Zhao Shuangju, former director of the Beijing Power Supply Bureau, was arrested on September 15 in connection to a US$55 million scandal.
His case is just the tip of the iceberg in connection to capital losses at the National Power Company, the national power monopoly that was dismantled in late 2002, and its reach extends across the country.
According to a report by the former North China Power Group, parent company of the Beijing Electric Power Corporation, to the former National Power Company dated January 8, 2003, huge amounts of bad assets and potential financial risks had resulted from irregularities in investments, loans and guarantees by its branches before 1996.
The report says that up to the end of 2001, 83 cases of such irregularities involving US$196 million had been revealed, of which the group had retrieved US$74 million.
In 1995, two deposits totaling US$8.47 million belonging to the Beijing Electric Power Corporation were frozen by their bank in order to honor its guarantee for a loan to Weikerui Company. Later the group retrieved the money after winning a lawsuit against the bank.
Auditor-General Li Jinhua's audit report revealed in June that a total of 631 projects invested by the National Power Company and its subsidiaries have lost money or left themselves open to potential losses.
These projects relate to a total investment of 7.8 billion yuan (US$948 million) and the mistakes have resulted in heavy losses of capital.
The National Power Company may have also concealed how much money it earned between 1998 and 2002 -- a total of 7.8 billion yuan (US$943 million) less than the true figure.
Besides this, a dozen individual economic crimes have been uncovered, involving 1 billion yuan (US$120 million).
Meanwhile, Zhao may face criminal charges, the Beijing News quoted sources from the capital's High People's Court as saying.
Zhao, 64, held his position at the Beijing Power Supply Bureau for 13 years to 1999 and was arrested in connection of the loss of 457 million yuan (US$55 million) from the state-owned Beijing Electric Power Corporation -- the successor of the bureau after restructuring earlier this year.
Zhao was forbidden to make business trips from July and the investigation actually began in 1997, according to informed sources.
According to the Auditor-General's report, Zhao provided guarantees to the Beijing-based Weikerui Wire and Cable Company of 1.1 billion yuan (US$133 million) from 1994 to 96.
When the company was on the verge of bankruptcy, a local court ordered the Beijing Electric Power Corporation to shoulder part of its compensation responsibilities, resulting in the loss of 457 million yuan.
Li Jie, the board chairman of Weikerui has been missing since late 2000. Li, a Beijing native in his 30s, had claimed to be a Hong Kong businessman.
One of the three major investors in Weikerui was a sub-company affiliated to the bureau. This sub-company contributed 64 million yuan (US$7.7 million) of Weikerui's US$25 million total registered capital when it was established in 1991.
The report shows this money had been taken from special funds for power supply subsidies.
Weikerui was a pillar enterprise whose annual output value exceeded 200 million yuan (US$24 million) between 1998 and 2000, according to the district government.
However, the company has faced severe financial problems since 1994, and a US$115 million investment to expand its plant was borrowed from banks.
In addition, in 1997 Li's Hong Kong company was found making loans and loan guarantees totaling US$60 million elsewhere in the country in the name of Weikerui, which resulted in huge debts.
(China Daily, China.org.cn November 26, 2004)
