FCAI News Highlights (November 22-28)

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Financial Corruption & Autocracy Initiative

November 28, 2014
Russia Puts ‘Putin’s Banker’ Sergei Pugachev on Interpol Wanted List
The Guardian
An exiled Russian oligarch who was once so close to the Kremlin he was known as “Putin’s banker” has been put on the Interpol wanted list by Moscow after falling out with his former associates. Sergei Pugachev – whose riches Forbes magazine estimated at more than $2bn (£1.3bn) at the peak of his wealth – fled Russia after claiming hostile interests were trying to seize his businesses. In recent weeks he has given interviews critical of President Vladimir Putin and the Russian political system. He is believed to be living in London.

Another Brother in Prominent Shanxi Family Is Target of Graft Investigation
Four months after an investigation into Ling Zhengce, the former vice chairman of the political consultative conference in the northern province of Shanxi, was announced by the Communist Party’s anti-graft watchdog, his younger brother, Ling Wancheng, has also been detained. In 2008, Ling Wancheng established Huijin Lifang, a private equity firm that he involved in many public listing deals in partnership with Shanxi businessmen. The company has pocketed more than 1.4 billion yuan in initial public offering deals since 2008. He is the youngest of the five Ling family siblings. As an inquiry targeting the second-oldest brother, Ling Zhengce expands, investigators say they have uncovered corruption linking the family, officials and businesses.

November 27, 2014
Xi Jinping Claims to Have Old Guard’s Backing for Anti-Graft Campaign
South China Morning Post
President Xi Jinping said yesterday that his administration’s anti-graft campaign had the “staunch backing” of retired party cadres, amid speculation that some former party leaders may not be prepared to fully support it. Citing a survey of retired officials this year by the Communist Party’s Organisation Department, Xi said “old comrades” generally approved of the party headquarters’ directions. “[You] have staunchly supported [our drives] to improve the party’s work style, and our determination to crack down on corruption,” Xi was quoted by state broadcaster as saying to a gathering of retired cadres in Beijing yesterday. “I hope all old comrades treasure [their] glorious past … and continue to be examples of the party’s glorious tradition and good practices.”

Prosecutors Pursue Former Officials of Chinalco, Shanxi
People’s Daily
Chinese prosecutors have indicted or identified several officials for arrest over their alleged corrupt practices, the top procuratorate announced on Thursday. The Supreme People’s Procuratorate (SPP) told the local Handan procuratorate, in north China’s Hebei Province, to file a prosecution case against the former vice president of state-owned aluminum producer Aluminum Corporation of China (Chinalco), Li Dongguang. The case will be heard by the Handan Intermediate People’s Court over his suspected acceptance of bribes, the SPP said in a statement. In another case, the provincial people’s procuratorate of north China’s Shanxi Province have decided to arrest Zhang Xiuping, former deputy secretary of the Communist Party of China’s (CPC) Jinzhong committee, over graft allegations.

Chinese VIPs Flee Vegas Baccarat Amid Crackdown at Home
Baccarat winnings on the Las Vegas Strip fell 36 percent to $97 million in October, echoing declines in Macau where an anti-corruption drive in China has crimped high-end play. Total casino revenue on the Strip fell 5.6 percent to $520 million last month with baccarat accounting for the largest share of the decline, according to data released yesterday by the Nevada Gaming Control Board. The numbers suggest the drop in spending by high-end Chinese card players that began in June in Macau has spilled over to the U.S., said Brent Pirosch, an analyst with CBRE in Las Vegas. Other markets, such as Singapore, have also seen declines in baccarat play, as probes by the Chinese government and a weak mainland economy impact business.

Ukraine in Anti-corruption Pledge as Parliament Meets
Ukrainian President Petro Poroshenko says he would like a foreigner to head the country’s new anti-corruption body. Mr. Poroshenko was addressing Ukraine’s parliament, as it convened for the first time since elections in October. He described “rampant corruption” as the “main cause of poverty in Ukraine.”

