Banking & Finance

Lai executed

Death sentence carried out as details emerge of official’s colossal graft

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The most corrupt cadre since 1949?

At a press conference by the Publicity Department of the Communist Party of China (CPC) five years ago, a reporter from Singapore’s Lianhe Zaobao asked an unexpected question: was it an unwritten rule that corrupt officials wouldn’t be sentenced to death, no matter how serious their crimes?

A senior official from the CCDI, the anti-corruption watchdog, came up with a standard answer: the Chinese judiciary is responsible for deciding on sentencing, according to the law.

Nevertheless the question hinted at an inconvenient truth. Even if there were an unspoken rule on avoiding the death sentence, it couldn’t be acknowledged for fear of stoking public anger at the protection it afforded corrupt bureaucrats.

However, nearly a decade ago two vice-mayors in Suzhou and Hangzhou were in fact sentenced to death for taking bribes when vetting real estate projects. At the time the State Council was in full flow on a campaign to crack down on malpractice in the property market. The bureaucrats were executed in 2011 – a rare instance of the death penalty being meted out for corruption.

Two year later the gears stepped up when Chinese leader Xi Jinping launched his sweeping anti-graft campaign. Tens of thousands of cadres have since been disciplined or imprisoned. And in 2016, the government assigned the threshold for capital punishment related to corruption to Rmb3 million. Yet there were no new death sentences until this month, when Lai Xiaomin, former chairman of China Huarong, one of the four biggest state-owned asset management firms (AMCs), was given one.

Lai’s fate was sealed this week when a senior court overturned his appeal. The 58 year-old was found to have solicited bribes totalling Rmb1.8 billion ($277 million), which state media described as a record amount since Mao first declared the People’s Republic in 1949.

Huarong was supposed to be a stabilising force in the banking system by absorbing many of its distressed assets, yet according to the CCDI the asset manager became another major financial risk under Lai’s stewardship.

In an article published on its website last week, the anti-graft agency said Huarong had been “raising debt relentlessly” and investing the proceeds in the real estate sector, in blatant violation of government policies that forbid ‘financial sector’ SOEs from engaging in property development.

Lai had ignored the rules, making Huarong into his “own kingdom”.

“From managerial staff to the main chef at the company canteen, many were friends and relatives from Lai’s hometown,” the state broadcaster CCTV contended. The CCDI said it has also disciplined 54 other, more junior Huarong officials and that inspection teams have been dispatched to the other asset management firms as well. As a result, the quartet of AMCs has curtailed the operations of more than 50 subsidiaries, trimming their non-core financial assets by Rmb188 billion.

Huarong’s Hong Kong-listed shares have plunged nearly 80% since early 2018. Barely profitable for three years, the company saw its market value drop to HK$36 billion ($4.6 billion) this week, compared with counterpart Cinda’s HK$180 billion.

All the same, Lai might be wondering why he deserves to be executed when other offenders have avoided the same fate. Wu Xiaohui, the former chairman of the buccaneering Anbang Insurance, whose sudden implosion has cost the taxpayer a fortune in clean-up costs, was sentenced to 18 years in jail over a much larger $10 billion fraud, for instance.

Perhaps the difference is that Wu was operating as a private citizen, albeit a politically-connected one. In Lai’s case he was a representative of the state in a role that was supposed to be rescuing a troubled sector. “Instead of solving a problem, Lai became a problem” is how Ren Shuli described it on Bloomberg this month. So in this instance, Lai’s status as a government official seems to have secured his fate, rather than saved him.

 

 

 

 

Keeping track, Feb, 1, 2021: We reported last week that Lai Xiaomin, former chairman of China Huarong Asset Management, had received the death sentence after being convicted of receiving a record amount of bribes (see WiC526)

It turned out that as WiC went to press last Friday, the 58 year-old had already been executed. “The execution followed the approval of the Supreme People’s Court and was carried out by a court in North China’s Tianjin Municipality,” Xinhua news agency said in a brief statement on Friday evening.

There was no details as to whether Lai was shot or injected with lethal poison, which are the forms of capital punishments practiced in the country. Lai was allowed to meet with his family shortly before his death, other Chinese media reported.


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