Shattered Halo for a Shanghai Magnate

By staff reporter Luo Changping, Chengzhong Xiaolu, Zhao Hejuan

A snowstorm and sub-zero temperatures plunged the northeast city of Songyuan into a deep freeze in late December. But inside a local courtroom, Zhang Rongkun felt plenty of heat.

Zhang, a billionaire businessman and central figure in a Shanghai pension scandal, was standing trial for corruption far from his home in this small, frigid city straddling the remote borders of Inner Mongolia, and the provinces of Jilin and Heilongjiang.

The hearing opened on the morning of December 27 in Songyuan Intermediate People’s Court with Zhang and three other defendants, also with two companies he controlled. Charges included bribery involving 29.1 million yuan, paying 1.7 million yuan in bribes to company staff, manipulating the stock market, securities fraud and and falsifying financial records. No date for a verdict had been released when went to press.

Zhang’s trial brought the scandal, which first saw public light in summer 2006 and mirrored China’s stepped-up efforts to fight corruption nationwide, a big step closer to endgame. As of late January, dozens of business and government officials had been convicted in connection with the case and others were awaiting trial.

Zhang, once listed among the richest entrepreneurs in China, was a prominent figure in the scandal who operated at the very nexus of power and wealth in the country’s largest city.

Years earlier, Zhang was a young businessman with somewhat successful enterprises in Suzhou and Nanjing. But he but was not particularly influential outside his home territory before 2000, when his theater of operations shifted to Shanghai. He rose to prominence almost overnight, winning a reputation as a generous young man of wealth who knew how to use money to connect with the right people.

Eventually, Zhang’s fingers got sticky. He succeeded in getting more than 1 billion yuan in state funds for a series of manipulative moves on the stock market. Next, through his highway construction business, he managed to access around 10 billion yuan from a public pension fund and through bank loans, using the cash to dabble in the financial sector, property and publicly listed companies.

How did this young, out-of-town businessman become such an astounding success in the heady metropolis of Shanghai? Easy. He made connections among the city’s power elite.

Just a Small Businessman

Zhang came from a humble family and did not attend college, finishing his education in 1992 after graduating from Suzhou No. 11 Middle School. He took his first job, at age 18, as a agent for Suzhou Sanshan Futures.

Zhang entered the work world with little more than quick wits, which soon made an impression on those around him. One person familiar with the young Zhang recalls, “He was good at working relationships with people, and he thought very quickly on his feet.”

In 1992, a college under the Suzhou Municipal Science Commission held a training course on foreign trade that brought some of Shanghai’s best-known professors to teach classes to senior managers from local, foreign-funded enterprises and major state-owned enterprises (SOEs). Zhang, showing rare foresight for a teen-ager, pleaded with several people for a chance to enroll and was eventually allowed to audit the course.

Before long, he quit his futures company job, and then spent even less time working at a holiday resort on Lake Taihu.

But in 1993, the 20-year-old Zhang began his career as an entrepreneur. For starters, in November of that year, he helped establish Suzhou Huidanni Fashion Ltd., a small apparel and leather goods dealer. The company’s 500,000 yuan in registered capital had been allocated by a clothing factory, Longnu Suits, that belonged to the Suzhou municipal police academy.

Zhang was put in charge of business operations at Huidanni, but Bureau of Industry and Commerce records show the company’s license was revoked within a year of being registered. Nevertheless, Zhang continued using the company’s name in future dealings.

Young Zhang had no intention of spending his days struggling to turn a profit as a small dealer in the rag trade. Testimony provided after the scandal broke tells that he was already involved in futures trading by 1994, and that his dealings on the Suzhou Commodities Exchanges earned him several million yuan. After that, Zhang was only interested in similar deals that brought rapid returns.

Meanwhile, Zhang got involved with an old classmate, Zhang Ying. She had worked at Huidanni for some time, and was either a shareholder or legal representative at several of Zhang’s companies. They married in 2003.

