On June 12, 2009, the Zhongwei City Administration for Industry and Commerce determined that Jinli Company had falsely reported its registered capital. "Given that the illegal acts of the parties did not cause social harm... it was decided to order Jinli Company to make corrections; a fine of 450,000 yuan would be imposed, to be paid into the state treasury."
However, after the suspension notice was issued, on December 17, 2007, Meili Paper Industry obtained an exploration license for coal in Liangshuiyuan area of Zhongwei City from the Land and Resources Department of Ningxia Hui Autonomous Region. After Jinli Company filed a lawsuit, the Ministry of Land and Resources revoked this exploration license.
During the Dragon Year Spring Festival, Xu Guoqing did not have a pleasant time. Although he was free, he was still considered "a guilty person." On January 16, passengers who tried to dissuade overloading were ridiculed by ticket sellers: "If you don't want to squeeze, take the funeral home car." The Shapotou District People's Procuratorate of Zhongwei City, Ningxia Hui Autonomous Region, issued a "Non-Prosecution Decision," determining that he "constituted the crime of false reporting of registered capital, but prosecution was not pursued." On January 19, the Shapotou District People's Procuratorate notified him by phone that his appeal had been accepted, and he was now waiting for the written acceptance decision from the procuratorate.
Xu Guoqing believed that the procuratorial organs' decision took into account the "Mayor's Office Meeting Minutes" of the Zhongwei Municipal Government. The real purpose of revoking Jinli Company's business license was to prevent Jinli Company from legally obtaining the exploration rights of the Liangshuiyuan coal mine, thereby protecting Meili Paper Industry's interests.
On the same day, Jinli Company paid the 450,000 yuan fine and injected 9 million yuan in cash. The Zhongwei City Administration for Industry and Commerce issued a new business license.
The Zhongwei Municipal Government explained that "holding a special meeting of the municipal government, revoking the original penalty decision, and revoking Jinli Company's business license, was exercising supervisory and inspection powers lawfully and reasonably."
In February 2008, according to the opinions of the Land and Resources Department of Ningxia, the Ministry of Land and Resources decided not to accept Jinli Company's application for exploration rights.
Thereafter, Jinli Company separately filed administrative reconsideration with the Ningxia Hui Autonomous Regional Government and the Regional Administration for Industry and Commerce, both of which were rejected on the grounds that "your company is suspected of falsely reporting registered capital and is under investigation and handling."
At the same time, due to Jinli Company's lawsuit, the Ministry of Land and Resources revoked the exploration license improperly issued by the Ningxia Land and Resources Department to Meili Paper Industry. Meili Paper Industry is a listed company in Zhongwei City. In 2006, it became a subsidiary of China Metallurgical Group Corporation - Zhongye Meili Paper Industry Co., Ltd. In April 2006, the Zhongwei Municipal Government committed to allowing Meili Paper Industry to develop and utilize coal resources in the Liangshuiyuan area.
In August 2005, Jinli Company applied to the Ministry of Land and Resources for an exploration license, requesting permission to explore 35 square kilometers of coal resources in the Liangshuiyuan area of Zhongwei City.
During the more than two-year investigation by the Zhongwei Public Security Bureau regarding Xu Guoqing's alleged criminal activities, Jinli Company's business license was revoked.
Starting from December 22, Meili Paper Industry was temporarily suspended from trading. The reason was "the public media reported information related to the company's asset swap... The company will verify relevant matters with all parties concerned, and a gang heard about doing something big at a restaurant and was locked down by the police." However, Meili Paper Industry had not resumed trading by the time the reporter went to press.
Jinli Company successively initiated administrative reconsideration and administrative litigation. On December 8, 2008, the Ministry of Land and Resources revoked the "Notice of Non-Acceptance of Exploration Rights Application."
