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 and reporting on these enforcement actions.
China Enforcement Actions
(1) On March 31, 2012, Li Ping, former Party chief of Futian District committee, was sentenced to six-and-a-half years in prison for accepting bribes totaling HK$4 million (US$515,082).
During Li Ping’s term as Party chief of Futian District, Guangzhou City, Guangdong Province between 2008 and 2009, he was found to have abused his power by helping a local real estate developer obtain a government contract for a Huaxin Village urban renovation project in exchange for bribes in the aforementioned amount.
On the same day, Li Lin, the former director of the Shenzhen Financial Development Office, was sentenced to seven years in prison for taking bribes of RMB 1 million (US$158,805) and HK$1.6 million (US$210,000). Li Lin was found to have abused his power as the city’s top official and to have offered improper aid to local enterprises in exchange for bribes during Shenzhen’s urban development period.
Cao Zhongjiao, former chairman of Shenzhen Road and Bridge Construction Group, was sentenced to ten years for offering projects to contractors in exchange for bribes exceeding RMB 420,000 (US$ 66,666).
Wen Pengfei (“Wen”), certifying engineer for Shenzhen Zhongxing Kingxun Electronics Co., was sentenced to one year for taking bribes as a non-state functionary during his term between 2006 and 2008 on the grounds that Wen provided fake certificates to suppliers applying for certification.
From 2011 to March 2012, courts in China’s Guangdong Province have intensified enforcement of bribery related offenses, investigating more than 720 commercial bribery cases and concluding 601 such cases, during that time. 474 state functionaries were among those convicted.
(2) On April 20, 2012, the Supreme People’s Court (SPC), China’s highest court, overturned the death sentence previously given to Wu Ying, who was previously convicted of fraudulent fundraising of in amount exceeding several hundred million yuan. The case was remanded to Zhejiang Higher People’s Court for resentencing. Wu previously admitted bribing government officials.
(3) On April 21, 2012, Dai Weizhong, the former vice president of state-owned Shanghai Lingang Economic Development Group was sentenced to life in prison for taking bribes exceeding RMB 8.1 million (US$ 1.28 million).
During Dai’s term as the group’s vice president and chairman of Shanghai Lingang Construction and Development Co., he purportedly abused his power to help a construction company win 18 construction projects with a gross aggregate contract value of over RMB 397 million (US$ 63,015,873). Dai also purportedly helped a subcontractor to win projects valued at more than RMB 200 million (US$ 31,746,031) and received US$20,000 in improper commissions to send his son to study abroad.
The sentence took into consideration the fact that Dai cooperated with authorities by confessing to many bribes prosecutors were unaware of and assisted in facilitating the confiscation of all of his ill-gotten gains. Despite this cooperation, Dai received a very harsh sentence.
(4) Following a two-month trial starting in February at the Shanghai No. 2 Intermediate People’s Court, on April 24, 2012, Chen Meng (“Chen”), former chief deputy official of Putuo District, Shanghai was sentenced to death with a two-year reprieve for taking bribes in excess of RMB 15,000,000 (US$ 2,380,952).
Chen was found guilty by the court of abusing his position as deputy chief of Songjiang District, Shanghai where he improperly helped others win construction contracts.
(5) On April 25, 2012, following the trials of Yang Yiming (“Yang ”), former deputy chief of the Chinese Football Association (“CFA”), and Zhang Jianqiang (“Zhang”), former chairman of the China Football Association Referee Commission, the trial of Xie Yalong (“Xie”), former chief of the CFA took place. Xie was accused of taking bribes of RMB 1.7 million (US$ 273,000). Unlike Yang and Zhang, Xie was accused as a non-state functionary.
Among the 12 counts of illegal interests alleged to have been accepted by Xie, one was a gift of RMB 170,000 (US$ 30,000) paid by Tony Li who, at that time, was the marketing director for Nike China in connection with the sponsorship of the Chinese Super League.
China Related FCPA Enforcement Actions
On April 25, 2012, Garth R. Peterson, a former executive of Morgan Stanley’s real estate investing operation in China pleaded guilty to violating the U.S. Foreign Corrupt Practices Act in a case involving alleged bribes to a Chinese official in exchange for business.
According to charges brought by the U.S. Securities and Exchange Commission (“SEC”) and Department of Justice (“DOJ”), Peterson exploited his secret business relationship with a Chinese government official to steer business to the real estate investment funds managed by his employer, Morgan Stanley, as well as to “secretly acquire” millions of dollars worth of real estate investments for himself and the official. The Chinese official was the former Chairman of Yongye Enterprise (Group) Co., a Chinese state-owned entity through which Shanghai’s Luwan District managed its own property and facilitated outside investment in the district. Peterson also reportedly paid himself and the Chinese official illegal “finder’s fees” in an amount totaling $1.8 million.
The SEC’s complaint charged Peterson with violations of the anti-bribery, books and records and internal control provisions of the FCPA, and with aiding and abetting violations of the anti-fraud provisions of the Investment Advisers Act of 1940. Peterson agreed to a settlement with the SEC in which he will be permanently barred from the securities industry, disgorge more than $250,000, and relinquish his interest in the valuable Shanghai real estate with a current value of approximately $3.4 million that he acquired through his misconduct.
In the related DOJ criminal action, Peterson pleaded guilty to a criminal information charging him with conspiring to evade internal accounting controls that Morgan Stanley was required to maintain under the FCPA. At sentencing, scheduled for July 17, 2012, Peterson faces a maximum penalty of five years in prison and a maximum fine of $250,000 or twice his gross gain from the offense.
After considering all the available facts and circumstances, including that Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials, the DOJ and SEC declined to bring any enforcement actions against Morgan Stanley related to Peterson’s conduct. The company voluntarily disclosed the matter and cooperated throughout the government’s investigation.