FOREIGN TRADE UNIVERSITY

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CASE STUDY:
TAN HOANG MINH GROUP VIOLATIONS ’ANALYSIS

Họ và tên MSV
Trần Ngọc Phương 2114710058
Trần Thị Thanh 2114710064
Vũ Ngọc Ánh 2114710010

Hanoi, April, 2024

1. Summary of Key Violations and Contributing Factors

Major Violations
● Fraudulent Bond Sales: Tân Hoàng Minh Group was embroiled in controversy
over its handling of bond sales, which were central to the scandal that unfolded.
The company was accused of fraudulently generating funds through bond
offerings that were not authorized by the appropriate regulatory authorities. These
transactions were allegedly marketed under false pretenses, suggesting an
unrealistic level of security and projected returns. This kind of misconduct not
only misleads investors but also jeopardizes the integrity of the financial market.
● Misuse of Investor Funds: It was reported that the funds raised from these bond
issuances were not used as stipulated. Instead of financing the real estate
development projects for which the funds were ostensibly raised, the money was
diverted to other, non-disclosed purposes. This diversion constitutes a severe
breach of trust and legal obligation, which can lead to significant legal
repercussions and loss of investor confidence.
● Regulatory Violations: The corporation committed several breaches of financial
and corporate regulations, including violations of securities and real estate
investment laws. Such actions erode the regulatory framework designed to protect
investors and maintain fair and efficient markets. By circumventing these laws,
Tân Hoàng Minh not only risked sanctions but also contributed to the erosion of
investor trust in the market's regulatory systems.

Factors Contributing to the Violations

● Aggressive Expansion Goals: Tân Hoàng Minh Group's rapid expansion into
various high-profile real estate projects likely exerted pressure on the company to
secure substantial funding quickly. This urgency may have driven the corporation
to employ aggressive and unlawful fundraising strategies, reflecting a
prioritization of growth over ethical business practices and legal compliance.
● Insufficient Internal Controls and Governance: The company's internal controls
and governance measures were inadequate, failing to detect or prevent
abnormalities in financial management and compliance. Effective internal controls
are essential for identifying risks early and mitigating them before they escalate
into serious legal or financial problems. The lack of such systems within Tân

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 Hoàng Minh allowed financial misconduct to go unchecked, highlighting a
significant governance failure.
● Weak Regulatory Oversight: Ineffective oversight by regulatory agencies
permitted these practices to continue for an extended period, exacerbating the
problem. The regulatory bodies tasked with monitoring financial activities and
corporate compliance were either unable or unwilling to adequately supervise the
firm. This lack of rigorous oversight is often a contributing factor in corporate
scandals, as it gives companies the leeway to engage in risky or illegal activities
without immediate repercussions.

Responsible Parties
● Top Management: The senior executives of Tân Hoàng Minh, including CEO Đỗ
Anh Dũng, played a pivotal role in these infractions. By making strategic
decisions that led to illegal operations, these leaders not only jeopardized the
company's financial integrity but also its reputation. The actions of the top
management are crucial as they set the tone for the company’s culture and
operational ethos, making their involvement in such scandals particularly
detrimental.
● Financial Department: The individuals in charge of the company's financial
operations, especially those responsible for the issuance of bonds, were directly
involved in executing the fraudulent activities. This department's complicity is
indicative of a broader organizational breakdown in ethical standards and
regulatory compliance, underscoring the need for stringent controls and
transparent financial practices.

2. Impact of Violations on Company Performance

Legal and Financial Consequences

The legal ramifications faced by Tân Hoàng Minh Group following the exposure of its
unethical practices were both severe and immediate. A formal investigation was
launched, which led to the arrest of several key executives, including the CEO, signaling
a robust response from regulatory authorities. These legal actions underscore the gravity
of the violations and the commitment of law enforcement to uphold financial and
corporate regulations.

