(Yicai Global) Sept. 25 -- Shede Spirits Chairman Liu Li, President Li Qiang, and Director Zhang Shaoping are under criminal and administrative investigation by China’s securities watchdog and police on suspicion of siphoning off the company’s funds, Shede said in a statement yesterday.

Zhang Shuping, the Suining, Sichuan province-based company’s director and vice president, will temporarily serve as chairman, and the company's Director and Vice President Pu Jizhou will take over as president, the company said.

Shede plunged into turmoil over the past two years as its actual controller, SkyOcean Group Holdings, which Zhou Zheng owns, stripped it of cash assets totaling over CNY4 billion (USD586.3 million), of which CNY475 million (USD69.6 million) has thus far not been recovered.

The firm will hold its third extraordinary general shareholders meeting on Sept. 28 to choose new members of the board of directors and the board of supervisors as well as new senior managers, it added.

Shede shares [SHA:600702] closed 5.01 percent down at lunch at CNY28.09 (USD4.11) today after previously already having hit the 10 percent down limit three times recently. The company's market value is now CNY10.48 billion.

SkyOcean and its affiliated parties have hoovered up CNY2.2 billion of Shede’s funds over the last year, seizing CNY1.9 billion from the start of the year to Aug. 19, Shede announced following a self-investigation on Aug. 19. SkyOcean has not repaid CNY475 million, of which the principal is CNY440 million, Shede stated.

Shede failed to review and disclose this information per regulations, and this accordingly raised its acts to the level of an unlawful misappropriation of the funds, the local branch of the China Securities Regulatory Commission charged in an administrative supervisory ruling on Sept. 1. The outcome awaits further police investigation, the company said. The case has been referred to prosecutors to bring embezzlement charges.

Shede’s first-half business income was CNY1 billion in a per-year 15.6 percent decrease, while net profit was CNY164 million, down 11.35 percent annually.

Formed in 1993, Hong Kong- and Beijing-based SkyOcean plies the culture, technology, finance, industrial property and consumer goods businesses.

Editor: Ben Armour