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KI News Highlights (August 8-14)

Kleptocracy Initiative

August 14, 2015
Former Provincial Official Expelled from CPC
A former provincial-level official of east China’s Jiangsu Province has been expelled from the Communist Party of China (CPC) for suspected regulation and criminal offenses, the the top anti-graft body said Friday. Approved by the CPC Central Committee, the Central Commission for Discipline Inspection (CCDI) filed and investigated the case of Zhao Shaolin, former member of the standing committee of the CPC Jiangsu provincial committee and secretary-general of the provincial Party committee.
KI – Zhao Shaolin was reportedly a former classmate of Xu Caihou, the corrupt Central Military Commission Vice Chairman, who was not prosecuted due to his terminal cancer.

Sharpening Internal Supervision
The rules increase the scope of inspections conducted by the CPC Central Commission for Discipline Inspection (CCDI) to include Party heads of higher people’s courts and provincial-level procuratorates, leading officials of ministries and top executives of key state-owned enterprises and financial institutions. Under the previous regulation, inspections by the CCDI concentrated on leading officials in provincial governments, CPC provincial-level committees, provincial political advisory bodies and provincial legislatures. More emphasis will be placed on inspections of the enforcement of political rules and Party policies as well as prevention of cliques. Bribery, trading power for personal gains, electoral fraud, buying and selling official posts, and immoral behavior are also on the radar.

‘Our Central American Spring’: Protesters Demand an End to Decades of Corruption
The Guardian
The route taken by hundreds of peaceful protesters on a recent Friday was particularly symbolic. It started at the Honduran Social Security Institute (IHSS) whose former director and other officials allegedly siphoned off some $200m through shell companies to pay for luxury lifestyles complete with mansions in Miami, sports cars and lavish parties with highly paid prostitutes. Though the light from the bamboo torches gives the protest a festive air, the message the protesters are sending is serious. One handmade sign reads “The corrupt have ripped apart my country.” Another says: “Enough is enough.”

August 13, 2015
In Crimea, a Disputed Beach Is a Symbol of Corruption
New York Times
Seventeen months after Mr. Putin deployed Special Forces troops to seize Crimea from Ukraine, prompting the deepest confrontation with the West since the Cold War, life on this Black Sea peninsula remains in disarray. Aside from the political shambles, Crimea has been isolated from the outside world by Western sanctions. Credit cards from abroad do not work. Cellphone signals drop constantly, and app stores are often inaccessible. Many mainstream web services like Gmail are frequently blocked, too.

As Yuan Falls, China’s Rich Seek Safe Havens Offshore
For many in the ranks of China’s wealthy, the shock devaluation in the yuan is a cause of regret – that they hadn’t moved more money offshore sooner. “With the devaluation, I’ve just lost several hundred thousand yuan,” said businessmen Tang Wei, who is moving assets out of China, partly to fund the living and schooling of his son in Canada next year. For those looking for more liquid assets, ones denominated in U.S. dollars are likely to be their first choice. “They would look at wherever they conceive they can preserve their wealth without any value erosion. At this point the U.S. dollar is looking like the safest haven,” said Allianz’s Ghosh.

Panic in the Kremlin
The past couple weeks have witnessed a series of incidents that suggest that all is not well in the Kremlin elite. “There is panic at the top of the Kremlin,” political analyst Andrei Piontkovsky wrote in a recent article in Apostrof. “This is evident in Naryshkin’s article, in the burning of foodstuffs at the border, and in Lavrov’s behavior at the press conference with Saudi officials.” Increasing numbers of Russia’s ruling class — or at least its smarter members — understand that the Putin system has reached the end of its usefulness. It’s hit the point of diminishing returns. At the heart of the crisis gripping the elite is a paradox: They can’t live with Putin. And they can’t live without him.