November 26, 2014
Putin’s Allies Channeled Billions to Ukraine Oligarch
In Russia, powerful friends helped him make a fortune. In the United States, officials want him extradited and put behind bars. In Austria, where he is currently free on bail of $155 million, authorities have yet to decide what to do with him. He is Dmitry Firtash, a former fireman and soldier. In little more than a decade, the Ukrainian went from obscurity to wealth and renown, largely by buying gas from Russia and selling it in his home country. His success was built on remarkable sweetheart deals brokered by associates of Russian leader Vladimir Putin, at immense cost to Russian taxpayers, a Reuters investigation shows.

Chinese Official Says West Is Hampering Anticorruption Efforts
Wall Street Journal
A Chinese diplomat said the lack of an extradition treaty with the U.S. and the prejudices of some Western officials are hampering China’s efforts to retrieve fugitives involved in corruption cases and their assets. Xu Hong, head of the foreign ministry department on treaties and laws, said Wednesday that all major countries have an interest in stopping the flight of corrupt officials and recovering ill-gotten assets. He said that President Xi and U.S. President Barack Obama at their summit in Beijing this month agreed enhance cooperation on fugitives. Still, Mr. Xu said China hopes Washington will do more to limit escape routes for Chinese criminal suspects including agreements under a United Nations convention on anticorruption that requires signatories to cooperate.

The Few, the Rich: Chinese Who Like Uncle Sam
Foreign Policy
Zhou’s success lies in his willingness to channel Beijing’s id, plainly stating feelings about Washington — as bully, competitor, and threat — that Beijing feels but can hardly address in public as the two nations’ economies grow increasingly interdependent. By contrast, in the elite Chinese circles that Rui once inhabited, vocal supporters of the United States are rather easy to find. Here, too, their view of the United States is directly related to the way they see China; Washington is a beacon of democracy struggling to carry on, while Beijing is an authoritarian regime trying to gain ground. But the elites’ view, like their income statements, are not shared by most in a country of about 1.3 billion citizens with a Gini coefficient that one estimate pegs at 0.74, signaling dangerously high levels of wealth inequality. Whether the elite motivation for a pro-U.S. slant is ideological or material, it’s all the same to those who choose to — or have to — stay behind here, and especially for the mass of humanity in this country who can’t afford to send their children overseas, place expensive air purifiers in every room, or go organic. For them, hostility towards the “one percent” in China naturally leads to subconscious antagonism towards the United States.

November 25, 2014
Canada Resident Caught Up in China Corruption Probe
Wall Street Journal
In January, John Jia traveled from Canada to Shanghai to attend a friend’s wedding, which he told his Instagram followers would be the “best wedding ever.” Eleven months later, the 21-year-old has yet to return home to Canada after being swept up in Beijing’s spreading anticorruption investigation, which has already implicated dozens of officials in China and reached into the operations of its state-run enterprises abroad. Mr. Jia told friends in a Facebook message in January that he has been unable to leave China after being placed on a “no fly/exit list” due to an investigation into his uncle, a “very powerful and high ranking politician.” That uncle is one of the Communist Party’s most senior figures: Zhou Yongkang, according to several people familiar with the matter. Mr. Zhou, a former domestic security chief who once ran China National Petroleum Corp., is being investigated for “serious disciplinary violations,” according to China’s state media.

The Anticorruption Campaign and Rising Suicides in China’s Officialdom
Asia Unbound
Depression or high pressure might be factors behind the deaths of many Chinese officials, but they cannot fully explain the increase in suicides by Chinese officials in recent years—as early as 2005, a survey of 200 middle-aged government officials found that nearly 50 percent of them were “mentally unhealthy.” Indeed, of the thirteen officials who killed themselves in 2014 and for whom official explanations of the cause of death were available, only five were said to have suffered from depression or high pressure, and at least six of them were associated with corruption-related investigations. An examination of the suicide cases clearly pinpoints the impact of the anticorruption campaign launched by the new leadership (which took over in November 2012). During the period 2011-12, a total of forty officials reportedly killed themselves. But since 2013, at least eighty-eight officials have done the same.

