Luo Aihua, chairman of Shenzhen Kangda (Group) Co., Ltd. (000048.SZ, hereinafter referred to as *ST Kangda), was criminally detained by the Shenzhen police on suspicion of breach of trust and harming the interests of listed companies.On August 13, *ST Kangda issued an announcement on this.

On the afternoon of August 13th, *ST Kangda urgently held a board meeting to remove Luo Aihua from all his positions - chairman, president, member of the strategy committee, and member of the audit committee.Li Lifu, vice president and chief financial officer of *ST Kangda, was dismissed along with Luo Aihua.*ST Kangda announced that Li Lifu has lost contact since August 10.

A person close to the Shenzhen Municipal Public Security Bureau revealed to Caixin reporter that the Shenzhen Municipal Public Security Bureau has set up a task force for this.The main problem is that Luo Aihua and others are suspected of misappropriating funds of listed companies on a huge scale.The person said.

Founded in 1979, *ST Kangda was listed on the Shenzhen Stock Exchange in 1994. It was once renamed as Zhongke Entrepreneurship.*ST Kangda started with raising chickens in the early years, and now it is a diversified group company involved in urban agriculture, public utilities and real estate.

Luo Aihua is the actual controller of *ST Kangda, and has been in charge of *ST Kangda for 15 years.Luo Aihua holds a 31.66% stake in *ST Kangda through Shenzhen Huachao Investment Holding Group Co., Ltd. and its persons acting in concert.*ST Kangda's board of directors has always been centered on Luo Aihua, and more than half of the members of the board of directors and the board of supervisors are its old subordinates.

The Caixin reporter was unable to learn the exact time when Luo Aihua and others were taken away.However, at the *ST Kangda Extraordinary Shareholders’ Meeting held on August 10, none of the core members of *ST Kangda, including Luo Aihua, Li Lifu, Chairman of the Board of Supervisors Zhang Minghua, etc., attended the meeting.The Caixin reporter noticed that the Shenzhen Securities Regulatory Bureau sent two staff members to observe the extraordinary general meeting of shareholders that day.

A person close to *ST Kangda confirmed to the Caixin reporter: At that time, Luo Aihua and others had submitted a request for leave to the secretary of the board of directors, and no one thought much about it.

As the second largest shareholder of *ST Kangda, Xiong Wei, the director of Shenzhen real estate company Kingkey Group Co., Ltd. (hereinafter referred to as Kingkey) stationed in *ST Kangda, has become the chairman of *ST Kangda on the afternoon of August 13.The announcement said: This move is mainly to maintain the stability of listed companies.

When the board of directors changed on July 1, Xiong Wei, nominated by Kingkey, was elected director.Kang Daer said: its qualifications are still subject to verification and confirmation by the regulatory agency.However, after Luo Aihua was detained, *ST Kangda's board of directors, headed by Xiong Wei, quickly promoted the Jingji team to senior management positions.Kingkey executives Ba Gen, Cai Xinping, and Huang Yiwu were elected as the president, vice president, vice president and chief financial officer of *ST Kangda respectively.

Kingkey now holds a 31.65% stake in *ST Kangda.*The equity battle between ST Kangda and Kingkey has lasted for three years.(For details, see Caixin Weekly report that Kangdaer vs. Jingji) The change of chairman this time may be the end of this.

Prior to August 3, Kingkey had launched a tender offer for *ST Kangda.If the tender offer is completed, Kingkey will hold 41.65% of the shares of *ST Kangda and become the largest shareholder. Chen Hua, the founder of Kingkey, will become the actual controller of *ST Kangda.

Chen Hua is determined to seek the control of *ST Kangda, but there is still a rich grievance hidden behind it.

Chen Hua and Luo Aihua have known each other for more than 20 years, and they had business contacts in the early years.At the end of 2013, Luo Aihua was investigated by the Economic Crime Investigation Detachment of the Shenzhen Municipal Public Security Bureau on suspicion of occupational embezzlement, and was released on bail pending trial.At that time, Luo Aihua's daughter was preparing for her marriage.

For this reason, Luo Aihua once asked Chen Hua for help, hoping that Chen Hua could help him escape.Luo Aihua promised Chen Hua that if she could get out of the criminal case, she was willing to cooperate with Chen Hua on projects, and the two parties signed letters as evidence.People close to Chen Hua and Luo Aihua respectively confirmed the above information to Caixin reporters.

Since then, Luo Aihua has indeed successfully escaped from the criminal case.A person close to Chen Hua told the Caixin reporter that Chen Hua asked Jiang Zunyu, then secretary of the Political and Legal Committee of Shenzhen City, for help, but Jiang Zunyu was sacked in October 2014.Chen Hua also left the Mainland for Hong Kong.People close to Luo Aihua said that Luo Aihua thought she could get out of the criminal case and did not rely on Chen Hua's help.

The two sides disagreed on this, and the relationship also deteriorated.Luo Aihua later believed that this grievance was originally set up by Chen Hua; while Chen Hua believed that Luo Aihua was treacherous, so he vowed to obtain control of *ST Kangda.

After going around for five years, Luo Aihua was once again criminally detained by the Shenzhen Municipal Public Security Bureau.Does this stem from Jingji reporting the case to the public security organ?In this regard, Kingkey's attorney Song Siyu clearly denied it to the Caixin reporter.He explained that Jingji only learned of Luo Aihua's arrest on August 13, and Jingji did not know who reported the case.

According to the Criminal Law, whoever commits the crime of breach of trust and damages the interests of listed companies, causing heavy losses to the interests of listed companies, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also be fined or solely fined;Not less than one year but not more than seven years of fixed-term imprisonment and a fine.

Hu Qin, Secretary of the Board of Directors of *ST Kangda, told the Caixin reporter that the police conclusion has not yet come out, and the company will promptly announce the progress of the matter.At the same time, the company and the board of directors will actively cooperate with the accounting firm to carry out the annual audit work under the leadership of the new chairman to ensure that the normal operation of the company will not be affected.

At present, *ST Kangda has been unable to publish its annual report due to the fierce competition for equity.If the 2017 annual report cannot be issued before September 2, *ST Kangda will be suspended from listing.

On August 13, *ST Kangda closed at 22.75 yuan per share, up 0.89%.■