Russia: Giant Aquarium to Open September Despite Embezzlement Scandal
The construction of one of the world’s largest ocean aquariums is set for completion this September despite being hit with a multi-billion rouble fraud scandal, according to Russian officials. News website claimed the total budget of the project was 15.5 billion roubles (US$ 231 million). But shortly after a visit to the site by Putin himself, prosecutors made waves in November last year by opening a criminal case into the alleged theft of up to two billion roubles (US$ 31 million) from the project. Several arrests followed.

U.S. Seeks to Seize $1 Billion in Telecom Probe
Wall Street Journal
U.S. authorities are asking European counterparts to seize about $1 billion in assets related to a wide-ranging criminal probe of alleged corruption by three global telecom companies and intermediaries close to the daughter of Uzbekistan’s president, according to court documents and people with direct knowledge of the criminal investigation. The effort is one of the biggest recent moves by U.S. authorities targeting what prosecutors believe are the spoils of alleged corrupt activities overseas.

Russia to Shut Down Rail Links Over Anti-Graft Arrest
Public Broadcasting of Latvia
Fears that Russian Railways’ (RR) oligarchic boss Vladimir Yakunin would react badly to the arrest by Latvian anti-graft officers of his friend and associate Ugis Magonis – disgraced former head of Latvian Railways (LDz) – seemed to prove accurate Thursday with the sudden announcement by the Russian side of repair works that look set to seriously disrupt cargo flows through Latvia.

August 12, 2015
Carly Fiorina: It’s Time to Fight ‘New Chinese Aggression’
The Republican presidential candidate said that if she were meeting with Chinese President Xi Jinping next month in Washington as President Barack Obama is doing, she would tell him that the U.S. is going to do more to assist its regional allies to push back against what she termed “new Chinese aggression.” “I would say first that we are going to be more aggressive in helping our allies in that region push back against new Chinese aggression, whether those allies are Australia or Japan or the Philippines. I would be conducting, actually now, at a moment when China’s economy is wavering a bit, I would be conducting more flyovers on the South China Sea. We cannot permit China to control a trade route through which passes $5 trillion worth of goods and services every year,” she added.

Chinese Telecoms Company ZTE Refuses to Bring Executive to US Over Arrest Fears
South China Morning Post
A US criminal investigation into allegations that the Chinese telecommunication company ZTE Corp sold banned US computer products to Iran has spilled into a civil dispute with a New York-based patent licensing company. ZTE has refused to make one of its top executives available for questioning over fears that he will be arrested. The civil and criminal investigations followed reports by Reuters that ZTE in 2010 had a US$120 million contract with Iran’s largest telecom company, including supplying US computer equipment. ZTE could face steep fines and restrictions on its US operations. Vringo’s chief legal and intellectual property officer David Cohen said the ruling highlighted “ZTE’s lack of respect for intellectual property and the rule of law”.

Associate of China’s Disgraced Presidential Aide Ling Jihua Accused of Leaking State Secrets
South China Morning Post
Another former associate of China’s ex-presidential aide Ling Jihua who once worked in the heart of the Communist Party’s machine will face prosecution for corruption and leaking party and state secrets, the top anti-graft agency said on Wednesday. After Ling was transferred to the United Front Work Department, Huo was moved to take on the role of deputy chief of the National Tourism Administration – an area in which he had no experience. Analysts earlier said the accusation of illegally obtaining – rather than a more serious one of leaking – state secrets could be a leverage to convince Ling’s younger brother, Ling Wancheng, to return to the mainland. American media reported last month that Ling Wancheng had fled to the United States with materials that could be of interest to Washington.

War Games Raise Risk of Russia-NATO Conflict
Supposedly defensive military exercises by Russia and NATO are actually leading the two sides closer to war, according to a new report by the European Leadership Network. The think tank’s policy brief released Wednesday analyzed their major military exercises this year and found that “each side is training with the other side’s capabilities and most likely war plans in mind … Russia is preparing for a conflict with NATO, and NATO is preparing for a possible confrontation with Russia.”

