Chinese bribes: Better to give than to receive

Zheng Xiaoyu, the former head of China’s food and drug agency, was executed last month for accepting $850,000 in bribes from pharmaceutical companies trying to fast-track approvals. But if history is any judge, those who dished out the bribes and saw their companies profit handsomely will suffer a great deal less.

Bribe-givers tend to get off relatively easy in China, according to legal experts, government statistics and media accounts. This not only leaves them free to bribe another day, critics say, but also sends a signal that a little money can get you around even the toughest rules and regulations.

“Those who give and take bribes should be punished equally,” said Ren Jianming, vice director of the Anti-Corruption and Governance Research Center at Beijing’s Tsinghua University. “I’ve repeatedly voiced my views on this, but realistically, little has changed.”

Zheng’s sentence, harsh even by Chinese standards, comes as Beijing finds itself under extreme pressure to show results after a series of health and safety scandals rocked confidence, spread fear and tarnished the “Made In China” label at home and abroad.

China’s Cabinet announced late last month that it was drafting new rules aimed at boosting responsibility and increasing penalties for illegal activities. No details about the regulations, which would affect producers and local governments, were released. Toxic food and pharmaceutical ingredients from China have been blamed for dozens of deaths in Panama and a large number of pet deaths in the United States, spurring import restrictions and stepped-up inspections globally. Among the items under scrutiny are seafood, toothpaste, toys, tires and food additives.

On Thursday, China banned exports by two toy manufacturers whose products were subject to major recalls in the United States.

Although there are many complex legal, structural and cultural factors underlying China’s product-safety troubles, bribery is believed to be a key component.

An estimated 150,000 new drugs were approved during Zheng’s 1998-2005 tenure as head of China’s State Food and Drug Administration, leaving investigators with much to examine. So far, six have turned out to be fakes cited in the deaths of at least 10 people. By comparison, the U.S. Food and Drug Administration generally approves fewer than 150 new drugs each year.

Most of the eight pharmaceutical companies named in legal documents appear to be thriving.

“Yes, we can supply Injection Oxymatrine in big volume,” said a sales official at Jilin Huayang Pharmaceutical Co. Ltd., referring to a hepatitis B and C treatment made by northeast Jilin province’s China Maoxiang Group, which is accused of paying Zheng $14,000.

The website of the Shanghai Double-Dove Co. still boasts the coveted “Famous Chinese Brand” government seal of approval it has received.

Double-Dove’s disposable sterile syringe and infusion device was reportedly fast-tracked for approval after Zheng’s wife received a used luxury vehicle and property in Shanghai valued at about $36,000.

And the “Buchang Brain and Heart Capsule” is still listed as a top seller on Xianyang Buchang Pharmaceutical Co.’s website. The company, which reportedly gave $10,000 to Zheng, advertises the capsules as a near cure-all for strokes, coronary heart disease, muscular weakness and cerebral vascular disease.

Officials with the eight named companies declined to comment, had unlisted numbers or were unavailable.

“I don’t know anything,” said a deputy general manager surnamed Mei at Double-Dove, before hanging up on hearing the name of the executed Zheng.

All eight companies linked to the scandal are based in China, though two have links with U.S. companies.

The Hainan Poly Pharmaceutical Co. Ltd., which according to state media gave Zheng $14,000, has a development agreement to produce vitamin C products for Cura Pharmaceuticals based in Eatontown, N.J. And Double-Dove has a contract to produce syringes for Retractable Technologies Inc., based in Little Elm, Texas.

China’s operating philosophy on bribery -- that it’s better to give than to receive -- is institutionalized in law and practice. Although the maximum penalty is death for those who pocket bribes of more than $13,400, the worst penalty most face is life imprisonment.

The starting point is also different. Those who take bribes face criminal charges for taking a cent more than $665. Those who give bribes can hand out as much as $1,300 before facing prosecution.

In practice, experts say, the disparity is even greater. Bribers are rarely the object of corruption investigations and most are let off if they confess. No briber has ever gotten life imprisonment and even sentences of 10 years are rare, Ren said, even though officials at all levels have been executed.

China’s legal system encourages prosecutors to rely on bribers for most evidence. There is little protection for whistle-blowers and no codified system of plea bargaining.

From January to October 2006, China investigated 8,010 cases of commercial bribery involving $117 million. Of the people investigated, 81% were found guilty of taking bribes and 17% of giving bribes, according to the Guangming Daily newspaper.

