Bribery Paves Way for Fraudulent Scheme at China’s State-Run Gold Mining Company

By Frank Fang
Frank Fang
Frank Fang
Frank Fang is a Taiwan-based journalist. He covers news in China and Taiwan. He holds a master's degree in materials science from Tsinghua University in Taiwan.
November 26, 2017 Updated: November 26, 2017

In Liaoning Province, a gold mine with about 0.2 tons of gold reserves was sold to a state-run gold company at a price equivalent to seven tons.

On Nov. 21, China’s state-run newspaper, the Procuratorial Daily announced the partial result of an ongoing corruption investigation into four entities: the state-run mining company, China National Gold Group Company, and its Liaoning Province firm, the gold bureau of the Liaoning provincial government, a geology team under the purview of the Liaoning authorities, and the Jintai-Hongqi Gold Mine and its former owners.

The corruption came to light after the Jintai-Hongqi Gold Mine was depleted in May 2013 after just 0.2 tons of gold were extracted. The Liaoning geology team had made an evaluation that the mine, located in Jianchang County in the province’s southwestern corner, contained a reserve of seven tons.

An investigation by the Liaoning prosecutor’s office discovered that private owners of the Jintai-Hongqi Gold Mine had bribed officials at the province’s gold bureau, officials in charge of the geology team, and top executives at China National Gold Group Company, in order to sell the mine at an inflated price with an overestimated gold reserve study. Li Wei and Guo Yuru, the owners of the gold mine, sold it to the state-run company at 360 million yuan (about $54.5 million) in January 2012.

To make the transaction possible, Li first paid 20,000 yuan (roughly $3,031) in bribes to Zhang Fuhe, a section director at the geology team, who led the evaluation study of the gold mine in 2009. Zhang, in return, ordered his engineers not to go into the mine themselves, but had them pick up ore from the mine every two or three days.

What Zhang’s engineers picked up was ore that been sprinkled with gold dust by Li, a trick that allowed the ore to show a higher gold yield when tested in the laboratory.

Epoch Times Photo
A craftsman displays a gold bar etched with a rat pattern, at a workshop in Chongqing City, China, on February 2, 2008. (China Photos/Getty Images)

To silence anyone who might become suspicious of the adulterated ore study results, Li also paid 20,000 yuan each to the technician who wrote the evaluation study; Qi Hong, director of the 11th geology team; and Ding Yan, the deputy chief engineer.

Further investigation revealed that the Liaoning firm did not have the final say in its acquisition of the gold mine. Rather, the final decision came from the parent company, China National Gold Group Company, and Sun Zhaoxue, the company’s former CEO, who had accepted a bribe of 11.5 million yuan (about $1.7 million) from Li.

Sun, after learning that the prosecutor’s office had launched an anti-corruption investigation, asked Li to prepare 10 million yuan (about $1.5 million) in bribes to himself, money Sun would use to bribe other officials to stop the investigation.

The sale also required approval from the Liaoning gold bureau. The investigation uncovered that Mr. Wang and Mr. Liu, the bureau’s former director and deputy director, had accepted a bribe of 9 million yuan (about $1.36 million) from Li.

Sun, after being placed under investigation in September 2014 by the Central Commission of Discipline Inspection, the Chinese Communist Party’s main anti-corruption watchdog, was sentenced to 16 years imprisonment on bribery charges in December 2016. His assets, worth 3.5 million yuan (about $530,206), were also confiscated.

In February this year, Li was sentenced to a two-year prison term and a fine of 15 million yuan (about $2.27 million); 34 additional suspects are being investigated.

On Weibo, China’s popular microblogging service, some have reacted with outrage, while others have taken the news as something to be expected.

One netizen from Anhui Province decided to take a jab at Sun, writing, “He got 11.5 million yuan in bribes, and 3.5 million was confiscated from him…I don’t understand. So does that mean the remaining 8 million yuan is for his retirement fund?”

A netizen with the moniker “SoLetitrain” from Shandong Province wrote, “Everyone, do not panic. This is China.”

A netizen from Shanxi Province wrote, “Hahaha, news like this actually happens at many different places everyday. They only got unlucky this time and were caught. Those who haven’t been caught have become very rich.”

Frank Fang
Frank Fang is a Taiwan-based journalist. He covers news in China and Taiwan. He holds a master's degree in materials science from Tsinghua University in Taiwan.