What the West Gets Wrong About Russia
New York Times
According to Gleb Pavlovsky, Mr. Putin’s former spin doctor extraordinaire, these days the Kremlin is still enigmatic, but no longer strategic. For Mr. Pavlovsky, Kremlin policy is fashioned rather like the music of a jazz group; its continuing improvisation is an attempt to survive the latest crisis. In Mr. Pavlovsky’s reading, Russia today is neither an ideological warrior seeking to remake the world order nor a hard-nosed realist desperately defending its sphere of influence. Far from grand strategy, what animates Mr. Putin’s Kremlin is the assertion of its right to break international rules. In fact, breaking the rules without being punished is the Kremlin’s peculiar definition of being a great power.

Ukraine’s Cold War Gets Hot as Combat Explodes in the Last 24 Hours
Daily Beast
Monday morning saw some of the heaviest fighting in eastern Ukraine since the fall of Debaltsevo, almost a week after the signing of the second Minsk “cease-fire” agreement.
According to Ukrainian reports, hundreds of Russian-backed fighters took part in an assault, supported by tanks and artillery fire, on positions near the village of Starognatovka, in the south of the Donetsk region. The attack was repelled and Ukrainian forces made their first territorial gains since February 10. Since then, heavy artillery and Grad rockets have rained down across this section of the front line.

China’s Fosun Linked to Anti-Corruption Probe
Financial Times
Fosun, one of China’s most internationally acquisitive companies, is defending itself against allegations that it sold property cheaply to an executive of a state-owned company who was on Tuesday jailed for corruption. The court proceedings, published in Xinhua, said that “after the establishment of a joint venture between Fosun and Shanghai Friendship Group” — a state-owned company of which Wang was then general manager — “Wang took advantage of his position and delivered benefits to Fosun”. Xinhua also said that Wang approached Mr Guo for his help in purchasing property for Wang’s parents in 2003. Two villas developed by Fosun’s property arm were then sold to Wang’s parents for Rmb2.1m ($330,000), some Rmb2.7m less than the properties’ market value at that time. Fosun said the figures were “revealed in the court’s judgment”. The two villas were resold in 2010 and 2013 for a total of Rmb14.8m, Xinhua said.

August 11, 2015
Tracking the Billions Stolen in Azerbaijan: An OCCRP Interactive Tool
For months, reporters for OCCRP have painstakingly untangled the connections between obscure companies and unknown individuals across the globe, following each thread back to its source: the clique surrounding the First Family of Azerbaijan. The result we launch today: an interactive portrait of the people and companies Baku’s corrupt establishment uses to hide the money it has stolen from the people.

Russian Publisher Prints Books About Putin Under Names of Western Authors
A Russian publishing house has printed a series of books about Vladimir Putin under the names of prominent western analysts and journalists – without the knowledge or permission of the so-called authors. The Guardian’s Luke Harding, The Economist’s Edward Lucas and US-based Russia expert Donald Jensen say that they did not know anything about Russian-language books attributed to them and produced by the Moscow publishers Algoritm in a series called Project Putin.
KI – An example of Putin’s propaganda machine at work.

Former Sichuan Political Advisor Tried for Bribery
Li Chongxi, former chairman of the Sichuan provincial committee of the Chinese People’s Political Consultative Conference, stood trial at the intermediate court of Nanchang, capital of east China’s Jiangxi Province. Prosecutors accused Li of taking advantage of his posts to seek benefits for local companies and accepting money and valuables worth about 11 million yuan (1.7 mln U.S. dollars). Li confessed to his crime during the trial, the court said. It did not announce the verdict immediately. Prosecutors announced an investigation into Li in September 2014, when he was removed from his post and expelled from the Communist Party of China.
KI – Li was one of Zhou Yongkang’s favorite subordinates during his time as Sichuan party secretary.

