By staff reporter Yang Haipeng

Wearing a casual shirt and an indifferent expression, Kang Huijun calmly waved to the family members who recently gathered at the Shanghai No. 1 Intermediate People’s Court. His pale wife, Wang Xiaoqin, stood nearby and sobbed.

Kang, formerly a high official for Shanghai’s Pudong New Area, stood trial with his wife September 23 for allegedly engineering illicit property deals and lining their pockets with millions of yuan in bribes.

Kang, 51, is charged with accepting nearly 6 million yuan in bribes and illegally owning property worth more than 11 million yuan. Wang is charged with accepting nearly 1 million yuan in bribes. A court decision is pending.
 

Such cases are not uncommon in China; many top officials own expensive apartments that, based on their incomes, they should not be able to afford. Indeed, Kang is one of several officials in Shanghai targeted by government investigators in recent years for buying apartments at below-market prices while illegally colluding with real estate interests.

What sets Kang and Wang apart, however, is the size and scope of their deal-cutting. Evidence submitted at the court hearing indicated the couple, for many years, bought high-priced apartments from developers at low rates, and then sold or rented them at market prices. The profits were huge. The total market value of their apartments reached 40 million yuan, while their other assets, including stock and cash, was around 30 million yuan.

Kang’s wheeling and dealing was so extensive that he earned the nickname Director of the Housing Deals.

Cheap Apartments

Kang knew the business well. For six years before rising to his most recent post as Pudong New Area deputy director in 2004, Kang was in charge of all major land deals and transactions in the city’s Lujiazui district. He headed Lujiazui Group and the Shanghai Lujiazui Finance and Trade Zone Development Co. Ltd. (SSE: 600663). He also worked for the Shanghai Pudong New Area as director of the Bureau of Economic and Trade starting in 1993.

A native of Shanghai’s Huangpu District, Kang worked in rural Jiangxi Province after graduating from high school in 1975 and returned to his hometown in 1979 to study politics at Shanghai Normal University. After graduating, he worked for the Youth League Committee and the Publicity Division of Shanghai Huangpu District.

A source close to the Shanghai Discipline Inspection Commission said Kang was first suspected of wrongdoing based on a mid-2007 personal property declaration. Inspectors noticed Kang had declared a below-market appraisal for his 300 square meter apartment at the Yanlord Riverside Garden luxury complex in prosperous Lujiazui. Yanlord was developed by Singapore-listed Yanlord Land Group, which priced apartments at about 40,000 yuan per square meter.

Kang allegedly made two deals with Yanlord. As early as 2001, he bought a luxury apartment for 8,300 yuan per square meter at a time when the prevailing market price was between 11,000 and 12,000 yuan per square meter. In 2006, Yanlord bought back the apartment from Kang for 8,300 yuan per square meter and sold him a larger unit – more than 300 square meters – for the same price. The difference between the purchase and market prices was a 4.89 million yuan bribe, according to prosecutors – the largest bribe mentioned in the charges against Kang.

Kang also was accused with helping Yanlord win land development rights for valuable areas of Pudong – parts of blocks SB4-1, 2, 3 and 4 as well as SB5-1 and 2. The charge stemmed from Kang’s work as general manager at Lujiazui Group, which had a preliminary agreement with Yanlord which, for an unknown reason, never closed. At the trial, Kang repeatedly defended himself by claiming he was only following instructions from superiors by giving development rights to Yanlord, and that he never intended to help the developer.

Friendly Gifts

Kang also allegedly received bribes from colleagues and friends in exchange for job offers and other inappropriate help. During 2004 and ’06, Kang helped his former secretary He Wei with employment and awarded a building renovation contract in Pudong to Shanghai Zhongcai Industrial Co., in which He’s wife Chen Luping held shares. In return, He allegedly handed Kang a HK$ 20,000 gift for his 50th birthday in July 2006 and NT$ 30,000 when Kang visited Taiwan in August 2007.

