Inner Mongolia Property Mogul Bites the Dust
Bayan Nur is a city nestled in the crook of a crescent-shaped valley, between the Yellow River and a desert, and surrounded by productive farms. It's name is Mongolian for "fertile lake," owing to the swampy Lake Wuliangsu on the crescent's eastern edge.
Bayan Nur is also an economic hub for north-central Inner Mongolia Autonomous Region that's prospered in recent years on the back of a local real estate boom.
But these days, unlike the fertile crescent's well-watered farms, Bayan Nur's real estate industry as well as its economy are gathering dust in the dry heat of a corruption scandal.
The scandal's long-term influence took center stage in March when an appeals court ruled against a businessman once revered as the city's biggest real estate mogul, Li Guomin.
Li has started serving a five-and-a-half-year term after the Ordos appeals court upheld his 2012 conviction on gambling and prostitution charges, which were indirectly connected to his business dealings. Authorities involved in the two-year crackdown have also focused attention on several government officials who worked closely with Li to build up Bayan Nur.
The scandal's latest development came June 30, when the Communist Party's Central Commission for Discipline Inspection announced that they were investigating Wang Suyi, former director of the party's regional United Front Work Department and a former standing member of the Inner Mongolia Autonomous Region Party Committee, on unspecified charges.
Investigators earlier probed and convicted Bayan Nur's former deputy mayor Li Shigui, and a former chief of the city's Linhe District, Xue Weilin. The city's former secretary-general Li Maolong is awaiting trial.
Each suspect while in office apparently enjoyed close ties to Li's business empire, which today is crumbling in the face of frozen construction projects, unpaid bills, and unfilled orders for glass, concrete and other building materials.
Signs of the empire's unfolding were obvious recently when Caixin visited Bayan Nur for this report: The cityscape is pock-marked with half-finished and unoccupied buildings – rows of buildings that in some places stretch to the horizon. Also left undone is a city government office complex where new buildings share plots with farm fields.
In its heyday, Li's company was at the center of Bayan Nur's economic boom. It chalked up several notable accomplishments by, for example, spearheading construction of the Guotai Fashion Plaza and the city's only five-star hotel.
Li succeeded in business by leveraging high-level connections and arranging credit deals that helped Guotai acquire prime land for real estate developments, sources told Caixin.
Rather than use his own money, sources said, Li convinced building contractors to front the funds needed for building projects, then repaid them with dividends from real estate sales. He also rallied government support for projects that required land-clearing and infrastructure.
"In many places where others were unable, he found ways to have old structures razed," said an insider close to Li. Usually in China, real estate development company "bosses need five or six years to finish a building. Not Li Guomin. His Four Seasons Flower complex went from land acquisition to completion in only two years."
Li's game worked remarkably well for several years. But he was forced to turn in his chips in May 2011, when police from the Inner Mongolia Public Security Bureau put him under house arrest.
Empire Building
An Inner Mongolia native, Li was born in the city of Chifeng in 1962 and later served in the military. After returning to civilian life, he got a job in the late 1980s at the Linhe District branch of the Industrial and Commercial Bank of China (ICBC) in Bayan Nur.
Li spent 10 years with ICBC, rising to the position of local branch manager. In the course of approving business loans, he "made a lot of friends," said a source. "He also had some messy accounts."
Li quit the bank in early 1990s' after being tipped off that ICBC superiors were planning to investigate him for corruption. The probe apparently fizzled.
Li then changed careers by setting up Guotai Group's predecessor, a company called Bayan Nur City Guotai Real Estate Development Co. Ltd. It was a gamble because the local real estate market at that time had yet to take off.
A breakthrough came in March 2002, when Li's company bought out a rug factory in Linhe District and tore down the buildings to make way for a shopping center called Guotai Fashion Plaza. The project inspired city government approval for more developments in Linhe, including a new office center for the municipal government.
In 2004, Bayan Nur officials decided to move the entire city center westward with an all-new, 20-square-kilometer development that combined office, commercial, government, residential and entertainment functions. An area for information technology companies was envisaged near apartment buildings, conference centers and sports facilities.
