Established in 1994, Tan Hiep Phat is one of the largest Vietnamese corporations in the field of soft drink and non-alcoholic beverages.
Despite the incident of customer finding a fly in the product "Number 1" of the brand back in 2015, Tan Hiep Phat has earned a steady income up to tens of million of dollars per year by successfully harvesting the bottled tea market.
Particularly, Tan Hiep Phat’s profit increased sharply from $42.9 million to $69.5 million during the period of 2016 - 2017, a growth of 62 percent.
Nevertheless, most of the annual profits are divided to the owners of the brand, who are family members of Tran Qui Thanh, Founder and CEO of Tan Hiep Phat.
In 2016, the use of Tan Hiep Phat’s profit was partly revealed in the case of Pham Cong Danh, former Chairman of the Board of Directors of Vietnam Construction Commercial Joint Stock Bank (VNCB).
According to the indictment, Tran Ngoc Bich, Director of Tan Hiep Phat, daughter of the conglomerate’s founder and some family relatives opened saving accounts at VNCB then pledged the savings-book to re-borrow money from VNCB and then loaned it to a third party.
Later on, $229 million was retrieved as evidence of defendants to pay back to VNCB. This is the amount Bich and other relatives have borrowed from VNCB in the form of pledging savings book. This was the bitter fruit that Tan Hiep Phat had to endure from these activities.
By depositing the money as an individual, Thanh’s family stands to gain a higher interest rate than as businesses and also they will be able to re-borrow money while enjoying high interest rates from the saving accounts.
Aside from VNCB, family members of Tan Hiep Phat’s founder also constantly deposited money into saving accounts then use savings-books to pledge at that bank or other banks to either re-borrow money or use as guarantee for another loan.
For instance, in September 2012, Thanh used 20 savings-books with a value of $48.5 million from Nam A Commercial Joint Stock Bank and SCB Bank to use as collateral at Eximbank. In April 2015, Thanh continued the same method at Eximbank using three savings-books from SCB with a value of $21.4 million.
In reality, Tan Hiep Phat's activities are not rare as many businesses with a good cash flow are willing to do the same as this method of circulating money flow offers depositors with high interest rate difference.
Looking at the volume of transactions of Thanh and his family members over the past few years, it can be seen that this activity is very profitable.
Nevertheless, there are many potential management and accounting risks with this kind of activity and it can only occur in private enterprises, where the owner has the right to decide and take the main responsibility, such as Tan Hiep Phat.
Over the years, many banks have recognized these risks and have sought to limit this activity by lowering the rate of mortgage using savings-book down to 90 percent from 98 percent to further tighten the process.