Investment, as the third largest shareholder, held 4.38%. It is worth noting that Qiyuan Investment was a company registered by Zheng Junhuai and Yili executives, and the funds for purchasing the shares came from incentive bonuses and loans for middle and senior management, including Zheng Junhuai. In March 2003, Yili's major shareholder, Hohhot Finance Bureau, transferred its 14.33% stake to Jinxin Trust of the Deyi system at 10 yuan per share, with a total transfer price of 280 million yuan. After Jinxin Trust became the major shareholder of Yili, it did not send any personnel to Yili's management. Therefore, the industry has always suspected that Jinxin Trust was only holding shares on behalf of then Yili Chairman Zheng Junhuai and others, helping them complete a management buyout, but both Yili and Jinxin Trust denied this. At the end of 1999, Hohhot Lixin Industrial was preparing to transfer its 2.68% stake in Yili. To buy these shares, Zheng Junhuai proposed and established Huashi Commercial and Trade Company in the name of some Yili executives. Later, the shareholders of Huashi Commercial and Trade were changed to the names of direct relatives of five Yili executives, including Zheng Junhuai. Zheng Junhuai later explained that his original intention was to serve as a transition for Yili's management incentive plan. In 2004, the conflict between Zheng Junhuai and Yili independent director Yu Bowei broke out, becoming the famous "independent director incident" at Yili. Yu Bowei publicly questioned Zheng Junhuai's illegal investment in treasury bonds and other issues, and also raised the issue of Huashi Commercial and Trade. In June 2004, the Inner Mongolia Regulatory Bureau of the China Securities Regulatory Commission sent an inspection team to Yili Group for investigation. In December, Hohhot announced that Zheng Junhuai and four other Yili executives, including Yang Guiqin, were criminally detained on suspicion of embezzlement of public funds. On January 5, 2005, Zheng Junhuai was formally arrested. The later indictment stated that Zheng Junhuai and four others were suspected of embezzlement of public funds, with the main criminal facts being the embezzlement of 15 million yuan in loans and 1.5 million yuan in borrowings from Yili's entrusted enterprises to purchase legal person shares of Yili for Huashi Commercial and Trade. The widely circulated issue of Zheng Junhuai and others embezzling treasury bond investment funds and using Jinxin Trust for a roundabout MBO was not included in the indictment. After being sentenced to 6 years in late 2005, Zheng Junhuai was released early around August 2008. After 2011, Zheng Junhuai joined Heilongjiang Hongxing Group, and currently serves as chairman of Hongxing Dairy. Zheng Junhuai's equity claims, Pan Gang's seclusion, Yili's delayed annual report... These successive "uncertainties" make Yili Group look somewhat foggy in this spring season. The old rival Mengniu's revenue of over 60 billion yuan has everyone eagerly awaiting Yili's annual report. Perhaps the upcoming annual report will bring some light to Yili... This article is compiled and edited by New Distribution, with references from Beijing News and Damo Finance. -END-