Beijing to Step Up Tax Evasion Campaign After US Multinational Firm Caught
South China Morning Post
A US multinational had admitted tax evasion and its mainland subsidiary had agreed to pay the central government 840 million yuan (HK$1.06 billion) in back taxes and interest, as well as more than 100 million yuan in additional taxes a year in the future, Xinhua reported on Sunday. “Because the amount involved is huge and the impact is enormous, this case has been called China’s first major anti-tax evasion case,” it said. “This case highlights the common tactic of multinationals to avoid tax, by transferring profits through various countries, taking advantage of differences in their tax rates.” The state news agency did not name the company, identified only as M, but said it was a “globally well-known company that has long been among the world’s 500 biggest firms,” headquartered in the US, and had established a wholly-owned foreign enterprise in Beijing in 1995. US software giant Microsoft did not reply to South China Morning Post inquiries about whether it was the company involved.

‘Putin’s Kleptocracy,’ by Karen Dawisha
New York Times
Her verdict is not merely that Putin’s boast of having built a potent, efficient state that fights for the little guy and against the venality of the powerful is bunk. Her bedrock claims are that the essential character of Putin’s system is colossal corruption and that he is a prime beneficiary. The thievery, she says, has made him fabulously rich, along with a coterie of trusted friends dating back to his days as a K.G.B. officer in Communist East Germany, then as first deputy mayor in 1990s St. Petersburg, then as head of the Federal Security Service.

November 24, 2014
Russia’s Project Moldova
Bloomberg View
Is Renato Usatii a Russian plot? The 36-year-old Moldovan, who made enough money in Russia to need a Rolls Royce Silver Wraith, came home in April to set up a political party, and has been running a glittering campaign for the parliamentary vote this coming Sunday. He’s now drawing support from 18 percent of the electorate, according to the latest unpublished poll by the U.S. National Democratic Institute, upending Moldova’s electoral arithmetic. Vlad Filat, the leader of the pro-European Liberal Democratic Party, says Usatii is a front for Russian secret services and criminal gangs — part of a multi-pronged Russian plan to get control over Ukraine’s westward neighbor. Russia’s aim, Filat says, is to get Moldova to renege on the trade and association agreement it has signed with the European Union and join Russia’s Eurasian Union instead. In other words, it’s the same strategy Russian President Vladimir Putin has followed in Ukraine, but with a political “green man” instead of soldiers and tanks.

Confused Survey Says Two Russian Energy Giants Top Google And Apple In Corporate Transparency
Transparency International ranks Russia’s two state-owned energy giants in the middle of the top 124 world companies for “transparency” because both have adopted detailed anti-corruption rules. The rankings do not ask whether these companies actually comply with their rules.

China, Russia, and the Sinatra Doctrine
Financial Times
For centuries European navies roamed the world’s seas – to explore, to trade, to establish empires and to wage war. So it will be quite a moment when the Chinese navy appears in the Mediterranean next spring, on joint exercises with the Russians. This plan to hold naval exercises was announced in Beijing last week, after a Russian-Chinese meeting devoted to military co-operation between the two countries. The Chinese will doubtless enjoy the symbolism of floating their boats in the traditional heartland of European civilisation. But, beyond symbolism, Russia and China are also making an important statement about world affairs. By staging joint exercises in the Mediterranean, the Chinese and Russians would send a deliberate message: if Nato can patrol near their frontiers, they too can patrol in Nato’s heartland.