Xu Guoqing's agent lawyer Zhang Kai believed that according to the Criminal Procedure Law: the investigation, detention, execution of arrest, and preliminary examination of criminal cases shall be handled by the public security organs. Prosecution, approval of arrest, investigation of cases directly accepted by the procuratorates, and indictment shall be handled by the people's procuratorates. Trial shall be handled by the people's courts. Except as otherwise provided by law, no other organ, group, or individual shall exercise these powers. The Zhongwei Municipal Government has no authority to conduct special research on whether Jinli Company is suspected of the crime of false reporting of registered capital, nor does it have the authority to convene responsible persons from public security, procuratorial, judicial, and other administrative agencies who bear the responsibilities of criminal litigation to participate in special meetings and jointly determine the guilt of Xu Guoqing and his company.
Xu Guoqing is the legal representative of Jinli Engineering Transportation Co., Ltd. in Zhongwei City, Ningxia. He believed that the procuratorial organs' decision to "not prosecute despite guilt" maintained the authority and dignity of certain leaders in Zhongwei City, but sacrificed his legitimate rights and interests. He would appeal until the end.
On January 16, 2012, the Shapotou District People's Procuratorate of Zhongwei City decided that Xu Guoqing constituted the crime of false reporting of registered capital, but the crime was minor, so prosecution was not pursued. However, this "Non-Prosecution Decision" avoided the facts that Jinli Company made up for the defective capital contribution by paying 9 million yuan in cash, paid a fine of 450,000 yuan, and the Zhongwei City Administration for Industry and Commerce replaced and issued the "Enterprise Legal Person Business License," and did not mention the special meeting minutes of the Zhongwei Municipal People's Government on June 16, 2009.
Zhang Kai believed that the physical assets of Jinli Company's 9 million yuan physical capital increase also existed. Due to some physical invoices not meeting the requirements for capital verification, some having physical assets but no invoices, and some being affiliated with other companies, they failed to meet the capital verification requirements, so some invoices were altered or blank invoices were used. On June 12, 2009, when the Zhongwei City Administration for Industry and Commerce ordered rectification, Xu Guoqing immediately corrected it with 9 million yuan in cash. According to the elements of the crime of false reporting of registered capital, compared with the facts of this case, Xu Guoqing's behavior did not constitute the crime of false reporting of registered capital.
Xu Guoqing's agent lawyer Zhang Kai believed that the Shapotou District People's Procuratorate's determination that Xu Guoqing "constituted the crime of false reporting of registered capital" was unclear in terms of fact-finding, insufficient in evidence, inaccurate in characterization, and did not meet the elements of the crime of false reporting of registered capital.
On January 12, 2009, the Zhongwei Public Security Bureau launched an investigation into Xu Guoqing's suspected loan fraud, and on February 4 of the same year, it launched an investigation into his refusal to execute judgments and rulings, and on February 25, it launched an investigation into his suspected false reporting of registered capital.
On June 16, Vice Mayor Ma Shijun of Zhongwei City convened a meeting attended by the Zhongwei City Public Security Bureau, Procuratorate, Court, Land and Resources Bureau, and Administration for Industry and Commerce. The meeting summary stated: "On the morning of June 16, 2009, Vice Mayor Ma Shijun presided over a meeting to conduct a special study on the related issues of the suspected crime of false reporting of registered capital by the Zhongwei City Jinli Engineering Transportation Company... The investigation by the Public Security Bureau of the suspected crime of false reporting of registered capital by the Zhongwei City Jinli Engineering Transportation Company is clear in facts and solid in evidence... It was decided to revoke Jinli Company's business license as soon as possible according to law."
Some media questioned how Xingzhong Industrial could claim to own the mining rights of the Liangshuiyuan coal mine when it clearly does not possess them? This operation has the suspicion of "getting something for nothing." At the same time, Meili Paper Industry's announcement concealed key information (risks), such as the transaction counterpart's business scope not including coal exploration and mining, without providing explanations.
