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The Anticorruption Blog

Stricter Anti-Corruption laws by implementation of a corporate criminal law in Germany?

Posted in Germany

Criminal proceedings against entities under German law only are possible under provisions of the Code of Administrative Offences (Gesetz über Ordnungswidrigkeiten). The applicable provisions have recently been tightened and now provide the imposition of a fine of up to ten million Euros upon an entity that has failed to perform its duties regarding the prevention of criminal conduct of employees.

However, this punishment is still not grave enough a threat to make companies set up compliance systems suited to fight misconduct of employees effectively, says Mr Thomas Kutschaty, Minister of Justice of North Rhine-Westphalia. Furthermore, the classification of such misdemeanors as Administrative offences does not do justice to the immense implications of many such proceedings, especially since in public perception typical Administrative offences are of subordinate importance, such as traffic offences or noise nuisance. Also, since structures in companies are often inscrutable it is at times rather difficult to attribute a certain offence to a particular employee. Difficulties of proof could be avoided if the focus of a criminal investigation would shift to the company.

Therefore in September 2013 the government of North Rhine-Westphalia introduced a legislative proposal designed to implement provisions of a corporate criminal law into the federal penal law. The intended penalties are significant. The presented bill provides for fines of up to 10% of the average annual turnover of a company. In addition, the draft makes provisions for affected companies to be excluded from being awarded public contracts for at least a period of one year which in fact might constitute a severe punishment for many companies.

Yet, the probability of the implementation of such legal provisions cannot be foreseen, although the German Governments coalition agreement provides that the topic shall be further developed.  The legislative draft has been praised by organizations such as Transparency International Germany, yet also strong criticism has been issued. Especially company associations such as the Chamber of Industry and Commerce have expressed concerns with regard to the extent of the punitive measures awardable.

It should be a matter of fact that not least with regard to anti-corruption measures the discussed provisions could be of utmost importance. An effective compliance would become even more important for companies, in particular since not only severe monetary fines are possible but also the loss of contracts and public humiliation in court are a threat.

Monthly China Anti-Bribery Update Report — March 2014

Posted in Uncategorized

1. New law or regulation

State level:

(1) On March 18, 2014, the General Office of the Communist Party of China (“CPC”) Central Committee and the General Office of the State Council jointly issued the Opinions on Practicing Conservation of Food and Combating Waste of Food (the “Opinions”), which target food excesses in the official activities of the Party, government agencies, and state-owned enterprises. The Opinions encourage simple and healthy meals and prohibit extravagant meals. All Party and government agencies as well as state-owned enterprises are required to include meal expenses in their “Three Public Expenditures,” and any significant catering expenses might be subject to spot-checks by departments of supervision.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

 

2. Upcoming law or regulation

No developments.

 

3. Government Action

(1) It was reported on March 3, 2014 that Du Bidong (“Du”), the former Inspector of Transportation Department of Shanxi Province, was sentenced by the Intermediate People’s Court of Xi’an City, Shanxi Province to 15 years in prison for taking bribes.

Du was found guilty of soliciting and accepting bribes during his term in office from September 2008 to February 2012, and such bribes were determined to amount to RMB 4.51 million (USD 725,992) from various construction enterprises, construction supervision companies and equipment suppliers by taking advantage of his position. Du was given a light sentence because he confessed his crimes and returned the illegal gains.

(2) The official website of the Central Commission for Discipline Inspection (“CCDI”) of the CPC on March 7, 2014 reported that Chen Baihuai (“Chen”), the former Deputy Chairman of Chinese People’s Political Consultative Committee (“CPPCC”) of Hubei Province, was being placed under investigation for abuse of power and taking bribes. Later, on March 9, 2014, CCDI announced on its official website that Shen Peiping (“Shen”), the Deputy Governor of Yunnan Province was under investigation for serious violation of Party discipline. Subsequently, on March 22, 2014, the CCDI announced again that Yao Mugen (“Yao”), the former Deputy Governor of Jiangxi Province, was under investigation for suspected violation of Party discipline. These three announcements did not disclose any details of the alleged violations, but it was noteworthy that the three are provincial and ministerial-level officials. More details are expected to emerge over the coming months.

(3) On March 19, 2014, Dai Xingnong (“Dai”), the former Deputy Chairman of CPPCC of Gangzha District, Nantong City, Jiangsu Province, was sentenced to 10 years and 6 months in prison by the Intermediate People’s Court of Nantong City for embezzlement and accepting bribes.

Dai allegedly embezzled public funds totaling RMB 229,901 (USD 37,008) by taking advantage of his position from 2011 to 2013. Dai was also found guilty of accepting bribes amounting to RMB 787,717 (USD 130,000) from 10 individuals. Dai was given a reduced sentence because he confessed his crimes.

(4) On March 19, 2014, Ma Guoqiang (“Ma”), the former Deputy Secretary of Zhoukou Depot of China Grain Reserves Corporation (“SinoGrain”), was sentenced to 15 years’ imprisonment by the Intermediate People’s Court of Anyang City in his second trial for embezzlement and taking bribes.

Ma was accused of taking advantage of his position during his term as Deputy Chief of Xuchang Depot of SinoGrain to embezzle public funds totaling RMB 181,760 (USD 29,198) and accept bribes amounting to RMB 484,000 (USD 777,52). Ma was sentenced to 15 years in prison in his first trial on November 11, 2013 by the People’s Court of Wenfeng District, Anyang City, and this judgment was affirmed by the Intermediate People’s Court of Anyang City after which Ma filed an appeal.

 

4. Other

No developments.

 

5. China-related FCPA Action

No developments.

Bribery prosecutions in the UK – where are we now?

Posted in Commercial Bribery, Courts, UK Bribery Act, United Kingdom

We reported back in 2012 that the UK’s Serious Fraud Office (“SFO”) had confirmed its commitment to enforcing the UK Bribery Act 2010 (“Bribery Act”) and that its new powers to prosecute bribery offences would remain an important tool in actions overseas.

