No tears are shed when an ex-government official is sentenced to die for
corruption. Indeed, rarely does a condemned criminal elicit even a gram of
public sympathy in China.
Which is why the soul-searching and pleas for mercy for death row inmate Wu
Ying have been so remarkable, and why her unusual court case is shaking the
nation’s perceptions of entrepreneur financing and an enormously popular, but
thinly regulated, private lending sector.
Public opinion, most notably expressed in the blogosphere, has been rallying
behind this young, former millionaire for nearly a year. Leading economists and
legal experts have analyzed her case at length. Scholarly seminars have focused
on the broad implications of her conviction and unexpected — some say
undeserved — death sentence.
Lawyers across the country have called Wu, 31, a victim of grave judicial
error. A few have even boldly criticized the highest court in Zhejiang Province
for upholding her sentence in January following a conviction for “fund-raising
fraud” in the city of Dongyang.
“I am utterly shocked,” said lawyer Tian Wenchang, director of the Beijing law
firm King & Capital, whose attorneys have defended Wu during more than 3 years
of trials. “I think from whatever perspective, there are no grounds for giving
Wu Ying the death penalty.”
Those pleading for leniency include attorney Zhang Sizhi, best known as the
appointed defender of Mao Zedong’s wife Jiang Qing at her Gang of 4 trial in
the 1980s. More recently Zhang, a senior consultant for the law firm WYZL in
Beijing, has defended dissident Wei Jingsheng and sociologist Wang Juntao, who
advised students during the 1989 Tiananmen Square incident.
In an open letter Jan. 25 addressed to an official who oversees criminal trials
at the Supreme People’s Court, the nation’s highest court, Zhang argued that
evidence presented by prosecutors at Wu’s trial indicates she did nothing to
deserve capital punishment.
Furthermore, Zhang has urged the judiciary to carefully consider the case in
light of its potential impact on private lending systems, through which
companies and individuals across China provide crucial, albeit risky and
sometimes costly financing for one another beyond the official banking system.
“The result for Wu Ying will have a demonstrative effect on China’s private
financing system, which is worth trillions of yuan,” he wrote. “A high degree
of legal wisdom is needed for this decision.”
Another Wu’s supporter is Zhang Weiying, formerly a dean at Peking University’s
Guanghua School of Management. He bluntly declared at a national entrepreneurs’
conference in February that “Wu’s death penalty is a setback for the cause of
reform in China.
“Judging from this case, how far are we from the market economy?” he asked
rhetorically. “At least 300 years.”
Wu, who’s been jailed since before turning 26 years old in 2007, was once
ranked by China wealth analyst Hurun Research Institute as the nation’s 6th
richest woman. She made her money by arranging high-interest financing for
small businesses in Dongyang. Hers was one of likely tens of thousands of
private lending networks operating to supplement the formal, regulated
financial service providers in China.
Sometimes compared to an underground banking system, the private lending
network likes wealthy people or entrepreneurs with excess cash to businesses
that find it difficult to borrow from state-owned banks. These are tight
networks that can mutually benefit, or ruin, all the players. Interest rates
can range from 14% to 70%.
The collapse of a single debt-ridden company that can’t repay a private lender,
can ripple through an entire credit-connected community.
Figures on the extent of this networking are imprecise, but some peg private
lending at about 4 trillion yuan ($636 billion) nationwide. In the city of
Wenzhou — 200 kilometers from Dangyang — as much as 20% of all credit may be
involved. Last July, the central bank’s Wenzhou branch estimated total area
private lending at 110 billion yuan, with 89% of local residents and 60% of
Unofficial borrowing surged in recent years after banks responded to government
orders to cool the economy by restricting loans to all but major enterprises.
Entrepreneurial Zhejiang has been a hotspot for businesses such as Wu’s.
Wu was arrested in February 2007 but had to wait until April 2009 for her trial
to begin. The Dongyang prosecutor initially charged her with “illegally
soliciting private funds,” which carries a maximum sentence of 10 years in
prison, and “contract fraud.”
The case was later transferred to a higher level prosecutor in the nearby city
of Jinhua, and the charge was changed to “fund-raising fraud” — which is
punishable by death — before the trial got under way in Jinhua Intermediate
According to prosecutors, Wu used promises of high returns to illegally lure 11
individual investors to contribute a combined 770 million yuan between May 2005
and early 2007. At the center of the alleged fraud was a property dispute
between Wu and one of her major creditor-investors Yang Zhiang over her Bense
Group, a consortium of hotel, logistics, retail furniture and car rental
concerns that was her chief source of wealth.
Most funds raised from each investor went toward paying off earlier investors
with interest as well as real estate, prosecutors said. Wu also enjoyed a
lavish lifestyle and luxury cars, the prosecution told the court, implying that
her wealth had been ill-gotten.
According to Jinhua prosecutors, Wu launched Bense in April 2006 after getting
rich by illegally tapping 14 million yuan in public funds and charging sky-high
interest rates — from 0.35% daily to 80% quarterly — from borrowers.
Wu allegedly registered multiple companies that had no operations. Even while
fully aware of her indebtedness, she continued borrowing to buy properties,
invest and even donate to charity organizations in an attempt to convince the
public that her financial status was sound.
Wu was accused of illegally skimming about 360 million yuan and piling up a 14
million yuan investment loss. Prosecutors said she spent 200 million yuan on
cars, 40 million yuan on dresses, watches and cosmetics, and another 60 million
yuan on recreational activities.
Prosecutors argued that Wu’s fraud upset the nation’s financial order as well
as the personal interests of many.
Wu’s defense attorneys including Beijing lawyer Yang Zhaodong passionately
refuted the charges, claiming her borrowing from her lending network’s scammed
no one. Each of the 11 people who loaned money to Wu and called a fraud victim
by prosecutors were either a friend or relative, the defense said, and had no
qualms about how their money was handled.
Most of the money raised by Wu was spent on expanding her business empire, the
defense argued. Her attorneys also claimed she did not publicly solicit funds,
as prohibited by law, nor use fraudulent promotions to drum up business.
Wrapping up arguments for a conviction, the chief prosecutor stopped short of
calling for the death penalty, yet said Wu’s activity posed a financial threat
that could have national impact, and thus warranted harsh punishment.
“Wu’s scamming involved an extremely large amount of money and brought huge
losses to the nation and people,” prosecutors Lu Yanxiu and Xu Da told the
Jinhua court. “For her severe crimes she should be severely punished.”
(source: Market Watch)