Monday 29 December 2008
Don’t Investigate Bosses as it’s Bad for Jobs, Police Told
A high-ranking national police officer has warned colleagues to be cautious in the use of detention and other tough measures in criminal investigations involving corporate executives, citing fear of potential social unrest caused by company closures, mainland media reported yesterday.
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Don’t Investigate Bosses as it’s Bad for Jobs, Police Told
Martin Zhou
25 December 2008
A high-ranking national police officer has warned colleagues to be cautious in the use of detention and other tough measures in criminal investigations involving corporate executives, citing fear of potential social unrest caused by company closures, mainland media reported yesterday.
The warning came a month after the detention of Wong Kwong-yu, billionaire owner of retail giant Gome Electrical Appliances Holdings, sent shock waves through the business community.
Observers say the remarks also reflect the government’s fear that uncertainty caused by criminal investigations of corporate suspects could add to the pressure on the already embattled economy.
The detention and arrest of executives should be the last resort for corporate crime investigators in their efforts to collect evidence, Assistant Minister of Public Security Zheng Shaodong told police chiefs in a national telephone conference.
“It’s intolerable to have business disrupted by improper law enforcement measures, which could even cause social unrest in some cases,” Mr. Zheng was quoted by Xinhua as saying.
“In enforcing the law, we have to take into account the social consequences on top of the legal consequences. The deepening of the economic crisis coupled with the inherent problems of our own economy means our operating environment has significantly changed.”
The central government has been busy in recent weeks containing a wave of strikes and protests by disgruntled workers following factory closures and mass lay-offs in export-oriented coastal areas such as Shanghai, Guangdong and Zhejiang , places seriously affected by a global economic slowdown.
Veteran Hong Kong-based China watcher Johnny Lau Yui-siu said: “At this crunch moment, the government would definitely not allow non-economic factors, such as criminal investigations into entrepreneurs, to take a further toll on the already fragile [business] confidence.
“It could mean more breathing space in the near future for those businesspeople already under a cloud.”
Most self-made elite entrepreneurs are believed to have broken or bent the law on their way to amassing fortunes, thanks to a lack of rule of law and tight control of the business sector by the central government.
Mr. Wong’s detention late last month on charges of stock price manipulation caused confusion, if not panic, at Gome, which employs more than 100,000 people in more than 500 stores around the country.
Although the central government later stressed that Mr. Wong’s alleged wrongdoings had nothing to do with Gome, officials seem to have learned a lesson and are not prepared to take any chances in the downturn.
The private sector also seems to have got the message.
“Wong’s situation is a clear-cut case of killing the chicken to scare the monkey,” said a Shanghai-based entrepreneur who employs thousands of workers.
“We understand the government’s priority on social stability instead of economic efficiency and will comply, or in other words, not cash in assets or lay off workers.
“We either choose to take sides with the authorities or risk being punished in one way or another, because everybody has his or her own skeleton in the closet and the government knows it all.”
Businessmen under scrutiny
Wong Kwong-yu Founder and chairman of Gome Electrical Appliances Holdings, the nation’s largest chain of consumer electronics stores. Under investigation since late November for alleged stock market manipulation.
Liu Genshan Shanghai highways tycoon, chairman of Shanghai Maosheng International Group. Under detention since July for allegedly swindling 4.3 billion yuan (HK$4.9 billion) in funds.
Wang Yi Former State Development Bank deputy governor. Under detention since June for suspected securities market irregularities.
Feng Yongming Heilongjiang furniture tycoon and de facto controller of Guangming Group Furniture. Was a member of the National People’s Congress until March sacking. Under detention since September for alleged embezzlement of state assets totalling 95 million yuan.
Shi Xue Ex-Dalian Securities chairman. Sentenced to death with two-year suspension by Hainan Higher People’s Court in September for corruption and embezzlement. Accused of stealing 264 million yuan during his tenure at the now-defunct Dalian Securities and Hainan Huayin International Trust and Investment Corporation.
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