Corruption Fighters Want More From World’s Strongest Nations
When the G20 summit, comprised of the world’s 20 strongest developed and emerging economies, was held this month in Brisbane, Australia, how to deal with worldwide corruption was a key focal point. But in the view of many working to curb corruption, a final communique put out by G20 nations fell short of expectations and failed to fully address systemic corruption problems. Ahead of the summit, Baker, along with the heads of Transparency International, the U.N. Convention Against Corruption Coalition, Oxfam, CARE, Amnesty International, and numerous other good-governance groups and NGOs, published an open a letter to the G20 calling on its member nations to act quickly. “You, the leaders of the world’s largest economies, must make the global financial system serve its citizens,” the letter said. “As long as there are places in the global financial system where illicit financial flows can find a safe harbor, and there are people to help hide these funds, there will be millions more around the world who will suffer.”

Xu Caihou Sought to Appeal to Jiang Zemin Before Downfall: Report
Disgraced People’s Liberation Army general Xu Caihou made a desperate attempt to meet former Chinese leader Jiang Zemin and plead for clemency before he was nabbed by anti-corruption authorities, reports Hong Kong’s Phoenix Weekly magazine. Some time before the party’s anti-graft authorities announced an official probe into Xu on March 15, it is alleged that the general made a special trip to Sanya in the southern island province of Hainan. Phoenix Weekly claims that while the trip was undertaken under the pretext of visiting “party elders,” Xu’s real aim was to beg for mercy from former party leader and Chinese president Jiang Zemin, who is understood to still wield enormous political clout despite stepping down as party general secretary more than ten years ago. The report states however that Xu failed to secure a meeting with Jiang, who was indeed on vacation in Hainan at the time. Though Jiang is said to be “saddened” by the downfall of several high-ranking officials from his generation, he remains strongly committed to the incumbent president and party chief Xi Jinping’s sweeping anti-graft campaign, the report added.

China Corruption Watchdog Launches Inspections, Eyes Sinopec
The inspectors, part of China’s Central Commission for Discipline Inspection (CCDI), will focus on senior figures within Sinopec who may be promoted to leadership roles. The official Xinhua news agency said the inspection would be complete within one month. The crackdown has so far netted Zhou Yongkang, former security chief and previously an oil industry man, and Jiang Jiemin, former head of top energy group China National Petroleum Corp, the parent of PetroChina Co Ltd. Earlier this month, China’s top prosecutor said a senior official of China National Offshore Oil Company (CNOOC) was under investigation suspected of having received bribes, the first executive from the offshore oil and gas firm embroiled by Beijing’s war on graft.

China’s Anti-Corruption Drive Could Boost State Sector
Financial Times
Until the central authorities make a serious attack on excess capacity in industries such as steel and stop saddling SOEs with excessively large labour forces to keep down unemployment, the state sector will remain a drag on China’s economic performance. But the anti-corruption campaign could act as an incentive for state sector bosses to smarten up their performance. As with much of China’s programme for reform, the pot has only just started boiling and is subject to serious constraints from the nature of the system. Creating a larger role for domestic and foreign private interests and reducing the monopoly sectors controlled by SOEs does not fit with Xi attachment to the big Party State. So anti-corruption offers an indirect line of attack – albeit with the danger of scaring managers into inactivity.

US Aids in Return of Economic Fugitives
People’s Daily
The latest judicial cooperation between China and the United States to nab economic fugitives has made major progress, with more than a dozen suspects brought back from the US to face trial, a senior official from the Ministry of Public Security said. Authorities have on hand “a priority list of alleged economic fugitives, including corrupt officials who are still at large in the US, and have requested the US to provide assistance for investigations,” Liu said. If there is solid evidence that confirms a transfer of ill-gotten funds, they will “take immediate measures to freeze the suspects’ assets including housing, bank savings and other investments in the US and criminally punish them, then issue deportation orders for them,” Liu said. Judicial officials from China and the US will meet in August or September every year to discuss their major concerns, including drug trafficking, weapons smuggling, cybercrimes and the hunt for corrupt officials and recovery of their assets, said Yang Shaowen, deputy director of the ministry’s international cooperation department. The Ministry of Public Security is also planning to set up an annual high-level meeting with US judicial authorities, including the US Department of Homeland Security, to apprehend more Chinese fugitives, he said.

