Content of the first instance criminal judgment of the Alibaba case in Vietnam

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On December 29th, 2022, the People's Court of Ho Chi Minh City issued a verdict in the criminal case 607/2022/HS-ST on the charges of Fraudulent appropriation of property and Money laundering against the defendants Nguyen Thai Luyen, Vo Thi Thanh Mai, and other defendants in the Alibaba case.

1. Details of the Alibaba case

According to the documents in the case file and the proceedings in court, the details of the Alibaba case are summarized as follows:

- Alibaba Real Estate Joint Stock Company (abbreviated as Alibaba Company), headquartered at 321 Dien Bien Phu, Ward 15, Binh Thanh District, Ho Chi Minh City, was granted a Business Registration Certificate by the Ho Chi Minh City Department of Planning and Investment on May 5th, 2016, with a charter capital of 1 billion VND.

It was subsequently amended on September 26th, 2017, increasing the charter capital to 1,600 billion VND. Alibaba Company, with Nguyen Thai Linh as the Director - Legal representative, had the following shareholders:

+ Nguyen Thai Linh holding 49.5%;

+ Nguyen Thai Luyen, Chairman of the Board of Directors (BOD) and Chief Executive Officer (CEO) (Linh's older brother), holding 1%;

+ Vo Thi Thanh Mai (Luyen's wife) holding 49.5%;

+ Main business activity: Real estate.

To serve the business of Alibaba Company, Nguyen Thai Luyen directed the establishment of 22 legal entities operating in various fields such as real estate, media, transportation, etc., with individuals from Luyen's family (including Luyen's younger brother, Luyen's wife) and some employees of Alibaba Company serving as Directors - Legal representatives.

- Regarding the offense of "Fraudulent appropriation of property":

Recognizing the significant demand for affordable real estate investment for residential and construction purposes of many residents in Ho Chi Minh City, Dong Nai province, Ba Ria - Vung Tau province, Binh Thuan province, and many other localities nationwide:

Luyen devised a business method on non-existent projects, which he named and drew on agricultural land following a 5-step process, then instructed his employees to carry out in order to gain the trust of investors who would deposit money with Luyen, specifically:

Step 1: Nguyen Thai Luyen used a small portion of personal funds and a large portion of funds embezzled from customers to instruct individuals, including trusted family members and employees of Alibaba Company, to register as recipients of a large number of agricultural land transfers in Dong Nai, Ba Ria - Vung Tau, and Binh Thuan provinces.

Step 2: The individuals who received the land transfers as mentioned above signed Power of Attorney contracts, granting authority to the legal entities established by Luyen to draw up non-existent "projects" on agricultural land, dividing and subdividing plots in violation of regulations as directed by Luyen.

(All projects were not registered with the Land Administration Authority for land use conversion or subdivision in accordance with the Land Law 2013; no procedures were carried out in accordance with legal regulations for project establishment).

Step 3: After receiving the power of attorney, the above legal entities, acting as investors, drew up non-existent projects, subdivided plots (dividing plots from 100 m2 to less than 400 m2 in violation of regulations, clearly indicating residential land, long-term use, etc.), and used media outlets for advertising and sales.

Step 4: Luyen continued to direct the investors to sign business cooperation contracts for the distribution of land plots with Alibaba Company, making this legal entity a distributor of land plots and directly collecting money from customers.

Step 5: After customers agreed to purchase, Nguyen Thai Luyen directed the legal entities as investors to sign Agreed Contracts, transferring the land use rights to customers, but the money was deposited with Alibaba Company for Luyen's management and use.

To gain trust and attract customers, Nguyen Thai Luyen also used sales tactics such as a commitment to repurchase at a higher price of at least 30% after 12 months or 38% after 15 months from the deposit date, or a leaseback option at a rate of 2% per month from the signing date with 95% of the contract value paid.

With this method, almost all customers who received land transfers in the form of residential land sold by Alibaba Company did not receive land use rights certificates (hereinafter referred to as land use rights certificates) as promised when due, but instead, the certificates would be converted to interest payments or repurchased based on the option contracts or accompanying contract appendices.

2. Some remarks from the Trial Council in the Alibaba case:

- Defendant Nguyen Thai Luyen argued that the mentioned projects did not require permission from the authorities, while the defense lawyer argued that these projects were all real but had not been approved by the competent authorities.

The Trial Council assessed as follows: Land is a limited resource, so every country in the world, including Vietnam, has policies to manage land use, specifically Article 6 of the Land Law 2013 stipulates:

"Article 6. Principles of land use

1. Compliance with land planning, land use plans, and land use purposes.

2. Conservation, efficiency, environmental protection, and not causing harm to the legitimate interests of land users around."

Accordingly, each locality has regulations on land use limits. However, in order to acquire a large amount of agricultural land, Nguyen Thai Luyen used the trick of having many relatives and subordinates put their names on the land, and by the time the case was discovered, the defendant had transferred 2,078,481.2 m2 in Binh Thuan province, 838,074 m2 in Ba Ria - Vung Tau province, and 1,519,783.96 m2 in Dong Nai province, exceeding the prescribed limits by a significant amount.

The defendant himself has experience in the real estate business since 2012 and is well aware that "investment projects in the construction of houses for sale or for combined sale and lease must transfer land use rights under the form of a plot subdivision, land lot sale," which must meet the following conditions:

(1) The land for implementing the project must have a land use rights certificate;

(2) Approved by the provincial People's Committee for investment decisions;

(3) changed the purpose to residential land;

(4) Completed the investment in infrastructure, including service works, technical infrastructure, and social infrastructure, according to the approved detailed construction planning at a scale of 1/500; ensuring connection with the general infrastructure system of the area before transferring land use rights to people for self-construction of houses; ensuring the provision of essential services, including electricity supply, water supply, drainage, and waste collection;

(5) Completed financial obligations related to land of the project.

However, comparing the documents in the case file and the defendant's testimony in court, it was determined that the defendant did not have any documents requesting investment decisions for the 58 projects that the defendant had implemented. At the time of signing the land use rights transfer contract, most of the projects were still agricultural land that had not been converted to residential land, and Alibaba Company had not yet implemented infrastructure construction but only used the land for cutting trees, filling in, and putting up advertising signs for plot subdivision and land lot sale projects. But the defendants created detailed drawings at a scale of 1/500 showing the infrastructure, including service works, technical infrastructure, and social infrastructure, as well as plot maps. Therefore, the People's Procuracy of Ho Chi Minh City determined that all 58 projects that did not exist had a basis, so the Trial Council did not accept the defendant's presentation and the defense lawyer's argument on this issue.

- The defense lawyer argued that Alibaba Company owned land, and most of it was in the rural residential land planning, so the agreements between the defendants for transferring assets formed in the future and not reaching the deadline for asset transfer were legal civil transactions.

The Trial Council stated that land is a special asset, so the State has strict regulations on transaction conditions. However, all the land plots sold by the defendants did not meet the 5 conditions for transfer as mentioned above, mostly being agricultural land, and even productive forest land (such as the Alibaba Long Phuoc 15 project), which had not been converted to residential land.

In addition, most of the projects, the defendants drew the projects themselves and sold them to customers immediately after agreeing to transfer agricultural land and depositing for residents without updating the changes in the land use rights holder and registering the transfer of land use rights. The Ali Venice City project, the Alibaba Toc Tien Residence 3 project, although Alibaba Company had only made a deposit and had not notarized the transfer contract with the landowner, the defendants had already subdivided and sold to customers.

Word File of the First-instance Judgment in the Alibaba case: 

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