Chen Liangyu - Pension Scandal, Dismissal, and Conviction

Pension Scandal, Dismissal, and Conviction

Further information: Shanghai pension scandal

In August 2006, Qin Yu, one of Chen's top aides, was abruptly dismissed from his position as Baoshan District governor, and arrested. Qin was charged with the misappropriation of $400 million of the city's pension funds. The city's social security coffers managed more than 10 billion yuan (US$1.25 billion) in assets. Instead of investing the money in low-risk government bonds and bank deposits, it was invested in expensive real estate and toll road projects around the city. It was suspected that the city's top leadership figures, including Chen, could be implicated in the scandal.

During Chen's term as party chief, he routinely pursued policies that drew friction from the party's central leadership and the policies of General Secretary Hu Jintao. Hu's government favoured balanced regional economic development and feared social divisions resulting from a widening wealth gap, and thus attempted to rein in regional leaders who wanted to pursue rapid economic development which they viewed as overtly favoring regional economic interests. Chen reportedly clashed with Premier Wen Jiabao openly at a Politburo meeting in Beijing over the issue of economic development, indicating that Chen believed the Premier was standing in the way of China's economic development. Chen's statements at municipal meetings also charted a new independent course; Chen opposed the Communist Party's long-held convention that "Marxism serves as the guiding scientific principle." Rather, Chen claimed to rely upon "all forms of science" – signaling he was at odds with the Communist Party's orthodoxy.

On September 25, citing alleged involvement in the pension scandal, Chen was dismissed as Shanghai party chief and suspended from his membership in the party's Central Committee and its Politburo. A team composed of some one hundred investigators from central authorities in Beijing was sent to Shanghai to investigate. Two days before his dismissal, Chen and mayor Han Zheng went to Beijing to meet with Hu Jintao. There Chen was detained, and only Han returned to Shanghai. The authorities carefully managed the transfer of authority in Shanghai. On the day of Chen's dismissal, Han Zheng returned to Shanghai at 3 am and called an official meeting to deliver Beijing's decision that Chen was suspended because of the scandal and that Han himself was assuming the post of acting party chief. Chen was charged with "helping further the economic interests of illegal business people", "protecting staff who severely violated laws and discipline" and "furthering the interests of family members by taking advantage of his official posts."

There was also indication that Chen's sacking occurred for political reasons; Chen was not the only Chinese official who had a history of misusing public funds. Chen was a protégé of former General Secretary Jiang Zemin and a senior member of the Shanghai Clique. In carving out a local fiefdom for himself and willing to boldly deviate from the party's official economic policies, Chen was seen as a serious rival to General Secretary Hu Jintao, and his dismissal was interpreted as a political victory for Hu. Chen was the highest-ranking Chinese official to be fired since former Beijing party secretary Chen Xitong (no relation) was sentenced to 16 years in prison in 1995 (released on medical parole in 2006). The Shanghai pension scandal also led to the dismissal of the chief of the Municipal Labour and Social Security Bureau Zhu Junyi, and the downfall of several prominent businessmen, the executives of Shanghai's biggest industrial conglomerate, and other city officials.

In July 2007, Chen was expelled from the Communist Party, and his case was transferred to judicial authorities. In comparison to the judicial action against Chen Xitong, Chen's case proceeded at a much faster pace. During the investigation, Chen was placed under house arrest in Qinhuangdao, where he lived in a mansion, and spent most of his time playing cards and reading, ordering his meals from menus. Thereafter, Chen was transferred to Qincheng Penitentiary in Beijing.

Chen's trial began in late March 2008. He was represented by Beijing lawyers Gao Zicheng and Liu Limu. He faced three charges: embezzlement, misuse of official powers, and behavior incompatible with his office. Chen acknowledged that he was "partially responsible" for the pension fund scandal, but pleaded 'not guilty' to the charges. However, he was found guilty by the court. At the end of the court session on March 25, Chen stated "I am sorry to the party, the people of Shanghai, and my family". On April 11, 2008, Chen, 61, was sentenced to 18 years in prison for accepting $340,000 in bribes and abusing power, specifically, for stock manipulation, financial fraud and his role in the city pension fund scandal, at the No. 2 Intermediate People’s Court, Tianjin.