CHINA: A corruption scandal involving a sacked vice-mayor of Beijing who allegedly took backhanders in exchange for billion-dollar Olympic Games real estate deals, widened to include a top property developer yesterday and also earned the attention of senior Communist Party leaders.
Liu Zhihua (57), responsible for the 2008 Project Construction HQ Office, which includes planning and awarding €32 billion worth of projects to upgrade infrastructure ahead of the 2008 Olympic Games, was sacked from his job and detained earlier this month.
The decision to fire Mr Liu is believed to have come from the top of the government, as part of efforts to be seen to be tough on graft ahead of the 2008 Olympics.
China has promised the preparations, including everything from bidding to the construction process itself, would be squeaky clean. The Beijing Olympic Games Organising Committee (Bocog) was swift to distance itself from the scandal, saying any bad behaviour by the vice-mayor was nothing to do with them and would not affect the Games.
However, the scandal deepened yesterday with the news that Liu Xiaoguang (no relation), a senior executive of Capital Group, China's sixth biggest real estate company which lists the Dutch bank ING among its joint venture partners, was detained on suspicion of corruption. Shares in the company's property unit, Beijing Capital, dropped by over 2 per cent after his arrest.
It is a fairly constant complaint in foreign business circles about how little transparency there is in the decision-making process on Olympic projects, whether it should fall to Bocog, the 2008 project office or the senior leadership above them.
Liu Zhihua was reportedly fired after a foreign businessman reported him for demanding a bribe, although many business people say it was not so much the bribe that was the problem, it was the way Mr Liu failed to deliver on the promise that caused a problem.
At the heart of the matter lies a parcel of land just west of the Olympic venue. A foreign property developer won the right to develop the land, then, out of the blue, the rights were transferred to a Chinese firm which said it now had the rights to develop the site. This annoyed the foreign investor so much that he blew the whistle very publicly and Mr Liu was picked up.
He is accused of corruption, bad morals and "dissolute behaviour". He has been sacked from the Beijing People's Congress, or city council.
Lurid reports of Liu Zhihua's behaviour ran rife. Some said he had built a glass pleasure palace filled with nubile young women paid for with backhanders from foreign businesses keen to cash in on the Olympic Games construction spending spree.
"Liu has more than one mistress. He has a secret pleasure palace for himself to have fun," Hong Kong's Wen Hui Bao newspaper said.
Mr Liu's sacking and the subsequent investigation may also be the opening salvo in an internal power struggle ahead of the 17th Party Congress, which is one of the Communist Party's five-yearly meetings at which key leadership appointments are made.