Yanukovych Doesn’t Arrive at Ukraine’s Prosecutor General’s Office for Interrogation
Ukraine Today
Ukraine’s ousted ex-president Viktor Yanukovych did not arrive at the Prosecutor General’s Office of Ukraine (PGO) for taking part in an investigation and legal proceedings because of a threat to his life and health, his lawyer Vitaliy Serdiuk told journalists at the PGO on August 11. According to Serdiuk, Yanukovych has appealed the procedure of a pre-trial investigation in absentia in the Court of Appeals, and this appeal will be considered at 16:00 Kyiv time on Tuesday.

Give China’s Devaluation a Chance
Bloomberg View
If Xi is truly interested in allowing the market to play a leading role in economic decision making, the real test will be whether his government shows the courage to open the country’s opaque financial system, tighten corporate governance and allow the media to play a bigger role in weeding out corruption. Rather than bellyaching about the latest currency move, these are the steps China critics should be watching for. Personally, I can’t help but feel optimistic that China’s yuan-regime change suggests they’re coming.

August 10, 2015
China Read Emails of Top U.S. Officials
The email grab — first codenamed “Dancing Panda” by U.S. officials, and then “Legion Amethyst” — was detected in April 2010, according to a top secret NSA briefing from 2014. The intrusion into personal emails was still active at the time of the briefing and, according to the senior official, is still going on. In 2011, Google disclosed that the private gmail accounts of some U.S. officials had been compromised, but the briefing shows that private email accounts from other providers were compromised as well. The government email accounts assigned to the officials, however, were not hacked because they are more secure, says the senior U.S. intelligence official. The senior official says the private emails of “all top national security and trade officials” were targeted.

Why Putin Is Losing
Russia’s claim last week, using an extremely creative interpretation of international law, to exclusive economic rights to nearly half a million square miles of the Arctic Sea, was certainly a head scratcher. But sparking a manufactured international crisis over the Arctic, one that pits Russia against the United States and Canada, might be just what the doctor ordered. Why? Because Vladimir Putin badly needs to make a new action movie to distract his people. The Kremlin leader is boxed in on so many fronts right now that he badly needs to change the subject.

What’s Behind Russia’s Actions in Georgia?
Russia’s latest alleged move against Georgia demonstrates that Moscow remains determined to disrupt the pro-Western course of this small South Caucasus state. Late on 10 July, Russian troops placed new demarcation signposts along the administrative boundary between the annexed territory of South Ossetia, which was removed from Georgia’s jurisdiction by force in the war of 2008, and Tbilisi-controlled territory. Crucially, a further 1.5km into the Georgian territory was added overnight. The new “border” is now a de facto occupation line, just a mile away from a major highway linking Georgia’s eastern and western regions.

Former Senior China Military Official Sentenced to Death for Corruption with Reprieve
Channel News Asia
A Chinese military court sentenced former senior officer Gu Junshan to death with a two-year reprieve for corruption, the Defence Ministry said on Monday, the latest official to fall in President Xi Jinping’s crackdown on graft in the armed forces. Gu’s case was linked to that of Xu Caihou, a former vice chairman of the elite Central Military Commission who the government said had confessed to taking “massive” bribes in exchange for help in promotions. Xu died in March.

Georgia’s Ex-President Takes on Corruption in Ukraine
Wall Street Journal
The appointment of Mr. Saakashvili to run one of Ukraine’s most notoriously corrupt regions has become a litmus test for the Kiev government, which has struggled to overhaul governance amid the continuing conflict with Russia-backed separatists in the country’s east. But the former Georgian president’s crusade has set him on a collision course with some of the most powerful stakeholders not just in Odessa, a port city of about one million on the Black Sea coast, but also in the capital itself.

Ukraine Reports Heaviest Shelling by Eastern Rebels Since February
Ukraine accused pro-Russian rebels on Monday of carrying out the heaviest artillery attacks on government positions in six months and warned of signs the conflict was escalating despite a ceasefire deal. The military said 400 rebel fighters supported by tanks had attacked government forces around the village of Starohnativka, 50 km (30 miles) north of the Kiev-held port city of Mariupol. The rebels denied attacking government troops. Control of Mariupol could help the rebels form a corridor to the Crimea peninsula, which Russia annexed from Ukraine last year.

