Insurance executive charged over fraud

By Xu Fang  |   2009-3-18  |     NEWSPAPER EDITION

A FORMER sales executive with a local life insurance company has been charged with embezzling 5.35 million yuan (US$782,393).

Jing'an District prosecutors said Song Hao retained most of the premiums due to be returned to a client and invested the money in the stock market. By the time he was caught, he had lost 1 million yuan.

Song, a 38-year-old local, was in charge of sales at the insurance company, which hasn't been named.

In early 2007, a company wanted to pay bonuses to employees. To avoid tax, it decided to buy medical insurance for them, surrender the policies after two months and get most of their money back, prosecutors said. In this way, it only needed to pay commission, a much lower sum than the tax that would have been due on cash bonuses.

The company, which has also not been named, spent 2 million yuan on insurance policies and agreed with Song that the premiums be returned in batches within six months.

But only 690,000 yuan was transferred to the accounts of the employees. Song bought stocks with the rest, hoping to earn huge profits, prosecutors said.

When the six-month period neared its end, Song had to lie that new rules meant the deadline had been extended to 12 months.

From 2007 to February 2008, the company spent a total of 12 million yuan on policies. Song is said to have kept 5.35 million yuan of it.

The insurance company uncovered the scheme last September and Song confessed. He has returned all the money, prosecutors said.