KI Daily Brief – May 6, 2015

Secret Audit Report Links Missing $1 Billion to Moldovan Businessman

Moldovan parliament speaker Andrian Candu has published the complete text of a controversial audit report into the disappearance of some $1 billion from three banks. The confidential report by the independent U.S. investigative consultancy Kroll documents in detail how companies and individuals tied to 28-year-old businessman Ilan Shor took control of three Moldovan banks during 2012-14 and then allegedly issued massive loans to Shor-connected companies during a three-day period in November. Funding for the massive increase in lending was, according to the report, “enabled by deposits from external financial institutions, including [three Russian banks] Gazprombank, Interprombank, and Alef Bank.” The Moldovan companies allegedly then immediately sent the money on to accounts controlled by offshore companies based in Latvia and registered in the United Kingdom and Hong Kong. 

Ukraine Oligarch Claims US Extradition Request is Political Interference

Firtash is one of the most powerful and most elusive of Ukraine’s oligarch class, a small group of individuals who have controlled much of the business in post-Soviet Ukraine and have often had huge influence over the political system. He has been linked to the Kremlin as well as figures in the Russian underworld – claims he has denied. Usually, oligarchs like to remain in the shadows, but to make his case that the US charges were politically motivated, Firtash made a rare boast about his political influence inside Ukraine.

The Trouble with China’s Anti-Corruption Campaign

A ruling in Shanghai banning the husbands, wives and children of top officials from running businesses is meant, of course, to allay the deep public concern about official abuse of power. The trouble for China is that the public knows only too well that corruption is not simply a by-product of the system. It is the system. It flourishes because there is no oversight, no free press, no separation of powers, no independent judiciary and no political opposition. “Why do they need to make it so complicated?” a Weibo user calling himself “Absolute Zero” writes. “All they need to do is to make officials’ assets public. We don’t care if they’re doing business, we just care if the business is legal.”

China’s Corruption Crackdown: Carrots for Law-Abiding Officials Are Key to New Economic Growth
South China Morning Post

So, while bribery in China may facilitate growth to some extent, it does not produce the kind of competitive business environment that supports long-term gains. Indeed, the reality is that corruption imposes a large, often random, tax on businesses, not least by discouraging officials from cutting red tape for all firms – a move that really would boost growth. Promotions provide officials with a strong positive incentive to boost growth. Consider Liu Zhijun , the former railway minister, who propelled China’s frenzy of high-speed rail construction. His yearning for professional achievement – and, especially, his desire to be promoted – motivated his significant contributions to GDP growth.

Calls to Punish China Grow
Bloomberg View

Patrick Cronin, the head of the Asia-Pacific Security program at the Center for a New American Security, said the U.S. should be exacting a diplomatic and reputational price for China’s bad behavior while increasing cooperation with other countries in the region. “We are trying to avoid being outmaneuvered by a very active and assertive China,” said Cronin. “When they do things to violate the norms, we have to make sure they don’t benefit.” Rethinking the quantity and quality of the engagement with China actually might be better for the relationship over the long term. What’s clear is that so far, China is paying no price for its aggression. Until the Obama administration changes that, Beijing will continue to change facts on the ground — and in the water — in their own favor.

Safe in New Zealand, Graft Fugitives Just out of China’s Reach

Yan, who is also known as William Yan, Yong Ming Yan and Bill Liu, got permanent residency in New Zealand in 2002 and acquired citizenship with the special approval of former associate minister of immigration, Shane Jones. Jones has been criticized for granting Yan citizenship even after learning Yan was the subject of an Interpol red notice, though an investigation by Lyn Provost, New Zealand’s auditor-general in 2013, ruled out any misconduct on Jones’ part. Yan, who lives in a multi-million dollar apartment in Auckland, has portrayed himself as a family man hiding from political persecution in China, but several properties in New Zealand are registered as belonging to his company or in names of relatives.

B.C. Developer Wanted in China Donated Thousands to Politicians
Globe and Mail

A prominent Vancouver real estate developer wanted by the Chinese government on corruption charges has made numerous political contributions over the years, particularly to the B.C. and federal Liberal parties, and also has a daughter who heads the provincial branch of the Young Liberals of Canada. Michael Ching Mo Yeung, who founded several real estate companies after arriving in British Columbia from China and has built business relationships with some of the province’s big real estate players, has donated roughly $17,000 to various political parties and leadership campaigns since 2007.

As Ukraine Murders Multiply, Who’s The Lead Suspect?
Daily Beast

In Ukraine, blame for the Kalashnikov and Buzyna murders, along with a string of other possibly-related murders, generally falls into two categories. One, as mentioned, is that that the Russian Special Services are behind the killings in an FSB provocation to cause unrest in the country’s capital. The other is that the ultra-nationalist Pravy Sektor and its affiliates are behind the killings, which Moscow suggests and which would seem, on its face, the logical choice of usual suspects.

Back to Daily Briefs