Li took advantage of the opportunity, and by June 2007 had finished work on a residential compound called Jintai Garden at the heart of the development zone.
Builders blazed ahead for the next few years, and Guotai Group benefited. Work on the 1.2-million-square-meter Four Seasons Flower residential complex started in 2008 and was completed just two years later.
The empire's business peak came in April 2011 – a month before police detained Li – when Guotai launched nine residential and commercial projects, some of which have since been abandoned.
Today, Guotai's website claims the company is still strong, with more than 7,000 employees and nine subsidiaries involved in real estate, retailing, hotels and financing. A subsidiary called Bayan Nur Guotai Investing Co. Ltd. provides financial services for small to medium-sized enterprises.
And Li's empire has been a boon to the local government, for example as Bayan Nur's top corporate taxpayer. In 2010 alone, the group's tax liability came to 130 million yuan.
Empire Unravels
In addition to approving construction of Li's five-star Bayan Nur Hotel near the new government office center, local officials agreed to guarantee profits for Li by steering all high-level government visitors and business conferences to the facility.
Helping fill the hotel was just one way officials backed Li's investments. Indeed, Linhe officials who spoke with Caixin. said that he would never have become a property market kingpin without support from city leadership. They said his friends in high places includes Li Shigui, Li Maolong, Xue Weilin and other officials.
Li as a daring, quick-witted business negotiator who thought any hurdle could be overcome with money, said one source. Authorities later confirmed this reputation by, according to the official Xinhua News Agency, tagging him as the primary briber of Li Shigui and Xue Weilin.
Li was found to have handed some 3.21 million yuan worth of "gifts" to Li Shigui, who authorities say accepted more than 16 million yuan in bribes while in office.
In the course of handling Li's case, court officials suggested Li Shigui and Xue Weilin accepted bribes and in exchange gave the real estate mogul preferential treatment for land contracts and decisions that involved city planning, forced demolitions and relocating uprooted residents.
Over the years, authorities said, bribes allegedly lubricated nearly every project linked to Guotai, including the Bayan Nur Hotel, Jintai Garden, Wangfu Garden and Four Seasons Flower complex.
Local police were on Li's side as well. For example, at his behest in 2009 police arrested a Jiangsu Province real estate businessman with whom he had argued over money. The suspect was detained for 37 days for alleged fraud and released, but then he was illegally held by Li's cronies in a hotel room for another two months.
A former justice official in Bayan Nur said city officials must have been involved in the abuse of the Jiangsu man, who after returning home filed a complaint with government officials. That complaint may have spurred party discipline authorities to probe Li.
A party inspector in March 2011 quietly arrived in Bayan Nur, and two months later Li was under house arrest.
Li was tried and convicted of organized crime activities including gambling and prostitution. In December 2012, he was sentenced by the Junggar Banner People's Court to five years and six months in prison, and fined 220,000 yuan.
The court, however, did not link Li's crimes to bribery. The ruling thus clashed with previous decisions against Xue Weilin and Li Shigui. In December 2011, the Baotou City Intermediate People's Court sentenced Xue Weilin to 11 years before staying his execution, and in November 2012 passed the same sentence on Li Shigui.
Li Maolong is being detained pending trial. He's already been ousted from his city office as well as the party on charges of breaking laws and violating party discipline codes.
After his conviction on organized crime charges, Li appealed to the Ordos City Intermediate People's Court, but to no avail.
Court files behind the court decisions indicate that more than 10 women worked as prostitutes at the Bayan Nur Hotel sauna between March and July 2010, and that between January and July 2011 the sauna was frequently used for prostitution for which customers paid more than 1 million yuan in total.
The court also ruled that between 2007 and 2011, Li pocketed more than 8.7 million yuan by organizing gambling alone or with accomplices at several sites including his home, an office building called Guotai Tower, and Bayan Nur Hotel's Yinghuang International Business Center.
Li was not alone in facing organized crime charges. Authorities also rounded up several hotel managers and women who worked at the sauna. And Li's crony who illegally detained the Jiangsu businessman was sentenced to nine months in prison.