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 ● Financial Penalties and Costs: Beyond arrests, the company incurred significant
financial losses due to fines and penalties imposed by regulatory bodies aimed at
penalizing wrongful acts and deterring similar future offenses. These financial
penalties further strained the company’s resources, already beleaguered by
mismanaged funds and potential liabilities from halted projects.
● Legal Costs: The legal proceedings themselves are a considerable expense,
involving fees for legal representation, court costs, and other related expenditures.
These proceedings can stretch over extended periods, thereby amplifying the
financial burden on the company.
● Increased Scrutiny and Compliance Costs: Following such high-profile legal
troubles, Tân Hoàng Minh likely faces increased scrutiny from regulators and
other stakeholders, necessitating a significant investment in compliance
infrastructure to ensure adherence to legal standards going forward. This shift not
only involves direct costs but also diverts resources from other business activities,
potentially impacting profitability and growth.

Impact on Reputation
The allegations and subsequent legal challenges have profoundly impacted Tân Hoàng
Minh’s reputation. Trust, once eroded, is incredibly challenging to restore, especially in
industries like real estate, where credibility is crucial for business transactions.

● Investor Confidence: Investor trust has plummeted, with many pulling out their
investments or shelving planned funding. Future fundraising efforts will likely
meet with skepticism, impacting the company’s ability to secure finance on
favorable terms, if at all.
● Customer Trust: Beyond investors, the scandal impacts customer perception,
crucial for a real estate company dependent on pre-sales and long-term customer
relationships to fund and facilitate development projects.
● Partner and Stakeholder Relations: The breach of legal and ethical norms affects
relationships not just with investors but also with partners, suppliers, and other
stakeholders who might now hesitate to associate with a company embroiled in
legal controversies.

Operational Disruptions
The operational impacts of the legal issues faced by Tân Hoàng Minh are significant,
with ongoing projects experiencing halts and delays, thereby affecting the overall
business continuity.

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 ● Project Delays and Cancellations: Many projects were either temporarily halted or
permanently canceled as a direct result of the financial instability and legal
entanglements. These disruptions not only lead to direct financial losses but also
affect future revenue streams that were expected from these projects.
● Increased Costs: Delays often lead to increased costs, including higher material
costs, additional financing costs, and penalties for late completion. These can
considerably diminish the profitability of projects.
● Resource Diversion: Responding to legal challenges often requires significant
managerial attention and resources, which might otherwise be directed towards
productive business operations. The diversion of these resources exacerbates
operational inefficiencies.
● Uncertainty and Long-Term Planning: The overarching uncertainty surrounding
the company’s legal standing and financial health complicates strategic planning.
Management must now navigate a landscape marked by legal impediments and a
tarnished reputation, which can stifle innovation and adaptive business strategies.

CEO's Strategic Actions Post-Crisis

As the newly appointed CEO in the aftermath of the Tân Hoàng Minh crisis, my
comprehensive action plan would consist of three main components: immediate actions
to stabilize the situation, policy reforms to prevent future issues, and long-term strategic
adjustments to rebuild the company's standing and ensure sustainable growth.

Immediate Actions
● Collaborate with Authorities: One of the first steps will be to establish a
cooperative relationship with law enforcement and regulatory agencies. This
collaboration will not only ensure a thorough and transparent investigation but
also demonstrate our commitment to rectifying past misdeeds. It's essential to
facilitate open lines of communication with these bodies, provide them with
needed documentation, and comply with ongoing investigations.
● Comprehensive Financial Audit: Conducting a full audit of all recent financial
activities is crucial. This audit will help us understand the depth and breadth of
past misbehaviors and identify any residual issues that need to be addressed.
Hiring an independent external auditor can increase the credibility of the findings,
ensuring that the audit's conclusions are viewed as objective and reliable by
external stakeholders.
● Immediate Compliance Review: In parallel to the financial audit, a comprehensive
review of our current compliance practices will be necessary. This review will aim

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 to immediately address any glaring compliance gaps and ensure that all of our
operations adhere to legal and ethical standards.