November 23, 2014
Is Wall Street Corruption Endemic?
USA Today There will come a time in the not-too-distant future when Wall Street banks won’t be regularly chastised for ripping off customers, defrauding the federal and state governments, facilitating tax evasion, laundering money for sworn enemies of the United States, and manipulating bond, interest rate, foreign-exchange, and energy markets. When this time comes, however, it shouldn’t be interpreted as a sign that things have changed. The reality is that corruption is endemic on Wall Street.

Billionaire CEO Pivots to Asia Amid Gunvor’s Russian Retreat
Gunvor Group Ltd. is looking to Asia for the next leg of its expansion as the company loosens the Russian ties that made it the world’s fifth-biggest oil trader. Chief Operating and Investment Officer Jerome Schurink has relocated temporarily from Geneva to Singapore to oversee the firm’s growth in a region that accounts for nearly a third of Gunvor’s revenue and trading volumes. The company is also looking for acquisitions in Asia after putting most of its physical assets in Russia up for sale in October, seven months after the Swedish billionaire agreed to buy the 44 percent stake of fellow Gunvor co-founder Gennady Timchenko. Timchenko, a Russian sanctioned by the U.S. for his close ties to President Vladimir Putin, founded what is now Gunvor with Tornqvist in the late 1990s.

Russia Says to Tighten Ties with Georgian Breakaway Region of Abkhazia
Vladimir Putin and the leader of Georgia’s breakaway region of Abkhazia will sign a strategic partnership agreement on Monday, the Kremlin said. Abkhazia relies on financial and political support from Moscow since Russia recognised it as independent along with South Ossetia following a five-day war with Tbilisi in 2008. Putin will meet Abkhazia’s Raul Khadzhimba in Russia’s Black Sea resort of Sochi on Monday to sign an “alliance and strategic partnership” agreement, the Kremlin said in a statement.

Russia Unnerves its Neighbors
Washington Post (Map)
Provocative Russian behavior this year has set off alarm bells across Europe, especially for countries like Finland that are not part of the NATO alliance.

November 22, 2014
How the United States Can Counter the Ambitions of Russia and China
Washington Post
Yes, the United States maintains key interests in the Middle East: Israel’s security, nuclear nonproliferation, stable energy supplies and counterterrorism. But we cannot lose sight of the most significant challenge to American power and leadership in a quarter-century: China and Russia acting like revisionist powers, trying to undermine key elements of the existing international order, including territorial boundaries and long-standing security partnerships. If this challenge is left unchecked, the world could again be divided into spheres of influence, with an ever-present risk of conflict among the major powers.

China Reacts to Massive Corruption Tally of a Fallen General
Foreign Policy
When China’s Ministry of Defense announced on Oct. 28 that the investigation into former Gen. Xu Caihou for alleged corruption had concluded and his case had been transferred to prosecutors, the ministry declared the bribes received by Xu and his family members as tebie juda, or “extremely huge.” This week, Hong Kong’s Phoenix Weekly and the Financial Times helped fill in the picture. Both had reports that cited people close to the investigation as saying investigators discovered Xu had one ton of cash (U.S. dollars, euros, and renminbi) in the basement of his 21,500-square-foot Beijing mansion as well as jade, emeralds, calligraphy, and paintings. The FT said the cash was neatly stacked in boxes and that each was conveniently inscribed with the name of the solider who had offered the cash in exchange for a promotion. Phoenix Weekly, published by Hong Kong broadcaster Phoenix Television, said in its Nov. 20 report that it took 10 military trucks to haul the loot away; the FT said it was a dozen trucks.

News Source : FCAI News Highlights (November 22-28)
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