Zhenjie Zhou on Corporate Crime in China

Zhenjie Zhou is the son of peasant farmers in China.

As a young man, he decided to become a lawyer.


And he decided to study corporate crime in China.

Zhou, now an associate professor at College for Criminal Law Science, Beijing Normal University, has written an eye opening yet nuanced book that is a must read for lawyers practicing corporate criminal defense and for anyone interested in the intersection of law and justice in the People’s Republic.

It’s called — Corporate Crime in China: History and Contemporary Debates (Routledge, 2015).

It’s a remarkable book — and not just because it’s the first book on the subject of corporate crime in China.

Up front, Zhou makes it clear that corporate crime is a big problem in China — from pollution, to bribery, to food safety crimes to industrial accidents.

And he doesn’t hide the political problems involved with getting the problem under control.

“Punishment and prevention of corporate crime in China face numerous obstacles that require more political than legal efforts, such as arbitrary and biased selective law enforcement, rigid restrictions on the activities of non-governmental organizations and local reluctance to prosecute corporations due to personal interests, the pursuit of growing the gross domestic product and the fear of losing absolute control on society,” Zhou writes.

“Therefore, discussions about the causes and the prevention of corporate crime are not limited to legal aspects, and elements such as the role of state-owned corporations at political stages, the complicated relationships between commercial organizations and governments and the criminogenic macro-regulation environment must be paid attention to.”

“Considering the special role of state organs and state run corporations on the Chinese political stage and the importance placed on gross domestic product growth by local governments make it difficult to address corporate crime without putting it into political context,” Zhou writes.

“Everything and everyone is supposed to serve ‘stability’ and ‘development,’ the two greatest themes of the time,” Zhou writes. “The criminal justice system is no exception. The fundamental values of criminal law, such as independence, justice and fairness, sometimes have to yield to political considerations in relation to ‘stability’ and ‘development.’”

What does Zhou mean by selective law enforcement?

“The food industry is a suitable example,” Zhou told Corporate Crime Reporter in an interview last week. “It is a secret known to all that food quality in China is unreliable and this is why the Chinese people buy milk from around the world.”

“But few food corporations have been punished, even in cases where violation to food regulations and laws are very evidential,” Zhou said.

Why didn’t Zhou include in this book the prosecution of GlaxoSmithKline for bribery in China?

“The GSK bribery case was intensively reported,” Zhou said. “However, in my opinion, it is just a typical corporate bribery case, not so special. More corporations, either foreign based ones or domestic ones, are doing the same. They are not punished for this or that reason.”

“It is very common to see that developing countries are reluctant to punish international corporations. This is done in order to attract foreign investments. The GSK case may mean a change in China.”

You say that most corporations, like GSK, are engaged in corruption. “They are not punished for this or that reason,” Zhou says.

What are those reasons?

“The reasons are complicated,” Zhou said. “For example, let’s say the corporation is reported to a high authority, say, the Supreme People’s Procuratorate. The conduct of offering bribes is so deliberate that it cannot be endured, or the corporation or a high level manager gets involved in another criminal case, or the bribery is widely reported by foreign media. GSK offered bribes so widely that it is impossible for Chinese law enforcement not to notice it.”

In your book, you write that “punishment and prevention of corporate crime in China faces numerous obstacles that face more political than legal efforts.” One of these you say is reluctance to prosecute corporations due to personal interests. Can you give some examples? How widespread is this problem?

“This question is quite sensitive,” Zhou says. “If you allow me, I suggest you read some reports on high ranking officials that have been investigated recently — for example, Qiu He, Deputy Secretary of CPC Yunnan Province Committee.”

“You will find there will usually be one or more corporations or businessmen behind a corrupt official. Bo Xilai, the former Secretary of Chongqing who has been convicted, Zhou Yongkang, former Secretary of Political and Legal Affair Commission of the Central Committee of CPC, and Guo Yagang, the general who recently arrested — are all the same.”

What do you mean by the criminogenic macro regulation environment?

“That means the macro environment makes it necessary to commit a crime in order to survive, or even it encourages people to commit a crime,” Zhou says.

“For example, in cases where the tax burden is so heavy that small and middle sized companies sometimes cannot survive without evading the tax.”

“For another example, if you want to use the materials that meet national standards to make cakes, you need to sell them at a higher prices.”

“But your competitors sell cakes at a lower price because they use materials that fall below legal standards, and no law enforcement authority punishes the competitors. Then, what you will do?”

The death penalty is still being used to punish corporate crime in China.

“It is not often in practice that defendants in corporate crime cases are sentenced to death,” Zhou says.

