Nov. 28 (Bloomberg) -- Gome Electrical Appliances Holdings Ltd. replaced Chairman Huang Guangyu, moving to distance itself from the company’s billionaire founder after he was detained by Chinese police.

Chief Executive Officer Chen Xiao will be acting chairman of Gome, which is “unconnected” to the probe, China’s biggest electronics retailer by stores said today. Huang and Chief Financial Officer Zhou Ya Fei, who was also replaced, are being investigated for “certain suspected economic crime,” Gome said in a Hong Kong stock exchange filing.

Past convictions of Chinese tycoons including Shanghai Land Holdings Ltd.‘s Zhou Zhengyi and Euro-Asia Agricultural (Holdings) Co.’s Yang Bin have caused their companies to collapse, fueling the urgency of Gome’s efforts to assuage the concerns of investors and suppliers. Chief rival Suning Appliance Co.‘s shares have gained more than 20 percent this week on speculation the police probe may allow it to acquire Gome.

“Investors’ confidence in the company has vanished,” said Sophie Fan, an analyst at CSC Securities HK Ltd. in Hong Kong, who recommends selling Gome’s stock. “A lot of people are afraid that the company’s capital chain will be broken if it struggles to pay suppliers.”

Huang is suspected of having manipulated trading in shares of Sanlian Commercial Co. and Beijing Centergate Technologies, state-run Xinhua News reported today, citing the China Securities Regulatory Commission. Tim Payne at Brunswick Group LLC, hired by Gome to handle public relations, declined to comment when contacted.

Bag of Radios

Huang dropped out of school at 16 and traveled to Beijing with his brother, Huang Junqin, armed with a bag of radios, batteries and other electronics devices from factories in his native Guangdong province to sell in the Chinese capital. Two decades later, the 39-year-old peasant’s son was ranked China’s richest man in Forbes Asia‘s 2006 list of the nation’s wealthiest.

The Chinese retailer Huang built said it was “verbally informed” of the probe yesterday. Beijing police confirmed they were investigating Huang in a faxed statement.

Gome is to the company’s best knowledge “unconnected” to the investigation of its founder, acting Chairman Chen said in a statement e-mailed today by Brunswick. Authorities haven’t asked Gome any questions in connection with the probe, he said.

Gome also said it had formed a “special action committee” to monitor the impact that the probe of Huang may have on the company. The committee will work to ensure Gome is “effectively insulated” from its founder’s “personal affairs,” Mark Greaves, a member of that committee, said in the e-mailed statement.

Among China’s Wealthiest

Huang, also know as Wong Kwong Yu, is the richest businessman probed by the Chinese government, which in the past year has jailed at least three men who’ve appeared on lists of the nation’s wealthiest.

Forbes Asia last month ranked Huang as China’s second- richest man, worth $2.7 billion, after he sold $300 million of shares this year. Hurun Inc., which has compiled a list of China’s wealthiest people for a decade, on Oct. 7 ranked him the country’s richest man, with a fortune of $6.3 billion. Huang has topped Hurun’s China rich list three times in the past five years.

Huang was detained by police for allegedly manipulating shares of Shandong Jintai Group Co., a Chinese drugmaker controlled by his brother, Huang Junqin, Beijing-based Caijing magazine reported Nov. 24.

Opening for Rival

Huang has been unavailable for comment since Nov. 24. Repeated calls to the mobile phone of Huang’s wife and Gome Executive Director Lisa Du over the past four days have been unanswered. Neither Huang nor Zhou was immediately available for comment today, according to Brunswick Group.

Shandong Jintai officials were also unavailable for comment and the company hasn’t issued a statement since suspending its Shanghai-traded shares on Nov. 24.

Gome’s shares have been suspended in Hong Kong since Nov. 24. Suning, China’s biggest electronics retailer by market value, has gained 23 percent this week as China’s benchmark CSI 300 Index fell almost 5 percent.

“The Huang incident provides an opportunity for industry consolidation which might benefit Suning’s development,” Huang Zhigang, a Shanghai-based analyst with Everbright Securities Co., wrote in a Nov. 24 note. “In the case of the worst result, Suning may surpass Gome and acquire Gome for consolidation should conditions permit.”

Gome suppliers including Haier Group, Samsung Electronics Co., Sony Corp. and Panasonic Corp., said their business with the Beijing-based retailer remained unchanged.

Bribery Probes

Zhang Wenzhong, founder of Wumart Stores Inc., was sentenced to 18 years last month for bribery. Zhang Rongkun, former chairman of Fuxi Investment Holding Co., was jailed for 19 years in April for bribery. Former Shanghai Land Chairman Zhou Zhengyi was sentenced to 16 years’ jail on Nov. 30 last year for bribery and forging tax receipts, after having been released from an earlier 3-year term in prison.

Shanghai Land was forced to sell its assets and delist from Hong Kong’s stock exchange in October 2005 after Zhou was convicted in 2004 of falsifying documents and stock market fraud. Zhou was ranked China’s 11th richest man by Forbes in 2002.

Euro-Asia Agricultural Holdings was also forced to delist from the Hong Kong stock exchange after founder Yang, ranked as China’s second richest man in 2001 by Forbes, was sentenced to 18 years in jail for fraud in July 2003.

To contact the reporters on this story: Stephanie Wong in Shanghai at swong139@bloomberg.net John Liu in Shanghai at jliu42@bloomberg.net

Last Updated: November 28, 2008 06:38 EST