So where are we now? In late 2013, the SFO charged printing company Smith & Ouzman Limited with offences of corruptly agreeing to make payments totaling nearly £500,000. Two of its directors, an employee and an agent have also been charged with the same offences and the trial is expected to take place in November 2014. The charges have however been brought under the Prevention of Corruption Act 1906, not the Bribery Act, as the alleged offences took place before the Bribery Act came into force. 

The SFO had brought arguably its biggest case against corruption when it charged Victor Dahdaleh, one of Labour’s wealthiest backers, of making multimillion-pound payments to win lucrative contracts. The trial took place in December 2013, but collapsed after the main witness changed his evidence and two further witnesses, lawyers at US firm Akin Gump, declined to testify.

This is not the first high-profile mistake that has been made by the SFO during its attempts to prosecute white-collar crime. The SFO is being sued by the property tycoon Vincent Tchenguiz for a series of alleged injustices relating to his arrest in connection with the collapse of the Icelandic bank Kaupthing. It was forced, in 2006, by Mr Blair, the then Prime Minister, to drop an inquiry into the alleged payment of Saudi bribes by BAE Systems to secure a multibillion-pound arms contract. In 2002, two trials costing the SFO £40m failed to convict anyone in connection with an alleged £20m fraud at DIY chain Wickes.

Following the collapse of the Victor Dahdaleh trial, the shadow attorney general, Emily Thornberry, said “The SFO under this government has lurched from shambles to shambles and cannot be relied on to carry out the complex investigations and prosecutions it was created to undertake.” Government insiders have said that the new National Crime Agency, which was launched in October 2013 to tackle serious and organised crime, including economic crime, could take over some of the work of the SFO. This may include work in relation to the Bribery Act.

Although there is yet to be a prosecution against a corporate under the Bribery Act, this could in part be explained by the fact that investigations take a long time and that, because the Bribery Act is not retrospective, a prosecution under the Bribery Act can only be brought in relation to offences that took place since the Bribery Act entered into force.

Cases under the Bribery Act could however be around the corner. The SFO confirmed in December 2013 that it had opened a criminal investigation into allegations of bribery and corruption at Rolls Royce and in November 2013, confirmed that it had opened a criminal investigation into G4S and Serco electronic monitoring contracts. Only time will tell whether these investigations will result in a prosecution and whether that will be under the Bribery Act or older legislation.

Monthly China Anti-Bribery Update Report — February 2014

Posted in China, China enforcement actions

1. New law or regulation

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

2. Upcoming law or regulation

No developments.

3. Government Action

(1) It was reported on February 7, 2014 that Zhou Guangrong (“Zhou”), the former Head of Health Bureau of Chengdu City, Sichuan Province, was sentenced to 14 years and 6 months in prison by the Intermediate People’s Court of Chengdu City for taking bribes.

Zhou was found guilty of soliciting real property worth RMB 349,600 (USD 56,891) and an automobile worth RMB 95,800 (USD 15,589) from Xu Zuo, a former employee of Chengdu Liquefied Natural Gas Co., Ltd. Zhou was also charged with conspiring with Xu Zuo and He Jie (the former President of Chengdu No.9 People’s Hospital) to illegally grant a construction project to a contractor surnamed Zhu, in exchange for bribes totaling RMB 4 million (USD 650,936). Xu Zuo and He Jie were respectively sentenced to 10 years and 13.5 years in prison for participating in the bribery.

(2) On February 17, 2014, Chen Bo (“Chen”), the former General Manger and Legal Representative of Hainan Highway Co., Ltd., a state-owned enterprise, was sentenced to 15 years in jail for bribe-taking, with deprivation of political rights for 5 years and confiscation of personal assets amounting to RMB 500,000 (USD 81,367) by the No. 1 Intermediate People’s Court of Hainan Province.

During his term from 2005 to 2010, Chen reportedly accepted RMB 6.995 million (USD 1.13 million) in cash and shopping cards worth RMB 20,000 (USD 3,254) from several individuals. As return, Chen sought illegal benefits for the bribe-givers in equity transfer and project construction by taking advantage of his position. Chen was given a light sentence due to his confession.

(3) On February 18, 2014, Central Commission for Dispute Inspection of Communist Party of China announced on its official website that Ji Wenlin (“Ji”), the former Deputy Governor of the southern island Hainan Province, is under investigation for serious violation of laws, regulations and disciplines. The announcement only had one sentence and gave no details. Subsequently, on February 19, 2014, the CCDI announced on its official website that Zhu Zuoli (“Zhu”), the former Vice Chairman of the People’s Political Consultative Conference in the northwestern province of Shanxi, was also under investigation for suspected serious violations of party disciplines and laws. Reportedly, Ji and Zhu are the first two provincial and ministerial-level officers toppled in 2014.

(4) On February 24, 2014, Wu Baoliang (“Wu”), the former Party Secretary of Xiao County, Anhui Province, was sentenced to life in prison by the No. 1 Intermediate People’s Court of Hefei City, Anhui Province with confiscation of his personal property worth RMB 600,000 (USD 97,640) and deprivation of political rights for life.

Reportedly, Wu was accused of taking advantage of his position during 2003 to 2012 to offer illegal benefits to others in enterprise operation, job arrangement and position promotion. As a return, Wu accepted bribes amounting to RMB 17.9 million (USD 2.91 million), USD 42,000, shopping cards worth RMB 64,000 (USD 10,414) and a watch worth RMB 35,000 (USD 5,695).

(5) On February 28, 2014, Zhou Zhenhong (“Zhou”), the former Member Of CPC Guangdong Provincial Standing Committee and former Head of United Front Department of Guangdong Province, was sentenced to death with a two-year reprieve by the Intermediate People’s Court of Xinyang City, Henan Province with deprivation of political rights for life and confiscation of all personal assets for accepting bribes and holding a large amount of property from unidentified sources.

During his term in office from July 2002 to the Spring Festival of 2011, Zhou allegedly accepted bribes totaling RMB 24.64 million (USD 4 million) from 33 individuals. In exchange, Zhou provided illegal benefits to the bribers in job promotion, enterprise operation and official election. Zhou was also prosecuted for holding more than RMB 37 million (USD 6.02 million) from an unidentified resource. Zhou was given a light sentence for his confession of the crime and return of illegal gains.

