Saturday, June 23, 2001

Miro Cernetig and Rod Mickleburgh

Mister Big's big day

He is China's top fugitive, the alleged mastermind of a smuggling and corruption scheme so massive that Premier Zhu Ronji has given Canada a stunning guarantee: Lai Changxing won't be executed if he's sent back. As his hearing approaches, Beijing correspondent MIRO CERNETIG and ROD MICKLEBURGH in Vancouver examine Lai's bizarre case and wonder whether the one-time high-roller really is wanted more dead than alive

Two dozen bar girls, all in their bordello uniform of matching miniskirts, white stilettos and fishnet stockings, mill about in front of the blinking lights of the Happy Man Karaoke Bar. They are glum. Customers are few and far between. The once-booming nightlife of Xiamen, the sleazy port on China's southeast coast, has gone to seed.

"It's never been the same since they took away Lai Changxing," says Fu Ting, 22. "We once thought he was like the emperor of Xiamen. But now we understand he brought us only black money, bad people and trouble. Now, of course, he should be executed."

Another girl, 19-year-old Chen Baomi, pipes in: "That devil Lai wasn't smart enough to be an emperor. He has only hurt the people here. I would fire the gun myself."

That's the revisionism of Xiamen, the former stomping ground of China's most wanted man. Once it boomed with smugglers and illegal moneychangers, brothels and high-priced bar girls. Now, it's the centre of China's biggest corruption scandal, and the high fliers are lying low. "Nobody wants to be caught in a government trap," says taxi driver Mu Zhaoxing, who says his business has been cut in half. "Everyone is afraid and it is making our lives much worse than two years ago."

The so-called emperor of Xiamen managed to escape the government trap himself by skipping the country to Canada. But the Premier of China wants him back and he wants him back now. It's personal.

They are an unlikely duo. Zhu Rongji, the flinty, beak-nosed, all-powerful Premier of the world's most populous country, has a well-earned reputation for brooking no nonsense and getting results.

Lai Changxing, a roly-poly, former peasant, well-digger and blacksmith, has a Grade 6 education. Yet he became one of the wealthiest entrepreneurs in Fujian, the Chinese province best known to Canadians as the source of so many illegal migrants in recent years.

Some say Lai, 42, succeeded only by lavishing wine, women and wads of cash on local Communist Party officialdom. But then his world collided with Zhu's and the impact has landed Canada in the diplomatic soup.

Today, the high-flying, high-rolling, high-living Lai languishes in the spartan jail cells of Vancouver's pretrial detention centre. He is short of cash now that skillful Chinese investigators have found and frozen his accounts, and the legal team he once had now is gone.

All he seems to have left is an abiding faith in his own innocence and a newfound faith in God. His favourite Psalm is "the Lord is my shepherd, I shall not want," his new pastor says. "He never tires of hearing about that or hearing about confession."

But his immediate fate lies in the hands of Canada's refugee-determination system.

On July 3, a five-week hearing will begin on the application Lai and his family have made to be granted refugee status. Such hearings are almost always held in private, but this one, at Lai's request, will be open to the media. It is expected to last five weeks and feature much sensational evidence, and the federal government has marshalled a huge legal force to fight the application every step of the way.

All this may come as a surprise to most Canadians — until they realize the extent of the scandal that surrounds Lai. He is accused of masterminding a multibillion-dollar smuggling and corruption racket that involved as many as 600 government, police, customs and Communist Party officials.

Considered the worst to hit China since the People's Republic was proclaimed in 1949, it reaches into the highest echelons of the party. Just how seriously Beijing takes the case became apparent last Nov. 8, when 14 prisoners, clad in slippers, shapeless green shirts and baggy shorts, stood with heads bowed before a Chinese tribunal and heard their lives declared over. As they listened to the grim verdicts, the former state officials stared at the floor, ashen-faced. Some were in tears.

As breathless state television reports detailed the alleged scheme to the Chinese public for the first time, however, the supposed mastermind was comfortably ensconced in faraway Niagara Falls, Ont., pursuing his favourite hobby. Looking from a distance very much like the "Mr. Big" or "Smuggling Kingpin" he is alleged to be, Lai Changxing was gambling.

During his 7½ hours at the tables that day, he lost nearly $18,000 — a fair bit of money, but nowhere near the $85,000 he had dropped three days earlier. His prolonged gaming binge in Canada's honeymoon capital had begun Oct. 26. It ended on Nov. 23, when a group of RCMP officers arrested him outside his hotel on an immigration warrant.

