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Story of Chinese ‘princeling’ shows limits of corruption campaign

This image of Zhao Jin, a connected Chinese developer who has been detained in a corruption investigation, is the only one McClatchy was able to obtain in court documents filed as part of a lawsuit against Zhao's company. Zhao, son of a Communist Party leader, allegedly scammed thousands of property owners at his developments in Tianjin, Nanjing, Jinan and other cities in China. Zhao was detained last year in a corruption probe that has also swept up at least six Communist Party officials, including Zhao's father, Zhao Shaolin.
This image of Zhao Jin, a connected Chinese developer who has been detained in a corruption investigation, is the only one McClatchy was able to obtain in court documents filed as part of a lawsuit against Zhao's company. Zhao, son of a Communist Party leader, allegedly scammed thousands of property owners at his developments in Tianjin, Nanjing, Jinan and other cities in China. Zhao was detained last year in a corruption probe that has also swept up at least six Communist Party officials, including Zhao's father, Zhao Shaolin. Shandon Quehua Law Firm

When Guo Li sued the developer of her apartment complex for real estate fraud in 2010, she said she had no idea he was a “princeling” – the offspring of a Communist Party official. By the time she learned it, it was too late.

After she filed her suit, according to Guo and her family, her apartment repeatedly was vandalized. She lost her job. Police officers beat her as they confiscated her beloved golden retriever. For resisting officers, a court in Tianjin – a city of 14 million people east of Beijing – sent her to a detention center for a year.

Only now is Guo receiving some partial vindication, as China’s crackdown on official corruption is snatching up people like Zhao Jin, the founder of the company that developed her building and who used the protection he had as the son of a party leader to carry out massive fraud.

Chinese authorities detained Zhao a year ago. China’s anti-corruption agency also has swept up his father, retired provincial party leader Zhao Shaolin, as well as officials in at least three cities where Zhao allegedly scammed thousands of property owners.

My phone is tapped. My email is being monitored.”

Shopkeeper who bought from Zhao Jin

But Zhao’s arrest has done little to bring justice to Guo – or Zhao’s other apparent victims. Scores of homebuyers and small business owners say they lost payments on apartments or retail shops that Zhao never completed. Many are now living in unmarketable apartments in deteriorating buildings that have become dens for drug dealing and prostitution.

According to Guo, numerous local officials who enabled Zhao’s misdeeds haven’t been arrested or held to account.

“All these officials were dragged down in the gutter by Zhao Jin,” she said in a recent interview. “If the relevant departments had done their job and stopped Zhao, he would not have been able to do what he has done.”

Since coming to power, Chinese President Xi Jinping has launched a broad anti-graft crusade that has boosted his personal popularity but also raised questions about whether enforcement has been selective, eliminating some of Xi’s potential rivals.

Zhao Jin is the son of Zhao Shaolin, the former secretary general of the Jiangsu Communist Party committee and a former aid to China’s current vice president

Corruption is endemic in China, and much of the public has rallied behind Xi’s efforts to prosecute some – although not all – of the party leaders and family members who have abused their positions.

Yet amid this crackdown, many victims of corruption say the government has kept a blind eye to their predicaments. Some say they face harassment – or worse – when they try to petition the government for assistance.

“Ever since I got involved with the petitioners, my life has been upended,” said one shop owner in Jinan, the capital of Shandong province. He said he lost 500,000 yuan – roughly $80,600 – buying into one of Zhao Jin’s real estate schemes in Jinan.

The shopkeeper, who asked that his name not be used, says that Jinan authorities harass anyone thought to be leading protests for restitution. “My phone is tapped. My email is being monitored,” he said. “I know this because of the things authorities ask me – things they couldn’t have learned any other way.”

“At one point, I had to call the police 10 times in five days. My father said it reminded him of what happened during the Cultural Revolution.” Lawyer Hu Chunyu

The story of Zhao Jin’s rise and fall only recently has come to light in China. It was first reported in May by the Chinese-language edition of Caixin, an investigative magazine that has deep sources inside the Communist Party. To date, English-language editions of Chinese state media haven’t reported on his dealings and detention, suggesting the party doesn’t want a foreign audience to learn about them.

Born in 1973, Zhao Jin is the son of Zhao Shaolin, who for eight years served as secretary general of the Jiangsu party committee. During his rise, the elder Zhao served as an aide to former Chinese Vice Premier Hui Liangyu and also to Li Yuanchao, China’s current vice president and Zhao’s predecessor in the Jiangsu party hierarchy.

Until he retired in 2006, Zhao Shaolin spent much of his career in Nanjing, Jiangsu’s provincial capital and the city where his son launched his first real estate ventures.

According to Caixin, the younger Zhao developed an unusual business model. Instead of acquiring cheap land on the urban periphery, he approached municipal governments about buying property in the city center, at a high price. These big payments won him friends among city officials, who depend on land sales for municipal revenues.

Then, instead of targeting high-end customers, Zhao marketed his apartments and retail outlets to the less affluent – those with little experience in real estate. He used newspaper advertising, discounts and other promotions to generate a stampede effect. Guo recalls people lined up for three days to land one of the first 2,000 apartments offered at Tianjin Chengji, where she now lives.

