(Beijing) – Shares of China Unicom slid as much as 3.6% Thursday after an internal investigation at the country’s second largest wireless carrier uncovered a massive scheme to inflate revenue figures over a five year period. 73 employees at the state-run phone giant were disciplined for “widespread falsification” which was considered “systemic” at Unicom’s north-central Shaanxi unit.
Some former top representatives and high officials of Shaanxi Unicom have ignored the law and blindly pursued big growth.
The nature and repercussions of the fraud are unprecedented in Unicom’s history, according to the document –Caixin
The internal investigation revealed that nine out of 10 branches in Shaanxi engaged in organized, cross-departmental falsification of about a third of it’s revenue over a five year period – roughly $261 million USD.
Over a five-year period, Unicom’s Shaanxi unit reported 5 billion yuan ($726 million) in revenue, of which 1.8 billion yuan – or about a third – was faked, the sources said, citing an internal message from CEO Wang Xiaochu
Punishments have ranged from firings to warnings, to deductions from performance pay.
The news comes as Unicom Group prepares to sell shares on the open market in a new offering, as part of a pilot program by the Chinese government to attract public capital into state-owned enterprises in a mixed-ownership structure. While a few billion in irregularities for a company with 300 billion yuan in annual revenue won’t make much of a dent in it’s fundamentals, the fact existence of the widespread fraud makes one wonder about what sorts of schemes haven’t been uncovered.
News of the China Unicom fraud comes months after China’s Liaoning rust-belt province was found to have inflated three years of revenues from 2011 -2014 to the tune of around 20%, along with various economic data, calling into question China’s commitment to accurate data in the face of slowing global growth.
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