Canadians quickly learned that Communist China's most wanted fugitive had been living here for more than 15 months, most of the time with the apparent knowledge of federal immigration officials.

Did China find out he had come here and tip Canada, or was it the other way around? The question has yet to be answered, but Lai clearly had an eventful time while on the run in Canada.

Although he had no known source of income here, he paid $1.3-million in cash for a mansion in Vancouver's exclusive South Granville area. The three teenaged children were sent to a private school during their first year, at a cost of $6,000 each.

Lai's wife, Tsang Mingna, also accused of corruption back home, opened an account in a local bank with an initial deposit of $1.5-million (U.S.). His friend, Billy Wei, chauffeured him around in a $90,000 sport-utility vehicle. And, of course, there were funds enough to finance hundreds of thousands of dollars in gambling debts before his arrest and huge legal costs afterward. At times, the services of a shady "cheque-cashing lady" were required.

Lai had entered Canada on Aug. 14, 1999, with a legal visitor's visa issued on his Hong Kong passport. The visa for all five family members was routinely extended in March, 2000. Wearing a variety of baseball caps, he soon became a familiar figure in local casinos, until he was barred by the B.C. Lottery Commission on suspicion of loan-sharking. Police surveillance found him associating with people believed to have ties to the notorious Chinese triad known as the Big Circle Boys.

Still, it was relatively smooth sailing until last June, when Lai was shocked out of his brightly coloured socks. Three Chinese security agents showed up in Vancouver, along with one of his younger brothers, having entered Canada posing as businessmen. At a downtown hotel, the agents pressed Lai to return voluntarily, hinting that his brothers, also facing smuggling charges, would suffer if he refused.

Soon after that encounter, Lai and his family applied for refugee status. On his form, the fugitive wrote: "If I return to the [People's Republic of China], I believe I will, for political reasons, be arrested, detained, subjected to an unfair and secret trial probably without legal representation, convicted on whatever charges the PRC government chooses to assert against me and be executed."

An execution, according to Zhu Rongji, is just what Lai deserves — in fact, the Premier has said he should be put to death several times over (10 times at first, reduced to three more recently).

There are many stories about why the millionaire ex-farmer has incurred the wrath of Zhu, who raised pigs himself during the Cultural Revolution. Some suggest that Lai brought about his own downfall by offering lavish gifts while the straight-arrow politician was on an inspection tour of Xiamen.

Another, equally unsubstantiated tale has the two crossing paths at a Spring Festival reception in 1998 when the Premier supposedly offered to leave Lai alone if he would stop smuggling and pay $200-million in back taxes.

It's more likely that the cost-conscious Zhu simply decided that Lai's supposed smuggling exploits were hitting him too hard in the treasury. In any event, he personally spearheaded the drive that brought Lai's empire crashing down.

It began with hundreds of investigators known as the "420 Team" being sent into Xiamen, led by China's most famous graft-buster, a tough 67-year-old woman named Liu Liying. The team commandeered a downtown hotel and instructed all members to stay inside at night, lest they risk bribery and sexual enticement from the alleged culprits.

Before very long, Lai's operations had been raided and closed, while an estimated 1,000 party cadres were summoned for questioning and more than 600 charges laid. But much to Zhu's dismay, his prime target managed to slip away, landing at Vancouver International Airport one day before he was due to be arrested.

Almost two years later, the Premier shows no sign of forgiving or forgetting. He seems ever willing to talk to reporters about Lai, whom he derides as a "turtle's egg" — an especially foul epithet in Chinese. Beijing will do and spend whatever it takes to bring him back, Zhu says. On some occasions, he claims to be confident that Canada will co-operate; at other times, he fears the opposite because the two nations have no formal extradition treaty.

To improve his chances, Zhu has made an unprecedented move: He has promised to honour Canada's policy against deporting people to face the death penalty by guaranteeing that Lai will not be executed if he returns. Considering that at least seven of the 14 condemned underlings have already met their doom, this is an amazing concession. But such is Zhu's fierce determination to retrieve Lai. And when the Premier of China talks, Canada listens.

Back in Xiamen, the city's former emperor — once admired for his ability to build skyscrapers and buy up soccer teams on a whim — clearly has fallen from grace.

