A few days after the end of the Spring Festival holiday, Cheng Sixi, deputy Party secretary of the finance bureau in Poyang, Jiangxi Province, received a phone call that was as simple as it was shocking.

Ouyang Changqing. Photo: Xinhua

The call was made on February 11 by Li Huabo, director of the economy and construction unit under the bureau, who told Cheng that he had fled to Canada a few days before Spring Festival (February 3), and that he had embezzled millions of yuan in public funds over the past few years.

The stunned Cheng then called local police. Local authorities, including the Poyang CPC Commission for Discipline Inspection, Poyang Public Security Bureau and Poyang Audit Bureau, formed a team to investigate the matter, leading to the downfall of several officials, including Cheng himself, the Beijing-based Legal Daily reported Wednesday.

An investigation found that Li and his cohorts had embezzled nearly 100 million yuan ($15.2 million) from the Poyang Rural Cooperative Association, placing the money into an account of a company they had set up.

The news struck the local community particularly hard, as Poyang is a poverty-stricken county that had seen only 410 million yuan (US$62 million) in financial revenues in 2010.

According to the Legal Daily, Li left a letter to Ouyang Changqing, the director of the Poyang finance bureau, who was also removed in the wake of the scandal.

Li expressed his regret to the local people and his department for what he did, and gave details of how he embezzled the money with other officials over four years.

Working on information from the letter, the team arrested two other main suspects, Xu Detang, an official at the Poyang Rural Cooperative Association, and Zhang Qinghua, a vice director of the economy and construction unit.

Li said in the letter that the money was obtained from the provincial government, which had set aside the funds for agricultural infrastructure projects, such as reservoirs.

Flaws in the system

Xu Xiaoming, a worker at the finance bureau, told the Legal Daily that standard procedures had been in place regarding approval for the use of funds. The unit that requires the funds should apply to the bureau, and a cheque is handed out only with the agreement of the operations unit, budget office, and other leaders in charge.

The seal of the director of the economy and construction unit should be stamped on the cheque before it can be processed by the Rural Cooperative Association.

However, Li got round these requirements by asking Zhang to give him the cheque and using forged seals. Li also escaped the supervision of his leaders, successfully transferring the funds to his company's account.

Cheng, Li's direct superior, said he gave Li the authority to deal with agricultural infrastructure funds as Li seemed like an honest man, the Jiangxi-based Jiangnan City Daily reported earlier.

Wu Zhimin, the director-general of the Poyang Rural Cooperative Association, also said accounts with the finance bureau were not thoroughly audited as the bureau was one of their main customers, the report said.

Ouyang, director of the finance bureau, said he did not know about the corruption scandal.

Cheng, Wu and Ouyang were dismissed and placed under investigation.

The report said Li had sold his property for 800,000 yuan (US$121,663) before Spring Festival, and applied for leave from his leaders as he prepared to flee the country.

The report also said Li was addicted to gambling, and made frequent trips to Macao.