To his staff, Zhang appeared distinguished and more stable than most young adults. His tall beau wore her hair short, with highlights, and came across as capable and experienced. The couple seemed very much in love. At company meetings, Zhang sometimes forgot himself and called her by a pet name.

Zhang Ying was personable, careful and well-organized. After the criminal investigation began, she kept close watch over her husband’s five defense lawyers, using different telephone numbers to call each and preventing them from contacting one another.

After his arrest, Zhang told one lawyer that his wife was “the only one who will try to save me now. Only she can save me.”

The ‘Suzhou Kid’

More than one source said Zhang escaped Suzhou’s small-town world via the Dongshan Hotel on Lake Taihu, a five-star hotel in a township of the same name and within Suzhou Municipality, nestled amid gorgeous scenery at the foot of lakeside hills. The state-owned Dongshan opened in 1994, two years after Taihu was listed as China’s first, national tourist region and holiday resort. It became a top choice for business and pleasure among Shanghai government officials and SOE senior managers.

Exactly what role Zhang played at the hotel is unclear. Some sources said he was contracted to run Dongshan, while others said he was appointed deputy general manager in charge of promoting overnight stays and business meetings. Regardless, the hotel was certainly the first major stage for Zhang to show off his talent for schmoozing with people who mattered.

When Shanghai power brokers gathered at Dongshan, Zhang would be right there with them, welcoming arrivals and seeing off departures. He made connections with powerful people in Shanghai’s upper echelons. Gradually, he came to be known in Shanghai’s world of business politics as “the Suzhou Kid.”

During this period, a pair of close friends and grade-school classmates named Han Guozhang and Han Fanghe got to know Zhang. A Zhang defense attorney later told that “the two Hans not only later helped Zhang with access to funds, but they also introduced him to many people in government and business circles in Shanghai.”

Han Guozhang was later sentenced to life in prison for accepting more than 6 million yuan in bribes. Han Fanghe was ordered to serve 18 years for accepting bribes worth more than 4 million yuan.

Before rising to become a prominent local official, Han Guozhang was well connected in Shanghai. He held a number of posts including head of the general office at Shanghai Electric, a conglomerate created by combining a number of the city’s electronics and engineering enterprises -- businesses that provided career springboards for Shanghai power broker Chen Liangyu and other senior figures from Shanghai’s branch of the Communist Party and city government.

Zhang’s efforts to cultivate connections were obvious when Han Guozhang fell ill in 1998. Zhang drove hundreds of kilometers to visit his sick acquaintance, and afterward the two got very close.

At that time, Han Fanghe was working at Shanghai International Trust Co. Ltd. (Sitico), which was in the process of establishing the Hua An Fund Management Co. Later, Han Guozhang became Sitico’s deputy CEO and Han Fanghe was named general manager of Hua An.
 
Han Guozhang said he introduced Zhang to Han Fanghe and other important Shanghai business figures, including Wang Chengming, who worked as Sitico chairman when the scandal broke and formerly served as CEO for the defunct Shanghai General Electric Corp.; Wang Guoxiong, a retired former general manager of Shanghai Industrial Investment Holdings; and Zhu Junyi, who was director at the Shanghai Bureau of Social Security when investigators moved in.

After Zhang rose to prominence in Shanghai and began spreading gold in the business and political worlds, some of the treasure passed through Han Guozhang’s hands -- proof that Zhang was skilled at creating, maintaining and extending a shadowy network.

The network started taking shape between 1997 and ’99 while Zhang’s business interests were expanding. In November 1997, his Suzhou Hengxu company formed a joint venture with Dongshan Hotel to create the Jiangsu Dongshan Industrial Development Co., with registered capital of 30 million yuan and a 55 percent stake held by Hengxu. Zhang chaired the board.

Then in 1998, on the recommendation of Han Guozhang, Zhang met Qin Yu, the deputy secretary of the Shanghai municipal Party Committee and personal secretary to the then-deputy mayor of Shanghai, Chen Liangyu.

