Possible bid collusion in SAO building case taken as second “Special Case” by DSI

The Department of Special Investigation (DSI) sets out to wrap up the first special case concerning the use of nominees in one of the SAO building construction contractors, China Railway Number 10 (Thailand)(CREC), within 30 days, before moving forward with the next accusation, bid collusion

The department has updated the public about its investigation into major cases, including the SAO building case, today. The DSI’s Director-General, Pol. Maj. Yutthana Praedam, has confirmed that the department has now taken possible bid collusion in the SAO building construction project as a “Special Case” under its law and authority. 

This follows the first special case announced on April 2, which concerns the use of nominees to run businesses in the CREC by a Chinese national, Mr. Zhang Chunling, and three Thai nationals.

The DSI’s investigation earlier uncovered fresh evidence to support the accusation that the three Thai shareholders are nominees at the company as they have untrustworthy financial statuses while having loan contracts worth more than Bt 2,000 million with “a Chinese executive”. 

The DSI also found that the three hold the company’s shares at 51% when combined, but these are disproportionate, as little as 0.0003% among them. The largest shareholder was named by the DSI as China Railway No.10 Engineering Group Co., Ltd. (CREC No.10), at 49%.

Justice Minister Pol. Col. Thawee Sodsong, who supervises the DSI’s investigations, believed such use of nominees had prompted the company to become eligible for taking part in a joint venture with its Thai counterpart, Italian-Thai Development Plc. (ITD-CREC Joint Venture), and signing a contract with the State Audit Office to build the collapsed building. The contract is worth more than Bt 2,100 million.

Pol. Capt. Surawut Rangsai, the DSI’s Deputy Director-General, and the head of the special investigation team investigating the SAO building case, said the nominee case is progressing extensively and the investigators could possibly wrap up the case within three rounds of the detention period of Mr. Zhang, or around 30 days. The conclusion of the nominee case could then enable the next case and others, he said.

“This is just the first phase of our work,” said Pol. Capt. Surawut.

The four are accused of being involved in the use of nominees to run businesses in the company, an act which violates the Foreign Business Act B.E. 2542 (1999). Foreigners who wish to run certain businesses listed under the act in Thailand must hold fewer shares than their Thai counterparts, 49% at most. These include construction.

Mr. Zhang, named by the DSI as one of the two executives of the company, is accused of being a foreigner who runs a business listed under the act (construction), and on behalf of the company, he is accused of conspiring in the use of nominees, while the three Thais are accused of conspiring with him, according to the DSI.

The arrest warrants were issued by the Criminal Court for the four last Saturday (April 19). The DSI had arrested Mr. Zhang on Saturday afternoon before the Thai shareholders turned themselves in two days later. They are all released on bail, but Mr. Zhang is barred from travelling overseas. 

According to his testimony, he is a state enterprise official who “was sent from the Chinese government to invest in Thailand”. He also said he holds the largest shares of the company on behalf of CREC No.10, the company’s largest shareholder.

Pol. Capt. Surawut said his status was confirmed by a representative of the Economic and Commercial Office at the Chinese Embassy here, who also showed up and presented relevant documents confirming that Mr. Zhang is an official of “a company in China that the Chinese government also has shares”. In other words, it’s a state enterprise, said Pol. Capt. Surawut. As checked by Bangkok Tribune, the company mentioned is CREC No.10.

The Chinese have denied all the charges, affirming that they have come and invested with Thai nationals.

Pol. Maj. Yutthana said the alleged offender could give their testimonies whatever they wish people to hear, but it’s the DSI’s duty to gather all pieces of evidence to prove the accusation. It cannot just listen to stories from the accused, he said.

The DSI has also charged China Railway Number 10 (Thailand) along with those four persons as the first alleged offender of the case. However, it has not yet pursued CREC No.10, as the status of the entity at this point is just the company’s shareholder. The department will only do so if it can get solid evidence, such as the issuance of the entity’s instructions to Mr. Zhang, according to the source. The issue is delicate as it involves a relationship between the two countries, and the department needs to handle it delicately, the source said.

China Railway Number 10 (Thailand) won the contract as a joint venture with the Italian-Thai Development Plc. (ITD-CREC) in 2020 to build the State Audit Office, which had collapsed during the major earthquake on March 28. 

China Railway Number 10 (Thailand) has also been found to be a joint venture with 10 other Thai companies, which altogether have obtained 28 state contracts, worth over Bt 13,424 million. The DSI is now focusing on the case of the SAO building first, but it has asked other concerned agencies to look for any irregularities that may arise in those projects.

Its largest shareholder, CREC No.10, meanwhile, also has a joint venture with the ITD (ITD-CREC No.10), which won Contract 3-1, part of the High-Speed Railway Development for Regional Connectivity Project, Phase 1 (Bangkok-Nakhon Ratchasima) in 2023. It’s claimed to be a collaboration project between the Thai government and China, and is part of China’s ambitious Belt and Road Initiative (BRI). The contract is worth more than Bt 9,000 million. In mid-2023, Mr. Zhang also represented CREC No.10 in a contract signing ceremony of the contract.

CREC No.10 is a subsidiary of China Railway Group Limited (CREC) based in Beijing, China, which is China’s state-owned enterprise in the construction of mega projects worldwide. 

Pol. Capt. Surawat said no official contact has been made at the government level yet. The DSI will do so if it has finished and wrapped up the first case. The DSI has also invited the ITD for interrogation this week, but no ITD representatives have shown up yet.

There are also two other cases that the DSI is pursuing as special cases. One case concerns the use of substandard materials, including steel bars in the construction of the building, and the other is the use of fake tax invoices by the supplier of the claimed substandard materials found at the construction site.

Also read: China Railway Number 10 (Thailand)’s boss under arrest