Petro-China executives face corruption probe.
Petro-China lost $1 billion dollars in market value in one day of trading, as investors bailed following news that the corruption probe in China had been expanded to include three executives at Petro-China.
Trading of shares in PetroChina and unit Kunlun Energy Co. KLYCY -8.19%were halted Tuesday ahead of PetroChina’s disclosure that three of the companies’ senior executives were under investigation by the Chinese government for “severe disciplinary violations” and had resigned.
The news followed by a day parent company China National Petroleum Corp.’s announcement that one of its executives was being investigated for the same reason. Neither PetroChina, the country’s largest listed oil company by capacity, nor CNPC have released specifics about the probes, but the term “severe disciplinary violations” often implies corruption investigations in China.
Analysts noted that investigations into Chinese state-owned enterprises, or SOEs, operating in the energy sector aren’t unprecedented, pointing to the arrest and resignation of former China Petroleum & Chemical Corp. chairman Chen Tonghai.
Mr. Chen was given a suspended death sentence in 2009 on corruption charges after he admitted to improperly accepting more than $28 million in bribes. In 2010, the company, known as Sinopec, also admitted that one of its employees took bribes from German auto maker Daimler AG.
This news piqued my interest entirely because Petro-China is a stakeholder in several Canadian projects, including heavy investments in Alberta’s oil and gas, as well as Kitimat’s LNG terminal. http://thetyee.ca/Blogs/TheHook/Labour-Industry/2012/12/14/petrochina-natural-gas-nexen/
In recent months, new President Xi Jinping started a very high-profile anti-corruption campaign after declaring corruption to be a threat to the survival of the Communist party. While allegations of corruption at the executive level are nothing new to the corporate world globally, in China the penalty is potentially lethal.
Case in point, the case of Zeng Chengjie, who had been referred to often in news reports as the Bernie Madoff of China. He was executed by lethal injection, and Chinese officials didn’t even inform his family prior to the execution. What struck many around the world in this case, including Araminta Wordsworth of the National Post, was the disparity between how Communist party members and officials are dealt with, and how everyone else is dealt with:
Liu Zhijun embezzled more than three billion yuan ($505-million), including $9-million in bribes. Investigators also discovered he owned 16 cars and more than 350 apartments, and supported 18 mistresses. (According to Chinese media reports, these figures represent about one third of what he actually stole.)
Zeng Chengjie, described as the Bernie Madoff of China, raised 3.5 billion yuan ($570-million) from more than 20,000 people, and was responsible for investor losses totaling 620-million yuan.
Both were found guilty, but guess which one was executed? Why Zeng, of course. The self-made businessman found himself unprotected after a clearout of officials who had encouraged him to get into the business in the first place.
Liu was the railways minister and a high-ranking Communist Party official with stellar family connections.
How – or if- the current investigation involving Petro-China and its parent company executives impacts it’s business outlook longterm is unknown, but this latest story highlights two big issues for me.
First,Chinese state owned businesses operating and investing in Canadian resources and infrastructure is still a big catch-point for many Canadions concernd about how that threatens Canada’s ability to control our own resources.
Second, the irony is not lost on me, of the stark contrast between the Chinese Communist Party pushing an anti-corruption probe forward…as superficial as it may be… while Canadian officials and politicians sit and twiddle their thumbs when the subject of corruption comes up in our own country – with the exception of Quebec’s Charbonneau Commission.