At his final trial in December 2007, Qin was sentenced to life in prison for taking 6.82 million yuan in bribes, of which almost 400,000 yuan was paid by Zhang.

A Suzhou source who did business with Zhang said he was well known in business circles. “He was doing pretty big stuff, and a fair amount of money was passing through his hands,” the source said. Zhang also offered loans, usually generously, to connections with cash-flow problems.

Zhang started making inroads into Shanghai, launching the Shanghai Tongchuang Enterprise Development Co. in December 1997. At the same time, he enrolled as a research student at East China Normal University with help from Qin, who had taught there. In 2000, Zhang made his big move into Shanghai, riding a wave of major developments in the business and political circles where he had long nurtured connections.

Making the Big Time

In the business district around the Hongqiao Development Zone and Gubei, close to the Pudong airport, is Shanghai’s largest villa-style international hotel, the Shanghai Xijiao Guesthouse. Once a gathering place for the city’s highest officials, it remains a symbol of status and power in Shanghai. And it was here that Zhang rented a luxury villa after moving to Shanghai, perhaps imitating techniques learned at the Dongshan Hotel.

Through Qin and others, Zhang in 2000 established a personal relationship with Wang Weigong, secretary to one of Shanghai’s most senior officials. In the years that followed, Wang would be one of the most important supporters of Zhang’s business and political dealings. He also was the official who accepted the largest share of the bribes, in total 9.3 million yuan. Authorties said it was at the Xijiao villa that, on six occasions, Zhang bribed Wang, helping to rapidly expand his network of connections among Shanghai officialdom.

Zhang’s 28 luxury cars were always at the ready. The fleet’s well-paid drivers could sleep at his villa. Zhang followed no regular work pattern and was awake late at night. Business meetings lasting until three in the morning were not uncommon.

Shortly after moving to Shanghai, Zhang started putting his capital to work. His first major campaign involved manipulating shares in Shanghai Haixin Group (600851.SS). The effort failed, and his scheming never really got back on its feet. Nevertheless, the Haixin deal opened doors for more favors and personal connections for Zhang.

His good friend at Hua An Fund-- general manager Han Fanghe -- proposed they work together to manipulate Haixin shares at a time when Haixin stock was an important part of the fund’s portfolio. Han Fanghe was on good terms with Haixin’s chairman, Yuan Yonglin, to whom he introduced Zhang.

The three worked in concert, using Hua An’s major holdings in Haixin to their advantage. Zhang would buy Hua An shares to push up the price, and afterward Han Fanghe would arrange for his funds to buy shares in Zhang’s holdings. Meanwhile, Yuan controlled the company and could help by reporting profits at appropriate times, even falsifying profit reports on the stock listing’s records.

The report from a court-appointed accountant showed Zhang used 11 companies he owned to open 135 fund accounts at 83 different securities trading companies, using 13,843 subsidiary accounts to manipulate stock.

It seemed a foolproof inside-trading scheme. But it started to falter during a strong bear market in late 2001, when a slew of dealers and stock manipulators fell into their own traps. Zhang could control share prices at will, but willing buyers for the stock were nowhere to be found. He also faced higher costs to satisfy asset managers who’d been promised fat returns. Zhang needed more money to stay in the game.

A bundle of Haixin shares were being offloaded at high prices on July 7, 2001, and Han Fanghe asked Zhang to support the price. Zhang complied, spending 270 million yuan in one day. Zhang later testified that, “We bought it until we we couldn’t take any more. My assistant Shi Wenqi, who was in charge of doing the deals, was in tears.”

These market players were lucky because Zhang managed to maintain a seemingly endless stream of funds. Why? He had access to substantial support -- 1.7 billion yuan from a company called Shanghai Industrial Investment.

