Cheng’s line of argument won him an acquittal in a lower court in February (the high court is hearing similar but separate charges). But it’s rare if not unprecedented to hear the PLA accused in open court.
Since Chinese President Jiang Zemin ordered the military to abandon its myriad business dealings in 1998, the PLA has by and large divested itself of retail businesses. When officers have been suspected of crooked activities, they have often been able to escape before being arrested: executives of 32 PLA-related companies–all of them officers with the rank of major-general or higher–have fled China since 1998.
The few who have actually been brought to trial on the mainland have been disciplined in secret: unbeknown to many, the former head of Army intelligence, Maj. Gen. Ji Shengde, was removed from his post more than a year ago, not because of his involvement in a U.S. campaign-finance scandal (he allegedly donated $300,000 to former U.S. president Bill Clinton’s re-election effort) but because he was fingered in a multibillion-dollar smuggling scandal in Xiamen. A secret military tribunal sentenced him to 15 years in prison last year. “No significant military personality has been tried publicly on the mainland for this sort of crime,” says Rand Corporation Sinologist James Mulvenon, whose recent book “Soldiers of Fortune” examines the sprawling Chinese military business empire from 1978 to 1998.
Nor have representatives of PRC organizations–military or otherwise–usually been brought to court for economic crimes in Hong Kong until recently. When the territory’s highly regarded Independent Commission Against Corruption (ICAC) plans to detain an employee with a mainland company, officials are first required to notify his or her employers. In the past, suspects have been whisked away before being arrested. “All along, suspected offenders were moved back to the mainland in order to avoid conviction,” says James To, chairman of the Security Panel of Hong Kong’s Legislative Council. “The ICAC was always furious, but it couldn’t do a thing.”
Cheng may have been left behind because he didn’t seem to be a threat to the PLA. Arrested by ICAC investigators in January of last year along with three other suspects, Cheng originally claimed to be working on his own and insisted that his business–importing cold-rolled steel and telephonic equipment–had been “delinked” from the PLA. The prosecution claims the company’s transactions were fraudulent, aimed at obtaining letters of credit from Hong Kong banks, which were then converted to cash. Subsequently, one of Cheng’s colleagues hanged himself in his cell with a blanket, according to local news reports. The ICAC says his wife jumped bail. The fourth suspect, a 30-year-old clerk named Chiu Hoi-yin, now sits meekly next to Cheng in the dock. In his earlier trial, Cheng argued that it was only after realizing that his former compatriots were not going to rescue him that he decided to come clean and implicate the Chinese military. (His defense in the high court is expected to begin this week.) Although on paper he had to resign from the PLA as part of the divestiture campaign, he now says he still thought of himself as working for the military, importing merchandise for the PLA.
Cheng’s case also reflects a growing assertiveness on the part of Hong Kong courts. In the past three years investigators have brought at least five major corruption cases against Hong Kong-based mainland executives. Last year the deputy manager of the prestigious Bank of China in Hong Kong was sentenced to nearly three years for corruption. This year several of the Hong Kong-based directors of China Travel face similar charges. Cheng’s company, Createx, belongs to the Southern Industrial & Trading General Corp. (Nam Fung), widely recognized as the commercial arm of the Guangdong-area military command. “The atmosphere has definitely changed,” says Daniel Li, the ICAC’s director of investigations. “Otherwise we couldn’t have cases like this in the Hong Kong courts.”
That leeway may not be coincidental: some local reformers think Beijing may hope to use the Hong Kong courts to prosecute cases that are too sensitive to handle on the mainland. “Jiang Zemin and his clique are very adamant about trying to get the PLA out of business,” says a mainland investment banker in Hong Kong who advises the leadership. “They hope the ICAC can get involved in cases like this one to shake up the [military] institution.” James To says reformist officials on the mainland have made clear to him that they wouldn’t mind if Hong Kong investigators went after a few more suspects.
Unfortunately, Beijing’s crackdown may already have riled the PLA too much. Top brass, says Mulvenon, are increasingly “resentful that civilian leaders feel the need to enforce corruption campaigns from the outside, rather than having the military police itself.” Already sensitive about having lost the income from its business empire, the PLA doesn’t fancy losing its reputation among ordinary Chinese as well. If more trials follow, the PLA might begin to feel as hemmed in as the isolated and bewildered Cheng.
