Suspended death sentence masks string-pulling saga

Asuspended death sentence for a senior mainland banker ... a divorce turned ugly ... the seductive red lights and can-can dancers of the Moulin Rouge in Paris. Put these together and you get more than a soap opera. You get a rare backstage look at the country's securities watchdog - the China Securities Regulatory Commission (CSRC), with its peculiar definition of integrity. Let's start with the big guy. Wang Yi, a former vice-president of the China Development Bank, was given a suspended death sentence on Thursday for accepting more than 11.96 million yuan (HK$13.6 million) in bribes. Sounds fair? Not to those who know the power of Wang. He is not just another banker who took bribes in return for granting loans. He's an ex-CSRC vice-chairman who, eight years after leaving the commission, helped an unqualified corporation to list in Shanghai without going through any official procedures. It was December 2007. Pacific Securities announced the acquisition of a listed company. It was a shock because the securities house had been losing money for three years and no vetting official at the CSRC had heard of the acquisition. How was that possible? Well, a letter signed by a person in the commission's general office arrived at the Shanghai Stock Exchange, and the door was opened for the deal, insiders told the local press. Wang reportedly pulled some strings to get the letter. As a secretary of the late state leader Bo Yibo in the '80s, he had many friends in power and had fixed many deals before. But this outright breach of the rules was hard to cover up. Six months later, Wang and his buddies, many of them ex-CSRC officials, were arrested. How could the whole regulatory system be brushed aside by one letter? Who signed it? Were officials beyond the CSRC involved? These are fair questions. Yet, since Wang pleaded guilty to several relatively trivial bribery charges, we will never hear the answers. The result leaves the integrity of the authorities, particularly the CSRC, seemingly intact, while Wang has the chance of regaining his freedom. (The suspended death sentence means he will be executed if he commits any crime during his first two years of incarceration. If he stays out of trouble, he will either be jailed for life or 15 to 20 years, depending on his behaviour. The special sentence was invented by chairman Mao Zedong for 'counter-revolutionaries'). Well, some may say that only bribery charges were raised because the full case was just too big for the mainland authorities to swallow. But even in more trivial cases, the results don't seem to be much different. Late last month, an elderly woman appeared on China Central Television alleging that Li Li, deputy director of the CSRC's legal department, had engaged in insider trading. The woman and her son later produced a mobile-phone SIM card and documents that indicated Li was its owner. On the card was a short message sent to Li's mother at 10.07am on March 7, 2007. It read: 'Sany Heavy Industry reports 1.16 yuan earnings per share for 2006 ... 10 bonus shares for every 10 shares ... two yuan dividend ... to be announced tomorrow.' Sany's share price and turnover rocketed from 10.08am that day, and the firm's subsequent announcement echoed the message. The son turned out to be Li's divorced husband; the pair have been fighting over an apartment since 2008. Oops. Call it ungentlemanly, revenge, harassment or whatever. The evidence, however, deserved a thorough investigation. Three days after the allegation was made, a CSRC representative said Li's ex had filed a complaint in 2008 but no basis had been found for it. First, Li's mother never traded any Sanyi shares; neither did Li's ex-husband during their marriage. Second, companies submit their results announcements and dividend proposals directly to the exchange, requiring no approval from the commission. But how about Li's other relatives and friends? Even if none of them traded on it, any leaking of price-sensitive information prior to an announcement is against the law. A CSRC official told local media in private that 'the case is too trivial'. Whoever said that must have regretted it in the days to come. Li's ex-husband released piles of photos of Li and fellow commission officials to the press. They were either beaming in front of landmarks in Europe - the Thames, the London Eye and the Moulin Rouge nightclub - or toasting one another at bars in Belgium and Luxembourg. By their side was the deputy general manager of a fund house that partly paid for the 10-day trip in December 2006. Normal government relations spending? Well, the trip was made while the commission was investigating illegal trading by an asset manager of the fund house. On the tour was Li, the commission's legal officer and a deputy director who oversees fund houses. No regulators who treasure their integrity would call this trip normal. It doesn't help that the fund manager was subsequently found guilty and punished. The fund house issued a declaration of ignorance of its employee's illegal activities long before the probe was completed, and it was never penalised for lax internal controls. Given the twisted valuations on the mainland's stock markets, the CSRC's overwhelming veto power and its limited (though improving) transparency, the commission has always been considered a department where (to quote the locals) jobs are so fat that they drip oil. But actually seeing the seaminess of how some regulators operate is still shocking to many in the market. The commission has remained silent about the latest revelations. Oh, by silent, I mean to the public. It has had a word with the press. The magazine Equity Market Weekly, which broke the 'travelgate' scandal, issued an apology on Wednesday evening saying 'there is no truth in the report, and the title 'The Fall of a CSRC Official' is unfounded'. An hour later, its chief editor disavowed the apology. 'Ask our owner whether the report is untrue,' he said, pledging to resign in protest.