Furen Pharmaceutical: Former Henan richest man Zhu Wenchen’s fraudulent journey

(Source: A Brief History of Finance and Economics)

​​On May 20, Furen Pharmaceutical, a listed company, announced that Zhu Wenchen, the actual controller of the company, was put on file by the China Securities Regulatory Commission on April 3 for alleged violations of laws and regulations.

​Looking back at Zhu Wenchen’s fortune, it is due to the crazy mergers and acquisitions in the capital market.

​In 2006, Fu Jen Pharmaceutical Co., Ltd. backdoored ST Minfeng and achieved a “curve” listing, becoming the largest pharmaceutical company in Henan Province. Since then, Zhu Wenchen began to build the “Furen Department” in the pharmaceutical industry, and successively reorganized many companies such as Henan Tiankang Pharmaceutical and Beijing Yuance Pharmaceutical. With multiple mergers and reorganizations, Zhu Wenchen’s business empire continued to expand, and his personal wealth skyrocketed as a result.

​However, several of the mergers and acquisitions were highly difficult mergers and acquisitions of snake swallowing elephants, which laid hidden dangers for future crises.

​Because there are a lot of unbelievable secrets in these mergers and acquisitions, the company has been reported by many people. Finally, in 2019, a dividend of Fu Jen Pharmaceutical triggered an unexpected chain reaction, and the 1.8 billion cash in the company’s account was found to be gone.

​On July 16, 2019, Fu Jen Pharmaceutical announced the dividend plan, and it is expected to pay more than 62 million yuan in cash dividends. According to the first quarterly report of 2019, the company has more than 1.8 billion yuan in monetary funds in its accounts, which is more than enough for dividends. However, three days later, Furen Pharmaceutical issued another announcement saying that the company had only 3.77 million available funds left, and the dividend plan could not be fulfilled.

Since then, the China Securities Regulatory Commission has found that Furen Pharmaceutical has a number of violations of laws and regulations, such as falsely increasing monetary funds, not disclosing funds occupied by related parties, and false records in mergers and acquisitions. The most serious of these is that Furen Pharmaceutical provided the monetary funds to the controlling shareholder and related parties for use, and did not record them in the financial books and information disclosure documents. The actual controller behind the controlling shareholder and related parties is Zhu Wenchen. Then Zhu Wenchen lost contact.

According to the supervision, from 2015 to 2018, Zhu Wenchen used Furen Group and its related parties to occupy as much as 2.794 billion yuan of listed company funds for non-operating purposes. Furen Pharmaceutical’s subsidiaries and grandchildren have a total of 776 million overdue debts, and the creditors of the controlling shareholder involve at least 7 provinces and cities. In addition, other listed companies of the Furen Group were also implicated. Songhe Liquor Industry was facing a suspension of production, and a large amount of equipment was used for mortgage financing.

​There are many cases in the A-share market of financial fraud and major shareholders hollowing out companies. Zhu Wenchen is a typical example.