Shanghai Industrial’s Wang and the firm’s former finance director Li Yizeng participated in the bear-market shares trading and, of course, got badly burned. To help, Zhang ordered a subordinate to deposit 5 million yuan into the stock fund account of a relative of the men. The recipients were well aware of his generosity.

Shanghai Industrial officials were eager to provide ever-more funds. Later, they simply let one of Zhang’s companies join them in a joint venture, Shanghai Industrial Xinchuang, and gave Zhang a 52 percent stake. From then on, Shanghai Industrial’s money was funneled to Xinchuang before being invested in the market.

By the time investigators clamped down in mid-2006, Shanghai Industrial and Shanghai Electric had together provided Zhang with more than 4 billion yuan.

Despite heavy losses, Zhang was able to repay on time almost all the money he borrowed for stock speculation. His credibility remained high and those who worked with him behind the scenes had also earned healthy bribes for taking risks.

For accepting bribes to fund Zhang’s stock speculation, Wang was sentenced to life in prison and Shanghai Industrial head of finance Li Yizeng received 15 years in jail. Haixin’s Yuan was sent to prison for eight years for accepting 1 million yuan in bribes and manipulating securities prices.

Zhang slid into the world of business by using assets management to access state funds and manipulate the market. His past personal contacts blossomed into a true alliance of vested interests. While losing money in the Haixin scheme, Zhang proved himself loyal, trustworthy and dependable. Not only were the powerful unshaken in their support for Zhang, but their confidence actually increased.

Manipulating the market with hundreds of millions in funds, Zhang could now be counted, in terms of his ability to mobilize resources, as a back-room tycoon of real significance in Shanghai’s high finance circle. Now he was ready to advance. Senior figures advised that he change strategy and make a grand entrance into public life by scaling a new ladder to high-level political resources -- through charitable donations.

Mister Charity

“For me, giving away a million only means that I’ll be buying one less new car this year, or one less apartment,” Zhang said.

In early 2001 at an event organized by the Shanghai Charity Foundation. Zhang had just donated 2 million yuan and earned honor as the biggest giver among the city’s private entrepreneurs.

Back then, Shanghai’s private businessmen were still more likely to keep things understated and show off their wealth. By Zhang was still an outsider in many respects, and had decided to use charitable giving to break into Shanghai life and pursue a bigger goal that. He was taking a roundabout way to rise in the city’s ranks.

Because of the Haixin affair, Zhang’s charitable activities were small in 2001. The next year, while his stock dealings bogged down, he turned his attention to Shanghai’s highways as a route for making money. Zhang then began giving away far more money, to the tune of 10 million yuan or more.

The China Charity Federation named Zhang one of the country’s 100 most influential philanthropists in December 2004. The federation’s public records show Zhang donated 32.27 million yuan over 10 years. In 2004 and 2005, he gave away 24 million and 38 million respectively.

As the size of his charitable giving increased, so did the status of this newcomer to Shanghai society. Between 2000 and ’02, he received several official honors, including a Shanghai “Star of Charity” award and a commendation from the Ministry of Civil Affairs.

Zhang’s highest honors came when he was 29 years old in 2002: He was appointed to the national Chinese People’s Political Consultative Conference (CPPCC) and given a seat on the standing committee of the All-China Youth Federation (ACYF).

Interestingly, to hide his relative inexperience and the rapidity of his rise, Zhang wrote a phony birthdate in the biography he gave CPPCC. He claimed he was born in 1968 -- five years before true birthdate.

Zhang then began shuttling between Beijing and Shanghai as a CPPCC member. He naturally sought to extend his network of connections to the capital. It was there that he bribed Wang on eight occasions. He was also making other arrangements.

Between 2004 and ’05, Zhang invested some 400 million yuan as part of his involvement in restructuring China Reinsurance Group. During this period, he was studying for an MBA at Peking University.

In March 2003, the Fuxi Group issued 1 billion yuan worth of short-term bonds on the interbank market, becoming the first private enterprise to issue such bonds.