4. Other

(1) According to the speech of Chinese Premier Li Keqiang (“Li”) in the Second Anti-corruption Session of State Council on February 11, 2014, China will continue to strictly implement anti-corruption measures, streamline administration and decentralize authority, and adopt a “zero tolerance” attitude to crackdown corruption in the year of 2014. “Whoever involving corruption should be investigated without exception”, said Li.

5. China-related FCPA Action

(1) On February 13, 2014, Avon Products Inc. (“Avon”) revealed in its quarterly financial statement that it could end up paying as much as USD 132 million to resolve the charges from U.S. Securities and Exchange Commission (“SEC”) and Department of Justice for possible violations of the Foreign Corrupt Practices Act (“FCPA”) in China.

Reportedly, Avon paid bribes to officials in China for promotion of its products and obtaining the sales license for its cosmetic products. In 2008, Avon launched an internal investigation of its China operations linked to the payment of improper promotional expenses. Avon had offered USD 12 million last year for settlement of the ongoing FCPA investigation, which, however, was rejected by SEC. By the end of last year, Avon had reportedly spent over USD 340 million for the FCPA investigation since 2008.

Deferred Prosecution Agreements arrive in the UK

Posted in Commercial Bribery, Courts, UK Bribery Act, United Kingdom

Deferred Prosecution Agreements (“DPAs”), an established part of the legal landscape in the US, have today, 24 February 2014, become available to prosecutors in the UK, thanks to Schedule 17 of the Crime and Courts Act 2013.

As we reported previously, DPAs allow commercial organisations (not individuals) to settle allegations of criminal economic activity (for example bribery or money laundering) without being prosecuted and without any formal admission of guilt.

An agreement is struck between the prosecutor and the corporate, under which the prosecutor will bring criminal charges but then immediately suspend the process, on the proviso that the alleged offender has agreed to, and complied with, a number of terms and conditions that the prosecutor deems appropriate, such as paying a financial penalty, paying compensation and co-operating with future prosecutions of individuals. If the company does not honour the conditions, the prosecution may resume.

DPAs are a “discretionary tool” at the disposal of prosecutors that will only be available after a formal invitation to enter into negotiations has been extended to a corporate. A DPA could be appropriate where the public interest is not best served by mounting a prosecution, for example where there is a lack of history of similar conduct, the offending represented the actions of a rouge employee or agent, the offending is not recent in nature and the organisation in its current form is effectively a different body to that which committed the offence, the corporate has a “genuinely proactive and effective” corporate compliance programme in place; and a generally proactive approach has been adopted by the corporate’s management team when the misdeeds werebrought to their attention, including self-reporting and remedial actions (such as the compensation of victims).

Entering into a DPA will be a transparent public event and the process will be supervised by a Crown Court judge who must rubber stamp the resolution of the case by way of a DPA, after considering the proposed terms at both a preliminary, and then a final, Court hearing. This is a key difference in how DPAs will function in England and Wales in comparison with the US. This of course means that even if a corporate has reached an agreement with the prosecutor, the DPA could still fail and the corporate may therefore find itself facing a criminal prosecution in any event.

It will be interesting to see how and when DPAs are used in the UK and what impact the judicial oversight plays in their success.

Monthly China Anti-Bribery Update Report — January 2014

Posted in China, China enforcement actions, Foreign Corrupt Practices Act

1. New law or regulation

State level: No developments.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules:

(1) On January 16, 2014, the Communist Party of China (“CPC”) Central Committee issued the Regulation on Selection and Appointment of the Party and Government Leaders (the “Regulation”), which took effect on the same day and replaced a prior regulation issued in 2002. The Regulation identifies the general principles and procedures for selecting leading officials. According to the Regulation, the selection, promotion and appointment of Party and government officials shall involve consideration of both the moral integrity and the professional experience of the candidate, but the former will be more stressed.

2. Upcoming law or regulation

No developments.

3. Government action

(1) It was reported on January 2, 2014 that Ma Junfei (“Ma”), the former Deputy Head of the Hohhot Railway Bureau in the Inner Mongolia Autonomous Region, was sentenced to death with a two-year reprieve by the Intermediate People’s Court of Hengshui City, Hebei Province. Ma was found guilty of accepting bribes amounting to more than RMB 130 million (USD 21.46 million) and holding a large amount of property from unidentified sources.

Railroads play an important role in transporting coal within Inner Mongolia, and the railway bureau determines how to allocate transport, giving some railway officials significant influence. Ma allegedly took advantage of his position to accept bribes from various enterprises and individuals totaling RMB 75 million (USD 12.38 million), including RMB 59 million (USD 9.74 million), USD 2.21 million, ERU 5,000 (USD 6,832), GBP 5,000 (USD 8,275), and 5.9 kilogram of gold on 269 occasions. Ma was also charged with holding RMB 63 million (USD 10.4 million) from unidentified sources.

(2) On January 5, 2014, Li Xuezhi (“Li”), the chief of the Ministry of Environmental Protection North China Supervision Center, was sentenced by the No.2 Intermediate People’s Court of Beijing to 14 years in prison for taking bribes.

Li reportedly accepted RMB 1.9 million (USD 313,758) and five Samsung mobile phones from Henan Xinxiang Xinya Paper Co., Ltd. in January 2011 while coordinating on-site environmental inspections of the company’s assets. In addition, Li received RMB 180,000 (USD 29,724) in cash, as well as gifts totaling RMB 12,000 (USD 1,981) while inspecting other enterprises in Henan province.

(3) On January 17, 2014, Hou Fucai (“Hou”), the former Chief of Construction Management Division of Housing and Urban-Rural Construction Bureau of Weinan City, Shanxi Province, was sentenced to death with two years’ reprieve by the Intermediate People’s Court of Xianyang City, Shanxi Province, for accepting bribes and holding a large amount of property from unidentified sources.

Reportedly, Hou registered a company named Weinan Xianghe Construction Technology Consultancy Service Co., Ltd., through which Hou solicited bribes in the form of security bonds and consulting service fees from 46 construction enterprises amounting to RMB 21.91 million (USD 3.61 million) during August 2006 to February 2012. Hou was also charged by prosecutors with owning property worth RMB 30.84 million (USD 5.08 million) from unidentified sources.

