EastSouthWestNorth: The Case of Liu Zhihua

The Case of Liu Zhihua

Here is the official statement on the case of Liu Zhihua:

(People's Daily via Xinhua) Vice mayor of Beijing dismissed for corruption. June 12, 2006.

Liu Zhihua, vice mayor of Beijing, was removed from his post for corruption and dissoluteness on Sunday.

The 28th session of the Standing Committee of the Beijing Municipal People's Congress decided on Sunday to dismiss Liu, as the committee has verified the facts of his wrongdoings, which are found to be quite serious and have baneful social influence. Considering Liu has violated the discipline of the Communist Party of China (CPC) and the government, the Central Commission for Discipline Inspection of the CPC and the Ministry of Supervision have put Liu's case on file for investigation and prosecution.

This is so obscure that even China Daily is puzzled. What exactly is 'dissoluteness'? This is certainly not in most people's regular vocabulary. So there was a re-write by the unnamed China Daily editor and you will have to take the measure the degree of snarkiness yourself.

(China Daily) Beijing Vice Mayor stripped of post for corruption. By Xiao Guo. June 11, 2006.

Vice Mayor of Beijing Municipal Government Liu Zhihua is stripped of his post due to 'corruption and degeneration', state media reported Sunday. The decision was made at a meeting during the Standing Committee of 12th Beijing Municipal People's Congress, Xinhua News Agency reported. But Xinhua fails to elaborate on Liu's corrupt way of life.

"Evidence of Liu's grave mistakes are very clear and certain so that he should be dismissed from his position, " Xinhua said. "Because Liu's behavior is against the Party and political discipline, the Discipline Inspection of central government will have him prosecuted." said Xinhua.

No comment from Liu is available.

Here, "dissoluteness" has been replaced by "degeneration." Now that clear things up, right? By the way, I love the last line: "No comment from Liu is available." Oh, and that "But Xinhua fails to elaborate on Liu's corrupt way of life" is such a gem!

What exactly did Liu Zhihua do that was degenerate? There is the usual thing about political struggles, like stabbing your comrades in the back instead of serving the people.

(New York Times) China, Citing Corruption, Fires Olympic Building Chief. Joseph Kahn. June 12, 2006.

The Beijing city government was upended in the mid-1990's when its powerful former party chief, Chen Xitong, and another top city official were purged in one of China's biggest corruption scandals. Like many such crackdowns, the purge and subsequent prosecution of Mr. Chen had its roots in struggles for political power.

It was not immediately clear if Mr. Liu's case involved political maneuvering. But it is often assumed that corruption cases are not exposed publicly unless the individual accused has fallen from grace. ...

Mr. Liu, 57, has not yet been charged with a crime. The allegations against him were not detailed. But the New China News Agency said in a dispatch that the city's governing council had concluded that Mr. Liu was "corrupt and degenerate" and that "the reality of his mistakes is clear and the evidence incontrovertible."

Well, we all know that the most complete, open and timely source of information in China is the Internet, especially the forums. Here is a screen capture from Aside of the comments on the news report:

Oh, golly, we forgot that the rules for forum comments have been changed in China recently -- comments are no longer permitted for sensitive news items anymore. So there are presently zero comments on this news report, although we cannot preclude the possibility that the people were truly not interested (note: You will have to take the measure of snark yourself).

Alternately, we can go to overseas Chinese media where anything and everything goes. Here is Hong Kong's Wen Hui Po (which is known to be pro-Beijing):

According to an informed source, Li Zhihua was dismissed because 'the masses reported that he was informed in 'the exchange of power with sex' (權色交易).

... Observers point out further that when the official statement refers to "corruption and degeneration," it usually means that the individual was involved in activities such as keeping mistresses (note: the degeneration portion). Furthermore, there must be economic issues (note: the corruption portion).

So, dissoluteness means 'sex.' We have certainly learned something today and we will make sure that we remember.