Zhang sought friends in the capital city. For example, Zhang gave more than 100,000 yuan to former head of the National Bureau of Statistics Qiu Xiaohua, who served with Zhang on the CPPCC and ACYF standing committee. The sum was treated as a gift, not a bribe, but it showed how Zhang used his CPPCC and ACYF positions to extend his network. Qiu was later indicted for bigamy.

Nevertheless, Zhang never fully developed his connections in Beijing. He had moved decisively into Shanghai, but it seemed his heart was not set on a Beijing expedition. Thus, Shanghai continued as his operations center until his downfall.

Highway Baron

During his early days of bold stock speculation using government money, Zhang worked quietly. After the bear market of 2001, however, he burst into public view as Shanghai’s new “highway baron.”

In the first half of 2002, Zhang worked through Han Guozhang and got to know senior management at the Shanghai City Investment Corp. He learned that Shanghai City Investment wanted to dispose of its interests in a highway, and that its managers were talking with businesses in Zhejiang but would welcome a bid for the road from a solid, Jiangsu-based enterprise.

The “highway” in fact consisted of the right to operate the Shanghai section of the Shanghai-Hangzhou expressway, which were held by a City Investment subsidiary, Shanghai Road and Bridge Development Co.

Zhang was determined to win the bid and set in motion the kind of high-level connections that competitors would be hard pressed to match. His first step was to establish a company called Fuxi Investment with registered capital of 500 million yuan, an amount later increased to 1 billion yuan.

Zhang hatched a scheme that was later outlined in court documents. “In January 2002, Fuxi Investment requested the assistance of Wang Weigong in their intended purchase of Shanghai Road and Bridge,” the documents said. “Wang Weigong invited then-Shanghai mayor Chen Liangyu and Zhang Rongkun to dinner. Zhang asked Chen Liangyu for his consideration in the road purchase matter, and Chen expressed his support for Zhang’s bid.”

This section of the court papers fills in details of the biggest turning point for Zhang. Having laid a sound foundation through charitable activities and networking, he could now easily expect support from Chen.

In the days following Zhang-Chen dinner meeting, one after another bidder for the road rights withdrew from the contest. They included Huawen Investment from Beijing whose owner, Wang Zheng, was persuaded by the experience to enter an alliance with local forces in Shanghai, only to ultimately fall in the pension scandal as well.

The manuevering led to an impressive signing ceremony on March 26, 2002, for the agreement to sell a stake in Shanghai Road and Bridge Development. Chen and other city officials joined the event’s host, the general secretary of the municipal government, Jiang Sixuan, in the No. 1 VIP Reception Room at Shanghai City Hall. Now the new highway baron Zhang and his month-old Fuxi Investment were at the center of public attention.

One of the fishy sources of Zhang’s money was the Shanghai pension fund. The court indictment said that, in summer 2002, Zhang was introduced to the social security bureau’s Zhu by the two Hans. In October, Zhang received a 200 million yuan loan from the bureau and “rewarded Zhu Junyi, Han Guozhang and Han Fanghe as previously agreed,” the indictment said.

Meanwhile, by winning the highway bid, Zhang reaped a windfall. According to Shanghai’s municipal indicators, which are used to transfer technology ownership, Shanghai Road and Bridge was assessed before the sale at 3.7 billion yuan in value, with 2.33 billion yuan in debt, leaving net assets for the new owner of 1.37  billion yuan. Coincidentally, Fuxi’s investment had valued the assets at 1.36 billion yuan.

The indictment said the actual amount paid was 1.015 billion yuan “which bought a stake in Shanghai Road and Bridge worth at the lowest estimate 1.336 billion yuan. Chen Liangyu violated decision-making procedures. Without proper debate and evaluation, he decided on his own authority to sell 99.35 percent of shares in the Shanghai Chengtou Corp. subsidiary of Shanghai Road and Bridge to Fuxi Investment.”

