SHANGHAI, China—This glittering city that showcases China's meteoric economic rise has become engulfed in a major graft investigation that gets saucier by the day.
There are reports of videotaped love trysts, payments to mistresses and a series of no-questions-asked loans to new development companies with names such as the Everlasting Virtue Co.
But what makes Shanghai's huge pension-fund scandal more than a garden-variety graft probe is the way it's spreading, with tentacles to figures in Beijing.
Moreover, the investigation leads some analysts to say that President Hu Jintao is using the scandal to sideline rivals and define China's future direction. The low-key Hu, now in his fourth year of power, seeks to strengthen his grip in the run-up to a key Communist Party congress next year.
The Shanghai scandal gives him an opportunity to battle two enemies: widespread corruption, which threatens to corrode the all-powerful party, and potential rivals for his job.
It may be little coincidence that Hu and his aides are using a battering ram of anti-corruption measures against Shanghai, home to a clique of loyalists to former paramount leader Jiang Zemin, who still wields limited clout behind the scenes.
The first salvo in the scandal came Sept. 25, when top party leaders sacked Chen Liangyu as Shanghai's party secretary and detained him, accusing him of siphoning hundreds of millions of dollars from the city's pension fund. Chen—a protege of Jiang's and part of the 24-member Politburo, the Communist Party's powerful decision-making body—was the highest-level official to be sacked in China since the mid-1990s. His removal was a bombshell.
"The repercussions were so strong. There is one word that can characterize our feelings: shock," said Tang Xianxing, a political scientist at Fudan University.
Jiang had installed Chen in 2002 as property prices soared and investment poured in. Under the now-disgraced boss, Shanghai had fostered an image of efficiency and success.
The city in quick order won the right to host the 2010 World Expo and completed the world's fastest rail service, a magnetic levitation train. Laborers began to toil on a 101-story skyscraper and built Shanghai's Formula One car-racing circuit.
But as the scandal involving the city's $1.25 billion pension fund began to unfold and some 100 or so auditors from Beijing set up camp in a Nordic-style villa to comb city records, developers and party officials trembled in fear.
News leaks alleged that the pension fund had squandered hundreds of millions of dollars in risky loans to developers tied to Chen and his underlings in a web of friendship, love and family connections, and cronyism.
So far, the city's labor and social security chief, its district government and the deputy secretary general of the municipal party committee have been detained.
Some 20 judges and 50 major developers and businessmen have been questioned, news reports have said, including Yu Zhifei, who brought Formula One car racing to Shanghai, and Zhang Rongkun, a developer who obtained loans from the pension fund that helped make him China's 16th richest man in a Forbes magazine rating.
The scandal reached Beijing in mid-October with the removal of Qiu Xiaohua, the nation's chief statistician, who's said to have received $6.3 million from a pension fund manager to give to his mistress. A report on China's biggest online portal, Sina.com, charged that videotapes had captured two detained officials in compromising trysts.
As the scandal spreads, so does the prospect of snowballing graft investigations.
"Right now, there are big corruption cases in Chongqing, Sichuan province, Guangdong province and Shanghai, and all the cases are connected to high-level officials in Beijing," said Tang, the Fudan University scholar.
But scholars said they expected tighter control on further probes as leaders limited any possibility that the spreading taint might undermine their authority.
"I don't think this campaign will keep on forever," Tang said.
Corruption is a weak flank for communist rulers. Statistics from the Supreme People's Court show that over the past five years, 83,308 officials have been prosecuted in 99,306 cases of graft and bribery, the state-run Xinhua News Agency said.
The party turns over only some of its members to the judiciary for punishment, however, preferring to deal with corruption behind closed doors.
The reason is that if prosecutors and the news media were to conduct their own investigations, academics said, it might implicate people close to Hu and undercut the legitimacy of the party, which has ruled China without opposition since 1949.
Under party rules, so-called "discipline and inspection" committees have nearly unlimited powers to hold officials indefinitely, isolating them and preventing them from collaborating with others on a defense.
"They disappear until the party decides what to do with them," said Jerome A. Cohen, a professor at New York University School of Law and an expert on China's legal procedures.
In the past decade, the party has said that it's instituted a series of measures to require officials to declare their assets. The procedures are routinely flouted.
"The policy isn't implemented strictly," said Yang Hongshan, a professor in the School of Public Administration at People's University of China. "An official can give his money to many of his friends or relatives to deposit in the bank."
(c) 2006, McClatchy-Tribune Information Services.
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