(4) On January 17, 2014, Liu Shenghai (“Liu”), the former Deputy Head of Local Tax Bureau of Dingxi City, Gansu Province, was sentenced to 22 years in prison by the Intermediate People’s Court of Jiuquan City, Gansu Province with confiscation of all his personal property for embezzlement, accepting bribes, and holding a large amount of property from unidentified sources.

During his term in office from 2004 to 2013, Liu allegedly took advantage of his position to accept bribes amounting to RMB 4.37 million (USD 721,015) from various individuals and enterprises. In exchange, Liu provided illegal tax benefits to the bribers. Liu was also charged with embezzling up to RMB 1.4 million (USD 230,988), misappropriating public funds totaling RMB 490,000 (USD 80,846) for stock investments, and holding RMB 5.88 million (USD 970,152) from unidentified sources.

(5) It was reported on January 23, 2014 that Zhou Jianhua (“Zhou”), the former Chief of the Standing Committee of the National People’ s Congress (“NPC”) of Xinyu City, Jiangxi Province, was sentenced to death with two years’ reprieve by the Intermediate People’s Court of Yichun City, Jiangxi Province with confiscation of all his personal property and deprivation of political rights for life.

Zhou reportedly accepted and solicited bribes on 99 occasions, totaling RMB 10.23 million (USD 1.68 million), USD 12,000, HKD 150,000 (USD 19,319), three bars of gold (each 50 grams) and other gifts worth RMB 235,800 (USD 38,939) by taking advantage of his position. In exchange, Zhou provided various illegal favors to the bribe-givers in real estate developments, investments, personnel arrangements, and elections of representatives to the Standing Committee of the National People’s Congress. Zhou appealed to Jiangxi Higher People’s Court for retrial and the case is now undergoing a second review.

(6) On January 24, 2014, Liu Jiakun (“Liu”), the former Deputy Chief of the Standing Committee of NPC and Secretary of CPC Committee of Taihe County, Anhui Province was sentenced to life in prison with deprivation of political rights for life by the Intermediate People’s Court of Suzhou City, Anhui Province.

Liu was reportedly charged with accepting bribes from real estate developers in the amount of RMB 24.66 million (USD 4.06 million), 12 bars of gold valuing RMB 1.76 million (USD 290,385), a painting worth RMB 1.56 million (USD 257,387), a BMW automobile worth RMB 960,000 (USD 158,392), and stock worth RMB 350,000 (USD 57,747). In return, Liu was found to have taken advantage of his position to pursue illegal interests for the benefit of bribe givers in connection with project contracts, land resettlement, demolition, and the disbursement of construction payments.

4. Other

(1) On January 10, 2014, the Central Commission for Discipline Inspection of the CPC and Ministry of Supervision reported that during 2013, discipline inspection and supervision agencies across the country have accepted 1,950,374 petition reports relating to anti-corruption, filed 172,532 cases, settled 173,186 cases, and disciplined 182,038 people, including 31 central management cadres such as Liu Tienan, the former Deputy Chief of National Development and Reform Commission, and Jiang Jiemin, the former Chairman of PetroChina Co., Ltd, a subsidiary of China National Petroleum Corporation.

(2) It was reported on January 22, 2014 that the U.S. Securities and Exchange Commission (“SEC”) suspended the China-based counterparts of the “Big Four” accounting firms (Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers) from auditing U.S.-listed companies for 6 months, due to their refusal to reveal their clients’ auditing documents to the SEC. The Big Four said that they would appeal the ruling. China Securities Regulatory Commission reportedly is negotiating with the SEC regarding follow-up issues.

(3) In October 2013, a US District Court in the Southern District of New York ordered Bank of China Limited (“BOC”) to produce documents in BOC’s possession that the court determined were not protected by the attorney-client privilege or work-product doctrine.

Reportedly, the plaintiff is the relative of two victims of a suicide bombing in Israel who sued BOC under the Anti-Terrorism Act for providing material support to a terrorist organization and requested BOC to provide documents that had been prepared by BOC’s legal department in China. BOC refused the request, asserting that these documents are under the protection of the attorney-client privilege or work-product doctrine. For the documents governed by Chinese law, the court ruled “because Chinese law does not recognize the attorney-client privilege or work-product doctrine, BOC must produce these items”. For the documents governed by US law, the court pointed out that the protection under the attorney-client privilege is limited in its application to communications involving licensed attorneys. Because in China, in-house counsels are “not required to have legal degrees or bar certificates”, the court found that BOC had not made a sufficient showing that “the members of BOC’s Legal and Compliance Department and other departments are members of the Chinese bar” and therefore ruled that “the attorney-client privilege does not apply”.

5. China-related FCPA Action

None.

Monthly China Anti-Bribery Update Report — December 2013

Posted in China, China enforcement actions, Foreign Corrupt Practices Act

New law or regulation

State level:

(1) It was reported on 8 December 2013 that the General Office of the Central Committee of the Communist Party of China (“CPC”) and the General Office of the State Council jointly issued the Provisions on Administration of Domestic Official Reception by Party and Government Organs” (the “Provisions”) to replace a prior regulation governing such matters that was promulgated in 2006. The Provisions further combat corruption and extravagance in connection with official receptions. Among the 26 articles of the Provisions, 15 articles are new, and 7 have been substantially modified compared with the former regulation. The Provisions aim to limit the use of receptions, to simplify reception etiquette, to limit the size of rooms used for receptions, to regulate security guard arrangements, and, generally, to reduce reception costs. The Provisions also contain strict and more detailed requirements and standards on where a business meal may take place and what must be excluded from a business meal.

Local level (Beijing & Shanghai): No developments.

Communist Party Rules: No developments.

Upcoming Law or Regulation

No developments.

Government Action

(1) On 6 December 2013, Song Wei (“Song”), the former Legal Representative, Executive Director and General Manager of Chongqing Liangjiang Water Co., Ltd., was reportedly sentenced for taking bribes by the No. 5 Intermediate People’s Court of Chongqing City to 13 years in prison with the confiscation of personal assets valued at RMB 600,000 (USD 98,939), as well as the confiscation of his illegal income totaling RMB 3.903 million (USD 643,600) for taking bribes.

