Query over Wen's role in relatives' investment
Date November 26, 2012
China's Premier Wen Jiabao. Photo: AP
SHENZHEN, China: The head of a financially troubled insurer was pushing Chinese officials to relax rules that required breaking up the company in the aftermath of the Asian financial crisis.
The survival of Ping An Insurance was at stake, officials were told in 1999. Direct appeals were made to the vice premier at the time, Wen Jiabao, as well as the then head of China's central bank - two powerful officials with oversight of the industry.
''I humbly request that the vice premier lead and co-ordinate the matter from a higher level,'' the chairman of Ping An, Ma Mingzhe, implored in a letter to Mr Wen reviewed by The New York Times.
Ping An was not broken up. The successful outcome of the lobbying would prove monumental.
Ping An went on to become one of China's largest financial services companies, a $US50 billion ($47.8 billion) powerhouse now worth more than AIG, MetLife or Prudential. And behind the scenes, shares in Ping An that would be worth billions of dollars once the company rebounded were acquired by relatives of Mr Wen.
The Times reported last month that the relatives of Mr Wen, who became Premier in 2003, had grown very wealthy during his leadership, acquiring stakes in tourist resorts, banks, jewellers, telecommunications companies and other business ventures.
The greatest source of wealth, by far, the Times investigation found, came from the shares in Ping An bought about eight months after the insurer was granted a waiver to the requirement big financial companies be broken up.
Long before most investors could buy Ping An stock, Taihong, a company that would soon be controlled by Mr Wen's relatives, acquired a large stake in Ping An from state-owned entities that held shares in the insurer, regulatory and corporate records show. And by all appearances, Taihong got a sweet deal. The shares were bought in December 2002 for one-quarter of the price another big investor - the British bank HSBC Holdings - paid for its shares just two months earlier, according to interviews and public filings.
By June 2004, the shares held by the Wen relatives had already quadrupled in value, even before the company was listed on the Hong Kong Stock Exchange. And by 2007, the initial $US65 million investment made by Taihong would be worth $US3.7 billion.
Corporate records show the relatives' stake of that investment most likely peaked at $US2.2 billion in late 2007, the last year in which Taihong's shareholder records were publicly available. Because the company is no longer listed in Ping An's public filings, it is unclear whether the relatives continue to hold shares.
It is also not known whether Mr Wen or the central bank chief at the time, Dai Xianglong, personally intervened on behalf of Ping An's request for a waiver, or if Mr Wen was even aware of the stakes held by his relatives. But internal Ping An documents, government filings and interviews with bankers and former senior executives at Ping An indicate the vice premier's office and the central bank were among the regulators involved in the Ping An waiver meetings and had the authority to sign off on the waiver.
After the Times reported last month on the family's wealth, lawyers representing the family said the article contained unspecified errors and the family reserved the right to take legal action. In addition, the Chinese government blocked access to the English-language and Chinese-language websites of the newspaper in China - and continues to do so - saying the action was ''in accordance with laws and rules''.
Neither Mr Wen, who is expected to retire in March, nor Mr Dai, who is now the head of the National Social Security Fund, could be reached for comment.
Thousands of pages of publicly available corporate documents suggest the Ping An stakes held by the Premier's relatives were concealed behind layers of obscure partnerships rather than being held directly in their names. The Times found no indication regulations or any law was broken, nor any evidence Mr Wen held shares in Ping An under his own name.
There are many unanswered questions about the relatives' holdings, analysts said, such as who might have known about the relatives' purchases and whether anyone had a legal obligation to disclose the information.
The New York Times