"It is of great national interest that we have this man back in Chinese hands," insists Liu Lian, a chauffeur for a local hotel who says his work hours have been cut in half since the scandal hit. "It is wrong for Canada to hold on to such a bad apple. Canada is being weak, being used by this man, and your government should do as our leaders wish. Send Lai Changxing back to account for his crimes against the people."

Such sentiment is almost universal, partly because of a campaign by China's powerful propaganda machine to make Lai the poster boy in its "strike hard" war on corruption. (Human-rights groups estimate as many as 800 people have been executed in the past month alone to "kill the chickens to scare the monkeys" away from lives of malfeasance.) Not only is he routinely identified as a thief, he is depicted as morally corrupt — someone willing to use sex to entrap public officials. This issue has become such a concern that it merits its own slogan: "Clean government starts with going home for dinner."

A recent report in the state-owned Legal Daily newspaper said Lai set this trap by inviting targets to the five-storey recreation complex he owned in central Xiamen. "The Red Mansion has super luxury decoration which can rival any five-star hotels in China," the paper reported. "It not only has all kinds of entertainment facilities, but also has over 40 prostitutes who are carefully selected from Jiangsu and Zhejiang provinces. All of these high-school-graduate girls are taller than 1.65 metres, they are good at singing, dancing and massage."

The girls were "the secret weapon of the Red Mansion" because, the Legal Daily alleged, Lai arranged to have businessmen and officials secretly videotaped while dallying with them — and instantly equipped himself to blackmail them.

Today, the mansion — completely red inside, down to the bedsheets, it takes its name from Dream of the Red Chamber, a classic novel about decadence — is about to become a tourist site. As well, CCTV, the national broadcaster, is considering a series about the place — which would give the regime an artistic opportunity to turn Lai's rise and fall into a cautionary tale.

Other signs of Lai's demonization abound. For example, in a move that would spark libel suits in the West, mainland officials told the Hong Kong-based Wen Hui Daily that Lai tried to bribe those who launched investigation into his affairs and later plotted to murder them.

As the allegations pile up, Xiamen is rapidly forgetting the tale of the peasant boy who made a meteoric rise to prominence.

Lai was born in 1958 in Jinjiang, a village just north of Xiamen where his parents were farmers. He spent less than seven years in school before going to work on the family plot, and yet he still had enough drive to hustle his way into small-time businesses. By the 1990s, through connections that remain unclear, he had become Xiamen's biggest private businessman, ferried about town in a fleet of limousines, complete with bodyguards, and wealthy enough to buy soccer team and bring it to the city.

"Let's face it, he made a lot of people in high places happy in this city and in the Chinese government …," says a businessman nursing his drink at an otherwise empty karaoke club. "Lai threw money around like a king and there were always pretty girls to keep his friends happy. He acted like he owned the city — and I think in some ways he did own the city, or at the very least the officials with power."

Demonstrating hubris rarely seen in China, he even decided to recreate the Forbidden City, home of China's emperors, on the outskirts of Xiamen, building a remarkable copy of the Heavenly Gate, complete with a portrait of Chairman Mao. "I don't know how much it cost, but it was millions," says one of the women who now clean the grounds (which look eerily like Tiananmen Square). "We all know that it is best if the government executes Lai, this place is made from black profits. Nobody comes here now."

And that is the real reason the city of 1.25 million has turned on its former favourite son. Even if he is innocent, his case has jammed a spoke into the wheels of its once-thriving economy.

"For two years, our economy has been in poor shape," a karaoke bar owner named "Miss Fu" notes as she tries to tempt passers-by with coupons for discount drinks. "With the police everywhere, our officials are now afraid to spend money on karaoke. This is why we need Lai Changxing to be killed. Only after his shadow is gone will officials and businessmen begin spending on karaoke and shark-fin soup."

Canada may not want Lai "to be killed," but it certainly seems eager to be rid of him. Ottawa opposes his refugee claim vigorously, and the co-operation between Canadian and Chinese officials on the case has been unprecedented.

Department of Immigration authorities have flown to China to gather evidence against Lai. The embassy in Beijing put a veil over the exercise, refusing to discuss the case, but investigators were allowed to interview prisoners convicted in connection with the smuggling scheme. They also seem to be relying almost entirely on material supplied by Chinese counterparts, some of whom are expected to testify during next month's hearing.

David Matas, the veteran human-rights and immigration lawyer Lai recently hired, says he has witnessed nothing like this in more than 20 years of practice. "They have taken the prosecution stance of a foreign country and said: 'That's our case.' They are trying to bring a Chinese prosecution into a Canadian refugee trial."

