In season five of the 1960s period drama Mad Men, the boss of a major car dealership has a seedy proposition for ad executives keen to win a lucrative contract. The dealer has taken a fancy to Joan Harris, the buxom office manager of the fictional agency, Sterling Cooper Draper Pryce. He tells them that winning the account is conditional on his sleeping with her. Initially insulted, Joan is eventually persuaded by a major financial incentive: a 5% equity stake in the firm. The business is secured.
Mad Men has received numerous awards for its portrayal of 1960s American corporate culture. But the means by which the account was won don’t sound particularly unique to the time or the people portrayed. Indeed, the concept is clearly alive and well in China today, such that businessman Xiao Ye seems to have relied on it for success at his own construction firm in Chongqing.
For years, Xiao’s Yonghuang Group has been winning lucrative construction deals in the city by filming bureaucrats having sex with attractive young women and then blackmailing his prey. So says Southern Metropolis Daily in an exhaustive article on Xiao and his methods. They proved so successful that Yonghuang’s website once boasted it had Rmb1 billion ($160.6 billion) in assets. But that was before some of the clandestine videos leaked onto the internet. A staggering 11 Chongqing officials and SOE bosses have now been sacked for their involvement.
Sichuan-born Xiao began his scam in 2008, figuring that sweetheart property deals and high margin municipal management contracts were the swiftest way to make his fortune.
But lacking good guanxi to make deals with Chongqing’s officials he hatched a plan to lure them into ‘honey traps’ instead. His firm hired three charming women in their late twenties, one of whom was his own mistress, Zhao Hongxia.
Xiao got hold of a contact book for the city’s bureaucrats and got the girls to start text messaging them. He coached them to pretend they worked for one of the city’s biggest property firms but to tantalise the cadres with suggestive language and provocative photos. The plan was to secure a meeting with the middle-aged men in hotels like Chongqing’s Hilton. After an appropriate period of flirting, the goal was to get them into the elevator, and up to a hotel room. Once there, the officials got more than they bargained for (which is saying something, given the circumstances). Xiao had installed pin-hole cameras in the girls’ handbags and these were used to capture the ensuing action.
With clear and incriminating footage, Xiao’s plan advanced to the next stage: the sting. Southern Metropolis Daily reports that he would send two male colleagues to burst in on the pair when they next met for a tryst. One man would pretend to be the outraged husband, the other an accompanying private detective. As the official remonstrated, he would be shown the video. Later another man would enter the room, saying he was a triad. Xiao would then ride to the rescue, saying he could smooth over the indiscretion with his gangster friends. But only if his own firm was given access to cheap land.
One of the first to fall for the trap was Lei Zhengfu, the former Party secretary of Chongqing’s Beibei District (see WiC179). It was video of Lei’s rather unimpressive physique that first leaked online late last year, causing sensation. It then emerged that to keep Xiao quiet, Lei had allowed Yonghuang Group to win construction tenders for three major projects in Beibei. The media alleges that profit margins for the deals exceeded 20%, enriching Xiao.
In 2009 Xiao and his girls went after a series of bigger fish, including the Party secretary of Jiulongpo District, and the chairmen of Chongqing Machinery and Electronic, Chongqing International Trust and Chongqing Land Group. The eleven men Xiao ensnared in total generated many more sweetheart deals around the city (on January 24 the Chongqing Municipal Committee made their identities public and confirmed they’d all been fired from their posts).
The scandal only came to light after a citizen journalist named Zhu Ruifeng got hold of copies of the videos. He uploaded the Lei Zhengfu tape onto the internet first, promising to dribble out the others so as to expose the wider corruption.
A fascinated Chinese press now says that the most surprising aspect of the whole scam is that it took three years to be exposed. But there’s a twist to the entire affair which might explain why. According to Southern Metropolis Daily, the compromised Lei suspected the scandal would come out, so in November 2009 told the top leaders in Chongqing what he had been doing. A police investigation followed, and Xiao was jailed. But the affair was then hushed up, and some of the compromised officials were (amazingly enough) even promoted.
Longtime readers of WiC may see where this is going and why a suppressed scandal in Chongqing has suddenly resurfaced. There looks to be a connection to Chongqing’s former (now purged) boss Bo Xilai – the objective of ongoing scandal may be to further taint his time in office, during a period in which Bo is awaiting trial for corruption. Bo’s former right-hand man Wang Lijun (now jailed, see WiC166) was in charge of the police investigation. Moreover Bo’s alleged corporate crony Xu Ming (also now detained, see WiC145) bought cheap parcels of land in Lei’s city district in 2010. The implication is that Bo kept Lei’s case quiet in return for a bit of personal enrichment.
While the impact of the scandal may suit Beijing’s anti-graft bosses, Chongqing’s surviving officialdom now looks to be losing patience with its enduring scale. The South China Morning Post reported this week that police have questioned the citizen journalist Zhu for seven hours and he was asked for the remaining tapes. He refused and promises more incriminating video will go online.
Zhu’s feistiness is impressive. But for Chinese netizens the unlikely hero (or should we say heroine) of the affair is Zhao Hongxia, seducer of six of the hapless officials. Zhou is now being dubbed as China’s “extraordinary anti-corruption woman” for her role in bringing down the men and has even been nominated on Sina Weibo as ‘person of the year 2012’. At first glance that looks like a remarkable case of moral confusion from the country’s netizens. But contempt for officialdom is the greater factor. One wag made the point by recycling a favourite Deng Xiaoping proverb that “black cat or a white cat, a cat that can catch mice is a good cat”.
But the scandal has even caught up with her. On Thursday she was arrested for extortion, reports the South China Morning Post.
© ChinTell Ltd. All rights reserved.
Sponsored by HSBC.
The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.