The receivers of Shanghai Land Holdings have sued its jailed former owner, Chau Ching-ngai, for more than HK$735 million, alleging that he took money out of the company to repay the loan he used to buy control of it.

The loan was made by Bank of China (Hong Kong), to which Chau earlier pledged his 75 percent stake in Shanghai Land. Chau, a rags-to-riches mainland tycoon, and his wife Sandy Mo, also named in Friday's court action, are already key figures in several banking scandals on both sides of the border.

Shanghai Land, whose receivers have begun liquidation efforts, said last month it was still unable to trace more than 600 million yuan (HK$565.62 million) loaned to subsidiaries. Its shares have been suspended from trading in Hong Kong since June 2003. On Friday, Shanghai Land and subsidiaries China Horizon and King Success Holdings filed a writ against Chau, Mo and others, including two Shanghai Land directors.

The suit focuses on three transactions, each of which, says the writ, ``was in reality a piece of self-dealing by [Chau].''

The funds involved were subsequently transferred to Bank of China (Hong Kong), it says.

One transaction in January 2003 - described by the company as the purchase of the Hotel Yihe Longbai Shanghai for around HK$380 million - was used to partially repay the loan that Chau used to acquire Shanghai Land.

Chau's solely owned company, New Nongkai Yihe Longbai, then entered into a loan agreement with Shanghai Rural Credit Cooperatives Union for 350 million yuan, which was diverted to a securities brokerage with ``substantial connections'' to Chau.

The second transaction was Shanghai Land's February 2003 purchase of Shanghai Hongxin Real Estate Development, which holds land on Shanghai's Wuzhong Road, for more than HK$330 million.

The third was the acquisition of another company with real estate in Shanghai, Bowyer Profits, for more than HK$33 million.

The writ says Mo, who was general manager of Shanghai Land and a director of the two subsidiaries, and Shanghai Land directors Lee Deng Charng and Angela Gong, were complicit in the transactions to varying degrees.

Also being sued are the ``purported'' vendors of the shares of the companies bought in the three transactions. They were identified as Yu Kwo, Siu Yim-wah and Yu Ling.

Chau, 44, also known as Zhou Zhengyi, is serving a three-year prison sentence in the mainland, handed down in June, for fraud and stock manipulation and falsifying corporate documents.

He rose from working in a wonton noodle shop to become a member of Hong Kong's smart set. In 2002, he ranked No 11 on Forbes magazine's China rich list, which estimated his family's net worth at US$320 million.

A year later, he was arrested in a headline-grabbing scandal over problem loans at Bank of China.

Shanghai Land's collapse brought on a shakeup at the bank, which led to the arrest of Liu Jinbao, then vice-chairman and chief executive of Bank of China (Hong Kong).

Chau's problems originated with a HK$2.1 billion bridging loan he obtained to finance the 2002 acquisition of the wireless Internet company that he turned into Shanghai Land.

His wife was charged in December with defrauding five banks of HK$89 million using bogus letters of credit. In February, she pleaded not guilty.

daniel.hilken@singtaonewscorp.com