Untouched since the crackdown began is Li's black Rolls Royce, which he used to drive around Bayan Nur simply to flaunt his wealth. Today, the car sits outside the Bayan Nur Hotel, reportedly waiting to be claimed by one of Li's unpaid creditors, covered in dust.
Bayan Nur is also an economic hub for north-central Inner Mongolia Autonomous Region that's prospered in recent years on the back of a local real estate boom.
But these days, unlike the fertile crescent's well-watered farms, Bayan Nur's real estate industry as well as its economy are gathering dust in the dry heat of a corruption scandal.
The scandal's long-term influence took center stage in March when an appeals court ruled against a businessman once revered as the city's biggest real estate mogul, Li Guomin.
Li has started serving a five-and-a-half-year term after the Ordos appeals court upheld his 2012 conviction on gambling and prostitution charges, which were indirectly connected to his business dealings. Authorities involved in the two-year crackdown have also focused attention on several government officials who worked closely with Li to build up Bayan Nur.
The scandal's latest development came June 30, when the Communist Party's Central Commission for Discipline Inspection announced that they were investigating Wang Suyi, former director of the party's regional United Front Work Department and a former standing member of the Inner Mongolia Autonomous Region Party Committee, on unspecified charges.
Investigators earlier probed and convicted Bayan Nur's former deputy mayor Li Shigui, and a former chief of the city's Linhe District, Xue Weilin. The city's former secretary-general Li Maolong is awaiting trial.
Each suspect while in office apparently enjoyed close ties to Li's business empire, which today is crumbling in the face of frozen construction projects, unpaid bills, and unfilled orders for glass, concrete and other building materials.
Signs of the empire's unfolding were obvious recently when Caixin visited Bayan Nur for this report: The cityscape is pock-marked with half-finished and unoccupied buildings – rows of buildings that in some places stretch to the horizon. Also left undone is a city government office complex where new buildings share plots with farm fields.
In its heyday, Li's company was at the center of Bayan Nur's economic boom. It chalked up several notable accomplishments by, for example, spearheading construction of the Guotai Fashion Plaza and the city's only five-star hotel.
Li succeeded in business by leveraging high-level connections and arranging credit deals that helped Guotai acquire prime land for real estate developments, sources told Caixin.
Rather than use his own money, sources said, Li convinced building contractors to front the funds needed for building projects, then repaid them with dividends from real estate sales. He also rallied government support for projects that required land-clearing and infrastructure.
"In many places where others were unable, he found ways to have old structures razed," said an insider close to Li. Usually in China, real estate development company "bosses need five or six years to finish a building. Not Li Guomin. His Four Seasons Flower complex went from land acquisition to completion in only two years."
Li's game worked remarkably well for several years. But he was forced to turn in his chips in May 2011, when police from the Inner Mongolia Public Security Bureau put him under house arrest.
Empire Building
An Inner Mongolia native, Li was born in the city of Chifeng in 1962 and later served in the military. After returning to civilian life, he got a job in the late 1980s at the Linhe District branch of the Industrial and Commercial Bank of China (ICBC) in Bayan Nur.
Li spent 10 years with ICBC, rising to the position of local branch manager. In the course of approving business loans, he "made a lot of friends," said a source. "He also had some messy accounts."
Li quit the bank in early 1990s' after being tipped off that ICBC superiors were planning to investigate him for corruption. The probe apparently fizzled.
Li then changed careers by setting up Guotai Group's predecessor, a company called Bayan Nur City Guotai Real Estate Development Co. Ltd. It was a gamble because the local real estate market at that time had yet to take off.
A breakthrough came in March 2002, when Li's company bought out a rug factory in Linhe District and tore down the buildings to make way for a shopping center called Guotai Fashion Plaza. The project inspired city government approval for more developments in Linhe, including a new office center for the municipal government.
In 2004, Bayan Nur officials decided to move the entire city center westward with an all-new, 20-square-kilometer development that combined office, commercial, government, residential and entertainment functions. An area for information technology companies was envisaged near apartment buildings, conference centers and sports facilities.
Li took advantage of the opportunity, and by June 2007 had finished work on a residential compound called Jintai Garden at the heart of the development zone.
