TRIAL CASTS LIGHT ON BANKS’ CHINA DEALS

Published on May 13, 2009 by brooks | This story has been viewed 254 views

An insider dealing trial involving a senior Morgan Stanley banker resumes today, promising to shed more light into the workings of major international investment banks on deals in China.

Hong Kong prosecutors allege that Du Jun, a former managing director of the fixed income department at Morgan Stanley Asia, spent HK$86m ($11.1m) acquiring shares in Citic Resources, an arm of China’s largest investment conglomerate, in 2007. At the time, Mr Du was part of two teams that advised the Chinese company on hedging and a bond offering related to the company’s investment in an oil field in Kazakhstan.

The hearing began last Monday with Mr Du pleading not guilty to 10 counts of insider dealing.

So far two senior Morgan Stanley bankers have testified for the prosecution.

One of the witnesses was Vinay Jayaram, managing director of global capital marketing at the US bank, who was a senior member of the two project teams – codenamed Colorado and Jumbo – that advised Citic Resources two years ago. Mr Jayaram told the court last week that Mr Du was asked to join the teams “from a relationship standpoint” as he was said to have had close relationships with senior executives at major Chinese companies and Morgan Stanley was competing with other rivals to win the advisory role.

Mr Jayaram indicated that Citic Resources was an important client because Citic, its parent, is a Chinese state-owned enterprise.

Mr Du was one of the three “relationship mangers” whose principal role was to “help us pitch and win the deal”, Mr Jarayam told the court.

“It was an important deal for Morgan Stanley given the nature of the client,” said Mr Jayaram. “We all knew that it was an important deal and we had to get it done.”

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