Zhang’s score from this deal was by no means limited to a bargain price. In addition, his Fuxi firm had made a leveraged purchase of the right to operate the Shanghai section of the Shanghai-Hangzhou Expressway for 30 years. And the highway deal was significant on another level in that it restored Zhang’s funding chain, which had been nearly broken by his losses on the stock market.

Fuxi received in August 2002 another 10 billion yuan credit line in Chinese and foreign currency from the Shanghai branch of the Bank of Industry and Commerce (ICBC) to use in infrastructure construction. Files show Fuxi Investment took out 600 million yuan in short-term loans from the ICBC that year.

Afterward, Zhang used the highway to secure financing and borrowed 3.45 billion yuan from the pension fund, triggering the investigation that brought him down.

Super Magnate

An informed source told that Zhang bought the highway firm against a background of new government policy aimed at opening infrastructure construction to private sector capital.

“In line with the intentions of senior officialdom, Wang Weigong, Qin Yu and others allowed Zhang Rongkun to be among the first to engage in this, and provided them with policy and financial assistance. The astute at the time were aware of this policy environment and so were able to become involved in some trial projects in these areas,” said the source.

The policy information had been made public in a document issued in December 2001 by the former State Planning Commission. It was aimed at promoting and attracting private investment. The document set out for the first time a proposal to “gradually open up areas available for investment. Except where special national regulations apply, any area where international investment is encouraged and allowed should also see permission and encouragement for investment from the (domestic) private sector.”

However, things did not turn out as hoped. In the process of implementing a policy of  “allowing private investment” into highway projects, strong interference by local government and non-transparent work practices made it difficult to create an environment for open and fair competition.

The “privatization” experiment became an arena in which official and private interests could collude, and expressways and similar major public infrastructure construction projects turned into means by which powerful magnates could gain access to financial advantages. Numerous examples of this outcome offer serious lessons for future policy-making.

Since the turn of the century, operating rights to highways in various localities were sold outside the public eye. Quite apart from the issue of cheap sell-offs, some private operators misused construction funds and falsely inflated project costs, ultimately bribing government officials to extend the time period during which they could collect road tolls.

A classic form of the real-world problem in applying this policy could be found along the two sections of Shanghai highway to which Zhang held operating rights. To someone familiar with this tactic, the point of newly built highways was not just the money to be made from their construction. More important was that they provided access to enormous loans. Over the course of a project that might last many years, a clever operator could falsely inflate construction costs and inventory, then use the money for investments.

Zhang tapped open sources of funding in the form of bank loans as well as a secret source -- the pension fund -- to greatly increase his leverage and advantages over other magnates.

Beginning in 2003, Zhang began taking illicit short-term loans from his two highway projects. He used the cash to buy assets that could be mortgaged with the pension fund. The amount of money snowballed, as his company assets increased to 13.622 billion yuan by the end of 2006 from 4.02 billion yuan in 2002 . Net assets grew to 5.313 billion yuan from 1.247 billion yuan in the same period.

By the time authorities clamped down, Fuxi companies had borrowed 6.134 billion yuan from Shanghai ICBC in the form of a long-term loan of 2.7 billion yuan for the Jia-Jin Expressway, a long-term loan of 2 billion yuan taken out to buy Shanghai Road and Bridge, as well as more than 1 billion yuan in short term loans accumulated over several years. Loans from the Shanghai pension fund had grew to 3.45 billion yuan.

During three years of expanding into highways, the Fuxi group invested in the financial sector, property, infrastructure and private shares of listed companies. These investments included around 4 billion yuan worth of shares in four companies, including China Reinvestment Group and China Life Reinvestment Group; a 20 percent stake in Hua An; investments worth 900 million yuan in Zhang’s hometown Suzhou; a 20 percent stake in the Jia-Jin Expressway; and two tracts of land in downtown Shanghai. The group also bought property worth about 100 million yuan in Beijing and Shanghai.

