Chinese Banker Accused of Corruption
One month ago, China Construction Bank President Zhang Enzhao pledged to root out financial criminals at the government-owned bank, China’s second largest and one of the strongest in the nation’s shaky financial sector.
Now Zhang, a 40-year career banker, has given up his post and is being detained on suspicion of corruption in the latest example of alleged corporate scandals in China.
His troubles may be linked to a trip in 2002 to California, where he played golf at a famed Pebble Beach resort and, according to a lawsuit, cut a deal that allegedly led to $1 million in kickbacks from a U.S. company.
The suit, filed in Monterey County in December, has come to light in the wake of Zhang’s abrupt resignation from the bank last week. The complaint claims that Zhang, 58, received bribes from Alltel Information Services of Florida in connection with contracts to provide software programs to Construction Bank.
Alltel is owned by Fidelity National Financial Inc., a large title insurer that was based in Orange County before moving to Florida last year. Fidelity declined to comment but wrote a blanket denial of the allegations in response to the lawsuit. However, Fidelity said it did invite Zhang to play a round of golf at Pebble Beach.
The breach-of-contract suit was brought by Grace & Digital Information Technology Co., a Beijing-based company that said it had been cheated out of commission fees for contracts that Alltel allegedly received from the bank.
“The golf outing constitutes a major part of the conspiracy,” said Jinshu “John” Zhang, an attorney at Santa Monica law firm Greenberg Traurig who is representing Grace & Digital. Zhang, unrelated to banker Zhang, said he believed that Alltel violated the Foreign Corrupt Practices Act of 1977 in paying for the golf trip.
Construction Bank, which has about 16,000 branches and is China’s largest property lender, said last week that Zhang resigned for personal reasons. Local media have speculated that Beijing’s removal of Zhang may also be related to his past ties to Zhou Zhengyi, a Shanghai real estate tycoon who was jailed last year for corruption.
Zhang’s departure comes as Construction Bank is preparing to be listed on an overseas stock market. Beijing is trying to reform its ailing financial institutions before China opens its banking sector to global competition in December 2006 under an agreement with the World Trade Organization.