Here is the economic bit from The Guardian (Beijing Olympic official sacked over corruption, Jonathan Watts, June 13, 2006):

Liu Zhihua, who oversaw the construction of the sporting venues that will be used for the games, is under investigation for allegedly taking more than 10m yuan (£670,000) from developers, according to Hong Kong's Oriental Daily.

Yes, but we really want to know about the salacious details about the sex bit. Surprisingly, for that, you will have to reach for The Times (Sacked Olympics chief had 'pleasure palace' full of concubines, Oliver August, June 12, 2006):

Details of Liu Zhihua’s colourful private life emerged today after he was sacked from his post when a foreign businessman reported him for extorting a bribe. ...

In the resort town of Kuangou, an hour’s drive north of the Olympic Village, police have sealed off Mr Liu’s multi-story development.

An unknown number of young woman, as well as waiting staff, are said to be confined to rooms there, waiting to be interviewed by investigators from the central discipline inspection commission, a shadowy anti-corruption agency inside the Communist Party.

“Liu has more than one mistress,” wrote the Wen Hui Bao newspaper in Hong Kong. “He has a secret pleasure palace for himself to have fun.” ...

Mr Liu’s palace is part of a resort complex in the hills north of the capital, close to the Great Wall. The architecture mixes classical Chinese courtyard layouts with modern glass and steel structures.

Near by is a conference centre with 150 rooms where domestic and foreign companies regularly conduct business meetings. A sports club on the same piece of land offers tennis courts, saunas and private venues for karaoke. The interior of the buildings aims to emulate high-end hotels. The carpets are thick, the sofas gilded and the chandeliers bedecked with fake gemstones. ...

Websites where readers can comment on news articles about Mr Liu were shut down. Nonetheless, chat rooms buzzed with allegations that China was certain to win at least one gold medal at the 2008 Games - for graft.

Someone calling themselves Sleepy Hippo wrote: “If they tell us Liu was leading a 'dissolute life' they should give us an explanation what that means. Then the other officials can compare it to their lives.”

The chat rooms were also filled with allegations that the rot must be going higher than Mr Liu. In China, it is often the deputies who are punished in corruption cases while the top cadres are exonerated. “Again it is a vice-mayor? Why not punish No 1?” wrote Used To Be Intelligent.

In the version of dissoluteness according to Ming Pao:

[in translation]

... According to information, the "dissoluteness" of Liu Zhihua was "sex not money." Since he was in charge of construction, he had a lot of contacts with Beijing real estate developers, some of whom tried to please him by introducing "intimate friends" and offering him luxury villas in suburban Beijing for rendezvous purposes. According to reliable sources, Liu Zhihua fell because one of the mistresses reported him. The villa complex where Li Zhihua was reported to use frequently has been under lockdown. According to information obtained by the reporter, the so-called palace is actually a place for recreation by the senior officials in Beijing city, including resting places, hostels, training centers, etc.

The 'lustiness' of Liu Zhihua is well-known among the Beijing media. A pretty female reporter working the "Olympics" story said that during many interviews, Liu Zhihua would look at her with 'lust' in his eyes and then she would become 'uncomfortable all over her.' But since he was a city leader, she did not imgaine the worse. Other reporters said that Liu was extra 'nice and close' to female reporters, and sometimes placed his hand on their shoulders as if he were an elder.

But yesterday, some Beijing people are doubting the charge of "dissoluteness." They said that the Chinese Communists have not used such a simple charge against a corrupt senior official. After all, "lifestyle problems" are prevalent among Chinese Communist officials and it would have to truly appalling in order for this to be brought up as the sole issue. These people suspect that the Li Zhihua incident is connected to the political situation in Beijing (namely, a fight with Beijing mayor Wang Qishan).

My conclusion: If you don't satisfy people's desire to know, you concede the territory to speculations and it becomes a frustating and quite hopeless rear-guard action to chase after various kinds of rumors. The Chinese authorities as well as the rest of us could have been spared all this if only they would lay it all out in an open and honest way, and it will be so much more effective and efficient.

Follow-up reports:

(FT.com) China’s media in unusual call for transparency. By Richard McGregor. June 14, 2006.

