The most recent FCPA and anticorruption enforcement developments involving the People’s Republic of China (PRC) are summarized below. Thanks as always to Squire Sanders Shanghai office for monitoring these enforcement actions.
China Enforcement Actions
(1) On April 26, 2012, Jiao Baohua (“Jiao”), municipal party secretary of Yining City, Yili Kazak Autonomous County, Urumqi Municipality was sentenced to death with a two year reprieve for receiving bribes exceeding RMB 34.65 million (USD 5.5 million) and for abusing his powers as a government official. A death sentence with a two-year reprieve is usually reduced to life in prison if the convict behaves well while serving the term. Jiao’s conduct allegedly led to public losses totaling RMB 53.72 million (USD 8.53 million).
(2) Following an internal anti-corruption investigation, Alibaba Group Holdings Ltd (“Alibaba”), China’s e-commerce giant, announced on May 4, 2012 that the company had taken legal action against some of its staff members working for Taobao.com (“Taobao”), Alibaba’s wholly owned subsidiary, and China’s biggest B2C doc.com company.
Reportedly, the internal investigation revealed that several Taobao employees had helped some of its online vendors remove negative comments posted by customers for their products in order to elevate the vendors’ performance ratings. In exchange for improperly providing access to the comment site, the employees received unlawful payments from the vendors.
By the time of the issuance of the announcement, Alibaba had already closed nine online shops that were thought to be involved in the improper conduct.
(3) On May 9, 2012, Wang Jiping (“Wang”), the former chief of Beijing’s local taxation bureau, was sentenced to death with a two year reprieve for accepting bribes and embezzling over RMB 14 million (USD 2.2 million).
During Wang’s term as head of the local taxation bureau, Wang purportedly abused his power by manipulating the bidding process for government construction tenders and arranging employment for the son of a top government official. Meanwhile, Wang allegedly conspired with Zhao Yun, legal representative of Beijing Yulin Tianyuan Science and Trade Co., Ltd. (“Yulin Tianyuan”), to form a joint venture with Beijing’s local taxation information center, a government entity affiliated to Beijing local taxation bureau. Afterwards, Wang directed Yulin Tianyuan to sell tax-controlled passcode machines to the joint venture at a price substantially over market. Zhao Yun was sentenced to 13 years in prison for his role in the scheme.
(4) On May 15, 2012, Zhu Yuying (“Zhu”), former vice director of the Standing Committee of the Municipal People’s Congress of Maoming City, Guangzhou Municiplity, pleaded guilty to awarding government contracts and government positions in exchange for bribes amounting to nearly RMB 18 million (USD 2.86 million).
From 2006 to 2011, Zhu purportedly helped 57 officials secure higher positions in local government in exchange for bribes totalling RMB 16.2 million (USD 2.57 million). In addition, Zhu admitted accepting bribes exceeding RMB 1.7 million (USD 269,841) in return for helping the payor of the bribe secure a contract for the construction of a drug-rehabilitation center.
(5) On May 16, 2012, Bei Yujie (“Bei”), former director of Central National Song and Dance Troupe, was sentenced to 15 years in prison for taking bribes totaling RMB 310,000 (USD 49,206) and embezzling payments to performers in the amount of RMB 90,000 ($14,200).
Following the 2006 award of a stage construction contract for the Central National Song and Dance Troupe to Zhejiang Defeng (a Zhejiang-based engineering company), Bei allegedly accepted RMB 300,000 (USD 47,619) from the manager of the company. The same company then paid Bei an additional RMB 10,000 (USD 1,587) in 2010 as a purpoted “gift” during Bei’s son’s wedding.
(6) On May 18, 2012, Lai Changxing (“Lai”) was sentenced to life in prison by the Intermediate People’s Court of Xiamen for bribery and smuggling related criminal offenses.
The ruling reflected a previous agreement between the Chinese and Canadaian governments guaranteeing that Lai would not be put to death upon his repatriation to China. Before Lai fled to Canada, he purportely ran the nation’s largest smuggling operation, involving scores of government officials. From 1991 to 1999, Lai used this operation to evade import tariffs exceeding RMB 13.99 billion (USD 2.22 billion). Lai reportedly paid bribes of approximately RMB 39.13 million (USD 6.21 million) to government officials to facilitate his smuggling operation.
(7) On May 22, 2012, Ying Guoquan (“Ying”), former chairman of Wenzhou Cailanzi Group (“Group Company”), a state-owned food enterprise was sentenced to death with a two year reprieve for graft involving more than RMB 370 million (USD 58.5 million). Most of the money was reportedly transferred to a majority-owned company of Ying’s son. In addition, Ying was convicted of illegally distributing State assets by fabricating the number of company employees and the amount of total wages paid to the Group Company’s employees from 1998 to 2007. In fact, most of the money was not paid to line employees, but rather improperly distributed to senior executives. In addition to Ying, 15 other former senior executives of the Group Company were sentenced to prison, serving terms ranging from 3 to 13 years.
(8) Seven years after Li Yimin (‘Li”), former vice-chairman of Guangzhou Pharmaceutical Holdings Ltd (the “Company”) was found guilty of illegally licensing the Company’s trademark “Wanglaoji” to Hong Kong-based JDB group (“JDB”), the China International Economic and Trade Arbitration Commission (“CIETAC”) has restored the Company’s full rights to the brand.
Li, during 2001-2003, accepted bribes totalling HK$ 3 million (USD 586,400) from the then Chairman of JDB, Chan Hung To, in return for illegally entering into agreements licensing the “Wanglaoji” brand to JDB for a term of 10 years, from 2010 to 2020. Based on this conduct, Li was sentenced to 15 years in prison by the Guangdong High People’s Court in 2005. The license granting JDB the right to use the “Wanglaoji” trademark out of the illicit deal, however, remained in effect at that time.
In April 2012, Guangzhou Pharmaceutical filed a protest with CIETAC challenging the validity of the license to JDB. CIETAC did not take long reviewing the challenge, and, in early May revoked the licensing agreements signed between 2001 and 2003 by JDB and Guangzhou Pharmaceutical. CIETAC’s ruling also required JDB to immediately cease any and all use of the “Wanglaoji” mark.
China Enforcement Data
According to the People’s Procuratorate of Chongqing Municipality, in the first four months of 2012, 473 people were prosecuted locally for duty-related crimes. Of those, 71 were officials at the county level or above, and most were charged with taking bribes.