Chinese Businessman Charged as ‘Gang Leader’ After $1 Billion Corruption Arrest

Businessman Chen Hongzhi was recognized as an "outstanding entrepreneur" and appointed to a local legislature in Lüliang, Shanxi Province, before his arrest on July 24. He is accused of corruption and being a "gang leader." (Famous Chinese Net)

Authorities in northern China’s Shanxi Province have charged one of the region’s wealthiest men with being a “gang leader,” according to local reports.

The accusation comes over a month after the July arrest of Chen Hongzhi, who provincial authorities had previously lauded for his achievements.

Owning more than $1 billion in assets, Chen, 43, runs a coal company, Lingzhi Conglomerate, which employs more than 6,000 people at four coal mines, as well as four coal wash plants, a middle school, a printing press, a luxury hotel, and a shopping mall.

Chen, with the support of Shanxi authorities, had a seat in a local People’s Congress (a rubber-stamp legislature) in the city of Lüliang in the western part of the province. In 2006, the provincial government hailed him as an “outstanding entrepreneur” and “advanced individual in social poverty alleviation.”

But on July 24, police arrested Chen after—according to state media—a series of criminal complaints, and raided his properties in the days that followed.

According to reports, the provincial government assigned the task of investigating and arresting Chen to police in Changzhi, a city east of Lüliang, which avoided using law enforcement personnel within Chen’s network of patronage.

On Aug. 28, Changzhi police announced they had seized 7.84 billion yuan (about $1.15 billion) worth of ill-gotten assets from Chen, including 341 houses and other properties in Beijing, Taiyuan (the capital of Shanxi), and other cities.

State media described police investigators as “shocked” by Chen’s opulence, including the discovery of gold nuggets, luxury watches, and a 714-piece collection of valuable chinaware, famous wines, paintings and calligraphy, and gemstones such as jade.

He faces life imprisonment.

The charge that Chen is a “gang leader” is because of the existence of his company’s 300-man security team, as reported by various state media. According to reports, most of the staff in these security details were “loafers” and “idlers.” Chen would bail out his staff if they were arrested for using violence, and continue to pay their salaries while they served their sentences.

Chinese officials and businessmen are often linked to organized crime. Gangs can help legitimate institutions do dirty work, in return for the right to operate hotels, clubs, and construction companies.

“Normally, gangs in China receive undercover protection from public authorities. The reason for this is the lack of law in some fields,” Hu Xingdou, a Chinese professor of economics, said in an interview with Voice of America. “The corruption of public authority is the source of these gangs.”

The police followed up Chen’s arrest with a wanted list that identified more than 10 officials, including the head of a local court, a local police chief, police instructor, village-level Communist Party secretary, and others.