The state-run Chinese media have challenged the authorities to explain the weekend sacking of one of Beijing’s top officials for corruption, saying such information was needed to retain public confidence in the government. The unusual call for greater transparency about a sensitive case follows the abrupt removal from office at the weekend of Liu Zhihua, the Beijing vice-mayor with responsibility for Olympics construction and land in the city.

Xinhua, the state news agency, said in a brief statement that Mr Liu was relieved of his position because of his “corrupt and degenerate ways” in the face of “incontrovertible” evidence received by the authorities.

In line with procedures for handling official corruption, Mr Liu’s case will be investigated and judged by the Communist party’s anti-graft body in secret, before any formal criminal proceedings are instituted. However, sections of the media have challenged the party’s closed disciplinary procedures, saying that the corruption of an official as senior as Mr Liu demands a more open process.

The People’s Daily Online, an arm of the daily newspaper that acts as the party’s mouthpiece, said it was impossible that Mr Liu’s dissolute life had only come to light in recent days. “We should at least have a deep think about some problems: whether the supervision of his power had run out of control, and whether it had been supervised at all,” the paper’s online edition said.

The China Business Times said officials like Mr Liu had huge power over the approval process for large developments in the city, mixing “the corruption of business with the corruption of power”. Mr Liu’s control over land made him a pivotal figure in the city government as the release and sale of real estate has become a significant source of revenue for local authorities.

In readiness for the 2008 Olympics the city has overseen the demolition of large areas and rapid construction of residential and commercial high-rises in their place. One of the most hotly contested sites under Mr Liu’s stewardship has been the Morgan Centre, a prime 39,000 sq m site adjacent to several Olympic venues now under the control of Beijing Capital Land, a city government-controlled developer. The $1bn development was originally backed by a foreign joint venture involving AC Morgan Investment, a privately held US investment company.

Prior to his detention Mr Liu had styled himself as a humble civil servant, winning coverage in the media for choosing a Volkswagen Santana car rather than the more expensive Audi favoured by top officials. Mr Liu, 57, vowed last year that officials responsible for building Olympics venues would be “honest in performing their official duties and...carry this principle through to the end”.

Reports in Hong Kong in recent days said that Mr Liu’s “dissolute” lifestyle included maintenance of a mistress, something which is commonly highlighted in Chinese corruption cases.

(DPA) Corruption scandal in Beijing Olympic construction widens. June 22, 2006.

A corruption scandal surrounding the construction of venues for the 2008 Beijing Olympics has widened with the arrest of the chairman of Capital Group, the largest construction and services company in the Chinese capital, the company and press reports said Thursday.

The arrest on Saturday of Liu Xiaoguang, chairman of Beijing Capital Group, followed the June 11 arrest of the sacked Beijing vice-mayor, Liu Zhihua. Liu Xiaoguang, 51, has 'cooperated with the relevant authorities regarding the investigation' of Liu Zhihua, the company said in a statement to the Shanghai Stock Exchange Thursday.

The South China Morning Post, which is based in Hong Kong, said the probe revolved in part around a valuable piece of land adjacent to the Olympic Stadium. The Hong Kong Stock Exchange suspended dealings in the shares of Capital Land, a subsidiary of Capital Group, on Wednesday. No details have been released of the charges the two men - who are not related - could face, although Beijing municipal government officials said earlier this week that Liu Zhihua had been arrested for 'corruption and dissoluteness.'

The South China Morning Post reported Liu Zhihua had been arrested for involvement in requisitioning the Beijing Morgan Centre, a large property project next to the stadium, from its original developer, Beijing Morgan Investment, and selling it through public tender to Capital Land last month. Quoting unnamed sources it said Capital Land had paid more than other bidders to win the project, which was taken from Morgan Investment for defaulting on land grant payments to the government. Morgan Investment's Chairman Lin Qiang is reported to be suing the Beijing government. Capital Group falls under the Beijing municipal government. It is active in municipal infrastructure construction, real estate, finance, industrial technology, commerce and trade, tourism and hotels.

