Prime Minister Nguyen Tan Dung has suspended the head of state-owned shipbuilder Vinashin for massive debts piled up by the group under his stewardship.
The decision was announced by the government office on July 14, two days after the Communist Party's Inspection Commission decided to transfer the case to the police for criminal investigation.
The 57-year-old chairman of Vinashin (Vietnam Shipbuilding Industry Group), Pham Thanh Binh, was suspended pending investigation into his suspected wrongdoings, said Minister Nguyen Xuan Phuc, Head of the Government Office.
Deputy Minister of Transport Nguyen Hong Truong has been appointed Vinashin chairman, the minister said.
Early this month, the government had reported that the shipbuilder's debts exceeded VND80 trillion (US$4.2 billion).
Binh, a shipbuilding engineer from Hai Phong City, has been Vinashin General Director since 1996 and held the chairman's position at the group since August 1998. Since 2003, he has been secretary of the group's Party Unit.
Prime Minister Dung has ordered that a taskforce be set up to deal with Vinashin's problems, including restructuring the group to continue developing the shipbuilding industry, managing its assets effectively, limiting the negative impacts on workers, preventing a domino effect on other operations and taking appropriate measures against individuals responsible for the group's predicament.
On July 5, the Party's Inspection Commission announced that it had found several key party members including Binh violating Party regulations.
Inspectors said Binh had been irresponsible in using state funds and pushing the company towards bankruptcy. Binh had also appointed his family members to key positions in the company in violation of state regulations, they said.
These violations have caused serious consequences, inspectors said, noting that Binh may have acted out of his own self-interest.
The Inspection Commission also said Vinashin had been dishonest in its financial reporting and had invested aggressively beyond its main business of shipbuilding, causing significant losses to the government budget.
Party inspectors also announced Binh would be placed under the disciplinary process and on July 12, they announced the case would be transferred to the police for investigation because they found indications of criminal violations by Binh and some other individuals in the group.
In a recent report by Tien Phong newspaper, Vinashin CEO Tran Quang Vu said: "We want to apologize to the Party, the government, the public and everyone who put their faith in Vinashin. We have failed to live up to expectations."
As shipbuilding is a comprehensive industry, comprising many other sectors like steel, machinery and paint, Vinashin had created "an ambitious plan" to build a well-rounded business in order to control quality and cut production costs, said Vu, who took over as CEO on July 1.
"However, we have to admit that we became overindulgent. Besides shipbuilding, which is our core business, we also invested in stocks, real estate and insurance markets.
"Since our business was based on loans, Vinashin faced difficulties when the economic crisis hit the global market, severing the company from its financial plans."
Vinashin was established in 1996 with a chartered capital of VND100 billion, according to a government report. The group has made great strides over the years, turning Vietnam into one of the strongest shipbuilders in the region.
It was hit hard by the economic downturn with many customers cancelling shipbuilding contracts or delaying payments, the report said.