Swiss bank UBS is at the centre of embarrassing revelations that it helped to set up a secretive offshore firm for the wife and daughter of a former senior Chinese official who has since been convicted of corruption. Zhang Shuguang, a former deputy chief engineer of the disbanded railways ministry, is awaiting sentencing after pleading guilty in September to taking more than 47 million yuan (HK$59.7 million) in bribes between 2000 and 2011 to help companies win rail contracts. He was the right-hand man of former railways minister Liu Zhijun, who was given a suspended death sentence for corruption in July. Zhang’s wife, Wang Xing, and daughter, Zhang Xixi, were revealed recently to be shareholders of a British Virgin Islands (BVI) company named East Asia Group Trading, according to the database of the International Consortium of Investigative Journalists (ICIJ). The US-based group has been releasing information over the past year on the secret accounts of high-profile and well-connected people, including several other mainlanders. In the ICIJ database, UBS is named as a master client of East Asia Group Trading, meaning an intermediary that helps clients set up offshore entities. The revelation about the BVI firm comes amid unwanted attention over the Swiss banking giant’s hiring practices. UBS recently suspended two Hong Kong-based bankers after launching an internal investigation into the appointment of Joyce Wei, a daughter of Tianhe Chemicals chairman Wei Qi. The bank had been viewed as the front-runner for work on a US$1 billion initial public offering of the mainland firm in Hong Kong. People who help set up BVI companies are like gun shop owners. They should do a background check on these people who buy guns Julian Russell, Pacific Risk US regulators are reported to be investigating investment banks over appointments of well-connected mainlanders that could be seen as providing an unfair advantage in business deals. “UBS should have been careful, given this BVI company is owned by the wife and daughter of a politically exposed person,” said Julian Russell, a director of Hong Kong-based consultancy Pacific Risk, using the risk industry’s term for would-be clients deemed to present a higher risk for potential involvement in corruption. “UBS helped set up this BVI company. People who help set up BVI companies are like gun shop owners. They should do a background check on these people who buy guns.” In 2009, UBS paid the US government US$780 million in fines to settle charges that it used its secretive services to help almost 17,000 Americans evade taxes. Russell said that while there was nothing intrinsically illegal about someone owning an offshore firm, there is a risk that such an entity could be used to receive bribes. The business activities of East Asia Group Trading could not be ascertained, and there is no evidence that the company has been involved in any wrongdoing. However, the fact that the wife of a senior railway official controlled a BVI company and that she had an intermediary role in supplying railway components to the rail authority is cause for concern, Russell said. During Zhang Shuguang’s tenure as a senior railway official, his wife acted as an agent to help international companies win contracts to supply train components to mainland rail projects, Caixin reported. Of course, it’s a concern that the wife was selling train parts to China while her husband worked in the railways ministry Raymond So, Hang Seng Management College Wang pulled strings in 2004 to foster a partnership between Evac of Germany and rail equipment maker Wuxi Wanli Industry Development, the mainland business publication said. Evac did not respond to an e-mail from the South China Morning Post, and Wuxi Wanli did not answer calls. “Of course, it’s a concern that the wife was selling train parts to China while her husband worked in the railways ministry. Even if there is no corruption, in terms of corporate governance, it’s no good,” said Raymond So Wai-man, dean of the business school at Hang Seng Management College. In November, Zhang’s mistress, Luo Fei, 32, confessed in a Beijing court to helping to cover up bribes received by him. The ICIJ’s records show that Wang Xing and another person, Wang Ruiting, became shareholders and directors of East Asia Group Trading on July 4, 2005, a year after Zhang Shuguang started work on the mainland’s multibillion-dollar high-speed rail programme, which has been dogged by corruption allegations. Zhang Xixi became a shareholder of East Asia Group Trading on June 17, 2009, according to the ICIJ. She had joined JP Morgan’s Hong Kong office the year before and resigned in 2010. The US government is probing JP Morgan’s hiring of well-connected mainlanders. Zhang Xixi’s shareholding in an offshore firm while working for JP Morgan is a cause for concern, So said. UBS and JP Morgan declined to comment. Zhang Xixi and Wang Xing could not be reached for comment.
Posted on: Mon, 17 Feb 2014 09:48:00 +0000
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