Builders blazed ahead for the next few years, and Guotai Group benefited. Work on the 1.2-million-square-meter Four Seasons Flower residential complex started in 2008 and was completed just two years later.
The empire's business peak came in April 2011 – a month before police detained Li – when Guotai launched nine residential and commercial projects, some of which have since been abandoned.
Today, Guotai's website claims the company is still strong, with more than 7,000 employees and nine subsidiaries involved in real estate, retailing, hotels and financing. A subsidiary called Bayan Nur Guotai Investing Co. Ltd. provides financial services for small to medium-sized enterprises.
And Li's empire has been a boon to the local government, for example as Bayan Nur's top corporate taxpayer. In 2010 alone, the group's tax liability came to 130 million yuan.
Empire Unravels
In addition to approving construction of Li's five-star Bayan Nur Hotel near the new government office center, local officials agreed to guarantee profits for Li by steering all high-level government visitors and business conferences to the facility.
Helping fill the hotel was just one way officials backed Li's investments. Indeed, Linhe officials who spoke with Caixin. said that he would never have become a property market kingpin without support from city leadership. They said his friends in high places includes Li Shigui, Li Maolong, Xue Weilin and other officials.
Li as a daring, quick-witted business negotiator who thought any hurdle could be overcome with money, said one source. Authorities later confirmed this reputation by, according to the official Xinhua News Agency, tagging him as the primary briber of Li Shigui and Xue Weilin.
Li was found to have handed some 3.21 million yuan worth of "gifts" to Li Shigui, who authorities say accepted more than 16 million yuan in bribes while in office.
In the course of handling Li's case, court officials suggested Li Shigui and Xue Weilin accepted bribes and in exchange gave the real estate mogul preferential treatment for land contracts and decisions that involved city planning, forced demolitions and relocating uprooted residents.
Over the years, authorities said, bribes allegedly lubricated nearly every project linked to Guotai, including the Bayan Nur Hotel, Jintai Garden, Wangfu Garden and Four Seasons Flower complex.
Local police were on Li's side as well. For example, at his behest in 2009 police arrested a Jiangsu Province real estate businessman with whom he had argued over money. The suspect was detained for 37 days for alleged fraud and released, but then he was illegally held by Li's cronies in a hotel room for another two months.
A former justice official in Bayan Nur said city officials must have been involved in the abuse of the Jiangsu man, who after returning home filed a complaint with government officials. That complaint may have spurred party discipline authorities to probe Li.
A party inspector in March 2011 quietly arrived in Bayan Nur, and two months later Li was under house arrest.
Li was tried and convicted of organized crime activities including gambling and prostitution. In December 2012, he was sentenced by the Junggar Banner People's Court to five years and six months in prison, and fined 220,000 yuan.
The court, however, did not link Li's crimes to bribery. The ruling thus clashed with previous decisions against Xue Weilin and Li Shigui. In December 2011, the Baotou City Intermediate People's Court sentenced Xue Weilin to 11 years before staying his execution, and in November 2012 passed the same sentence on Li Shigui.
Li Maolong is being detained pending trial. He's already been ousted from his city office as well as the party on charges of breaking laws and violating party discipline codes.
After his conviction on organized crime charges, Li appealed to the Ordos City Intermediate People's Court, but to no avail.
Court files behind the court decisions indicate that more than 10 women worked as prostitutes at the Bayan Nur Hotel sauna between March and July 2010, and that between January and July 2011 the sauna was frequently used for prostitution for which customers paid more than 1 million yuan in total.
The court also ruled that between 2007 and 2011, Li pocketed more than 8.7 million yuan by organizing gambling alone or with accomplices at several sites including his home, an office building called Guotai Tower, and Bayan Nur Hotel's Yinghuang International Business Center.
Li was not alone in facing organized crime charges. Authorities also rounded up several hotel managers and women who worked at the sauna. And Li's crony who illegally detained the Jiangsu businessman was sentenced to nine months in prison.
Untouched since the crackdown began is Li's black Rolls Royce, which he used to drive around Bayan Nur simply to flaunt his wealth. Today, the car sits outside the Bayan Nur Hotel, reportedly waiting to be claimed by one of Li's unpaid creditors, covered in dust.
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