Wuhan official tried for investment deception

Former deputy director general of the Wuhan Urban Management Bureau was tried on Tuesday of deceiving the local government and taxpayers of more than 207 million yuan ($34 million), Chutian Metropolis Daily reported.

Zeng Huaisheng, 65, was responsible for attracting foreign investors to a natural gas project in Wuhan, provincial capital of Hubei province.

According to regulations, majority ownership of a project should be in the hands of Chinese investors.

Zeng reached an agreement in 2001 with a Hong Kong company (considered a foreign investor) for a 50-50 shareholding ratio between Chinese mainland investors and the Hong Kong company.

A year later, Zeng asked the Hong Kong company to give up a 1-percent share of the gas project in May 2002 in exchange for the rights to establish a new business in the Chinese mainland.

Zeng kept his deal with the Hong Kong company secret and claimed that the Chinese investor, Wuhan Natural Gas Group, held a 51-percent share of the gas project.

A joint venture company was then founded in March 2003, with Wuhan Natural Gas Group holding a share of 50 percent, the Hong Kong company 49 percent and the third company 1 percent.

The provincial commerce department of Hubei then repealed the foreign investment certificate of the joint venture company after Zeng’s deal was discovered.

The joint venture company got a tax preference of 204 million yuan and the company founded by the Hong Kong side got a bonus of more than 3.19 million, according to the report. The local tax department has recovered the lost invesment.

A verdict in Zeng’s case has yet to be decided.