Forty-year-old Chen Wei, a manager of a state-owned company and
holder of a master’s degree, recently found himself sentenced to
death, but was granted a reprieve. He had embezzled amounts to the
value of almost US$630,000 and misappropriated public funds put at
more than US$4.95 million.
Chen worked for a foreign economic and technical cooperation
company after gaining his postgraduate qualification. In November
1994, he was promoted to the post of manager of the futures
transaction department and then became the legal representative and
manager of an affiliated company in Shanghai, which engaged in
securities trading.
But he was to deceitfully misuse his position of trust, for he
went on to embezzle and misappropriate. In granting a reprieve of
the death sentence, the court took into consideration the fact that
most of the embezzled money had been recovered.
Trends in abuse of positions of financial trust
In 2003 the courts in Beijing heard a total of 990 cases of
economic crime. Of these 102 involved embezzlement and 57
misappropriation. For instance, the Beijing No.1 Intermediate
People’s Court handled 31 cases of economic crime and handed down
sentences to 37 convicted criminals. In dealing with cases
involving misuse of positions of trust in state-owned enterprises,
law officers have found five main trends among the offenders:
- They tend to commit their crimes at an early age. For example,
Ding Tong, a cashier at the Beijing Environmental Health Bureau,
was only 27 when he was caught misappropriating over US$108,000 of
public funds.
- These are generally smart, well educated people. About 80
percent hold associate degrees or better. For example in a recent
case, Huo Haihong, director of the Zhongguancun City Credit Union
in Beijing’s Haidian District, graduated in finance in 1983.
- They tend to hold financial management or executive positions
in state-owned companies. Chairmen of boards of directors and
company presidents account for some 60 percent of the cases.
- Their methods are clever and sophisticated. Frequently these
are not just simple abuses of power but carefully concealed and
complex crimes that rely on professional expertise to find
loopholes in operating procedures.
- They steal large sums of money. For example Han Guochang, an
accountant at China North Industries Corporation, embezzled US$1.69
million and Song Zhang’ai of the China Huarong Trust and Investment
Corporation misappropriated more than US$4.7 million of public
funds.
The judge’s recommendations
The judge in the Chen Wei case said, “The offenders have been
able to succeed in abusing their positions of trust because we lack
effective mechanisms necessary to restrict their power and to
supervise them in the exercise of their duties. During the reform
of the state-owned enterprises the managers and administrators
assumed far reaching powers. However they are operating without
rigorous supervision either at the national macro-control level or
from their organizations’ own internal mechanisms. What’s more, lax
internal financial auditing procedures provide tempting
opportunities for crimes involving embezzlement and
misappropriation.”
To help prevent crimes involving abuse of positions of power,
the court suggested a two-pronged policy that would combine legal
punishment and deterrence with better preventative measures. The
focus should be on strengthening reform of the systems involved and
introducing new practices in the state-owned companies in addition
to cracking down on abuse of power by individual officials. In
terms of improving their financial control systems, the enterprises
should ensure they have reliable procedures for the verification of
written authorizations backed up by frequent monitoring of the
proper application of these procedures.
The court also identified certain other measures which could
help safeguard the property and rights of the enterprises. These
included the more effective use of serial numbers on financial
vouchers, senior staff appraisals, regular auditing of accounts,
publishing of accounts and the implementation of financial auditing
systems.
(China.org.cn by Li Xiao, June 6, 2004)