Appliance giant Gome sues ex-chairman

Xinhua, January 6, 2012

A Beijing court on Thursday heard a lawsuit filed by a leading Chinese home appliance retailer against its former chairman over his allegedly "misleading" media interview that the company claimed "seriously damaged the firm's reputation and business operations."

Gome's ex-chairman Chen Xiao was accused of giving an interview in May last year to financial newspaper 21st Century Business Herald in which he disclosed the company's operations and warned investors not to hold Gome's stocks.

Gome's executive chairman Zou Xiaochun on Thursday told the Beijing No 2 Intermediate People's Court that Chen breached a contract with the company upon his resignation in March last year. The contract allegedly stated that Chen would be paid 10 million yuan ($1.57 million) to keep his mouth shut about the company.

Zou asked the court to order Chen to repay the 10 million yuan.

Chen was not present at the trial. His defense lawyer stated that the sum was paid in the name of "compensation for senior executives" and there was no evidence that the payment was intended to keep Chen silent.

The court was adjourned two hours after the trial started. The judge announced that the trial would be continued and asked both sides to use the next week to prepare evidence.

Chen, 52, was appointed as Gome's chairman on January 16, 2009 after Gome founder and former chairman Huang Guangyu was detained by Beijing police over suspicion of illegal business deals, insider trading and corporate bribery. Huang sought Chen's ouster but was voted down by shareholders in September 2010.

Chen said he resigned "to spend time with his family." But it was not until his resignation that Chen's sour relationship with Gome executives surfaced.

Gome, one of China's largest home appliance retailers, owns more than 1,500 stores across the country, earning 150 billion yuan ($23.6 billion) in annual revenues over the last few years, according to the company.