While in office from 2005 to 2012, Song allegedly accepted bribes on 25 occasions from various construction companies totaling RMB 3.903 million (USD 643,600). This money was used by Song in daily consumption and stock investments. In exchange, Song provided various illegal favors in various construction and subcontracting projects to the bribe-givers. Song was given a lighter sentence because he confessed his crimes.

(2) On 11 December 2013, Xiao Yanong (“Xiao”), the former Deputy Commissioner of the Customs in Tianjin was reportedly sentenced for taking bribes and holding a large amount of property from unidentified sources to 16 years in prison by the Intermediate People’s Court of Guigang City, Guangxi Province, with confiscation of personal assets of RMB 1 million (USD 164,899).

During his term in office from 1995 to 2010, Xiao allegedly took advantage of his position to purchase real estate for himself and others at obviously below-market prices and accepted bribes totaling RMB 4.626 million (USD 762,822). Though a civil servant, Xiao possessed RMB 1.204 million (USD 198,538), USD 28,000, HKD 156,000 (USD 33,014) and JPY 330,000 (USD 3,131) from unidentified sources.

(3) On December 18, 2013, Wu Zhizhong (“Wu”), the former Deputy Secretary-general of the People’s Government of Inner Mongolia Autonomous Region was sentenced to life in prison by the Intermediate People’s Court of Hohhot City for embezzlement, bribery, misappropriation of public funds, and holding a large amount of property from unidentified sources.

Reportedly, Wu was accused of taking advantage of his position to embezzle special funds of the Inner Mongolia Department of Finance in an amount more than RMB 10.26 million (USD 1.69 million), accepting bribes with his wife and other close relatives totaling over RMB 5.45 million (USD 898,819), and owning significant amounts of property from unidentified sources aggregating to RMB 20.97 million (USD 3.45 million), HKD 19,757 (USD 2,547), EUR 3,479 (USD 4,779), USD 134,352 and CAD 856 (USD 799). Wu’s wife, Yu Huilong, was sentenced to 9 years in prison for participating in the bribery and embezzlement.

(4) On 20 December 2013, Huang Zhiguang (“Huang”), the former Vice Chairman of the Shenzhen Standing Committee of the Chinese People’s Political Consultative Conference and Party Secretary of Shantou City, was sentenced by the Intermediate People’s Court of Guangzhou City, Guangdong Province to 14 years imprisonment for taking bribes and illegally possessing weapons.

Huang was charged by Guangzhou Municipal People’s Procuratorate for accepting bribes, including jade decorations and Cordyceps sinensis, a valuable Chinese traditional medicine, on 6 occasions, totaling RMB 5.56 million (USD 917,110) and HKD 20,000 (USD 2,579). In return, Huang was found to have taken advantage of his position by seeking illegal interests, such as job promotions for the bribe-givers. Huang was also found guilty of possessing several guns without the proper licenses.

(5) On 20 December 2013, Zhu Fulin (“Zhu”), the former Deputy Mayor of Jinhua City, Zhejiang Province was sentenced to life in prison by the Intermediate People’s Court of Lishui City, Zhejiang Province for taking bribes. Zhu was also deprived of his political rights for life, with confiscation of all his personal assets.

Reportedly, Zhu was convicted of taking bribes from 13 individuals in the form of real estate transactions and investment income, totaling RMB 14.42 million (USD 2.37 million) and EUR 3,000 (USD 4,121). Zhu also accepted a Mazda automobile and three bars of gold while serving as the Chief of the Land Management and Planning Bureau, Party Secretary of Lanxi City, and the Deputy Mayor of Jinhua City from 2000 to 2012. In exchange, Zhu abused his position by providing illegal benefits to the briber-givers in land development, job arrangements, enterprise environmental assessment, etc.

(6) Also on 20 December 2013, Chen Zhubing (“Chen”), the former Head of the Enterprise Department of Ministry of Finance, was sentenced by the No. 1 Intermediate People’s Court of Beijing City to life in prison for taking bribes.

Chen was found guilty of soliciting and accepting bribes amounting to RMB 24.54 million (USD 4.04 million) during his term in office from 2001 to 2011, and of providing illegal benefits in the form of funds and project approvals for various enterprises, abusing his power on nine occasions.

Other

(1) On 11 December 2013, the official website of the Central Commission for Discipline Inspection (“CCDI”) and the Ministry of Supervision (“MOS”) reported certain actions of the government to implement further the reform decisions of the Third Plenary Session of the 18th CPC Central Committee. According to the report, China will develop the standards for the welfare and benefits of governmental officials, including their offices, houses, cars, secretaries, security guards, official receptions, and vacations for the purpose of preventing extravagance and corruption.

(2) It was reported on 25 December 2013 that the CPC Central Committee has issued “2013-2017 Work Plan for the Establishment of a Sound System for Punishing and Preventing Corruption” (the “Plan”), which asserts that China will continue to curb the proliferation of corruption over the next five years. In addition to combating corruption, the Plan also stresses the importance of unremittingly improving the work style of the Party and the transformation of governmental functions to eliminate corruption.

China-related FCPA Action

None.

 

Monthly China Anti-Bribery Update Report — November 2013

Posted in China, China enforcement actions, Foreign Corrupt Practices Act

1. New law or regulation

State level:

On November 25, 2013, the Central Committee of the Communist Party of China and the State Council jointly issued the Regulation to Ban Official Extravagance (the “Regulation”), which regulate the management of funds, official travel, official receptions, official vehicles, and official conferences, etc. According to the Regulation, the use of official cars for general purposes will be canceled and only cars for law enforcement, confidential communications, emergency services, and special purposes will be retained. This Regulation is part of China’s anti-corruption campaign, which emphasizes no tolerance for waste or extravagance.