The group's five holding companies are listed on domestic and foreign stock markets, and the group had total assets of 45.2 billion yuan (5.57 billion dollars) at the end of 2004. Net assets were put at 11 billion yuan.

(Reuters) China's Hu orders sacking of vice mayor-source. By Benjamin Kang Lim. June 22, 2006.

Chinese President Hu Jintao ordered the sacking of a vice mayor at a secret meeting to prevent political patrons from protecting him, a government source said on Thursday, in a sign Hu was determined to fight graft. But many analysts said the fall of Beijing Vice Mayor Liu Zhihua this month was as much about political posturing by Hu ahead of a leadership reshuffle at a crucial five-yearly meeting of the Communist Party next year as it was about corruption.

Liu, 57, responsible for urban planning and awarding $40 billion worth of projects to upgrade infrastructure ahead of the 2008 Olympic Games, was replaced by another vice mayor who rose through the Communist Youth League, Hu's power base. "Hu Jintao personally took charge of the case. He presided over a three-day meeting and decided to take out Liu Zhihua," the source who has close ties to Hu's camp told Reuters.

Liu is accused of corruption and bad morals and has been sacked from the Beijing People's Congress, or city council, the official Xinhua news agency said last week without elaborating. "Beijing (government leaders) did not know about it beforehand to prevent (them from) protecting him," said the source who spoke on condition of anonymity. But the source dismissed speculation Hu was jockeying for power against his predecessor, Jiang Zemin, 79, who is keen to have a say in the upcoming leadership reshuffle. Jiang also still wields some influence through proteges in the party's nine-member decision-making Politburo Standing Committee. The cabinet spokesman's office and the Beijing city government, reached by telephone, had no immediate comment.

The scandal has unsettled China's real estate industry, which has been hit by a series of government measures to curb speculation. Beijing Capital Co., a property affiliate of conglomerate Capital Group, said in a statement in the Shanghai Securities News on Thursday that group general manager Liu Xiaoguang was cooperating with a government investigation surrounding the disgraced vice mayor. "At present, company operations are normal," the announcement said without giving details. Capital Group is one of China's biggest real estate developers with assets totalling 45.2 billion yuan ($5.65 billion) as of the end of 2004. It was unclear if the two Lius were related.

The party's graft busters took Liu Xiaoguang away for questioning from the Beijing international airport on June 16, the online edition of China Securities Journal said. A company spokesman has denied the 51-year-old Liu Xiaoguang was involved in any irregularities or crimes.

Shares in Beijing Capital, which were suspended on Wednesday as news of the incident leaked out, were down 4.5 percent at 4.72 yuan in Shanghai at 0530 GMT. Shares in Shenzhen-listed Super Shine Co., which is teaming up with the group to develop a residential and commercial property project in Beijing's Olympic Centre, had tumbled 5.1 percent to 5.38 yuan. Capital Group is also the parent of Hong Kong-listed Beijing Capital Land, whose shares remained suspended on Thursday. The group has interests in real estate, water and gas supply, fund management, trading and electronics.

(SCMP) The rise and fall of a career cadre. By Mark O'Neill. June 25, 2006.

The scandal that claimed a vice-mayor of Beijing spread last week to the property sector, with the chairman of one of the city's top developers being interrogated as part of a widening probe, which threatens to cast a shadow over the Olympics.

Beijing Capital Land (BCL), the mainland's sixth-largest real estate firm, said on Wednesday that its chairman, Liu Xiaoguang , was being questioned in connection with the investigation into vice-mayor Liu Zhihua , who was detained on June 9.

According to sources in Beijing, Mr Liu is one of several property tycoons being questioned as part of the case. Shares of BCL on the Shanghai stock market were suspended on Wednesday and fell 2.23 per cent when they resumed trading on Thursday.

The news of the questioning of Mr Liu, stopped at Beijing airport on June 16, gave some clues as to the real reasons behind the dismissal of his namesake.

