A rags-to-riches poster boy for the success of Chinese capitalism was sentenced to 14 years in jail Tuesday for bribery and insider dealing.
Huang Guangyu built Gome Electronics into the country’s biggest appliance retailer and was once considered the richest man in China, worth $6.3 billion. He joins a number of other high-profile tycoons who have been jailed on financial charges as the government struggles to rein in widespread corruption.
“This was not an isolated case,” says Yan Yiming, a lawyer specializing in insider trading cases. “The nexus between money and power is very strong in China, and this sentence is significant because it clarifies the difference between right and wrong.”
Mr. Huang, who has sought to maintain control of his company even from his jail cell over the past 17 months, was also fined $88 million for his illegal business dealings and had $30 million worth of property confiscated. His shares in Gome, however, are still estimated to be worth $1.9 billion, according to Thomson One Analytics.
Huang was detained in November 2008 during a police investigation into allegations of stock market manipulation. The net spread to catch senior government officials and officers in the financial police, accused of taking bribes.
Huang grew up in a poor family in southern China, moving to Beijing in the 1980s as the government set China on the road to capitalism. He seized the opportunities offered by a lightly regulated market and booming consumer demand, moving from clothes trading to appliance stores. Gome, which he founded with $4,400, now has more than 1,100 stores and employs 300,000 people selling refrigerators, televisions, and home electronics.
Culture of corruption
The bribery and insider trading that have landed him in prison “are quite common” in China, says Mr. Yan. “They are so common that a lot of people don’t even know they are wrong and don’t feel guilty when they do it.”
Mou Qizhong, another man who once topped the Hurun Rich List compiled by Rupert Hoogewerf, a Shanghai-based analyst, is serving a life sentence for bank fraud. Shanghai property developer Zhou Zhengyi was sentenced two years ago to 16 years in jail for bribery, forgery, and embezzlement.
According to the Hurun Report, 19 of 1,330 executives on its rich list in the past decade are in jail or awaiting sentencing on bribery charges.
“Many people in this society today do not see obeying the law as a value,” says Yan. “They see making as much money as possible as a value. If the [ruling Communist] party cannot get a grip on corruption it could kill the party or the country.”