By staff reporters Ling Huawei, Li Qiyan and Yuan Mei, intern GaoWa and special Hong Kong correspondent Long Xueqing

Qin Hui, 37, controls a media empire, but is best known for his fashionable nightclubs and extravagant lifestyle.

The billionaire owns the most notorious nightclub in Beijing, "Paradise" (tianshang renjian), in the five-star Beijing Great Wall Sheraton Hotel.

Among frequents of the city’s night life, the club has long enjoyed a reputation for its high-priced VIP services and rooms full of beautiful girls. In 2003, Qin bought a luxury Bentley 728 priced at 8.88 million yuan (US＄ 1.07 million) at the Beijing car exhibition.

Neither, however, is what makes him hit recent headlines in the press. On April 11, he was taken into custody by Beijing police. No official announcement has been made on what led to his arrest, but police sources close to the case tell Caijing that he was arrested for suspicion of bribery.

His arrest, sources say, is due to his shady ties with Zhang Enzhao, the former China Construction Bank (CCB) chairman who resigned in March and was reportedly arrested for suspicion of receiving bribery.

Qin’s first successful business came in international trade. From an ordinary family in Da County,Sichuan, Qin worked in Guangzhou and Hong Kong after graduating from college in 1989. In 1994, he registered firm that imported iron ore, bringing in large profits.

After this initial venture, Qin opened "Paradise" in downtown Beijing, which brought him returns more valuable than money. Catering to rich businessmen and people in power, the nightclub helped him develop important business and underworld relationships and political ties.

In June 2000, he established the Zhuojing Investment Holding Limited to purchase listed companies. He first controlled A-share Changfeng Communication Group (000892), holding 26.61 percent of its stocks. In September 2003, the two parties joined hands to establish the Stellar Digital Content Center Co. Ltd. (SDC), later renamed Youtong Digital Media Co. Ltd. The company started with a registered capital of 400 million yuan (US＄ 48.2 million),with Changfeng providing 40 percent of the money.

Last February, Qin purchased 25 percent of the A-share Hunan Computer Co. Ltd. (000748) stock worth 380 million yuan (US＄ 45.8 million). However, before the deal finished, Qin had managed to "borrow" 90 million yuan (US＄ 10.8 million) from the company. After this was revealed, Hunan Computers immediately broke off the proposed deal.

While expanding his businesses in the mainland, Qin purchased shares in Hong Kong through the Strategic Media International (SMI), a company he registered in the British Virgin Islands in 2003. Within a year, he controlled three listed companies in Hong Kong, including Star East Holdings Ltd. (0198), Mobile Media Holdings Ltd. (8036), and Leadership Publishing Holdings Ltd. (8010). Star East and Leadership Publishing were later renamed SMI Corp and SMI Publishing. Qin also acquired 70 percent of shares in Hong Kong-based Sun TV, which belongs to the listed Sun Media Group Holdings (0307).

What Qin has bought are not profitable assets. They often register huge amounts of losses. In 2003, for example, Star East reported a loss of 76.68 million yuan (US＄ 9.2 million).

Qin sought to manipulate these companies’ stock prices through several brokerage firms. A director from a Hong Kong brokerage firm who declined to be named told Caijing that at the end of 2003, Qin contacted the company and expressed interest in jointly speculating on Star East.

"He wants to repeat his [low-price] maneuvers in the mainland market, but this time in Hong Kong. He would need at least 20 million yuan (US＄ 2.4 million) to control the price of the firm." Due to financial restraints, Qin was unable to execute the plan.

Analysts say market manipulation was beyond Qin抯 abilities.Insiders told Caijing that he spent up to HK＄100 million (US＄12.8 million) to purchase the Star East stock. "It is a bit strange since other people could have bought it for a mere HK＄10 million (US＄ 1.28 million)," said the anonymous brokerage firm manager.

Leadership Publishing was another example of Qin’s poor record of financial maneuvers. The group, which owns the Sing Pao Daily, has gone from bad to worse after Qin took control. Insiders told Caijing that the newspaper’s financial losses soared from HK＄ 40 million (US ＄5.1 million) before SMI stepped in to the current HK＄ 140 million (US＄ 16.9 million). If the situation does not improve, the group including the Sing Pao Daily, may go into bankruptcy before the end of May, analysts say.

Qin has not profited from his expansion into Hong Kong. He earned about HK＄ 22 million (US＄ 2.8 million) from SMI Corp’s stock issue lastFebruary, the only issue any of his companies have ever attempted. His previous investment in the four Hong Kong companies cost him HK＄ 400 million (US＄ 51 million). Sun TV has registered a loss of more than HK＄30 million (US＄3.6 million).

Qin has had to lay off a large number of employees and defaulted on salaries to reduce operational costs.

His only return from the Sun TV involved an illegal deal between the Tidetime Sun Group Limited, formerly the Sun Media, and Youtong Digital Media. In September 2003, Qin smuggled TV equipment, which the Tidetime Sun had bought at US＄3 million, to the mainland and sold it to Youtong at 100 million yuan (US＄ 12 million). According to Hong Kong laws, the deal involved the illegal sale of listed corporate assets. Sources say related parties have reported the transaction to Hong Kong’s Independent Commission Against Corruption.

Given the poor price to earning ratio of Qin’s companies, analysts generally do not care about their performance. Wu Weike, an analyst from Bank of China International, said investors know little about Qin. "Most of his acquaintances are from the entertainment industry."

Qin’s acquaintances are not limited to the entertainment industry, but also include bankers. In 2002, he met Zhang Enzhao, who, insiders say, helped him secure large bank loans.

Caijing’s investigation shows Qin has been granted 900 million yuan (US＄ 108.4 million) worth of loans from CCB and Minsheng Bank.

Sources close to Qin told Caijing that he received 600 million yuan (US＄72.3 million) worth of loans from CCB in 2002. The loans, which were to "support new media development," were approved by Zhang.

Li Wei, chairman of Stellar Media, a company controlled by Qin, told Caijing the loans areguaranteed by Qin’s properties, including an apartment-hotel building in Shanghai, a floor Qin had purchased from a downtown Beijing office building, as well as a film-production base in a Beijing suburb.

Rumors have it that Qin gave Zhang more than US＄1 million in kickbacks for approving the loan. Caijing has been unable to verify this.