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Mark O'Neill

Hard-working Chen Haowu had all the qualities needed to develop the mainland's infant securities industry - intelligence, nearly 20 years experience in the central bank and concern for his staff.

 In 10 years as chairman, he built Hubei Securities from a local brokerage with capital of 10 million yuan (about HK$9.34 million) to an investment bank and stockbroking company with capital of one billion yuan and branches in several provinces.

 But last week, the securities industry was stunned to learn of Chen's arrest, on five charges of bribery and illegal trading from which he earned more than three million yuan.

 He faces a long prison term and possibly execution.

 Investigators have not given details of the charges, but industry sources said that he might have taken bribes from companies that were trying to secure a stock market listing, a complicated procedure which depends on approvals from many levels of bureaucracy.

 They also allege that Chen tried to inflate the profits of Hubei-based firms to secure listing approval.

 It was the poor interim results of most of the 46 Hubei companies listed in Shanghai and Shenzhen last year that gave Chen away.

 Investors complained about them to newspapers and the authorities, asking if the financial statements of some of the companies had been falsified during the initial public offerings.

 On paper, Chen had the ideal pedigree to run a securities firm.

 Born in 1952, he started work at the age of 16 as a salesman in a rural collective during the Cultural Revolution, before passing an exam to enter the banking college of his native Hubei, in central China.

 After graduation, he was assigned to the Hubei branch of the People's Bank of China, then the only bank in the country, which in 1984 became the central bank, divesting itself of its commercial units.

 He had an excellent record, working his way from the secretariat to the department of financial research of which he became chief.

 He published many articles and was known as a studious man who mixed little socially and enjoyed hiking.

 With this background, he was chosen in 1990 to set up and run Hubei Securities as the province's first step in the new industry.

 Since the firm had no car for him, he continued to use his own ageing minivan.

 One summer day, with the temperature more than 30 degrees Celsius, the van's engine blew up on the bridge that crossed the Yangtze river and Chen had to push it to his office, his clothes drenched in sweat.

 He collected all his articles into a book and distributed copies of it to his employees.

 He was popular with his staff, providing most of them with two-bedroom apartments and wages above the average for the industry in Hubei.

 Wuhan became one of the biggest stock-trading centres in the country.

 In the early 1990s, the city lobbied hard to set up the country's third stock exchange, arguing that its central location would provide a good regional balance to the bourses in the east and south.

 Beijing considered the idea but rejected it at a time when it regarded the markets were a mixed blessing.

 Now that they have become an integral part of the financial system, computerisation and electronic trading seemed to have made the idea of a third market redundant.

 Chen's life was transformed by the stock boom, offering him power and money he had never imagined. He could not resist the temptation.

 He started taking money in 1992 and over the next six years took bribes from five companies totalling 396,000 yuan, HK$60,000 and a gold necklace worth 5,800 yuan.

 For two years from June 1997, he stole public funds worth 631,700 yuan and US$60,000. In the year from January 1998, he earned 1.4 million yuan from illegal stock trading.

 This wealth transformed his lifestyle. He took up golf and drove round the course in a Toyota jeep.

 Off the greens, his rickety minivan became three different cars.

 For government meetings, he used an Audi. Going to and from the office, he used a Lexus 400 and for pleasure a BMW 750.

 All this came to an end on the morning of October 8 last year, according to the version told by brokers.

 Three men in plain clothes arrived at his office, where the guard asked if they had an appointment. When they said no, he said they could not see Chen.

 'There is no place in China that we cannot go,' they replied and marched into his office, where they showed him their identity cards, from the Central Commission for Discipline Inspection, the Communist Party's top anti-corruption body.



Tarnished image of securities industry's golden boy