In late June, more than 150 executives from Siemens (SI), the German industrial giant, met in Beijing to discuss compliance with Chinese and U.S. anticorruption laws. That a multinational would spend millions to strategize about avoiding bribery charges in a country where bribery is rampant shows how much business is changing in China.
Hugo Restall: The Rules in China – WSJ.com
March 30, 2010 By
After a Chinese court sentenced four executives of Australian mining company Rio Tinto to lengthy prison terms for bribery and stealing commercial secrets yesterday, Canberra was quick to respond. Foreign Minister Stephen Smith pointedly stated, “As China emerges into the global economy, the international business community needs to understand with certainty what the rules are in China.”
In the eight months since Australian citizen Stern Hu and his Chinese colleagues Wang Yong, Ge Minqiang and Liu Caikui were arrested, we've learned a great deal about the lack of certainty and rules not only in China, but also in the global commodities trade. Some of that is China's fault, but hardly all of it. The Australian government and Rio Tinto must share the blame for lack of transparency and failing to play by the rules.
Foreign media coverage of the arrests and trial has focused on whether the Chinese authorities pursued this case for political reasons. Remember that early last year, cash-starved Rio Tinto angered China by inviting Aluminum Corp. of China, or Chinalco, to take a $19.5 billion equity stake and then backing out of the deal under a combination of shareholder, government and public pressure. Rio was also driving a tough bargain in iron-ore price negotiations with Chinese buyers. Many observers speculated that the four executives were pawns in a high stakes game of tit-for-tat orchestrated from Beijing.
Certainly the timing of the case makes such suspicions inevitable. But the reality is probably more complicated. The Chinese justice system may be manifestly unfair, and once it gains momentum a guilty verdict is a foregone conclusion. Yet Rio itself put forces in motion that led to four men losing their freedom.
It all started with the boom in the global iron-ore market in the early 2000s. That’s when China’s steel industry embarked on a massive expansion of capacity, turning the trade in ore from a buyer’s market to a seller’s market. China’s large state-owned steelmakers bought at the benchmark price negotiated by Japanese and Korean mills, while smaller firms had to pay the higher spot price. This created an incentive for arbitrage and corruption, but unfortunately both the Chinese government and the mining companies were slow to take account of this in their internal controls.
Life Sentence for Former Chinese Supreme Court Justice
January 19, 2010 By Leave a Comment
A former Chinese Supreme Court judge was sentenced to life in prison Tuesday following his conviction for embezzlement and receiving more than half a million dollars in bribes.
Huang Songyou, the court’s former vice president, is the first judicial official of his stature to be tried and convicted on such charges, part of a continuing battle by the Communist Party against deep-seated corruption.
Formally known as the Supreme People’s Court, the body is the highest judicial panel in China with wide-ranging powers including overseeing lower courts and reviewing death sentences. The court has 13 members, with its grand justice also sitting on the party’s decision-making Central Committee.
Huang’s entire property also was confiscated as part of the ruling, according to a brief report by the official China News Service.
Huang, 52, was accused of taking 3.9 million yuan ($574,000) in bribes from a law firm in return for favorable rulings on cases between 2005 and 2008.
He was also charged with embezzling 1.2 million yuan ($176,000) in government funds while serving as president of a city level court in the southern province of Guangdong in 1997.
Huang was fired and kicked out of the party in August and went on trial last Thursday at the Langfang Municipal Intermediate Court in Hebei province just outside Beijing. Calls to the court rang unanswered on Tuesday.
The official Xinhua News Agency said Huang had confessed to the charges during the investigation stage and most of the bribes and embezzled funds had been recovered.
“But as a chief justice, Huang knowingly violated the law by trading power for money and taking a hefty sum of bribes, which has produced a bad impact on the society, and should be punished severely,” Xinhua said, citing the verdict.
Foreign Journalists in Beijing Hit by E-Mail Hackers – NYTimes.com
January 18, 2010 By Leave a Comment
At least two foreign journalists living in Beijing have had their Google e-mail accounts hacked, a journalists’ advocacy group in China said Monday. The hackers changed settings so that all Gmail messages would be forwarded to unfamiliar addresses.
The journalists apparently discovered that their accounts had been hacked after Google announced last week that hackers had attempted sophisticated attacks on its security infrastructure. The attacks were traced to mainland China. Google also said that two Gmail accounts had been compromised and, separately, that dozens of people pressing for human rights in China had had their e-mail accounts hacked. In retaliation, Google had said it would talk to the Chinese government about ceasing the practice of self-censorship of its Chinese-language search engine, Google.cn, and that the search company could close down or curtail its operations in China.
The two foreign journalists recently victimized by hackers were among a large number of Gmail users in China who checked their accounts after Google’s announcement and discovered that their accounts had been compromised. In many of those cases, it was unclear exactly when the hackers had broken into the accounts. The attacks are separate from those that were aimed weeks ago at the security infrastructure of Google and more than 30 other companies and entities, most of them based in Silicon Valley, California.
via Foreign Journalists in Beijing Hit by E-Mail Hackers – NYTimes.com.
Swiss to Reveal Tax Man Tactics
November 16, 2009 By Leave a Comment
Switzerland will unveil the criteria behind the disclosure of 4,450 UBS accounts handed over to U.S. tax officials at a press conference tomorrow, Bloomberg reports.
As part of a late summer settlement between UBS and the U.S. government, the Swiss banking giant agreed to hand over the names on those UBS accounts. (UBS paid $780 million in February to settle criminal charges that the bank helped wealthy American clients avoid paying U.S. taxes.)
Swiss officials are expected to reveal the model used by IRS and Justice Department lawyers to suss out overseas tax evaders. The Am Law Daily reported in August that the Justice Department might never release an appendix to its UBS accord detailing the criteria used to select the 4,450 accounts, because it doesn't want to tip its hand on disclosure requirements and possibly incentivize individuals not to come forward under an amnesty program.
The amnesty deadline for U.S. citizens to file income tax returns disclosing assets stashed away in offshore tax havens passed on October 15. Swiss authorities withheld details of how UBS accounts were selected so as not to interfere with the IRS's voluntary disclosure program, which saw about 7,500 Americans submit filings.
Now the country's Justice Ministry–making more headlines recently for its role in the Roman Polanski case–will announce more intimate details of its arrangement with U.S. regulators. According to Bloomberg, the criteria will likely be based on a point system that automatically triggered the disclosure of certain accounts.
Like speeders getting pulled over by state troopers on a highway, certain accounts would accrue points based on certain characteristics. Have a million Swiss francs in your local savings bank in lakeside Lucerne? That's a point. Financial arrangements structured as foreign trusts and foundations also are fertile ground for red flags, Bloomberg reports.
The IRS has recently opened new offices in Beijing, Panama City, and Sydney as part of its effort to crackdown on overseas tax havens for U.S. citizens. Bloomberg recently reported that Hong Kong has become a target for federal prosecutors keen on determining how the roles financial professionals possibly linked to tax evasion have evolved after the former British colony was returned to China in 1997.
Read more: Swiss to Reveal Tax Man Tactics.
