BUSINESS

Zurich Insurance denies it bought into Chinese firm illegally

Former premier's daughter aided scheme to buy into Chinese firm illegally, UK newspaper claims

PUBLISHED : Sunday, 13 October, 2013, 12:00am
UPDATED : Sunday, 13 October, 2013, 5:40am

Global insurer Zurich Insurance has denied violating Chinese laws following recent accusations that it bought shares of a Chinese insurance company, years before foreign companies were allowed to do so, with the help of the daughter of former premier Li Peng.

In a written reply to the Sunday Morning Post yesterday, Zurich said when it reached an agreement with Orient Group, a privately owned Chinese conglomerate, in 1996 to buy 10 per cent of shares of an insurance company that it owned, the agreements specified that the shares would remain with the Orient Group until restrictions on foreign shareholding in life insurance companies under Chinese law were lifted.

"Based on a legal review conducted by Zurich, Zurich did not violate any laws or regulations existing at the time of these events," it said, adding the profit it reaped from selling some of the shares later were "consistent with the strong performance of the Chinese economy and stock market over the past decade".

It also said its acquisition of shareholdings in New China Life commencing in 2000 were "entirely unrelated to the transaction with the Orient Group".

Li Xiaolin also publicly denied allegations that she had brokered the deal by introducing executives from Zurich in 1995 to three Chinese businessmen who held a majority stake in New China Life, the country's largest private insurance company.

Li, who now heads China Power International Development (CPI), a mainland power-producer, issued the statement through CPI's official Weibo account on Friday, calling the allegation a "vicious slander".

"Li Xiaolin never knew any people from insurance companies, nor did she have personal relations with any insurance company," the statement said.

According to a report in British newspaper The Daily Telegraph, Zurich paid US$16.9 million into an offshore account as a "good faith fee".

In return, New China Life agreed to sell Zurich almost a quarter of the company, the report said, citing court documents and transcripts.

In 2010, Orient Group's owner Zhang Hongwei accused his former employee Bill Zhao of misappropriating some of the money that Zurich paid.

The Daily Telegraph, quoting court transcripts, said Li told Zhao in 1995 that the chairman of Zurich was interested in breaking into the Chinese market, and Zhao sent the message later to Zhang, who was then his boss.

The report alleged the payment by Zurich was used to bribe several high-ranking Chinese officials with thousands of dollars of "pocket money".

Payments included the purchase of a house for the daughter of the then finance minister, Xiang Huaicheng , while she studied in the US, it said.

The company also gave US$10,000 to Tian Fengshan , the former land and resources minister who got a life sentence for corruption in 2005, when he visited the US in 1998.

Others who allegedly received payments included Ma Mingjia , a former senior official at the People's Bank of China, and Huang Mengfu , a former vice-chairman of the Chinese People's Political Consultative Conference.