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Thu, Aug 17, 2006 - Page 10 News List

Shanghai Electric scandal prompts official warning


Communist leaders in Shanghai have been warned to steer clear of corruption amid reports senior officials at a city-owned company are under investigation in a pension fund scandal, state media reported yesterday.

The allegations against the chairman and two directors of Shanghai Electric Group Co (上海電氣集團) constitute a "severe violation of state financial discipline," Chen Liangyu, the top official in China's biggest city told party officials at a meeting on Tuesday.

"This is a period prone to corruption. We must remain ever alert in the struggle against graft," Chen was quoted as saying by the official party newspaper Liberation Daily.

Officials on Tuesday confirmed that Shanghai Electric's chairman, Wang Chengming (王成明), was under investigation for allegedly "severely violating party discipline."

The company, a major industrial equipment maker which has shares traded in Hong Kong, announced earlier that two of its directors, Han Guozhang (韓國璋) and Zhang Rongkun (張榮坤), were also linked to allegations of bribery and embezzlement of pension funds.

Details of the allegations are scant and a staffer at the office of the secretary of the board for Shanghai Electric said officials wouldn't be available for comment until later in the week.

However, media reports say Han is suspected of embezzling millions of dollars by overstating the number of laid off workers eligible for benefits.

Han simply pocketed the extra payments, drawn from a fund providing pension and health benefits, the reports in the 21st Century Business Herald and other newspapers said.

Meanwhile, Shanghai courts have frozen the assets of Fuxi Investment Holding Co (福禧投資控股), a company controlled by Zhang that holds shares in Shanghai Electric.

It was unclear if there was any direct link between the investigations of the three men.

A Shanghai Electric subsidiary, Shanghai Mechanical and Electric Industry Co (上海機電), said in a statement that the investigation into Wang's dealings was not related to his role in the company but was directed at him as an individual. It gave no details.

Shanghai Mechanical and Electric Industry has shares traded in Shanghai.

The charges are a major embarrassment for Shanghai Electric Group, one of the city's biggest industrial showcases.

Originally founded as the city's Heavy Machinery Bureau in 1949, the company is Shanghai's largest machinery manufacturer and a local partner of major international companies such as Japan's Mitsubishi Heavy Industries Ltd and Germany's Siemens AG.

The company is involved in many of the country's biggest projects, including the Three Gorges Dam.

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