Caixin
May 24, 2019 04:15 AM
POLITICS & LAW

Exclusive: The Graft Network Around Disgraced Shaanxi Chief

Zhao Zhengyong. Photo: China News Service
Zhao Zhengyong. Photo: China News Service

A massive graft network surrounding a former provincial party chief surfaced as unfolding investigations took aim at more family members and associates of the disgraced official.

At least six businessmen have come onto investigators’ radar as they probe the corruption case of Zhao Zhengyong, former Communist Party chief of Northwest China’s resources-rich Shaanxi province. Relatives of Zhao including his wife, daughter and brother have also become targets of graft investigators, Caixin learned from several sources.

The 68-year-old Zhao was the first provincial-level official to fall in 2019 to Beijing’s sweeping, years-long anti-corruption campaign. He was placed under investigation by the party’s top graft buster in January, less than a year after he retired as a deputy chairman of the Internal and Judicial Affairs Committee under the National People's Congress, China’s parliament.

Zhao was the governor of Shaanxi between 2011 and 2012 and the province’s party chief from December 2012 to March 2016. Authorities have yet to disclose details of Zhao’s alleged violations.

But an avalanche set off by the Zhao probe has swept up his family members and business associates, shedding light on the family’s extensive reach in Shaanxi’s oil, coal, property and finance sectors. Illegal profits earned by the Zhao family using his power amounted to hundreds of millions of yuan, sources said.

Zhao’s wife, Sun Jianhui, played a crucial role in managing the family’s network with business associates, sources close to the matter told Caixin. Official connections of Sun’s political family helped Zhao, a miner’s son from Maanshan, Anhui province, to climb the bureaucratic ladder in the early days, one knowledgeable person said on condition of anonymity.

“As high-handed as he is, Zhao has a reputation of fearing his wife,” the person said.

Sun is known to have a fondness for jewelry and jade, and she is active among a small group of wives of rich coal owners. She is tough and liked to meddle in Zhao’s work and connections with aides, another person familiar with Sun said.

One of the closest associates of Sun is Li Hua, a former employee of Shaanxi Construction Engineering Group. A source told Caixin that Sun helped Li obtain business favors in construction projects that eventually brought benefits to the Zhao family. Li was detained by authorities to assist the investigation shortly after Zhao’s downfall, Caixin learned.

Zhao’s influence may also have helped his only daughter to earn a 20 million yuan ($2.9 million) bonus for her job in a local commercial bank’s deposit department, Caixin learned. A bank executive said the daughter’s income was legal compensation for winning deposit clients for the bank. An industry source said that without Zhao’s influence, an ordinary bank staff member would be unable to secure so much in deposits.

“Hiring relatives of senior officials is the easiest way for those (small) banks to gain access to government support and state-owned company deposits,” the source said.

Under industry rules, a bank staff member might be able to win a 20 million yuan bonus for securing more than 330 million yuan of deposits.

Zhao’s brother, Zhao Zhengfa, is an active figure in Shaanxi’s construction business. A local businessman said he was shocked by Zhao Zhengfa’s blatant manner in discussing business deals and profits with local officials in public at a banquet.

Zhao Zhengfa, Sun and Zhao Zhengyong’s daughter have all been placed under graft investigation, sources said. They couldn’t be reached for comment

‘White glove’

Investigations surrounding Zhao Zhengyong has shed light on how dirty officials could work with business aides to obtain profits and hide illegal deals.

Caixin learned from sources that several businessmen in Shaanxi’s oil and coal sectors have been probed since Zhao’s downfall for acting as Zhao’s “white glove,” a term referring to a person who acts as a middleman between businesses and politicians to facilitate secret deals.

They include He Jiuchang, former chairman of the state-owned Shaanxi Yanchang Petroleum (Group) Co. Ltd., and his predecessor Shen Hao; Yu Wei, Zhao’s childhood pal and chairman of chemical maker Shaanxi Haian Industry Co. Ltd.; and Yao Chunlei, an employee of Shaanxi Coal and Chemical Industry Group Co. who managed a Hainan luxury spa resort to entertain the Zhao family.

The list is still growing. Caixin learned that Hao Xiaochen, chairman of state-owned Shaanxi Gas Group Co. Ltd., and Wang Yong, chairman and founder of the privately owned Beston Investment Enterprise Co. Ltd., have also been targeted by investigators. Neither could be reached for comment.

Zhao, Wang and Hao are acquaintances for years, sources said. Hao spent decades in Shaanxi Gas and has been the head of the company since 2003. The company owns a majority stake in the Shenzhen-listed Shaanxi Provincial Natural Gas Co. Ltd., which is in charge of building and operating the province’s long-distance natural gas pipeline system.

A person with knowledge told Caixin that Wang accompanied Zhao in 2007 on a short-term training course at Harvard University. Wang paid the bills for Zhao’s daily life there, the person said.

Industry sources said that with assistance of Zhao and Hao, Wang’s Beston built a deep foothold in the natural gas industry in Shaanxi. In January, Wang said Beston, with businesses ranging from telecom networking to energy and tourism, paid more than 100 million yuan in taxes to the local government, suggesting a business with sales in the billions of yuan.

Business records indicate close ties between Shaanxi Gas and Beston. Hao appeared as a board member of one of Beston’s subsidiaries, and the two companies have jointly invested in several local natural gas projects since the late 2000s, part of local infrastructural development plans backed by Zhao.

To flatter Zhao, Hao once had Shaanxi Gas spend more than 4 million yuan building a tennis court, local officials told Caixin. Hao was ordered to assist the investigation around the Lunar New Year holiday in early February, multiple sources told Caixin.

Wang’s whereabouts are unclear. Some sources said he has been aiding the investigation while others said he fled to the U.S. An executive at Beston’s headquarters in Shaanxi declined a Caixin interview request and said the company was still operating normally.

Contact reporter Han Wei (weihan@caixin.com)

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