Accepting Chinese-based evidence at face value flies in the face of China's abysmal human-rights record, Matas says. "And Mr. Lai's position is that he has committed no crime."

It seems almost as if Canada now considers China something other than a Communist regime with a judicial system tied directly to its political rulers and no accountability, no presumption of innocence and no appetite for evidence beyond confessions from those who stand accused.

"Some judges do their best, but there is no tradition of an independent judiciary in China," says Earl Drake, former Canadian ambassador to China. "Ultimately, judges are responsible to the Communist Party of China, not to some higher party or principle."

In recent years, China has taken steps to improve its court procedures, but guilty verdicts are guaranteed in cases of interest to political leaders. In fact, sentencing is approved in advance. Mass trials in the Xiamen scandal began under a total news blackout, but within a week the government-owned China Daily was predicting a "heavy haul" of executions and the BBC reported that President Jiang Zemin had told politburo members capital punishment would be necessary to enforce discipline and relieve public indignation.

Seven weeks later, the 14 death penalties were handed down.

This is the kind of justice Lai can expect in China, says a source close to the case. Much of the evidence is little more than smoke and mirrors. "People are being executed literally for nothing over this thing."

For his part, Lai remains adamant that he has done nothing wrong and denies stridently that he ever supplied women to Communist officials and then videotaped their activities. "I can swear there were no such things," he told The Globe and Mail in an interview.

He was even more emphatic with the newsmagazine Asian Weekly, calling the allegations "really the most absolute lies. It is all made up. I don't have even one picture from that place. They blame me for letting so many people be executed. I can swear. If I did this, my whole family would die."

As for the smuggling, Lai told The Globe that Xiamen, as a government-designated special economic zone, has fast and loose import-export rules. His companies had arrangements with state-owned agencies because they lacked certain licences, but there was no highly organized network to circumvent customs duties.

He contends that he and his businesses were singled out by ambitious cadres seeking to make him an example. He also suspects he was caught up in the murky in-fighting that passes for backroom politics in China and was targeted in a bid to besmirch a politburo member named Jia Qingling.

While serving as Communist Party chief in Fujian before his move to Beijing, Jia occasionally dined with Lai and the two had their pictures taken together. Today, Jia is a protégé of President Jiang while it is Premier Zhu who is beating the drums to have his old dinner partner brought back.

So now the dilemma facing Canada is this: Even if most of the allegations against Lai were true, what are the chances he would receive a fair trial?

In a recent interview with a Hong Kong television station, Zhu reaffirmed his pledge not to invoke capital punishment. Lai, he said, "should have died three times and that is not even enough. Now, I have agreed he will not be sentenced to death and that is the biggest concession, the biggest concession."

Chinese authorities have reneged on such promises in the past — Xiamen's former vice-mayor, Lan Pu, was lured back from Australia by assurances of leniency. Then he was accused of accepting $850,000 in bribes and condemned to death.

Zhu is a man of his word, according to former ambassador Drake, "so the promise is good … as long as he's in power — he is a man of honour. But Zhu Rongji will be stepping down in the spring of 2003. What then?"

Matas is even more skeptical. "It's impossible to rely on their word. People can be beaten to death in prison. They have given assurances in the past that have not been lived up to."

In the early 1990s, a financial planner named Wang Jianye fled to Thailand after learning that Communist authorities wanted him for accepting bribes in the booming city of Shenzhen. He was soon extradited from Thailand after China gave an oral promise that he would not face the death penalty on the lone charge against him.

Once he was back, however, a raft of additional charges prompted a death sentence. Shortly thereafter, a haunting picture appeared in government newspapers. It showed Wang in the back of an open-air truck, a tense, bitter smile on his lips, as he was being driven off to his execution.

An unidentified lawyer later told the South China Morning Post that, "if Wang had been presumed innocent in the beginning, I think he would have won the case."

And Lai knows better than anyone how China works — how quickly a person's fortunes can change.

For most of the 1990s, he was toast of the town, celebrated on high and in the street. Now, his grandiose plans are in ruins, his building sites overrun with rubbish and rats, and he is looking at a hearing that may yet send him back to face a firing squad. Even his old soccer squad is losing.

"That's the way the People's Republic of China is," he told the Globe. "If they want to say you're good, you're good. If they want to say you're bad, you're bad."