Policy Reforms
● Strengthen Corporate Governance: We will overhaul our governance structures to
establish stricter internal controls and ensure strict adherence to all applicable laws
and regulations. This includes restructuring the board to include members with
expertise in law, ethics, and compliance, and setting up an independent internal
audit committee that regularly reports to the board.
● Restore Investor Relations: Restoring trust with investors will be crucial. This will
involve establishing a transparent communication plan that keeps investors
regularly informed about the steps being taken to stabilize the company and any
strategic changes that are being implemented. Transparency reports, investor
meetings, and regular updates will be part of this effort.
● Ethics and Compliance Training: All employees will be required to undergo
comprehensive training on ethics, compliance, and the legal aspects of corporate
finance. This training will help instill a culture of integrity and ensure that all team
members understand their roles in maintaining the ethical standards of the
company.

Long-Term Strategy
● Cultural Revamp: Cultivating a culture of integrity and accountability throughout
the organization will be a top priority. This involves more than just training; it
means leading by example, establishing clear accountability mechanisms, and
rewarding ethical behavior. Regular culture audits and employee feedback
mechanisms will be implemented to monitor progress.
● Reevaluation of Business Strategy: We need to evaluate and realign our business
strategy to ensure it prioritizes long-term growth, sustainability, and compliance
with legal frameworks. This may involve divesting from unprofitable or high-risk
ventures and focusing on core areas where we have competitive advantages and
can operate without compliance risks.
● Community and Stakeholder Engagement: Rebuilding the company’s image will
require a concerted effort to engage positively with the community and all
stakeholders. This includes not just investors but also customers, local
communities, and regulatory bodies. Initiatives might include community
development programs, partnerships with local businesses, and regular open

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 forums to discuss community concerns and how the company can contribute
positively.
● Sustainability Initiatives: In the long term, integrating sustainability into our
business operations can serve as a pillar of our revival strategy. This involves
adopting sustainable practices in all aspects of our operations, from development
projects to daily operations, to ensure we meet both environmental and social
governance criteria.

Conclusion

The case of Tân Hoàng Minh Group serves as a stark reminder of the significant
repercussions that can arise from legal and ethical violations within a corporation. The
analysis detailed in this report has outlined the major violations committed by the
company, including fraudulent bond sales, misuse of investor funds, and regulatory
breaches. These actions led to severe consequences affecting every facet of the
company's operations—from legal repercussions and financial losses to a tarnished
reputation and operational disruptions. The situation at Tân Hoàng Minh underscores the
critical importance of strict adherence to ethical standards and legal requirements in
corporate governance.

Upon examining the factors contributing to these violations, it is evident that a

combination of aggressive expansion goals, insufficient internal controls, and weak
regulatory oversight paved the way for these detrimental activities. These elements,
coupled with a leadership that prioritized rapid growth over sustainable and ethical
business practices, created a perfect storm that led to the company's downfall.

As a response, the strategic plan outlined for the new CEO includes immediate actions to
stabilize the current situation, comprehensive reforms to strengthen corporate
governance, and a long-term strategy aimed at rebuilding trust and realigning the
company with industry best practices. This involves close collaboration with authorities,
conducting thorough financial audits, enhancing investor relations, and fostering a
company-wide culture of integrity and accountability. Moreover, reevaluating the
business strategy to ensure it aligns with legal and ethical standards is crucial for
sustainable growth.

The journey to recovery for Tân Hoàng Minh Group will require a steadfast commitment
to these strategies, emphasizing transparency, responsibility, and community
engagement. Through these efforts, the company can hope to restore its reputation, regain

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trust from investors and customers, and establish a more robust foundation for future
operations. This case serves as a valuable lesson for other corporations on the importance
of ethical leadership and the potential long-term costs of neglecting legal and corporate
responsibilities.