Major Chinese commercial real estate conglomerate self-reports potential bribery violation to the judicial department
July 10 – According to media sources, a leading Chinese commercial real estate conglomerate conducted an internal investigation regarding certain bribery allegations. The investigation identified 18 employees who allegedly sought personal benefits by abusing their position of power and authority in the company. Two employees were suspected of receiving an undisclosed large sum of bribes from several construction companies. The real estate company subsequently self-reported to the judicial department relevant authorities regarding the findings and mitigation actions taken by the company.
Ling Jihua, aide to former President Hu Jintao, arrested and accused of bribery allegations
July 20 – LING Jihua, head of the Communist Party’s United Front Work Department and deputy chairman of the Chinese People’s Political Consultation Conference was investigated by the Supreme People’s Procuratorate (China’s top prosecuting body) for multiple allegations, including abusing his position and accepting large sums of bribes either directly or indirectly via his relatives. LING had been expelled from the Communist Party earlier for violating Party discipline, paving the way for the subsequent investigation.
Military procurement continues to be a focus for bribery crackdown with top military officials arrested
July 30 – GUO Boxiong, former vice chairman of China’s Central Military Commission, was expelled from the Communist Party and is currently under investigation by the Chinese authorities for bribery allegations. GUO’s responsibilities included administering defense expenditures and assets. Another top military official named GU Junshan, who was the deputy director of the People’s Liberation Army General Logistics Department, was found guilty of accepting bribes and was sentenced to death with a two-year suspended sentence. GU was mainly in charge of military procurement and contracts. According to various news articles, GU allegedly accepted 6% kickbacks in the sale of military land totaling CNY 2 billion (approx. USD 330 million) in the Shanghai area. Since GU was tried before the military court, specific facts of the parties involved were not disclosed to the public.
Chairman of a major chemical engineering company was found guilty of offering bribes
August 5 – The chairman of a Hong Kong listed chemical engineering company was found guilty of offering bribes by a Chinese court. The court imposed a fine of CNY 30 million (approx. USD 4.83 million) on the company and the chairman was sentenced to imprisonment for three years. The main customer of the company is one of China’s largest stateowned petroleum groups and the investigation into the company was allegedly related to the previous investigation of the state-owned petroleum group. Several reputable Chinese and foreign media sources have speculated that ZHOU Bin, the son of ZHOU Yongkang, may have secretly been a shareholder of the chemical engineering company and the company may have took advantage of ZHOU Yongkang’s government connections to gain commercial contracts.
“Sky Net” continues to repatriate top wanted Chinese fugitive officials from overseas
As of September 18, YANG Jinjun, the most wanted fugitive on Sky Net’s 100 Most Wanted List and the brother of YANG XiuZhu (former chief of the Zhejiang Province Construction Bureau), was successfully repatriated from the United States. Chinese media sources reported that YANG was the first wanted fugitive successfully repatriated with assistance from U.S. enforcement authorities.
“Sky Net” is a multi-agency operation involving the collaboration of four Chinese government agencies/organs: Organization Department of the Communist Party of China’s Central Committee, Supreme People’s Procuratorate, Ministry of Public Security, and the People’s Bank of China.
President XI Jinping emphasizes cyber-security during visit to the U.S.
September 23 – During the Eighth Sino-U.S. Internet Industry Forum held in Seattle, U.S., President XI gave a speech to a group of American and Chinese technology company executives addressing China’s concerns regarding cyber-security and emphasized that China is committed to improving internet security. According to media sources, the China Internet Security Certification Center distributed a document to multiple U.S. technology companies and requested them to comply with Chinese national security regulations. The document also stated that Chinese authorities may request that companies turn over their user data and intellectual property to demonstrate that the company does not and will not in the future possess data that is harmful to China’s national security. For further information on the new National Security Law, please see the “A New Era in National Security?” located in this newsletter.
Chinese government/SOE officials under investigation for Q3 2015
Based upon data published by the CCDI, the following visual map of China highlights the provinces which have been targeted the most during the third quarter of 2015. It is important to be aware of the status and trend of China’s anticorruption enforcement activities, especially when companies may have business interests in those targeted areas.
Click here to view image.
Notable individuals put under investigation in Q3 include:
- LING Zhengce, Former Vice Chairman of Shanxi People’s Political Consultative Conference;
- ZHOU Benshun, Secretary of Hebei Provincial Party Committee and Chairman of the Standing Committee of Hebei Provincial People’s Congress;
- GU Chunli, Vice-Governor of Jilin;
- DENG Qilin, Former Chairman and Party Committee Secretary of Wuhan Iron and Steel; and
- XI Xiaoming, Vice-President and Party Group Member of the Supreme People’s Court.
Manufacturer of infant formula settles FCPA charges with U.S. SEC and agrees to pay USD 12 million for making improper payments to health care professionals at Chinese hospitals
July 28 – One of the world’s largest manufacturers of infant formula agreed to pay USD 12 million to settle Foreign Corrupt Practices Act (“FCPA”) charges brought by the U.S. Securities and Exchange Commission (“SEC”). It was found that the company violated the FCPA by making improper payments through third-party distributors to healthcare professionals at Chinese government-owned hospitals in an effort to recommend the company’s infant formula to new or expectant mothers. The investigation also found that the company lacked sufficient internal controls to prevent and detect approximately USD 2 million in improper payments out of its Chinese subsidiary. The company had been using off-the-book slush funds to pay doctors and other healthcare professionals in China for the purpose of retaining business.
U.S. DOJ issues memorandum concerning individual accountability for corporate wrongdoing
September 9 – A memorandum written by the U.S. Department of Justice’s (“DOJ”) deputy attorney general titled “individual accountability for corporate wrongdoing” (“Yates Memo”) shifts DOJ’s investigative approach from corporations to individuals. The Yates Memo states that “one of the most effective ways to combat corporate misconduct is by seeking accountability from individuals who perpetrated the wrongdoing.” The Yates Memo indicates six key steps to strengthen the pursuit of individual corporate wrongdoers:
- in order to qualify for any cooperation credit, corporations must provide to the DOJ all relevant facts relating to the individuals responsible for the misconduct;
- criminal and civil corporate investigations should focus on individuals from the inception of the investigation;
- criminal and civil attorneys handling corporate investigations should be in routine communication with one another;
- . absent extraordinary circumstances or approved departmental policy, the DOJ will not release culpable individuals from civil or criminal liability when resolving a matter with a corporation;
- DOJ attorneys should not resolve matters with a corporation without a clear plan to resolve related individual cases, and should memorialize any declinations as to individuals in such cases; and
- civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.
A full version of the Yates Memo could be found at the U.S. DOJ website.
SEC announced fraud charges in cross-border scheme to secretly control and manipulate stock of U.S.-listed Chinese companies
September 10 - The SEC announced fraud charges against a Wall Street CEO and his company, family members, and business associates accused of secretly obtaining control and manipulating the stock of Chinese companies they were purportedly guiding through the process of raising capital and becoming publicly-traded in the United States. The SEC alleged that the individuals involved secretly obtained more than five percent ownership interests of newly U.S.-listed companies for the purpose of manipulating the stock of the Chinese companies and deriving illegal gains. To avoid detection and evade SEC reporting requirements as beneficial owners, they divided their shares among a vast network of foreign accounts and generated tens of millions of dollars in illegal profits as they sold the securities into artificially inflated markets. The SEC’s complaint alleged violations of the antifraud provisions and the disclosure and reporting provisions of the U.S. federal securities laws or the aiding and abetting thereof.