Earlier this month, Cheng Chao, former senior manager of the Dadukou branch of a real estate company in our city, was sentenced to seven years in prison for embezzling 290,000 yuan in home purchase funds that a client had borrowed from a bank. Depositing client funds into employees' personal accounts has apparently become an unwritten rule among real estate agents, for a simple reason——to make loan deposits “convenient.”

Case:

Agent ran off with 290,000 yuan in home payments

A reporter learned from the Dadukou District People's Court that Cheng Chao, 31, is from Cangxi, Sichuan. In February 2009, Cheng Chao applied for a position at the Dadukou branch of a real estate company in our city (hereinafter referred to as the real estate company). In July of the same year, due to outstanding performance, he became a senior manager of the branch.

In November 2009, Li Yu, a resident of Dadukou, entrusted a property to the branch where Cheng Chao worked for sale. The two parties agreed that after the sale was completed, the agent would handle all transaction funds, and Li Yu would pay nearly 15,000 yuan in agency fees, which would be deducted from the final payment. Cheng Chao and Li Yu signed a power of attorney and a notarization document. Both documents were drafted according to the standard format of the real estate company, but Cheng Chao modified the part concerning the collection of bank loans for the property, changing the clause in the power of attorney that the real estate company's finance department should collect the home payment on behalf of the client to a clause that the entrusted person (i.e., Cheng Chao himself) would collect it.

Cheng Chao quickly found a buyer, Wang Gong, willing to purchase the property for 508,000 yuan. After Wang Gong paid a down payment of 218,000 yuan, he requested a bank loan for the remaining home payment. Cheng Chao applied to the bank for the loan on Wang Gong's behalf. On January 13, 2010, the bank approved a loan of 290,000 yuan and deposited the 290,000 yuan into Cheng Chao's personal account.

Having accumulated debts from gambling and stock trading, Cheng Chao withdrew the money in February 2010 to repay debts and then absconded with the remaining funds.

Statement:

Transferring funds through personal accounts has become an unwritten rule

In April 2010, Li Yu had still not received the remaining 290,000 yuan from the home sale and could not contact Cheng Chao, so he complained to the real estate company's headquarters. The company had no choice but to pay Li Yu more than 270,000 yuan after deducting the agency fee, and then reported the matter to the police.

Shortly after Cheng Chao fled to Chengdu, he was detained for theft. On November 18 last year, when the Chengdu Detention Center was verifying the identity of detainees, it discovered that the detainee Xu Gang was actually the fugitive Cheng Chao. On December 7, 2011, Cheng Chao was transferred to the Dadukou District Public Security Sub-bureau.

The person in charge of the real estate company stated that Cheng Chao violated the company's rules and regulations by depositing client funds, which should have been collected and recorded by the company's finance department and deposited into the company's designated account, into his own personal account. The company would pursue additional losses incurred as a result.

The Dadukou District People's Court recently held a hearing in the case. Cheng Chao argued that it is common for clients' home purchase payments to be deposited into real estate agents' personal accounts and that this is a tacitly accepted unwritten rule in the industry, so the company had no reason at all to pursue additional losses incurred as a result.

During the trial, several of Cheng Chao's colleagues testified in court that sometimes, for convenience in the loan deposit process, agents did deposit client funds into their own personal accounts first. According to the real estate company's formal business process for collecting home payments on behalf of clients, the only person authorized to collect payments is the cashier designated by the company; no one else may act as the collection agent. Doing so would first require approval from the company and would also lead to too many handling personnel and a longer time before funds are transferred to the client. Therefore, for simplicity, the handling agent was sometimes simply given full responsibility.

Lawyer:

Real estate company should bear responsibility for oversight

Regarding the industry unwritten rule mentioned by Cheng Chao, a reporter received confirmation from an agent who was unwilling to be named.

During the trial, the judge also disclosed that several people in the real estate agency industry had testified to Cheng Chao's account of the unwritten rule on collecting payments. Accordingly, it could not be determined that Cheng Chao had violated company rules in collecting the home sale payment, and the company's claim for additional compensation had no basis. Earlier this month, the Dadukou District People's Court sentenced Cheng Chao in the first instance to seven years in prison for the crime of occupational embezzlement and ordered that the 290,000 yuan in illegal gains be recovered from Cheng Chao.

Yang Chaomin, a lawyer at Chongqing Yutao Law Firm, said that in order to avoid various disputes and losses, real estate companies should strictly supervise and enforce the rule that client funds be collected by designated personnel and deposited into dedicated accounts. When agents sign contracts with clients, it is only an act performed in the course of their duties, and they still represent the real estate company; the party signing the contract with the client is still the real estate company. Once the inflow and outflow of funds are not strictly controlled and client interests are harmed, from a legal perspective all losses will still be borne by the real estate company. Therefore, real estate companies should strictly eliminate this industry “unwritten rule” that may cause unnecessary trouble. (All names in the text are pseudonyms.)