“China is now implementing a policy of restricting the use of the death penalty (the 8th amendment to the criminal law abolished capital punishment for 13 non-violent economic crimes in 2011 and the 9th amendment being reviewed by the standing committee of the NPC now proposes to abolish 9 additional ones too). I think you may have read reports about Wu Ying case in Zhejiang Province and Zeng Chengjie case in Hunan Province.”

“Both of the defendants were convicted of fraud of collecting funds by fraudulent means and sentenced to death because the amounts involved were extremely huge (2 or 3 billion RMB). Wu is lucky. Her death sentence was reduced to a life imprisonment. Zeng was executed.”

What is the state of independent investigative reporting on corporate crime in China?

“According to my knowledge, there is no comprehensive investigative reporting on corporate crime in China yet so far, although such reports as those on corporate social responsibility, crimes by entrepreneur or a particular case have been seen. In addition, there are some articles on corporate crime of course,” Zhou says.

Whistleblowing in China seems to be a hazardous activity. Zhou cites a report that says that 1,200 whistleblowers were assaulted or killed in China in 2008. What is the current state of whistleblower protection in China?

“The crucial role of whistleblowers has for a long time been recognized by judicial bodies in China,” Zhou said. “For example, according to the Procuratorial Daily on 29 October 2014, nearly 80% of investigated corrupt officials are reported by whistleblowers. Therefore, the SPP (Supreme People’s Procuratorate of the PRC) issued Regulations of the People’s Procuratorate on Whistleblowing in October 2014. But so far, I have not got any new advancements in this field.”

Is this the first book written about corporate crime in China?

“Although some English articles on corporate crime in China have been published, this one according to my knowledge is the first one,” Zhou says. “Before publishing this book, Routledge asked two professors — I do not know who they are, maybe two professors in the UK — in this field to comment on my publication proposal in 2013, and they also said that my book would be the first one.”

Zhou seems to be quite open and direct in his writing.

Are there things that you know about corporate crime that you cannot write or say? Or are you free to write and say what you wish about corporate crime in China? Have scholars who have written on corporate crime been punished? Aren’t they similar to whistleblowers?

“Personally, I think I should be open and direct as a researcher,” Zhou says. “Meanwhile, I think we should look at the facts, however terrible they are, right between the eyes if we want to resolve the problems. I have expressed what I think about corporate crime and expressed my basic ideas in my book.”

“I am of course free to write and say what I wish about corporate crime in China. Sometimes, however, I may have some difficulties in publishing if the issue in question is sensitive.”

“As far as I know, no scholar has been punished just for writing on corporate crime. Maybe there have been some lawyers or other persons who reported corporate crimes — especially those involving corruption of officials in governmental organization to authorities.

While most of Corporate Crime in China covers the legal landscape, the most fascinating parts cover the atmospherics.

And Zhou is under no illusions about the difficulties reformers face.

“It is unwise and impractical to attempt to prevent corporate crime merely by using criminal law because corporate crime is a social phenomenon with its causes deeply rooted in the mixture of cultural, economic and political elements in China,” Zhou writes.

“A comprehensive policy composed of strict enforcement of law by government agencies, voluntary self-control of corporations and enthusiastic public participation is preferable. In addition to maintaining the deterrence of corporate punishment, the policy should aim to facilitate establishment of a compliance culture inside a corporation and precipitate citizens’ participation in discovering corporate misconduct in accordance with law. Those purposes are inherently interrelated. If the promptness and certainty of criminal punishment cannot be ensured, the resolution of a corporation to establish and keep a compliance culture may be weakened and public trust in corporate punishment may erode.”

Zhou is concerned about the over criminalization of the field. But as he points out, “reports of cancer villages, contaminated milk powder scandals (Sanlu) and the Qingdao oil pipeline blast in November 2013 due to gross breach of production safety regulations that caused at least 62 deaths remind us of the fact that corporate crime has been on the increase both in number and in harm caused.”

“The main problem in the present corporate crime policy in China does not lie with legislation but with enforcing the law,” Zhou says. “Selective enforcement lets too many illegal acts by corporations go unpunished.”

Zhou waxes philosophical about the reality of getting a grip on corporate crime policy in China.

“Certain macroscopic issues, such as safeguarding the right to association and reducing the reliance on the gross domestic product as a promotional stepping stone are apparently beyond the scope of this work because they need political wisdom and courage more than legal knowledge in an existing one party structure,” Zhou concludes.

“However, we can make efforts to satisfy practical regulation needs by introducing more flexible particular punishment, to ensure payment of victim compensation. . .and to facilitate whistle blowing by enacting a consolidated whistleblower protection law.”

[For the complete q/a format Interview with Zhenjie Zhou, see page 29 Corporate Crime Reporter 13(12), March 30, 2015, print edition only.]

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