Zhang’s most profitable investment was his participation in a private share issue made prior to Shanghai Electric’s listing on the Hong Kong stock exchange. His close friend Han Guozhang played an important role in this deal.

Shanghai Electric is China’s largest equipment manufacturing group and the largest state-owned enterprise in Shanghai. It earned 60.49 billion yuan from sales in 2005. The company’s core assets were held by the restructured Shanghai Electric Group Ltd. (SEG), which listed on the Hong Kong stock exchange in 2005 (HKSE 2727) and posted 2005 earnings of 34.4 billion yuan.

At the time of the restructuring in 2004, Zhang’s good friend Han Guozhang was deputy CEO of SEG. Zhang was also an old acquaintance of board chairman Wang Chengming.

Fuxi paid 1 billion yuan for a 10.54 percent stake in SEG in September 2004, becoming the second largest shareholder. After the company went public, Zhang’s holding was reduced to 8.15 percent, and Zhang was deputy chairman. Han Guozhang later testified that 910 million yuan of the money Zhang paid for his stake in SEG came from loans provided by Shanghai Electric.

SEG went public on the Hong Kong exchange’s H-share market on April 28, 2005. Based on the initial price, the value of Zhang’s shares in the company had risen to between 1.58 billion yuan and 1.67 billion yuan. By the time the pension scandal broke, the value had risen to more than 2.5 billion yuan. And with help from his subsidiaries, Zhang borrowed several million yuan from SEG to play the Hong Kong markets, earning HK＄ 138 million.

Crime and Punishment

Even after expanding into highways between 2003 and ’05, and rounding up several billion yuan from banks and the Shanghai pension fund, Fuxi still had trouble raising money. The company issued in March 2006 some 1 billion yuan in one-year short-term bonds on the interbank market at 3.6 percent. This was the first time in China that short-term bonds had been issued entirely by a private enterprise, and for a time they were very popular among funds.

The pension scandal broke in July 2006, adding directly to the risk of the Fuxi’s short-term financing. On August 21, Shanghai  Far East Credit lowered the firm’s debt rating from A-1 to C, making Fuxi’s paper the first junk bonds in China. But by then, Fuxi’s major assets had been frozen by the courts and investors were facing total loss. Industry insiders regarded this event as the first credit crisis for China’s debt market.

Investigators claim Zhang, Fuxi CEO Zhang Jun, and the company’s chairman and operations chief executive Wang Yongde “provided intermediaries with falsified annual accounts for the three years between 2002 and 2004, inflated reports on 900 million yuan in an accumulation fund and the first half report for 2005, and concealed loans of more than 3 billion yuan Fuxi had received from the Shanghai Enterprise Annuity Development Center and loans of 450 million yuan Shanghai Industrial had made to the Xitian Hotel secured against stock.” This was cause enough to charge them with securities fraud.

Various news reports about the scandal have painted a fairly clear picture of Zhang’s assets. But details of his dealings and the judicial verdict have not been made public. For example, it appears his holdings in the two highways have been liquidated to pay off debts to the pension fund, and his shares in Shanghai Electric and China Reinsurance have been bought back by the respective companies at cost.

Now the sheen is off the halo that circled a magnate worth 10 billion yuan. As he awaits punishment, Zhang is again just a small-town nobody.

The series of trials for former officials, business leaders and market-players involved in the pension scandal is now wrapping up. Already, they’ve produced one death sentence, three life sentences and at least a dozen sentences of 10 years or more. However, a legal source close to the case said the five charges against Zhang are not particularly serious. So when sentencing day arrives, he may find himself in a different league than the government officials who expected life in prison or suspended death sentences for taking bribes.

Zhang and his Fuxi empire rose and collapsed with amazing speed. One experienced defense attorney expressed astonishment at the wild roller coaster ride Zhang took after leaving home at the tender age of 18. Now the Suzhou Kid is mulling over his past as a pivotal figure in a game of collusion between politicians and businessmen, and awaiting a court decision in cold Songyuan.

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