By staff reporter Luo Changping

An imposing government building in one of the least developed cities in Hunan Province stands as a visible reminder of extravagant overspending by more than a dozen local officials nabbed in a corruption scandal.

The so-called “white house” of Loudi, a six-story edifice with a grand dome, is at the center of court hearings that recently got under way.

The Loudi story also points to widespread problems tied to “image” construction projects by local governments across China – an issue that the country’s central authorities have tried to control since 2007.

The Loudi city government office building opened in 2006 at a cost of about 500 million yuan, but its glory days ended just a year later, when the government’s then-secretary general Shen Qinghua was detained by Communist Party investigators. He was charged with sloppy management of city finances and an urban construction fund, as well as problems tied to the relocation of the city government to new offices.

Shen’s case led to further investigations and ousters of other government officials and functionaries. These included Xie Wensheng, a former member of the local party’s standing committee, and several other officials accused of corruption, bribery and booty transfer. To date, 26 people have been charged in 18 cases involving more than 20 million yuan.

Relocation and Rent-Seeking

By relocating government offices to the new building on Loudi’s south side, officials hoped to encourage development of a surrounding area covering about 5.5 square kilometers.

The plan unveiled in 2002 called for building the new government office together with support facilities worth nearly 1.5 billion yuan, including roads, community buildings and a fire station. The city opened a temporary agency to oversee the relocation process with 18 staff members from key city departments, including Shen and Xie.

Caijing learned that the entire staff – excluding only the office driver – has come under scrutiny as part of the corruption probe.

Shen’s indictment shed some light on the malfeasance. It said he and accomplices received a 1 million yuan cash bribe, of which 370,000 yuan went directly into Shen’s pocket. He also accepted a separate bribe exceeding 1.84 million yuan.

At the time, Shen was serving as city secretary general and head of the relocation office. More than 90 percent of the money he accepted was directly related to the relocation project, while the rest was paid by related business owners in holiday cash and gifts.

Shen has not disputed the amounts of the alleged bribes, all of which was repaid. Prosecutors charged him with 10 counts of bribery.

Stuffing Shen’s Pockets

Shen helped his hometown friend Hu Guojun to win several contracts for the main construction of the new building between 2002 and ’07. For the favor, Hu paid Shen 344,000 yuan.

Shen also received four bribes totaling 548,000 yuan in July 2003 from Chen Longji, manager of the Hunan Miluo South Stone Decoration Co. Chen’s firm won a 13 million yuan contract to build a 40,000 square-meter wall at the office complex, the indictment said.

Chen’s company had been investigated by a provincial supervisory office for operating without a license, but Shen smoothed the way by issuing an official guarantee backing the contractor.

The office project provided several other lucrative opportunities for rent-seeking. The construction of Central Hunan Avenue was greased after Shen and Xie received 1 million yuan in January 2003 from Qiao Yonghe, owner of the China Road and Bridge Corp. First Engineering Bureau, Tianjin Office. Also as part of the illicit deal, Shen received four payments totaled 370,000 yuan.

In addition, Liu Xiaofeng of Lengshuijiang City Mining Construction Engineering Co. and Ning Yonghu of the Liuyang Jianxi Gardening Co., which won the landscaping contract for Central Hunan Avenue, gave Shen 240,000 yuan and 173,000 yuan, respectively.

Too Extravagant

The Loudi finance bureau said construction of the new building, which provided space for 30 agencies and about 50 square meters per staffer, cost about 4,200 yuan per square meter, or some 500 million yuan.

But on paper, the Loudi government’s official bill was only 30 million yuan, leaving the rest of the project’s budgeted money for developers. Indeed, development was spurred by the expropriation of around 2 million square meters of farmland in the project area.

Moreover, the transactions were not approved by the Hunan provincial finance department, said a department official.

The Loudi case is not alone. According to China’s Ministry of Construction, “image building” was a factor in about 20 percent of the urban construction projects launched in 662 cities and 20,000 small towns nationwide. Such projects typically involved broad roads, large public squares or extravagant office buildings. These include government buildings in the Yingquan district of Fuyang, a city in Anhui Province, and in the Huiji district of Zhengzhou.

Extravagant projects such as these led to the demise of many government officials. In January 2007, for example, Huiji’s ex-chief Feng Liucheng was sentenced to life in prison for accepting more than 6.7 million yuan in bribes. Similarly, Yingquan’s chief came under investigation and was suspended in June.

Ren Jianming, deputy director of the Anti-Corruption and Governance Research Center at Tsinghua University, said a wave of extravagant government building projects since 2002 is directly linked to standardization of government income and expenditures. Now “gray income” has nowhere to go, prompting some departments to pay for new government buildings and office equipment.

The issue was addressed in a document released by the party’s Central Committee and State Council in March 2007. That led to more oversight of government buildings and facilities while, at the same time, investigations of fund embezzlement, borrowing, endowments and construction costs dating to January 2005.

The document linked extravagant government building projects to abuse of power. Liu Xirong, vice secretary of the Central Committee for Discipline Inspection, said defining irregularities in government building construction as corruption has helped party members and leaders grasp the gravity of the problem, so they can voluntarily prevent the phenomenon.

But it’s too late for Loudi, where shabby homes and schools stand near the government’s new, grandiose building.

A local farmer who lost his land in the project told Caijing that he has applied for permission to attend the trials of Shen and others in Loudi Intermediate Court. His application is pending.