By staff reporter Fu Yanyan

After a six month investigation, prosecutors are preparing for the possible trial of a former executive for the Shenzhen Development Bank (SZSE: 000001) accused of embezzling millions of yuan for online gambling.

Caijing learned from the prosecutor’s office in Shenzhen’s Futian District that the suspect, a former bank supervisor identified only by his surname Zhang, allegedly stole more than 30 million yuan from the bank while working as director of the bank’s clearing center for branch cash collections.

Rumors about the case surfaced March 4 and led to a sharp selloff of the bank stock. The next day, a bank statement admitted irregular trading activities had been detected, and that a branch employee was suspected of embezzling capital through an internal account.

Investigators have found that Zhang was an online gambler who could not pay his debts. To support his habit, he allegedly used his position to make several transfers of bank funds to a person account.

Between March 2004 and August 2007, Zhang allegedly siphoned 25 million yuan. Then on February 27, investigators said, he transferred 7.25 million yuan to his account from a colleague’s operating account.

How could such a bank employee cover his tracks for four years? A source close to the bank told Caijing that “in the past, people could get access to the system of the bank’s clearing center only by a computer account, and the bank seldom checked its financial accounts. Therefore, Zhang, as director of the center, could easily cover any violation.

“But the bank later upgraded the system to require permission from two people to operate the system, which led the discovery of Zhang’s case.”

A bank spokesperson declined to provide further details now that the case has reached the Shenzhen People’s Procuratorate.

The bank’s March 5 statement said necessary measures have been taken to control losses, and that the expected loss from this case could be limited to 30 million yuan. “The case has little impact on the bank’s financial performance and operations,” the statement added.

A securities analyst told Caijing that holes in the internal management systems at some Chinese banks leaves room for this kind of case.

Indeed, the analyst said, the Shenzhen bank “must improve its risk control mechanism to avoid worse cases.”

1 yuan = 14 U.S. cents