Zhao also used strong-arm sales tactics so buyers would sign agreements before they could closely read them. One shopkeeper in Jinan recalls being part of a crowd of 100 prospective buyers who were allowed to see a small number of retail sites and forced to decide on the spot. “The competition was very intense,” he said. “There was little time to make a decision.”

Lawyer Hu Chunyu was “shocked and stunned” by contracts Zhao’s company pressured buyers to sign.

After getting locked into a deal, buyers often found later that the apartment or shop they’d purchased was smaller than advertised, and lacked heating or gas. They also learned that Zhao had added extra floors to his tightly packed towers, beyond what authorities had permitted.

After it was completed, Tianjin Chengi’s four buildings housed more than 15,000 people – several hundred more than originally planned, according to Caixin. Wings of these buildings lacked adequate or reliable elevators, leaving dwellers stranded for 15 minutes or more trying to get down from the higher floors. Similar problems were reported at Zhao’s Chengji project in Jinan, which includes more than 7,000 apartments.

$1,600 The approximate sum Zhao first offered Guo Li to drop her suit

When homebuyers complained or threatened to sue, Zhao responded in two ways, according to Caixin and residents interviewed by McClatchy: He deflected lawsuits by dissolving companies and changing management, while keeping secret his ties to the project, or he employed thugs to silence those who couldn’t be bought off.

When Guo, 46, learned in March 2010 that her first apartment – she and her husband, Lin Yi, had bought two – was smaller than the 59 square feet in her contract she filed suit.

That’s when her life got complicated. In June, a pair of police officers stopped Guo and her husband and questioned them about the registration of their golden retriever – named Lifu – which they had on a leash. The police then tried to take away the dog, and Guo resisted. Later police charged Guo with biting the hand of a police official, which Guo adamantly denies.

At one point, I had to call the police 10 times in five days. My father said it reminded him of what happened during the Cultural Revolution.”

Lawyer Hu Chunyu

Guo was released on bail, pending trial, but was unable to retrieve Lifu. Then vandals smeared feces on her family’s apartment – she lived in the second one and used the first as an investment. Jin Lingyi, Guo’s 71-year-old mother, said the family lived in fear for weeks.

“Other homeowners had similar issues (with the developer),” she said. “But Zhao Jin saw that Guo was the leader of the homeowners, and so he went after her.”

According to Guo, in October 2011 Zhao offered her 10,000 yuan – about $1,600 – to drop her case, but she refused, insisting upon what she felt she had been shorted – 50,000 yuan, or about $8,000. Two months later, Guo was called into a Tianjin court. With no chance to defend herself, the court sentenced Guo to a year in detention for “hindering official duties” of a police officer. She then learned that, a day earlier, a separate court had thrown out her lawsuit.

7Number of officials detained in the scandal.

Around this same time, residents of Zhao’s Chengji development in Jinan were actively revolting. In November 2011, shop owners blockaded the busy road outside Chengji, with some waving a banner that read: “We want heating, gas and security.”

Police finally broke up the blockade by hauling off several of the protest leaders, according to one Chengji resident interviewed by McClatchy.

Unable to get the government to help them, scores of property owners hired a Jinan lawyer to sue the Chengji development company. The lawyer, Hu Chunyu, said he was “shocked and stunned” when he read some of the property contracts Chengji had pressured buyers to sign. He filed the first of two lawsuits against Chengji in October 2013.

Hu, 37, said he was unaware when he filed the suit of Zhao Jin’s ties to the company or his family connections. But like Guo, he soon learned.

First, said Hu, Chengi’s management tried to bribe him into dropping the case. They offered him the equivalent of $20,000 to serve as a “consultant” for Chengji, which he refused, Hu said.

“As soon as they learned they could not buy me, they turned to violent tactics,” he said. These included threats, vandalism and a pair of thugs who, according to Hu, kicked and beat him outside his office in early 2014. To protect his family, Hu moved out of their apartment and stayed in different hotels for several nights.

“At one point, I had to call the police 10 times in five days,” he recalled. “My father said it reminded him of what happened during the Cultural Revolution.”

The lawyer said the intimidation tactics continued on and off for months until July 2014, when authorities detained Zhao as part of a broad anti-graft investigation. Three months later, state media reported that the Central Commission for Discipline Inspection had detained Zhao’s father, Zhao Shaolin, for “serious violations of law and regulations.” In December, similar charges were leveled against Wang Min, a former Jinan party chief accused of taking massive bribes from a developer named “Zhao.”

Altogether, according to Caixin, five other public officials associated with Zhao Jin have been detained in Tianjin, Nanjing and Jinan.

The whereabouts of all these officials are unknown. In China, public announcement of a graft probe means that an official will surely be stripped of his party membership and will likely spend time in jail, especially if he or she doesn’t confess.

Yet the nightmare is far from over for many of those who say they were conned by Zhao. As their buildings deteriorate, some property owners say their life savings are at risk, and they have no one to hold accountable.

Hu, the lawyer, said he remains hopeful that the pending verdicts in his two lawsuits could provide residents with some measure of justice. “Zhao Jin’s criminal group has accumulated tremendous revenue all these years,” he said. “What should happen now is a process of returning that money – taking what was robbed from the people and compensating them.”

But that could be difficult. “He has caused so many problems with his misdeeds,” the lawyer said. “It is impossible to solve them all.”

McClatchy special correspondent Tiantian Zhang contributed to this report.

Stuart Leavenworth: @sleavenworth

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