Briefing notes for the prosecution

  • Background: Major Case 4-20, billed as the largest corruption scandal in the People's Republic of China's history, is rooted in the 1998 "Three Stresses" campaign to reinforce one-party rule and obedience to the central government and to combat corruption. Government officials and managers of state-owned firms were required to attend day-long criticism sessions in which many were denounced.
  • Inspiration: The national auditor-general's report that $14.2-billion (U.S.) in taxation revenue — more than 20 per cent of the budget — was being misappropriated by officialdom. "Party organization and leadership is lax …," President Jiang Zemin said. "No matter who it is, no matter how high the post, those who deserve punishment will be punished … There will be absolutely no leniency."
  • Stakes: Smugglers, black marketers and extortionists steal business from major domestic companies that are still called "state-owned" but in fact are traded on Asian stock markets. Eight are among Fortune magazine's top 500 corporations.

    In 1998, an estimated 42 million barrels of oil were smuggled into China and sold at a discount — a trend found among virtually all commodities. After the crackdown on smuggling, government revenue from import duties increased by 78 per cent in 1999.

    Also, China wants to promote development and trade, but foreign companies will not tolerate having to pay off tier after tier of bureaucracy to get their products into the market.

  • Case target: Yuanhua, or Fairwell, Trading Group, a consortium of real-estate and property development companies owned by Lai Changxing, a wealthy entrepreneur in Xiamen.
  • Holdings: Before having its assets confiscated, Fairwell was constructing an 88-storey skyscraper and a two-tower, 30-storey international hotel, and owned Xiamen's soccer team, a theme park that is a major tourist attraction and the Red Mansion, an exclusive resort for the political and military elite located in the company's downtown compound.
  • Accusation: That Lai's contacts in Hong Kong, Taiwan and on the mainland helped Fairwell avoid tariffs on products worth an estimated $9.5-billion (U.S.) over several years. Unloaded at the company's dock in Xiamen, the goods were sold throughout Fujian at a hefty profit.
  • Big sellers: Bulk oil, petroleum products, rubber, semiconductors, cigarettes, mobile phones and luxury cars.
  • Investigation: Almost 400 antigraft police were led by by China's top anticorruption prosecutor, Liu Liying.
  • Fallout: Fairwell's payroll allegedly included Lan Fu, Xiamen's vice-mayor in charge of foreign trading and security; most of the leaders of the Xiamen Communist Party branch; the deputy chief of the Fujian police; the chief of police in Fujian's capital of Fuzhou; the heads of Xiamen's Customs, Security and Telecommunications Bureaus; and the Xiamen branch managers of China's three largest banks. In all, more than 150 senior officials were detained with hundreds questioned.

A high roller

Highlights of Lai Changxing's gambling record at Casino Niagara in Niagara Falls, Ont., where he was arrested last Nov. 23:

  • Duration: 84 days (starting Nov. 2, 1999)
  • Playing time: 470 hours and 56 minutes
  • Daily average: 5 hours and 36 minutes
  • Total buy-in: $5,704,750
  • Days up $10,000 or more: 12
  • Days down $10,000 or more: 34
  • Closing position: down $445,735.50
  • Best day: up $237,500 (Aug. 22, 2000)
  • Worst day: down $85,400 (Nov. 5, 2000)

Death-sentence champ

Even though Amnesty International complains that Beijing plays down the number of executions, China is the perennial leader of the death-penalty pack. Capital punishment often is handed down after flawed trials and for crimes that rarely warrant it anywhere else. Still, judging by 1996 figures, the situation is improving.

  • Year: 2000
  • <Total: 1,457 in 27 countries
  • <CHINA: 1,000* (69%)
  • <Saudi Arabia: 123 (8%)
  • <United States: 85 (6%)
  • <Iran: 75 (5%)

* Equals just under one execution for every million Chinese citizens.

  • <Year: 1996
  • <Total: 4,272 in 39 countries.
  • <CHINA: 3,500* (82%)
  • <Ukraine: 167 (4%)
  • <Russia: 140 (3%)
  • <Turkmenistan: 123 (3%)
  • <Iran: 110 (3%)
  • <United States: 45 (1%)

* Equals just under three executions for every million Chinese citizens.

— Rick Cash, Globe and Mail Library

[World 2001] [News by region] [News by topic]

Created: June 27, 2001
Last modified: September 1, 2001
CSIS Commercial Sex Information Service
Box 3075, Vancouver, BC V6B 3X6
Tel: +1 (604) 488-0710