Pham Thanh Binh was sentenced after a four-day trial in the industrial port city of Haiphong, state media reported. He was convicted of ignoring regulations governing the management of state-owned enterprises and bringing the firm, known formally as Vietnam Shipbuilding Industry Group, to the brink of bankruptcy. Seven other executives were sentenced to 10 to 19 years in prison on the same charge, while another received a three-year sentence for misusing government property.

The near-collapse of the company triggered an outpouring of anger in Vietnam over the perceived abuses of its state-run firms, which often receive access to credit at lower rates than private-sector businesses.

One lawmaker called for a rare vote of no-confidence in the government, and Prime Minister Nguyen Tan Dung apologized to the country's legislature for his role in the debacle, and only barely fought off a leadership challenge in early 2011 after his policies of nurturing powerful, state-owned conglomerates so spectacularly turned sour.

Among other things, Vinashin ran aground over its rapid diversification into a host of sectors in which it had only a passing familiarity, if any at all. Among other things, Mr. Binh steered the company toward developing tourist resorts and brewing beer.

By mid-2010, Mr. Binh, a marine architect by training, had racked up over $4.4 billion in debts at Vinashin, and in December that year the company defaulted on repayment of a $600 million syndicated loan.

Since then, Mr. Dung has vowed to clean up Vietnam's state-owned enterprises, which control around 40% of the country's economic output. He replaced the chief of Vietnam Electricity Group, or EVN, in February after the firm came under criticism for investing in cellular phone networks instead of focusing on its core business of boosting Vietnam's electricity generating capacity and subsequently contributing to a series of debilitating power outages in key industrial areas, including Hanoi and Ho Chi Minh City.

State-owned oil company PetroVietnam, meanwhile, recently pulled out of an ambitious real-estate project in a reflection of the government's new bid to refocus some of Vietnam's largest and most influential businesses.

Mr. Binh, who was arrested in August 2010 and was held in continuous detention, denied in court that he was personally responsible for the losses. Instead, state media reported him as saying that the aftermath of the global financial crisis was to blame. Mr. Binh also said he sidestepped government approval for some projects because he wanted to get them started quickly.

So far, the police investigation has focused primarily on the loss of more than $43 million from two projects to introduce a jet-foil ferry service and build a botched electricity generation plant.

U.S. hedge fund Elliott Advisers LP has dropped a lawsuit against Vietnamese state shipbuilder Vinashin, according to a person familiar with the matter Monday.

Elliott sued Vinashin in the British High Court in December for its investment in a US$600 million syndicated loan that Vinashin defaulted on in December 2010. Vinashin initially offered repayment of 35 cents on the dollar to bondholders before Elliott filed that suit, according to a person familiar with the matter.

Elliott was suing for par value of its debt along with unpaid interest and default interest, totaling $13.2 million, according to a filing made to the court seen by the Wall Street Journal.

In its court filing, Elliott argued that by issuing a letter of support to Vinashin, Vietnam's government had effectively guaranteed the debt. Vietnam's government, however, maintains that Vinashin's debts aren't the responsibility of the state.

Elliott previously won in a legal battle against the government of Peru in 2000, and settled a case with the Republic of Congo in 2008.

Vinashin's management team couldn't immediately be reached for comment.

By James Hookway - The Wall Street Journal - April 2, 2012