Trinh Thi Hau, 47, former general manager of Vinashin Finance Company, an affiliate of Vietnam Shipbuilding Industry Group, better known as Vinashin, was taken into police custody Tuesday after her house and office were searched, the Thanh Nien newspaper said.

Tuoi Tre newspaper reported Thursday that Hau and Ho Ngoc Tung, Vinashin's chief finance officer, were accused of "contravening state regulations causing serious consequences."

The two had illegally approved expenditure of 60 billion dong ($2.8 million), which was taken from a $750 million pool of cash raised by the government in an international bond sale, Tuoi Tre said.

The money included 42.8 billion dong ($2 million) that was allocated to a Vinashin affiliate company to buy steel, but was instead used to import industrial waste from two outdated South Korea thermal power plants, it said.

Police also have launched an investigation intoTung, who is in Australia receiving medical treatment, the newspaper said.

Executives at Vinashin and police declined to comment Thursday.

So far, eight Vinashin executives including chairman Pham Thanh Binh have been arrested for alleged mismanagement.

Earlier last year, the company was teetering on the edge of bankruptcy. It amassed huge debts estimated as of June at $4.5 billion — about 4.5 percent of the country's gross domestic product — after its expansion into areas outside shipbuilding — everything from animal food production to tourist resorts.

The shipbuilding conglomerate was established in 1996, and the Communist government had high hopes that it would become one of the world's top shipbuilders, while serving as an example of the country's new success as it opened up to foreign investment and trade.

In December, Vinashin defaulted on the first payment on a $600 million loan from a group of creditors led by Credit Suisse.

Ratings agencies have downgraded Vietnam's credit rating, citing problems at Vinashin as one of the reasons for the action.

The Associated Press - February 17, 2011