Many people believe that it was related to land deals for which he had a major responsibility as the vice-mayor responsible for property development and construction.

Industry sources said that the focus of the investigation of Liu Xiaoguang concerned the auction at the end of May of the Morgan Centre, a half-finished building on a prime site close to an Olympic venue in Beijing's north.

Work on the project stopped in October 2003 when the developer ran out of money and the city government put the site up for auction, against the objections of the developer.

Beijing Capital Land outbid five other companies for the site with an offer of 1.761 billion yuan for the property, more than 200 million higher than the second-highest bid.

The size of the bid surprised many in the industry, leading some to suspect something irregular.

BCL is a powerful company with interests in infrastructure, tourism, hotel and industry as well as property and a land bank of 4 million square metres, of which more than 90 per cent is in the capital, giving it the title of "Beijing's Land King".

Officially, not much has been said about the reasons for the vice-mayor's arrest. In a brief statement on June 11, Xinhua said that Liu Zhihua had been fired "because of his corrupt and degenerate ways" in the face of incontrovertible evidence received by the authorities. Since then, the mainland media has given no more information about the most high-level dismissal since the arrest of Beijing party chief Chen Xitong in April 1995.

In July 1998, Chen was sentenced to 16 years in jail for embezzling US$2.2 billion of public funds during his time as party chief from 1987 until 1995. At the court he pleaded innocent and continues to deny any wrongdoing.

The official silence about Liu Zhihua is expected, but has angered many people. The rise and fall of such a powerful official in the Chinese city hosting the Olympics for the first time cannot be explained in a single paragraph.

Born in Panjin , Liaoning province , in 1949, Liu graduated from university with a degree in economics and served in the Beijing and National Labour Bureaus, in the Western District of Beijing and was appointed vice-mayor of Beijing in 1999, ranking fourth among the nine vice-mayors.

His was a particularly important portfolio - responsible for construction, property redevelopment, sports and public transport - making him a key player in construction projects for the Beijing Olympics.

Since 1999, vast areas of the city have been demolished and replaced with residential and commercial high-rise property, with prices more than doubling during that time. This has made real estate one of the most lucrative businesses and opened up officials who control the sale of land and permits to bribes and kickbacks that run into the millions of dollars.

The Beijing Organising Committee said that Liu held no position with it and that his arrest would not affect the preparations. IOC spokeswoman Giselle Davies said the update it had received from Beijing was that the charges were not Olympic-related.

The official secrecy has Beijing residents speculating on reasons for the arrest. They believe the charge of degeneracy is not unusual for high officials. Liu is said to have several mistresses, some introduced by developers competing for his favour. Woman reporters who have interviewed him say that his salacious behaviour and body language made them feel uneasy.

On weekends, he used a pleasure palace called Xanadu in a high-security compound in Huairou county outside the capital which is full of luxury villas belonging to senior Communist Party officials and rich business figures. Domestic staff and several beautiful young women at his villa have been ordered to stay at home to help the police investigation.

In this, Liu's life was similar to that of Chen, who had a luxury villa in western Beijing with a mirror on the bedroom ceiling where he took his mistress, the sales manager at a city hotel, at weekends.

But this behaviour is not sufficient cause for dismissal, especially at such a sensitive moment two years ahead of the Olympics.

Four other hypotheses are possible.

The first - and most plausible - is that he fell foul of the fierce competition for land. The party-controlled Wen Wei Po newspaper in Hong Kong said that a disgruntled businessman had alerted the authorities to Liu's corruption. Most likely, he had paid a bribe in return for land, had not received it and, in anger, reported Liu.

The second is that he was a scapegoat for soaring house prices in Beijing, which along with Shanghai, has seen the fastest growth over the past five years, a bonanza for the city government and property developers but a disaster for people on low and medium incomes who are forced to take out increasingly high mortgages.

The third concerns possible poor construction quality at Olympic venues, which may even have required the demolition and rebuilding of some. Given the national prestige at stake for the Games, that would be sufficient cause for the government to fire Liu.

