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Home > Bribery
Hypermarket Caesar jailed for ten years for giving “reward for go-between”


Imprisoned for 10 years, the big shot of hypermarket, Mr. Zhang Wenzhong, was announced innocent.  


On May 31st, 2018, the Supreme People's Court of China held a retrial of Mr. Zhang Wenzhong’s case and revoked the original verdict under which Mr. Zhang was found guilty of fraud, making bribes by unit (i.e., Wumart), and misappropriation of funds.  Together with Mr. Zhang, Wumart Holding Group Co., Ltd. (the unit that was found guilty of making bribes) was announced innocent as well.


It is the first of several new trials of convicted entrepreneurs, aiming at reassuring the private sector about the government's caring for private businesses.


Before Mr. Zhang Wenzhong was put into jail, he was in charge of one of the most influential chain markets in China, Wumart – Wumart is among the earliest China mainland companies that was listed with Hong Kong Stock Exchange.  In 2006, pending the criminal investigation, Mr. Zhang was forced to resign from the Wumart.  Later in 2009, Hubei High People's Court sentenced him to 12 years in jail and a criminal fine of RMB 500,000 (about USD 70,000).  Also, Wumart was found guilty of unit bribery (i.e., a unit (vis-à-vis individual) paying bribes) and was fined RMB 5.3 million (about USD 800,000).


That case was quite controversial back then.  The original judgment by the court of appeal found that Wumart had swindled RMB 31.9 million (USD 5 million) out of state funds, and that Mr. Zhang had arranged the payment of a bribe after Wumart’s buying shares held by state-owned enterprises.  His attorney said, "there are serious mistakes in the determination of facts and the application of law in the previous judgment against Zhang Wenzhong."  It was, in Mr Zhang's own words, "a case of serious grievance against common senses."  Zhang Wenzhong has also been bittering about this.


In October 2016, Zhang filed a complaint with the Supreme People's Court which held a retrial on December 28, 2017.  The case was heard publicly on February 12, 2018.


After the retrial, the Supreme People’s Court held that Zhang Wenzhong was not guilty of any of the charges in the case, and announced that Mr. Zhang Wenzhong is innocent, so is Wumart.  The U-turn of the case was hailed to send a signal to private businesses and entrepreneurs that their private property will be under the same protection of the law as the state property.


We congratulate Mr. Zhang Wenzhong. However, companies doing business in China should be mindful of the risks in relation to commission or “reward for go-between,” which could easily fall with the category of bribery.


According to the original judgment, between 2003 and 2004, after Wumart’s acquisition of the shares that China International Travel Service (“CITS”) and Guangdong Yuecai Trust and Investment Company held in Taikang Life Insurance Co., Ltd., Mr. Zhang arranged “rewards for go-between” for now managers of CITS and Yuecai.  The reward was as much as RMB 5.3 million (about USD 800,000).  The reason why Mr. Zhang could be exonerated 10 years later is that Mr. Zhang, as per the exonerating judgment, did not have the intention to bribe.


Bribery is a serious offence under China’s Criminal Law.  There are ten crimes for bribery.  A unit could be the payer of a bribe; a unit (state-owned) could be the recipient of a bribe as well.  A death penalty could be imposed on the recipient of a bribe if the recipient is a governmental official.  You may get access to bribery-related articles of The Compliance Reviews by following the link.


*The author, Henry Chen, is a senior partner of Dentons Shanghai Office, before which Henry Chen was the AP Compliance Director of Ford Motor Company.  Henry Chen is licensed to practice law in both China and the New York State of the U.S.  Henry is the author of the book Risk Management on Commercial Bribery in China.  Henry is accessible via henry.chen@dentons.cn  


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