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Wednesday, September 4, 2013

The Dark Side of China's Crackdown on Corruption

The BBC reports that a Chinese official, Yu Qiyi, was allegedly drowned by Communist Party investigators during following an interrogation on April 8.  Suspected of wrongdoing arising out of a land deal, Yu was subjected to "the shuanggui process, an internal disciplinary procedure where officials are asked to confess wrongdoings."  During his April 8 interrogation, interrogators' reportedly submerged Yu's head in icy water multiple times in their efforts to obtain a confession.  This tactic seems to have caused Yu's death the following morning. The BBC adds that the shuanggui process is "extra-legal" and has resulted in "a number of reports of sudden deaths in recent months."

This report reveals the darker side of China's recent crackdown on corruption.  The biggest story I have heard that stems from this trend is the GlaxoSmithKline investigation, where Chinese authorities have alleged that the company "paid up to $490 million to doctors in China through 700 travel agencies in exchange for sales of drug products."  The investigation has gone from an initial focus on individual sales agents to an allegation that the corruption is much more systematic and part of GSK China's overall business plan.  The investigation has led to various arrests, including the arrest and resulting confession of Peter Humphrey and his wife Yu Yingzeng who were operating a fraud investigation business that was allegedly involved in the GSK bribery scheme.  At China Law Blog, Dan Harris notes that these arrests signal China's ramped-up enforcement of its corruption laws and warns people doing business in China to avoid anything that even slightly resembles corruption.

Yu's arrest adds a troubling dimension to this fast-evolving situation.  It will be interesting to see how transparent the investigations remain - the BBC notes that the details of Yu's death are a "rare acknowledgement" of the methods employed by China's government.  For those doing business in China, interesting times are certainly ahead.

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