The fourth is that he was the victim of a power struggle ahead of a leadership reshuffle at a five-yearly meeting of the Communist Party next year.

Reuters reported last week that party chief Hu Jintao himself ordered the sacking at a secret meeting to prevent Liu's political patrons from protecting him.

Meanwhile, in his cell, Chen Xitong remains defiant. He has refused an offer of medical parole, insisting he be released unconditionally saying he is innocent and not ill. "I will die before I admit my guilt. There are political factors that have consigned me to death. I will raise protests and appeals," he has told investigators.

His supporters say that he was the loser in a power struggle with then party chief Jiang Zemin , whose authority he challenged.

Then, as now, control over land for property development was the most lucrative source of patronage.

(Apple Daily via ChineseNewsNet) July 1, 2006.

More news from the Roadside News Agency. The origins of Liu Zhihua's problem were tied to Beijing's largest incomplete building: the AC Morgan Center. In 2002, the Morgan Center announced that the AC Morgan Company (USA) intended to build its Asian headquarters. AC Morgan is unrelated to JP Morgan or Morgan Stanley; actually, it is a Chinese company from Henan province. Originally, the AC Morgan was supposed to consist of one hotel, one office building and three residential apartment buildings. In October 2003, construction was halted due to lack of funds. In January 2006, the Beijing city government requisitioned the land and sold it off at 1.76 billion RMB by auction.

So the rumor is that Liu Zhihua 'crossed' certain people in the AC Morgan affair. Liu was lured to have a tryst with a woman during which the entire proceedings were secretly taped and then shipped to the Central Disciplinary Committee. The tape was said to be crisp and high-quality, and this is the reason why the Central Disciplinary Committee said that it possessed "introvertible" evidence about the "dissoluteness" of Liu Zhihua.

(SCMP) Corridors of power buzzing with sex scandal. By Wang Xiangwei. July 3, 2006.

Mixing sex and politics brews great scandals and mainland leaders have recently had plenty of them on their hands. But none has set the corridors of power in Beijing more abuzz than the scandal that led to the sacking of vice-mayor Liu Zhihua .

Xinhua's statement announcing Mr Liu's downfall on June 11 was very brief, merely saying that he was sacked for "living a decadent life" because of the irrefutable evidence received by the authorities. But overseas media and mainland analysts did not seem to buy the story, suggesting that there were other, deeper reasons.

What Xinhua failed to mention was that the irrefutable evidence was contained in six hours of videotape of Mr Liu's sex romps with his long-time mistress and other women in various hotel rooms.

The videotapes were delivered directly to the Central Commission for Disciplinary Inspection, the Communist Party's top anti-graft body, which in turn forwarded them to the mainland's top leaders.

One story making the rounds of the corridors of power was that the leaders were unanimous in their decision to sack Mr Liu immediately after suffering the humiliation of watching the entire tape.

As with every great sex scandal involving senior government officials, politics also plays an important role.

In Mr Liu's case, most senior central government and Beijing municipal government officials were said to have learned of his arrest only after the decision was made, leaving no room for his political allies to make last-minute pleas on his behalf - with good reason. Before his arrest, Mr Liu had been shortlisted to become the capital city's top anti-graft official whose power was to investigate other officials' corruption and sex scandals.

Some overseas media have hinted that Mr Liu's fall was the result of political jockeying.

Mr Liu was the Beijing municipal government's secretary-general - the mainland term for the title of chief of staff - to Jia Qinglin who was then the city's mayor. Mr Liu was later promoted as the city's vice-mayor in charge of urban development and construction when Mr Jia was the party secretary, before his rise to China's fourth most powerful official as chairman of the Chinese People's Political Consultative Conference.

Many mainland analysts have wondered whether Mr Liu's sacking was a message intended for Mr Jia, a close ally of former president Jiang Zemin , in the wider context of the leadership reshuffle scheduled for next year. In the realm of the Chinese-style political manoeuvrings wrapped under the utmost secrecy, your guess is as good as mine.