State inspectors have recommended penalties for rampant financial mismanagement at the state-owned Vietnam Rubber Group which lost nearly US$391 million over the course of six years.
Members of the Government Inspectorate found the group and its member companies had made a series of unprofitable investment decisions between 2005 and 2011.
One major violation, according to the inspectors, was the group's significant investment in the Phu Rieng-Kratie Rubber Company which began cultivating rubber in Cambodia in 2007.
Mismanagement of the foreign subsidiary may have resulted in VND483 billion ($22.75 million) in losses, not to mention nearly $1.9 million in loans the company cannot pay back.
Much of this money was lost due to Phu Rieng-Kratie Rubber's investments in non-core businesses, the inspectors said.
By the end of 2011, the group had put more than VND2.42 trillion ($114 million), or 13 percent of its registered capital, into businesses that have nothing to do with rubber.
Some businesses made no profit, some resulted in losses, while the best investments resulted in profits under four percent.
For example, over VND390 billion the group invested in the Phu Yen Hydropower Investment Company and the Central Region Construction Corporation earned nothing over the course of five years.
A more than VND600 billion investment it made into the steel and hotel businesses resulted in zero profit between 2008 and 2011.
The group began to divest from those businesses in 2012 but had more than VND2.1 trillion tied up in 23 companies by the time the government inspection began in May of last year.
The group's subsidiaries also made poor non-core investments.
The Tay Ninh Rubber Joint-Stock Company in the namesake province invested nearly VND70 billion into six companies only to profit VND1.5 billion after many years.
The Dong Nai Rubber Company invested VND362 billion, which mostly yielded a zero sum profits.
Several members of the Vietnam Rubber Group also joined others at the group’s member companies to open the Dong Thap Seafood Import-Export and Processing Company in 2007 with VNDD169 billion in registered capital drawn from the welfare fund without the board’s unanimous approval.
The Dong Thap Company racked up losses that finally totaled over VND144 billion in 2012.
Those losses were added on top of outstanding bank debts that amounted to VND235 billion.
The inspectors asked the Ministry of Public Security to dig deeper into the specific disbursal of the funds in each case.
They also found violations in the transfer of land rights, but the details of those violations remain unavailable.