On March 21, 2018, the anti-bribery watchdog of the Communist Party of China ("CPC") , the local outpost of the Central Commission for Discipline Inspection ("CCDI"), and the local outpost of the State Committee of Supervisory ("Committee") in Yunxi county, Hubei province, announced a “serious” violation of the spirit of the CPC's "Eight Rules" (which is a CPC policy on the prohibitions and restrictions of gifts, entertainments and luxurious activities).  The fired officials are Mr. KE, Yuzhi, the former Deputy Director of the county Environment Protection Bureau and his boss Mr. ZHANG, Liguo, the former Director of the bureau.  On the afternoon of March 22, the CCDI and the Committee held a press conference jointly and announced its investigation result.

On January 14, 2018, during the funeral of Mr. Ke's father, Mr. Ke received RMB 10,500 (US$1,500) of gift money (or condolence comfort money) from 25 colleagues and staff members of the bureau including RMB 500 (US$ 70) from Mr. Zhang.

Mr. Ke was fired because he violated CPC disciplines by taking gift money even if the gift money is in the nature of condolence comfort.  What made it more serious is that Mr. Ke did not tell the truth to the CCDI and the Committee in the first place when facing the investigation.

Mr. Zhang was fired because he personally gave the gift money and failed, as the leader of the bureau, in performing his responsibility of good party governance especially under the Eight Rules.  As the result, his subordinates in the bureau attended the funeral and gave the gift money. 

Hereinafter are some replays that are helpful for us to understand the whole case.

Case replay

"Director, my father just passed away in the county hospital.  I want to ask for a few days off.  I need to go back to Tumen town to run funeral......."  On the afternoon of January 14, 2018, after his father died of illness, Mr. Ke Yuzhi immediately reported the situation to Mr. Zhang Liguo.

"After the promulgation of the Central Committee Eight Rules, there are strict rules on the wedding, funeral and other social events.  It would be too risky to send the money.  But if I don't give the money, I won’t feel good.  After all, we have been working together for a decade……"  Zhang was a little hesitant.

"When the father of a colleague dies, it is very normal to send some comfort gift money according to Chinese culture and social conventions.  Maybe I can just drop by myself after work……"  After struggling, Zhang decided to go and give the gift money.  On January 15, Zhang asked his office to prepare RMB 1,000 (US$ 140) as a gift in the name of the labor union.  And he prepared 500 yuan (US$ 70) as a gift money in his own name.  After work in the afternoon, he went to attend the funeral in Tumen town and gave the money simultaneously.

"During marriages and funerals, it is cultural for colleagues to come by and attend the events.  It should be no big deal……"  With such thoughts, 25 colleagues in the bureau attended the funeral as well and gave Ke RMB 10,500 (US$1,500) in total.  Zhang knew his staff members would go, but did not try to stop them from going.  For the same reason, Ke took the money for granted.

Investigation process

At the end of February 2018, the Committee received whistleblowing tips from the public: the Deputy Director of the Environment Protection Bureau of Yunxi county, Ke Yuzhi, used his father's death to “amass” wealth.  Subsequently, the CCDI and the Committee at the municipal and county level quickly set up a joint investigation team.

"Did you receive money during your father's funeral?"  The investigation team asked Ke.

"I received RMB 10,500 yuan from 25 cadres and staff from the unit.  I thought it was a normal social activity."

"Did you accept any money from the persons in relation to the projects of the bureau?"

"I received RMB 2,000 yuan from the person in charge of the construction of a rural environmental improvement project.  After my father's funeral, I gave it to the financial office of the bureau and asked them to return it to that person."

"Was other money collected refunded?"

"I still haven't refunded RMB 1,500 to other 4 people.  And the rest of the money has been returned after the funeral."

Later then, the investigation team talked one by one with the officials who sent the gifts, and found that Ke Yuzhi began to return some money after learning that there will be an investigation of the whole event. 

After the investigation, the investigation team interviewed Zhang Liguo.  This time Zhang admitted his mistakes voluntarily and told the truth.

"You, as the director, did not try to stop your subordinates from taking action in violation of the Party’s disciplines, and even took the lead in giving gifts.  The influence is very bad.  How do you feel now?"

"I blame myself for my poor awareness of disciplines and rules.  I didn't have a deep understanding of the Party's firm determination to carry out strict party disciplines and went against the 'four winds' (which is another CPC policy on gifts, entertainments and luxury activities)"  Zhang Liguo was remorseful.

Since 2012, the CPC has been putting great effort into the battle against corruption.  With years going by, the CPC's stance against corruption is tougher and tougher as you may see from the case.  As a well-known slogan goes, CPC is not only snaring the "tigers" (those corrupted officials with tremendous influence or in the high position), but is also taking down the "flies" (those officials or cadres with less power and less impact). 

Under this circumstance, MNCs should never underestimate CPC's campaign against corruption and be extremely precautious in dealing with the government relations.  Especially, some activities that would be deemed as normal social conventions might be in conflict with CPC's disciplines or rules.

*The author, Henry Chen, is a senior partner of Dentons Shanghai Office, before which Henry Chen was the AP Compliance Director of Ford Motor Company.  Henry Chen is licensed to practice law in both China and the New York State of the U.S.  Henry is the author of the book Risk Management on Commercial Bribery in China.  Henry is accessible via henry.chen@dentons.cn