In late 2005, prosecutors announced that they would blacklist bribers from public works projects, although the initiative hasn’t gained much traction.

Several factors underpin this double standard, attorneys and legal scholars say. One is a perception that government officials have the upper hand, and often have it turned palm-up, in any dirty dealing.

“Chinese officials have traditionally been on the strong side, part of a big government with few checks on their power,” said Ruan Qilin, professor of criminal law at the China University of Political Science and Law. “It makes people believe bribers are on a weak footing and have no choice.”

Politics also play a role, analysts say. Growing unrest and an expanded gap between the rich and poor have left the Communist Party increasingly worried about its hold on power.

One response has been highly public anti-corruption campaigns among its cadres.

The U.N. Convention against Corruption, ratified by Beijing in 2003, views both sides as deserving equal punishment in bribery cases, a stance also taken by anti-corruption group Transparency International.

Most officials found guilty of lining their pockets take their punishment quietly. Zhang Yushun, the ex-mayor of Lanzhou, in Gansu province, did not.

Zhang was accused of taking $105,000 from real estate developers, including $25,000 funneled through his wife and daughter.

“Why has no one who offered bribes been given sentences so far while a lot of government officials who have accepted bribes receive sentences?” he asked during his sentencing in the Dingxi People’s Court.

Zhang’s question didn’t seem to help. In late 2005, he was sentenced to 10 years in prison, but the three firms caught giving him money were not prosecuted.

“A lot of companies think it’s not that big a deal to engage in bribery,” said Li Yong, Zhang’s attorney. “The way they see it, they just report on a few officials and get away with it.”

In recent weeks, China has announced several measures aimed at tightening oversight of the nation’s food and medical producers. It has announced tougher inspections and higher standards, closed 180 food companies and barred several others from exporting.

Many of China’s punitive measures are conducted in secret, but most of those made public have involved safety issues.

Pharmaceutical industry officials blame structural, moral and legal factors in an industry where as many as 5,000 companies are locked in a fierce competitive battle and where overlapping regulators are overworked and tempted to cut corners for personal gain.

Many companies view bribe paying as little more than a business cost, said Zhou Huanxi, 48, who worked for the Hangzhou Aoyi Baoling Pharmaceutical Co. for 17 years.

Zhou was jailed for three years after she reported to regulators in 2001 that her company was using fake or unauthorized ingredients in products for pregnant women. Rather than act on her complaint, she said, local authorities leveled charges against her.

Hangzhou Aoyi Baoling was fined $134,000 when word of her accusations seeped out, Zhou said. The company was making at least $6.5 million in profit by underreporting taxes, “so from their standpoint, $134,000 is a bargain,” Zhou said.

Pang Xiaoquan, a manager at the company, said Hangzhou Aoyi Baoling was fined and that it was not Zhou’s place to say how much it made through tax irregularities and ingredient changes. The changes made the products more suitable for expectant mothers, he said. The company’s mistake, he added, was that it didn’t inform regulators. “That was a lesson learned in blood,” Pang said.

“It’s so easy to defraud the public with shoddy medicine,” Zhou said. “Once a year, the inspectors would come, but it was just a formality. They would have a nice meal with the managers, accept some gifts and leave. And they would warn the company before they came.”

As the government has intensified its fight against corruption, bribers apparently have become more creative. Early last month, China’s Supreme Court outlined new bribery definitions.

Among the innovative tactics under scrutiny lately: moon cakes embedded with diamond rings and jewelry-bedecked “golden books,” usually turgid biographies of top Communist Party leaders.

Other methods involve executives who purposely lose to officials at high-stakes mah-jongg games, rig lotteries or sponsor their children at overseas universities.

“People always find creative ways to play games,” said Ren, of Tsinghua University, adding that the focus should be on prevention rather than attacking the symptoms. “As a Chinese saying goes, ‘When evil is 1 foot tall, the evil spirits will be 10 feet tall.’ ”

Finding a way around restrictions is hardly new. Bronze utensils from the Shang Dynasty, believed to be about 2,800 years old, depict what appears to be China’s oldest known bribe story, according to a 2006 report in Hangzhou’s Metropolitan Express newspaper. The account details how an aristocrat named Diao Sheng evaded tax-evasion charges by offering the investigator a precious bronze pot and a large piece of jade. The charges were promptly dropped.

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mark.magnier@latimes.com

Yin Lijin in The Times’ Beijing Bureau contributed to this report.