Local level (Beijing & Shanghai): No developments

Communist Party Rules: No developments

2. Upcoming law or regulation

No developments

3. Government Action

(1) On November 1, 2013, Tian Xueren (“Tian”), the former Deputy Governor of Jilin Province and Party Secretary of Bank of Jilin, was sentenced to life in prison for taking bribes by Beijing No. 1 Intermediate People’s Court, with all the personal assets confiscated.

During Tian’s term from 1995 to 2012 as Party Secretary of Jilin City, Member of Standing Committee of Jilin Provincial Party Committee, Deputy Governor of Jilin Province, etc., Tian was found to have accepted bribes amounting to more than RMB 19.19 million (USD 3.24 million) on 85 occasions. In addition, by taking advantage of his positions, Tian sought illegal gains from other companies and individuals in loan approval, job promotion, and business contracts. Tian was given a lighter sentence due to his confession of the crime.

(2) On November 11, 2013, Xiong Guijin (“Xiong”), the former Party Secretary of Yunpu District, Nanchang City, Jiangxi Province, was sentenced to 17 years in prison by Nanchang Intermediate People’s Court.

During his term in office from September, 2000 to May, 2011, Xiong allegedly accepted bribes in various currencies on 192 occasions from 35 individuals, totaling RMB 7.07 million (USD 1.16 million), USD 104,000, and HKD 40,000 (USD 5,159). In return, Xiong used his positions to seek unlawful benefits for the bribe-givers in job promotion, real estate development, and project construction. In addition, Xiong was found guilty of holding a large amount of property from unidentified sources, including RMB 5.84 million (USD 958,900), USD 150,000, HKD 120,000, Euro 40,000 and a valuable watch. All the illegal gains and the property from unidentified sources were confiscated.

(3) On November 15, 2013, Lu Xiangdong (“Lu”), the former Deputy General Manager of China Mobile Co., Ltd., was sentenced to life in prison for accepting bribes by Jilin Intermediate People’s Court.

Lu, in collusion with others including his wife, reportedly abused his position to take more than RMB 25 million (USD 4.1 million) in bribes from 2003 to February 2011. Lu was given a lighter sentence due to his good attitude and confession of guilty, and his return of the illicit money.

(4) It was reported on November 18, 2013 that Lei Ting (“Lei”), the former Mayor Assistant of Maoming City, Guangdong Province, was sentenced by Guangzhou Intermediate People’s Court to 16 years in prison for offering bribes, accepting bribes, and abuse of power.

Reportedly, Lei offered real estate property to Luo Yinguo, the former Mayor of Maoming City for promotion. Lei was found guilty in accepting bribes totaling HKD 400,000 (USD 51,596) from a real estate developer that was seeking approval from Lei for a construction project. The court also found that during Lei’s term as Chief of Maoming Planning Bureau, he had unlawfully granted approvals to various real estate development projects without receiving the necessary prior approvals from higher levels, resulting in losses to the state amounting to RMB 119 million (USD 19.53 million).

(5) On November 20, 2013, Wu Zhanhui (“Wu”), the former Deputy General Secretary of Dongguan Municipal Party Committee, Guangdong Province, was sentenced to life in prison and deprived of political rights for life by Guangzhou Intermediate People’s Court for taking bribes and holding huge property with unidentified sources.

Wu was accused of helping a business man named Lai Hongzhong (“Lai”) in winning the bid for an industrial waste disposal project from 2003 to 2012 by taking advantage of his office. In return, Lai reportedly provided Wu with bribes amounting to RMB 49.7 million (USD 8.15 million). Wu was given a lighter sentence because of his confession of the crime.

4. Other

(1) It was reported on the official website of the Central Commission for Discipline Inspection (“CCDI”) and Ministry of Supervision (“MOS”) on November 4, 2013 that CCDI and MOS have implemented an “Eight-point Code”, shortening the duration time for national conferences, simplifying official document categories by 56%, and cutting their conference expenses by 84.06% and reception expenditure by 52.07%. This was described as demonstrating the determination of the national disciplinary watchdog to fight against corruption.

(2) On November 8, 2013, the official website of CCDI and MOS released the names of 51 members of its discipline inspection teams who were stationed in major governmental departments and important state-owned enterprises. The inspection teams have been under the direct leadership of CCDI and MOS since 2004.

5. China-related FCPA Action

It was reported on November 26, 2013 that PetroChina Co., Ltd. (“PetroChina”), which is a subsidiary of China National Petroleum Corporation and is listed on the New York Stock Exchange, received notice from the U.S. District Court of Southern District of New York of a complaint brought by a Belgian investor who claimed that PetroChina had violated U.S. securities regulations. PetroChina has been the subject of an anti-corruption probe arising from investigations of the former Chairman Jiang Jiemin, the current chairman Zhou Jiping, the former CFO Zhou Mingchun, and the current CFO Yu Yibo. The amount claimed in the complaint is unspecified.

 

Monthly China Anti-Bribery Update Report — October 2013

Posted in China

1. New law or regulation

State level: No developments

Local level (Beijing & Shanghai): No developments

Communist Party Rules: No developments

2. Upcoming law or regulation

No developments

3. Government Action

(1) On October 10, 2013, Tian Xueren (“Tian”), the former Executive Deputy Governor of Jilin Province, stood trial in Beijing No.1 Intermediate People’s Court for accepting bribes totaling RMB 19.19 million (USD 3.14 million).

Tian was accused of misusing various government positions that he held from 1995 to 2011, and seeking illegal benefits and job promotion from more than ten bribe-givers. Tian was expelled from the China Communist Party and dismissed from his position in July 2012. The verdict in his case has not yet been announced.

(2) It was reported on October 14, 2013 that Liu Huaan (“Liu”), the former Deputy Head of Lujiang County, Anhui Province, was sentenced by the Intermediate People’s Court of Hefei City, Anhui Province to 15 years in prison for taking and soliciting bribes.

During his 12 years in office from 2001, Liu allegedly accepted bribes of RMB 5.78 million (USD 948,099) and USD 20,000, among which RMB 3.36 million (USD 551,144) were solicited by Liu. In return, Liu sought illegal benefits for others in project construction, payments for construction, and the restructuring of enterprises. Liu was given a lighter sentence due to his confession.

