Economy

The new Gang of Four

How four corrupt officials solicited bribes from foreign multinationals

Guo: officially corrupt

At first glance, the bare bones of Guo Jingyi’s story is hardly one that will catch attention in China: corrupt official convicted for taking Rmb8.45 million in bribes. But since the arrest of the official at China’s Ministry of Commerce two years ago, the story has looked more like a soap opera with each passing day.

Two years ago, after a tip off from an insider, Guo was detained by special investigators in a corruption probe. “Initially, people thought it was just one or two single corruption cases; but step by step, Beijing apparently wanted to have a full story and thus to expand its investigations,” said one of the sources close to the commerce ministry.

What they uncovered was a complex web of corruption that encompassed three government departments and spanned over a decade. Guo and his gang were indicted for taking a total of Rmb15 million in bribes, though analysts reckon that the number is vastly understated as it does not include items like apartments, luxury cars and watches that were given as gifts.

Guo, who was recently sentenced to death with a two-year reprieve, is formerly director general of the treaty and law department at the Ministry of Commerce, a role responsible for interpreting investment rules. At the ministry, he met Deng Zhan, who was mainly responsible for issuing approvals and licenses to foreign investors.

The two soon knew they were onto something. Through their network they recruited Liu Wei and Xu Mangang from the State Administration for Industry and Commerce and the State Administration of Foreign Exchange (SAFE) respectively. Liu and Xu were both heavily involved in the approval for start-ups, and mergers and acquisitions. The four later brought on Zhang Yudong, a Beijing-based lawyer, as a middleman. (They were interconnected: Guo and Zhang studied at Beida – see page 13 – together, while Guo and Liu were neighbours.)

In its latest issue, the magazine Caijing describes in detail how Deng and Guo worked: when foreign firms applied for approval for an M&A deal at the Ministry of Commerce (needed for all deals valued at more than $50 million), they paid bribes through corporate lawyer (Zhang) to officials in charge of approving their applications (in this case, Guo).

Meanwhile, the official in charge of formulating the corresponding regulations (Deng) would work to address the company’s needs in local law or leave loopholes to allow more freedom for manoeuvre. So with the help of the lawyer and officials, the investment applications would be approved. Caijing says Zhang paid about 10-30% of legal fees in kickbacks to the officials when the deals were completed.

Their downfall, however, has local press seeking to link them with foreign firms. The Economic Observer is citing a consumer electronics giant that allegedly paid Rmb400,000 to Deng between 2002 to 2006, and analysts reckon more international companies will come under scrutiny. Zhang’s roster of clients is said to include large multinationals.

However, their bribe haul looks surprisingly modest when contrasted with yet another corruption case that has come to light.

Hao Pengjun, his wife and brother-in-law amassed a small fortune in their capacity as government officials in the small county of Puxian in Shanxi province. National media have been stunned by the fact that this relatively low-ranking official – a former director of the county’s coal bureau – managed to bank Rmb127 million as well as buy 35 residential properties valued at Rmb170 million. To put this sum in context, it equates to a third of Puxian’s entire tax revenues last year.

Hao has been jailed for 20 years and as Wang Xiangwei notes in his column in the South China Morning Post: “Hao’s story is the latest damning evidence of the systemic corruption permeating all levels of the government.”


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