Zhu Rongji

Jail not the end for disgraced high-flyers

PUBLISHED : Saturday, 22 May, 2010, 12:00am
UPDATED : Saturday, 22 May, 2010, 12:00am

This week you will have read a lot about the jailing of mainland billionaire Wong Kwong-yu for 14 years and 600 million yuan (HK$685.62 million) fine for insider trading and bribery.

Is the jail term too harsh? What does it mean for his empire, the Gome group?

Wong was once the country's richest man and his fall also brought down many top officials. However, other than that, I do not see much significance in the sentence.

A look at the whereabouts of some other disgraced financial heavyweights, whose imprisonment made local and international headlines, will tell you why.

Let's start with Zhu Xiaohua, a disciple of former premier Zhu Rongji who handpicked him to head the foreign exchange bureau and then state investment arm China Everbright Group in Hong Kong.

He was dubbed 'Goldfinger' or 'The Red Alchemist' by the media as any company's association with Everbright, no matter how real, would send its share price sky-high. Tycoons lined up to shake his hand.

He disappeared in 1999. Three years later, he was sentenced to 15 years in jail for taking four million yuan in bribes. His wife committed suicide before the sentencing.

In late 2007, Zhu resurfaced. He was granted medical bail due to a stomach problem. Last year, he remarried and was involved with a private equity firm, according to people who have met him.

Mainland law grants prisoners medical bail if they are seriously ill, incapable of looking after themselves due to a physical handicap, or too old to pose any threat to society. The prisoner cannot take up any company directorships or hold a management position. Neither can they leave the country or meet the media without government approval. But getting married is okay.

No less controversial is the case of Wang Xuebing. Dubbed 'China's best bank official' by foreign media, Wang - another of Zhu Rongji's elite cadres - was given the task of reforming the country's state-owned banks. He took the helm of Bank of China at the young age of 42 in 1993 and later China Construction Bank.

His arrest in 2002 was a huge embarrassment, especially as it came on the eve of Bank of China's listing in Hong Kong. He was the most senior mainland banker to face corruption charges.

In December 2003, a court sentenced him to 12 years' imprisonment for granting bad loans and accepting 1.15 million yuan in bribes. However, five years later, he appeared at various business events, according to people who were present.

No information is available on why he gained an early release. Mainland law grants prisoners a reduction in sentence for showing genuine remorse or making a contribution to society. This can involve stopping a major crime, reporting criminal activity in jail, making a major scientific invention, saving life or helping combat a natural disaster. Perhaps Wang has done one of these.

The case of his subordinate, Liang Xiaoting, is even more telling. The son of a former provincial party head, Liang was a high-flyer. He was the first mainland investment banker to sit on the Securities and Futures Commission.

In 2004, a court gave him an indefinite jail sentence for accepting 2.95 million yuan in bribes.

Less than five years later, he was freed so he could receive medical treatment for a mental problem. The mainland policy on prisoners serving an indefinite jail term allows them to be granted medical leave if they have served seven years of their sentence or are suffering serious chronic illness, or they show genuine remorse.

Liang is said to be recovering well. He is working for a well-connected property developer in Beijing, according to a friend. 'Given his guanxi, he will have little problem rebuilding his business,' the friend said.

And let's not forget Guan Jinsheng, the godfather of the mainland securities market. He was the founder of the country's first real brokerage firm and the first mainlander to go on CNN to talk about China's securities market.

In 1995, he correctly bet against a change in Chinese treasury policy. However, the 5.6 billion yuan profit his firm made turned into 1.6 billion loss in one day as the government declared his last-minute trading invalid. Guan was sentenced to 17 years' jail in 1997 for accepting 400,000 yuan in bribes. Seven years later, he was out. The reason? Medical, of course.

Guan has no major involvement in business these days. However, he has turned up at every annual reunion of his old team, according to one of the members who said Guan showed no signs of serious illness. He is even said to have returned to his habit of chain-smoking recently.

Bored by these dusty old stories? Cannot recall any of the names?

That's exactly the point.

They were all given lengthy jail terms and their sentences were widely publicised at the time, which served the purpose of showing the public the power of justice or the weakening of a political rival. But as time moves on, no one will remember their names, why they were arrested or when and why they were released.

To be fair, it does not just happen in China. Remember Michael Milken, the junk bond king who served less than 20 per cent of his 10-year sentence? But in those cases, at least you can ask how and why.