(3) On October 15, 2013, Wang Jianshe (“Wang”), a former member of Municipal Standing Committee and Secretary of Committee of Political Science and Law of Huangshan City, Anhui Province, was sentenced to 15 years in prison for accepting bribes. Personal assets worth RMB 600,000 (USD 98,418) were also confiscated by the Intermediate People’s Court of Bengbu City, Anhui Province.

Wang was found guilty of accepting bribes from 56 individuals during his time in office from 1987 to 2012, amounting to RMB 5.06 million (USD 829,996), ERU 5,000 (USD 6,737), HKD 16,600 (USD 2,141), and USD 13,100. In return, he helped the bribe-givers to receive illegal benefits. Wang confessed to his crime and said that he would not appeal.

(4) It was reported on October 19 that Su Jishang (“Su”), the former Chief Editor and President of Xinjiang Economic Daily and Chairman of Xinjiang Xinwen Media Investment (Group) Co., Ltd, was sentenced to 20 years in prison by the Intermediate People’s Court of Urumchi, Xinjiang Uygur Autonomous Region. He was convicted for embezzlement, bribery and misappropriation of public funds.

Su was accused of embezzling public funds amounting to RMB 3.72 million (USD 610,195) on 6 occasions by means of fabricating reports of bonuses and rewards for employees, using false invoices, and through the misuse of company funds, taking bribes totaling RMB 4.18 million (USD 685,694) on 21 occasions, and misappropriating for his own business operations public funds in an amount exceeding RMB 32.5 million (USD 5.33 million).

(5) On October 25, the Higher People’s Court of Shandong Province rejected the appeal of Bo Xilai (“Bo”), the former member of the CPC Central Committee Political Bureau and the former Municipality Party Secretary of Chongqing Municipality of his original sentence to life imprisonment by the Intermediate People’s Court of Jinan City. The higher court also affirmed the facts, the evidence, and the application of law in the first trial resulting in Bo’s conviction for bribery, embezzlement, and abuse of power.

(6) It was reported on October 31 that Wang Shaoping (“Wang”), the former Chief of Jiangxi Agricultural Machinery Bureau, was sentenced by the Intermediate People’s Court of Fuzhou City, Jiangxi Province to 18 years in prison for both taking bribes and abuse of power.

Wang was found to have sought illegal benefits for others in the promotion and marketing of agricultural machinery in Jiangxi Province, subsidies for agricultural machinery, and the settlement of such subsidies in return for bribes from 22 individuals, including RMB 6.86 million (USD 1.12 million), USD 7,000, EUR 8,000 (USD 10,779), shopping vouchers worth RMB 44,000 (USD 7,217), 2 bars of gold and one apartment worth RMB 116,079 (USD 19,040). Wang was also accused of illegally approving unqualified agricultural machinery to enjoy national subsidies, and causing the state’s loss in subsidies for agricultural machinery amounting to RMB 22.03 million (USD 3.61 million). Wang was reported to have received a lighter sentence because of his good attitude in pleading guilty and confessing his crime.

4. Other

(1) On October 22, 2013, Cao Jianming (“Cao”), the Prosecutor General of the Supreme People’s Procuratorate (“SPP”), reported to the Standing Committee of the National People’s Congress (“NPC”) regarding the government’s initiative to combat embezzlement and bribery since 2008. According to the report, during the period from January 2008 to August 2013, national prosecutors have investigated 151,350 embezzlement and bribery cases involving 198,781 individuals, among which 167,514 persons were prosecuted and 148, 931 persons were convicted. The amount of property recovered amounted to RMB 37.7 billion (USD 6.06 billion). Cao pointed out that efforts had been made to increase the reporting channels, but that the working mechanisms and capacity of law enforcement by prosecutors continued to need improvement. It is the first time since 1989 for SPP to report to NPC on its anti-embezzlement and anti-bribery work.

(2) On October 23, 2013 the Central Commission for Discipline Inspection (“CCDI”) was reported to have dispatched ten teams to conduct inspections in the provinces of Shanxi, Jilin, Anhui, Hunan, Guangdong, and Yunnan, as well as inspections of Xinhua News Agency, the Ministry of Lands and Resources, the Ministry of Commerce, and China Three Gorges Corporation. These were all part of a second round of inspections by CCDI. The first round was completed in September 2013.

(3) On October 31, 2013, CCDI issued a Notice Prohibiting the Purchasing, Printing, or Sending of Items such as Greeting Cards using Public Funds, requiring that all Party and government agencies as well as state-owned enterprises and financial institutions to cease using public funds for such purposes, unless necessary for (a) foreign affairs, (b) Hong Kong, Macao, and Taiwan-related affairs, or (c) overseas Chinese affairs.

5. China-related FCPA Action

None

China Anti-bribery Report September 2013

Posted in China, China enforcement actions, Foreign Corrupt Practices Act

1. New law or regulation

State level: No developments

On September 23, 2013, the Ministry of Finance, the National Government Affairs Administration, and the Administration of Government Affairs, directly under the Central Committee of the Communist Party of China (“CPC”), jointly issued the Administrative Measures on Conferences of Central and State Departments (“Measures”), which target cutting expenditure on official meetings by central government departments. Such meeting expenditures, which include food and accommodation fees for attendees, are reported to have increased year-by-year due to oversized or unapproved meetings held by certain government departments. These are considered to have led to the serious waste of public funds and created more opportunities for corruption. The Measures specify the standard costs that should be applicable to four categories of meetings at different levels and of different sizes.

Local level (Beijing & Shanghai): No developments

Communist Party Rules: No developments

2. Upcoming law or regulation

No developments

3. Government Action

(1) On September 5, 2013, Yang Dacai (“Yang”), the former Head of Work Safety Administration of Shanxi Province, was sentenced by the Intermediate People’s Court of Xi’an City, Shanxi Province, to 14 years in prison for taking bribes and holding a huge amount of property from unidentified sources.

Yang was found guilty of taking bribes totaling RMB 250,000 (USD 40,839) to help a company obtain its work safety qualification. In addition, Yang was unable to explain the source of personal assets amounting to RMB 5.04 million (USD 823,329). Yang became well known to the public after he was pictured smiling at the scene of a traffic accident on August 26, 2012, which left 36 people dead. Later, he was found in different online pictures wearing various luxury watches, and became known online as “Brother Watch” by Internet users. This may have contributed to drawing the attention of the authorities to him.

