Yili, one of China's leading dairy makers, is facing a serious public relations battle after a whistle-blower, in an online letter, accused its chairman and other executives of embezzling hundreds of millions of yuan worth of assets from the company.

Shares of Yili plummeted the daily limit of 10 percent after the letter became public.

The letter was claimed to have been written by Zhang Sanlin, who previously worked as an assistant to Zheng Huaijun, founder and former chairman of Yili. The letter appeared on 10 major domestic websites and BBS forums yesterday.

Zheng was sentenced to six years in prison in 2005 for illegal management buyout.

Zhang was said to have been fired by Yili the day after Zheng was put under investigation, according to Caijing Magazine.

Yili said yesterday the letter was slanderous and was intended to "disrupt the firm's operations."

The company has reported the matter to police, it added.

The letter, with many details, claimed that executives of Yili, especially chairman Pan Gang, used multiple means to steal assets and money from the listed state-owned enterprise.

Pan allegedly hired two advertising companies when he worked as a department general manager in 2004 and spent 21.45 million yuan (US$3.31 million) on advertising and public relation campaigns. None of the deals had valid receipts, the letter said.

In 2003, he took 2 million yuan in cash from his department under the guise of an annual bonus, the letter added. Pan and his family also allegedly formed a commercial firm in Inner Mongolia Autonomous Region in north China and stole 20 million yuan from Yili by listing it as a consultation fee.