Central Commission for Discipline Inspection investigators are currently scouring China Resources (Holdings) Company Limited, a state-owned conglomerate, and the administration of Hainan province, for evidence of graft.
Keith Darby, a 69-year-old British citizen, submitted a detailed letter alleging corruption both in the state-owned company and the provincial government with the hope of bringing an end to a legal saga that has dragged him into financial difficulties and barred him from leaving the country for over a year.
“Thinking about what I encountered in Hainan, I just feel we have been overshadowed by a huge black web,” Darby wrote in his submission to graft inspectors last week.
In the letter, the British businessman said Hainan government departments and courts have informed him verbally that China Resources was too powerful in the province to be challenged. Local officials told him they did not dare to help him, he said.
China Resources and its Hong Kong-listed subsidiary, China Resources Land, did not reply to e-mailed questions for comment on Friday. China Resources has in the past denied wrongdoing in the case.
In 2006, Darby set up a joint venture with Bloom World, a China Resources subsidiary registered in the British Virgin Islands, to develop a luxury resort in Hainan, but a falling-out led to legal proceedings in 2010.
Before Beijing courts ruled on the case, the ownership of 131 mu (8.7 hectare) of some 160 mu (10.7 hectare) of the resort’s total land had passed from the joint venture to a China Resources subsidiary for 12.11 million yuan (HK$15.23 million).
Darby, the joint venture’s legal representative, said he was only informed of the sale after it had occurred. China Resources executives had broken into the company safe and stolen its official seal to sign the contract, Darby alleged in a police report he filed at the time.
The sale was hugely profitable. A year earlier, the real estate consultancy CBRE had estimated the value of the entire land plot at 497 million yuan. “It was complete theft,” Darby said, adding that he has yet to receive the payment.
Because the corporate seal has since remained with China Resources, Darby said he has been left with a company that cannot pay its bills or taxes – which require identification by corporate seal.
The Wanning People’s Court in Hainan told Darby it could not hear the case asking for the return of the seal because it had been unable to reach the executives of the British Virgin Island-registered China Resources subsidiary. The other subsidiary that acquired the land told the court it had no knowledge of Darby’s claim.
Last year, a debtor took Darby’s company to court in Haikou over his inability to pay debt accrued in the botched land deal. The British businessman found himself in a catch-22 situation: he was responsible for the company but unable to act on its behalf because its corporate seal remained with China Resources.
In its ruling in December 2012, the court barred him from leaving the country pending the repayment of the company’s debt. He hasn’t been able to leave China since February last year.
Darby said he and his family have been threatened and harassed by unidentified people from the moment he began to challenge the land sale. They have since moved to Guangdong over safety concerns, but they still live in fear.
Unable to get judicial assistance, Darby started digging through Hainan company records and found a network set up since the year 2000 of four companies in the British Virgin Islands and two in Hong Kong through which China Resources operated in the province.
Offshore tax havens such as the British Virgin Islands provide financial secrecy that is often used by mainland companies to gain tax benefits reserved for foreign investors. The ownership of offshore accounts does not, however, necessarily constitute a crime or indicate wrongdoing.
In 2012, the British Virgin Islands and the Cayman Islands were China’s third-largest source of foreign investment after Hong Kong and the United States.
“We wonder,” Darby wrote to Communist Party’s central discipline inspection commission last year, “whether the gaining of favourable taxation policies within the identity of fraud foreign capital of their investments in the mainland was approved by the central government.”
While his letter went unanswered, new graft investigations recently have given him unexpected hope that his fate might change.
China Resources Land vice-chairman Wang Hongkun was detained in mid-April, shortly after the detention and questioning of the conglomerate’s chairman, Song Lin, by discipline inspectors.
Wang had served as general manager of China Resources in Hainan. His personal seal was on the 12.11-million-yuan contract for the land that Darby alleged was sold to the China Resources subsidiary without his knowledge. On April 22, Wang formally resigned as vice-chairman of the Hong Kong-listed China Resources Land, citing personal health reasons.
Party investigators are also currently scouring through the files of the Hainan provincial government. In March, the Central Commission for Discipline Inspection dispatched an anti-graft team to the province to further investigate, according to media reports at the time. The deputy provincial governor, Ji Wenlin, had already been detained for “serious discipline violations” in February.
“Hainan was their fiefdom,” said Darby. “Now that Song Lin and Wang Hongkun have been taken into custody, I hope very much that their network in Hainan will be investigated.”
Darby said he wanted to return to the United Kingdom. “That’s were my roots are,” he said. “I yearn to go back to England and see my good old friends. I think remaining in China after this is not on the agenda.”