Chinese Communist Party Newspaper Warns Against Retired Officials Exerting Political Influence Behind Scenes
South China Morning Post
Some retired officials intervene in decision making for crucial issues through their former subordinates long after they have retired, the commentary said. If decisions are made against their wishes, they accuse serving officials of being superior and aloof, the article said. Such lingering influence puts their successors in an awkward position and weakens the cohesion of the party, the commentary said.

Bring Moldova Back from the Brink
New York Times
The Republic of Moldova — a tiny country of just 3.5 million people — is at risk of becoming Europe’s next security crisis, with potential consequences far beyond its borders. Over the last six years little has been done to open up the country’s economy and its institutions. Corruption remains endemic and the state is still in the hands of oligarchs, while punishingly low incomes have propelled hundreds of thousands of Moldovans to go abroad in search of a better life. The clear lesson from Ukraine has been that, in today’s Europe, a state’s strength and stability depends on its commitment to democracy and the rule of law. Russia’s illegal annexation of Crimea was deeply destabilizing, but we must never forget that the crisis in Ukraine began with the people’s profound disillusionment with their political institutions.

August 9, 2015
Corrupt Chinese Officials Getting Smarter, But Not Smart Enough
A newspaper affiliated to the top anti-graft body on Saturday published a report detailing how corrupt officials tried to outwit graft-busters but still failed in the end. The report cited 11 cases in which corrupt officials fabricated lies, agreed with others not to give away each other, colluded with others to devise a consistent story, transferred ill-gotten wealth and destroyed or made up evidence to stall investigation efforts. One local official was very careful with his phone. He bought multiple phone cards, used unregistered phones to talk with his accomplices and met with them at secret places, according to Mao Jianbiao, a local corruption investigator in Hangzhou, Zhejiang province.

US Frustrates Russian Oligarchs’ Cat and Mouse Over Sanctions
Financial Times
Airfix Aviation Oy, IPP Oil Products (Cyprus) and Oy Langvik Capital are hardly household names, but when the US added the three companies to its sanctions list last month it opened a new front in its game of cat-and-mouse with some of Russia’s wealthiest oligarchs.

August 8, 2015
Australia Orders More Foreign Homeowners to Sell
Wall Street Journal
Treasurer Joe Hockey said foreign investors have been ordered to sell six properties in the cities of Sydney, Brisbane and Perth. The homes are valued between 152,000 and 1.86 million Australian dollars (US$112,768 and US$1.38 million). The orders could be the tip of the iceberg, with Mr. Hockey revealing probes have unearthed 462 possible breaches of foreign homeownership rules after the government ramped up its spending on enforcement in its May budget. Under the new regime, nonresidents illegally acquiring established properties will face a maximum fine of A$127,500 or three years imprisonment. They will also stand to lose the capital gain made on the property, 25% of the purchase price or 25% of the market value, whichever is greater. Third parties, such as real-estate agents and financial advisers, also may be prosecuted under the changes for assisting in an unlawful purchase.

Former President of Georgia Seeks to Free Ukraine From Moscow’s Orbit
Washington Post
In Ukraine’s last-ditch battle to stamp out official thievery and wrest the nation from Russia’s orbit, an unlikely leader is heading the charge. Mikheil Saakashvili, the crusading ex-president of Georgia, is trying to upend Ukraine’s most lawless region as the new governor of the smuggling stronghold of Odessa. A man who led his tiny nation into war with mighty Russia has taken up a new fight in a high-profile appointment in a fellow post-Soviet state that was a slap at the Kremlin. Western officials say that Saakashvili’s anti-corruption assault will be as crucial in the effort to break Ukraine free from its ex-Soviet masters as the country’s shooting war with Russian-backed rebels — and that the hot-headed Georgian has just months to get it done.

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