On March 4, 2009, the Zhongwei Public Security Bureau sent a letter to the Zhongwei City Administration for Industry and Commerce, stating that Xu Guoqing was suspected of loan fraud, refusal to execute court judgments, and false reporting of registered capital crimes, "suggesting that your bureau revoke Jinli Company's registration according to law."
Meili Paper Industry announced that the mining rights referred to are the coal mining rights of the central-eastern exploration area of the Liangshuiyuan coal mine district in Zhongwei City.
On December 20, 2011, Zhongye Meili Paper Industry Co., Ltd. announced that the company intended to exchange assets with Xingzhong Industrial Co., Ltd. of Zhongwei City, with the assets to be exchanged being the "coal mining rights" that Xingzhong Industrial did not yet own. After the announcement, Meili Paper Industry's stock price rose by the daily limit for two consecutive days.
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On October 26, 2011, the Shapotou Branch of the Zhongwei Public Security Bureau revoked the cases of Xu Guoqing's suspected refusal to execute judgments and rulings and loan fraud. On December 5, after supplementary investigation, the case of Xu Guoqing's suspected false reporting of registered capital was transferred to the Shapotou District People's Procuratorate of Zhongwei City for review and prosecution.
Xu Guoqing believed that the procuratorial organs' determination of "guilty but not prosecuted" forced him to swallow the bitter pill of guilt while the procuratorate avoided responsibility for wrongful cases, which was painstakingly devised. If the procuratorial organs could not declare the appellant innocent, he would appeal to the Supreme People's Procuratorate and the Standing Committee of the National People's Congress.
However, on June 15, the Zhongwei Public Security Bureau again sent a letter to the Administration for Industry and Commerce, requesting the revocation of Jinli Company's business license.
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On February 2, 2007, the Ministry of Land and Resources issued a "Notice on Suspending the Acceptance of Coal Prospecting Rights Applications," deciding to suspend the acceptance of new coal prospecting rights applications nationwide from February 2, 2007, to December 31, 2008. Thereafter, the suspension period continued to be extended.
Our newspaper reports from Beijing on January 29.
However, after Jinli Company won the lawsuit, local judicial authorities began to investigate Xu Guoqing's alleged criminal activities. (See our newspaper's report on May 25, 2011, "The Suspicious Matters Behind the Prospecting Rights Dispute")
Meili Paper Industry stated that according to the explanation provided by the Land and Resources Department of Ningxia Hui Autonomous Region regarding the coal resources of the central-eastern exploration area of the Liangshuiyuan coal mine district, the base price assessment value of the mining rights is 130 million yuan. Xingzhong Industrial expects the subsequent total cost of obtaining the mining rights to be 160 million yuan... The assessed value of the mining rights is 340 million yuan. Increased by 180 million yuan.
Zhang Kai said that on January 13, 2000, Xu Guoqing and his younger brother Xu Guojun invested 1 million yuan and applied for the registration of Jinli Company. The 1 million yuan registered capital was legally valid at the time of establishment registration. The administrative penalty decision of the Zhongwei City Administration for Industry and Commerce and the prosecution opinion of the Shapotou Branch of the Zhongwei City Public Security Bureau refer to Jinli Company increasing its registered capital from 1 million yuan to 10 million yuan by contributing 9 million yuan in physical assets on March 6, 2006, during the process of changing the registration. These facts are very clear. The existence of these two objective facts precisely proves that the procuratorial organs' determination that the applicant is suspected of the crime of false reporting of registered capital is unclear in facts, insufficient in evidence, and inaccurate in characterization.
Xu Guoqing believed that from the "Mayor's Office Meeting Minutes" of the Zhongwei Municipal Government "revoking Jinli Company's business license as soon as possible" to the procuratorial organs' determination of "constituting the crime of false reporting of registered capital," the core was one: after revoking the business license, Jinli Company would not exist as a legal entity and thus could not obtain the exploration rights, allowing Meili Paper Industry to bypass the Ministry of Land and Resources' suspension of accepting exploration rights notifications.
On June 30, Jinli Company's business license was revoked.