CHINA – Luckin Coffee, a China-based coffee retail chain has announced changes to its Board of Directors and fired two senior management officials after internal investigations linked the top executives to an accounting scandal.
In April this year, the coffee chain, which is listed on Nasdaq, revealed the discovery of RMB2.2 billion (US$310m) in fabricated transactions after a Special committee was set up to investigate into “certain issues raised to the Board’s attention” during the audit of the consolidated financial statements for its 2019 fiscal year.
Among the financial irregularities included substantially inflating certain costs and expenses which were envisaged to have material impact on the company’s overall financial statements.
By then, the Special Committee indicated that beginning in the second quarter of 2019, Mr. Jian Liu, the Chief Operating Officer and a director of the company, and several employees reporting to him, had been engaged in the misconduct.
On May 12, 2020, the coffee chain announced that the Special Committee of the Board had brought to the attention of the Board evidence that sheds more light on the fabricated transactions.
The Board hence terminated Ms. Jenny Zhiya Qian and Mr. Jian Liu from the positions of the Chief Executive Officer and the Chief Operating Officer, respectively, effective May 11, 2020.
“The Board also demanded and received from Ms. Qian and Mr. Liu their resignations from the Board,” Luckin Coffee said in a statement.
In addition to the former CEO’s and CFO’s termination, Luckin Coffee said that it has placed six other employees, who were involved in or had the knowledge of the fabricated transactions, on suspension or leave.
The company’s Board of Directors has appointed Mr. Jinyi Guo, a director to the Board and a Senior Vice President of the Company, as the Acting Chief Executive Officer of the Company.
Mr. Wenbao Cao and Mr. Gang Wu have also been appointed as directors to the Board. Mr. Wenbao Cao has served as Senior Vice President of the Company in charge of store operations and customer service since June 2018.
Before joining the Company, Mr. Cao had over 23 years of experience at McDonald’s China and served in various positions, including vice president and North regional manager at McDonald’s China.
Mr. Gang Wu has served as Vice President of the Company in charge of strategic partnerships since March 2019, and has also been in charge of supply chain management since April 2020.
Before joining the Company, Mr. Wu had over 26 years of experience in airline industry, including holding senior management positions at China United Airlines, China Eastern Airlines and Air China.
The company, which has vowed to take on Starbucks as the world’s leading coffee chain, said that it will continue to cooperate with the Internal Investigation and focus on growing its business under the leadership of the Board and current senior management.