From 1998 to 2004, prosecutors say, Kang used his influence to help former subordinate Huang Xinnong rise to important positions at Lujiazui Group. Huang gave the director a 90,000 yuan gift, and an “insurance premium” of 50,000 yuan in an envelope for the 50th birthday celebration.

In 2001, Kang helped transfer land use rights for three blocks in the city’s Jinhua area – blocks 1-1, 1-2 and 1-3 – that were originally owned by Shanghai Jinli Real Estate. They were transferred to Shanghai Xiangyi Real Estate for the development of Shanghai International Garden complex. The Kangs bought an apartment in the complex in 2006 for a preferential price that included an 88,500 yuan discount. Prosecutors said the discount was a bribe.

In late 2002, Kang helped former classmate Xu Daqing acquire the development rights for a block in Pudong for the Shanghai Dijie Property Co., where Xu served as a director. In return, Xu and his girlfriend Zhou Lili gave 20,000 pounds to help Kang’s son study in Britain between 2003 and ’07. What’s more, Kang borrowed 500,000 yuan from Xu in June 2005 to fix a high-end apartment – an amount that prosecutors called a bribe because he never paid it back.

Xu’s bribery apparently was far more extensive. Wang confessed, for example, that he also handed over about 90,000 pounds of the the 120,000 pounds that the couple’s son spent while in school in Britain.

Another page in Kang’s prosecution casebook is devoted to deals with former classmate Xu Herong. Shortly after his 1993 appointment as Pudong trade bureau director, Kang put Xu in charge of the East Shanghai International Travel Service Co.,  appointing him general manager. Eleven years later, he asked a subsidiary of Lujiazui Group to cooperate East Shanghai in a land development deal. The deal fell through, but Xu didn’t forget to pay back Kang. He promised to buy for all China-Britain travel tickets for Kang’s son. Xu then started giving the couple US$ 4,000 every New Year for their son.

Wealth Accumulation

What’s even more shocking is the way the Kangs accumulated wealth. A Powerpoint show in court broke down Kang’s seized property into four parts. The first part consisted of 16 apartments Kang bought with 14 million yuan using relatives’ names in high-end residential areas such as Yanlord Riverside, Lujiazui Garden, Hanhe Yuan, Wonderful World Town, International Lidu City, and Consul Garden. According to a conservative estimate, the combined market value of these apartments is at least 40 million yuan.

The second part of Kang’s wealth consists of deposits in multiple currencies in four banks worth more than 4.5 million yuan. The third part consists of 14.1 million yuan in stock in Wang’s six accounts. Wang admitted to owning another account under her brother’s name.

The couple’s treasure chest also includes an unaccounted-for11.84 million yuan. Kang said Wang was in charge of the family’s finances, and that he knew little about this extra cash. Later, Wang disclosed she had made money in other ways, such as stocks, bonds, funds, apartment deals and rentals, as well as through lending.

The couple handled transactions involving more than 20 apartments and paid more than 500,000 yuan in taxes, 1 million yuan for apartment outfitting, and 1 million yuan in personal income taxes. According to the prosecution, they earned more than 1.33 million yuan through home rentals and 5 million yuan via home transactions. In addition, Wang earned more than 7 million yuan from stock investments and earned up to 6.29 million yuan as an employee of an insurance company – far more than her husband’s 3.35 million yuan paycheck for his years at Lujiazui Group.

The couple’s other income is no less complicated. It includes interest from loans to friends, including borrowers such as the listed company Jielong Industries, and dividends from investment to companies such as Guangyang Group. Kang also admitted that, as director for more than 20 subsidiaries of Lujiazui Group, he was paid several thousand yuan at every board meeting. For example, the subsidiary Fudu Real Estate Co. once paid him 80,000 yuan as a director’s allowance.

Kang said never intended to withhold information about the huge wealth. Indeed, he has openly confessed a wide range of details about the couple’s finances. Prosecutors, however, have concluded that much of the property was illegally obtained through bribes.

1 yuan = 14 U.S. cents