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.
1. New law or regulation
(1) It was reported on July 6, 2013 that the Supreme People’s Procuratorate (“SPP”) of China issued a Code of Conduct for the Law Enforcement of People’s Procuratorate Prosecutors in Civil and Administrative Cases (“Code of Conduct”). Further implementing the Civil Procedure Law, which was amended in August, 2012, this Code of Conduct stresses that meetings with the parties to civil and administrative cases and their agents must be conducted jointly by two or more prosecutors. Also, the prosecutors are prohibited from seeking illegal benefits for themselves and/or their relatives.
Local level (Beijing & Shanghai): No developments.
Communist Party Rules:
(1) It was reported on July 18, 2013 that Xi Jinping, the Chairman of the Central Military Commission and the President of China, issued Provisions for Implementation of the Accountability System for the Party’s Integrity in the Military (“Provisions”). The Provisions emphasize the necessity of establishing an accountability system in the military to end problems of “formalism, bureaucracy, hedonism, extravagance and corruption.”
2. Upcoming law or regulation
3. Government Action
(1) On July 2, 2013, Gao Yujun (“Gao”), the former Deputy General Manager of Shandong Branch of Huadian Power International Co., Ltd. and Chairman of Shandong Century Electric Power Development Co., Ltd., was reportedly sentenced by the Intermediate People’s Court of Yantai City, Shandong Province to death with two years’ reprieve for corruption, embezzlement, and accepting bribes.
While in office from 2004 to 2010, Gao allegedly accepted bribes totaling over RMB 22.9 million (USD 3.73 million) on 70 occasions, taking advantage of his position to assist various individuals with business contracts, purchase orders and payment settlements, including RMB 21.68 million (USD 3.53 million), USD 80,000, GBP 28,000 (USD 42,565), and EUR 5,000 (USD 6,623) for such items as shopping cards and watches. The Court ordered confiscation of all the personal assets of Gao.
(2) On July 8, 2013, Liu Zhijun (“Liu”), the former Railways Minister, was sentenced by the Second Intermediate People’s Court of Beijing Municipality to death with two years’ reprieve, plus confiscation of all personal assets for taking bribes and abusing power.
As an official serving in China’s railway system for most of his life, Liu allegedly took bribes amounting to RMB 64.6 million (USD 10.53 million) between 1986 and 2011. In exchange, Liu abused his position by providing illegal benefits to the bribers in the form of promotions and the award of construction and cargo transportation contracts. Liu is the highest ranking official convicted since China’s new President, Xi Jinpin, came to power.
(3) On July 18, 2013, Wu Zhiqiang (“Wu”), the former Deputy Secretary of Foshan City and Secretary of Political and Legislative Affairs Committee of Foshan City, Guangdong Province, was sentenced by the Intermediate Court of Chaozhou City, Guangdong Province, to 11 years in prison plus confiscation of personal assets valued at RMB 700,000 (USD 114,184).
Wu was reportedly accused of taking bribes from Luo Zuohong (“Luo”), the general manager of Foshan Shunde Shenghu Investment Co., Ltd. on ten occasions, aggregating RMB 5.4 million (USD 880,853) between July 2007 and August 2011. In return, Wu abused his position to help Luo receive project approval and to be elected as a member of the Chinese People’s Political Consultative Conference of Foshan. Wu confessed his crimes to the prosecutors on January 16, 2012, and all the bribes have been returned by his relatives.
(4) On July 23, 2013, Luo Yinguo (“Luo”), the former Party Secretary of Maoming City, Guangdong Province, was reportedly sentenced by the Intermediate Court of Zhongshan City, Guangdong Province to death with two years’ reprieve for accepting bribes and holding significant property from unidentified sources.
Luo was charged with accepting bribes totaling over RMB 20 million (USD 3.26 million) between 1998 and 2011 and owning property in the amount of RMB 50 million (USD 8.15 million) with no identified source. In exchange for favors, Luo is reported to have assisted the bribers with job promotions and the award of construction projects. It was reported that a total of 61 officials were under investigation in connection with Luo’s corruption. Luo’s wife, Zou Jifang, was sentenced to six years in prison for taking bribes.
(1) It was reported on July 23, 2013 that in the first six months of the year 2013, Chinese prosecutors have investigated 13,842 individuals in 9747 cases on suspicion of bribery and embezzlement harming the public interest, involving a total of RMB 1.77 billion (USD 288.7 million).
5. China-related FCPA Action
(1) The Ministry of Public Security ( “MPS”) officially reported that certain senior executives of GlaxoSmithKline (China) Investment Co., Ltd. (“GSK China”), including two vice presidents, one legal affairs director, and one business development manager, were detained for allegedly directly and indirectly (through travel agencies) offering bribes amounting to RMB 3 billion (USD 489 million) for government officials, medical associations, foundations, hospitals, and physicians to promote sales and raised retail prices. Certain executives of GSK China have reportedly received kickbacks and other benefits through travel agencies by fraudulently using special VAT invoices and/or false invoices issued by the same travel agencies in violation of PRC tax laws. MPS describes the case as “involving numerous people, continuing for a long time, involving huge amounts and constituting serious violations”. Detained executives of GSK China have confessed their crimes.
GSK China is a subsidiary of GlaxoSmithKline Plc (“GSK”), a leading pharmaceutical company listed in London and New York Stock Exchange. In a later statement GSK confirmed that certain senior executives of GSK China appeared to have acted outside GSK’s approved procedures and in violation of PRC laws.