(2) On September 11, 2013, Zhang Shengtao (“Zhang”), the former Deputy Mayor of Anyang City, Henan Province, was sentenced to 15 years in prison by the Intermediate People’s Court of Zhumadian City, Henan Province.

During his term as Deputy Mayor from April 1994 to September 2011, Zhang allegedly accepted cash bribes from 14 individuals from different enterprises, totaling RMB 8.25 million (USD 1.34 million) and USD 10,000, plus shopping cards worth RMB 120,000 (USD 19,603) and a garage worth over RMB 100,000 (USD 16,335). In exchange, Zhang provided illegal benefits to the bribe-givers in the form of various construction projects, land utilization opportunities, and company financing. Zhang also was found to have accepted bribes from 137 subordinates amounting to RMB 6.28 million (USD 1.02 million) and USD 1,000, plus shopping cards worth RMB 32,000. Zhang was given a lighter sentence then might otherwise have been the case because he confessed to his crimes.

(3) On September 12, 2013, Cai Bin (“Cai”), the former Political Commissar of Panyu district branch of Guangzhou Urban Administrative Committee, was sentenced by the People’s Court of Haizhu District, Guangzhou City, Guangdong Province to 11.5 years in prison for accepting bribes.

Cai was found to have outsourced work from Pan’an Industrial Automobile Maintenance Factory, an affiliated enterprise of the government, to two individuals in exchange for bribes from the two individuals amounting to RMB 2.75 million (USD 449,237). The Party Commission for Discipline Inspection, as well as the relevant departments in Panyu district commenced their investigations of Cai as the result of an online report last year claiming that Cai owned 22 parcels of real estate, an allegation that earned him the nickname “Uncle House”.

(4) On September 22, 2013, Bo Xilai (“Bo”), a former member of the CPC Central Committee Political Bureau and the former Municipality Party Secretary of Chongqing Municipality, was sentenced to life imprisonment by the Intermediate People’s Court of Jinan City, Shandong Province for accepting bribes, embezzlement, and abuse of power. Bo was also deprived of political rights for life, and all of his personal assets were confiscated.

During his term as Mayor and Municipality Party Secretary of Dalian City, the Governor of Liaoning Province and the Minister of Commerce, Bo, together with his wife and son, allegedly accepted from Tang Xiaolin, the general manager of Dalian International Development Co., Ltd. and Xu Ming, the chairman of Dalian Shide Group Co., Ltd., bribes in an amount exceeding RMB 20.44 million (USD 3.33 million). In return, Bo took advantage of his position to seek benefits for and protected the interests of the two companies in construction projects. Bo was further found to have embezzled a project fund totaling RMB 5 million (USD 816,795). He was also charged with abuse of power in the murder of British businessman Neil Heywood by his wife, Bo Gu Kailai.

(5) On September 30, 2013, Yang Hanzhong (“Yang”), the former Deputy Secretary of Political Science and Law Enforcement Committee of Inner Mongolia Autonomous Region, was sentenced to death with two years’ reprieve by the Intermediate People’s Court of Baotou City for taking bribes and abuse of powers.

Reportedly, Yang was charged with taking advantage of his positions during his term in office from 2000 to 2012, and accepting and extorting bribes amounting to RMB 40.37 million (USD 6.59 million), USD 350,000, and AUD 40,000 (USD 37,724). He was charged with these acts on nearly 70 occasions, all performed in exchange for interests granted to others in real estate development, construction projects, and job promotions.

4. Other

(1) It was reported on September 28, 2013, that all the ten inspection teams of the Central Commission for Discipline Inspection (“CCDI”) have completed their investigations. Starting from the end of May 2013, ten inspection teams were conducting inspections in the provinces of Inner Mongolia, Jiangxi, Hubei, Chongqing, and Guizhou, as well as the Ministry of Water Resources, the Export and Import Bank of China, the China Grain Reserves Corporation, the Renmin University of China, and the China Publishing Group. Their investigations focused several areas, including corruption, work style, “bureaucratism”, “hedonism”, and other disciplinary issues. All of the teams found problems in the area of job promotions during their investigations; nine teams found corruption and bribery problems as well.

(2) On 2 September 2013, CCDI and the Ministry of Supervision jointly launched an official website (http://www.ccdi.gov.cn/), in order to improve the public supervision of anti-corruption campaigns. The website will reportedly timely publish cases that are under investigation by disciplinary authorities and the results of such investigations. It was reported that since the official launch of the website, more than 15,253 cases of disciplinary violations have been reported, averaging 760 cases per day.

(3) China’s anti-bribery investigation into the pharmaceutical industry, which began with investigations into the British drug company GlaxoSmithKline, is ongoing. Authorities have been probing numerous international and Chinese drug companies with regard to corruption and pricing issues. On 13 September 2013, Bayer, a leading German pharmaceutical company, admitted that it had been visited by the State Administration of Industry and Commerce. Bayer reported that it was cooperating with the authorities with regard to an investigation. On 17 September 2013, the pharmaceutical company, Novartis said that it would conduct an investigation into whether Alcon, its ophthalmic production department, had bribed doctors in China. The Chinese domestic insulin manufacturer Gan & Lee, likewise said on 11 September 2013 that it was investigating allegations published by a magazine regarding its bribery of doctors over the past five years.

(4) Dumex is currently confronting allegations that it has bribed doctors and nurses in exchange for being selected to provide the “first taste of milk” to newborn babies. It was reported by China Central Television that in April, Dumex paid RMB 500,000 (USD 81,679) to doctors and nurses in seven provinces, including Beijing, Liaoning, Jilin, Hebei, Tianjin, Inner Mongolia, and Heilongjiang. Dumex has launched an investigation into the alleged bribery. The Dumex brand is owned by Danone Group, a pioneer in producing infant formula milk powder, which has more than 100 years’ experience in the industry and business in 120 countries around the world.

5. China-related FCPA Action

None