State-owned enterprise quality projects should not become personal ATMs (continuously enhancing anti-corruption penetration capability)

（Original title: A responsible person at a state-owned hotel group in Nanyang, Henan, designed layer-by-layer “firewalls”; colluded with family members to carry out profit-oriented corruption. How could high-quality state-owned enterprise projects become a personal cash machine? (Continuously enhance the anti-corruption crackdown’s depth of penetration)）

Why did someone send hundreds of millions of yuan to him after he bought a house in Beijing with his son’s money?

Under a 10-year hotel leasing contract, profits were doing well—so why did the contract get terminated suddenly after only a year?

Why has the account holder of a certain bank card been living in Hebei for a long time, yet this card is often used in Zhengzhou?

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Not long ago, a case compiled from these pieces of information was sent to the Discipline Inspection and Supervision Commission of Nanyang City, Henan Province. The leads pointed to the person in charge of a state-owned hotel group in Nanyang—Li Lin, formerly the party secretary. The investigators at Nanyang City’s Discipline Inspection and Supervision Commission then began to unravel the case step by step.

Li Lin’s case involved multiple companies. To evade investigation, Li Lin also deliberately muddied the books of equity disputes, increasing the difficulty of the investigation. Investigators at Nanyang City’s Discipline Inspection and Supervision Commission spent nearly 3 weeks, verifying data point by point—equity transfers, fund loans, interest settlement, and more—before they finally clarified the origin and the full sequence of Li Lin’s violations of discipline and law.

The breakthrough in the case came from a seemingly ordinary home-purchase payment: a person named Chen Rui transferred hundreds of millions of yuan as a home-purchase payment to Li Lin’s son. Following the lead, the investigation team conducted a deeper sweep and found the wealth-management funds in the accounts of Li Lin herself and her relatives, as well as data on multiple properties owned by her and related persons—truth soon emerged.

Investigators discovered that multiple unfamiliar companies had frequent fund transfers with Li Lin’s relatives. Among them, the transfer records of two companies were particularly dense. “These companies have nothing to do with Li Lin, but the funds ultimately flowed into her relatives’ accounts held in their names on her behalf.” Pan Ke, deputy director of the Eighth Examination and Investigation Office of Nanyang City’s Discipline Inspection and Supervision Commission, said.

The source of the suspicious funds pointed to a hospital’s rent payments. Tracing the lead, investigators found a “strange” property.

This property is in Zhengzhou. In 2014, the hotel managed by Li Lin and the owner of this property signed a 10-year lease agreement, stipulating that it would be rented each year to operate a hotel branch. The branch had a great location and good facilities. The investment was recovered in just 10 months, becoming an important profitable outlet for the group. However, only one year later, that branch closed.

So why was that? It turned out that Li Lin found a new “business opportunity”—a hospital also coveted this site and was willing to pay higher rent.

Facing huge profits, Li Lin got a crooked idea. First, she had her brother-in-law, Chen Rui, set up a company, which in practice held the assets on her behalf. Before they formally terminated the lease agreement with the property owner, Li Lin then claimed that her brother-in-law’s company was the entity that took over after the original hotel’s restructuring, so that it could renew the lease at the original rent standards. Next, she then subleased it to this hospital at a price exceeding the original tenant’s rent, with an annual price increase of 4%.

After all these maneuvers, Li Lin became a “sublease intermediary.” What should have been the legitimate revenues of a state-owned hotel flowed, steadily and without interruption, into her own pockets.

During the investigation, Pan Ke also found that Li Lin did not directly collect this rent, but instead withdrew cash through Chen Rui’s bank card.

Ding Ying, an investigator, said that Chen Rui’s bank card was used for cash withdrawals in Zhengzhou for years, but Chen Rui himself rarely left Hebei. Li Lin’s niece’s bank card was frequently used to withdraw money at an ATM at a certain bank. The ATM was only one street away from the residential compound where Li Lin lived. “All kinds of evidence indicate that Li Lin herself was using these bank cards,” Ding Ying said.

Not only did Li Lin arrange for others to hold assets on her behalf; she also “shadow-controlled” the shares of enterprises. A hotel managed by Li Lin successfully won a school’s management and services project. As long as it provided diligent service, the project could deliver stable, decent returns each year. Therefore, it became a “choice target” in her eyes, and she began planning to profit from it.

To achieve private control, Li Lin proposed that the hotel she managed set up a new company to operate the project. Later, Li Lin designated an ordinary employee, Du Yi, who had no ability to invest, to hold 90% of the shares in that company on her behalf, while the hotel she managed would only hold 10% of the shares symbolically. Most of the profits from the 90% shares held by Du Yi were taken into Li Lin’s own pocket. After being packaged, Li Lin placed this high-quality state-owned enterprise project into her personal pocket.

“To people who don’t know the situation, this company looks like a wholly owned subsidiary of a state-owned hotel. In reality, it became Li Lin’s private cash machine.” A member of the investigation team said. After that, Li Lin first arranged for staff to issue false invoices in the names of “consumables,” “salaries,” and so on. After cash withdrawal through parts of the finance personnel’s accounts, she took the money for herself, siphoning out more than tens of millions of yuan.

“‘Bank cards held on behalf’,” “shadow shares”… whether it was taking in money, buying a house, or holding shares, Li Lin hid behind the scenes and hired others to hold things for her. She designed many “firewalls” to try to pull the wool over everyone’s eyes. However, the Discipline Inspection and Supervision Commission of Nanyang City successfully penetrated the multiple layers of disguises—such as equity holding on behalf and embedded investments—so the truth of this new kind of corruption characterized by business-style operations and hidden corruption finally came to light. Ultimately, for violating organizational discipline and integrity-related discipline, and committing the crimes of embezzlement, accepting bribes, and abusing power by personnel of a state-owned enterprise, Li Lin was sentenced by the People’s Court of Wolong District, Nanyang City to concurrent punishment for multiple offenses: 14 years’ fixed-term imprisonment, along with a fine. Meanwhile, the funds involved in her violations of discipline and law were ordered to be recovered.

“These corrupt acts occurred in different periods and were spread across multiple places. Previously, relying on manual verification was like searching for a needle in the sea. Now, with new technology, we can improve investigative efficiency and quickly connect everything into a complete chain of evidence, making the concealed ‘business-style corruption’ impossible to hide,” an investigation team member said.

Although the case investigation has ended, the work did not stop there. The Discipline Inspection and Supervision Commission of Nanyang City carried out in-depth case-based rectification, promoting the group to improve systems and mechanisms such as state-owned asset oversight and restrictions on non-competition for senior managers of state-owned enterprises, achieving the goal of “investigating a case, improving a set of systems, and solving a category of problems.”

（All persons involved in the article are pseudonyms）