A Shanghai court sentenced Zhou Zhengyi to three years for manipulating stock prices and falsifying registered capital reports. The case immediately reminded us of the case of Yu Huafeng, the former general manager of Southern Metropolitan News who was sentenced to 12 years for embezzlement. The problem is that Zhou embezzled 700 million Yuan (approximately US$84 million), while Yu’s case involved only 100,000 Yuan (about US$12,000).

According to the Xinhua web site, on June 1, the First Intermediary Court of Shanghai handed down its guilty verdict for the case of Zhou Zhengyi et al. of Shanghai Nongkai Development Group for manipulating stock prices and falsifying registered capital reports.

The verdict fined the company 33 million Yuan (approximately US$4 million) for manipulating stock prices and 7 million Yuan (about US $845,000) for registering nonexistent capital. Zhou was sentenced to two years and six months in prison for manipulating share prices and one year for falsifying registered capital reports. His final sentence was a total of three years in prison, the verdict said.

Xinhua also reported that, according to court investigations, between October 1998 and September 2000 Zhou raised large amounts of money through intermediaries to buy and sell, often without transferring ownership, stocks of Xuzhou Engineering and Mechanical Technology, Inc. As Zhou at one point owned 95.93% of the traded stock, he made illegal profits because the buying and selling caused the stock price to increase by 402%.

Prosecutors also noted that in the same time period Zhou converted the 700 million Yuan of artificially inflated capital into real capital and increased the registered capital of Nongkai from 100 to 800 million Yuan, falsifying the increased amount.

Zhou’s case provoked heated discussions in China and reminded observers of the Southern Metropolitan News case in Guangdong.

A people's court in Dongshan, Guangdong Province sentenced Yu Huafeng, former managing director of the Southern Metropolitan News, to 12 years for corruption and embezzlement on March 19. The court also confiscated 50,000 Yuan (about US$6,000) of Yu’s personal property.

The prosecutor told the court that Yu had taken 100,000 (US$12,000) Yuan from the newspaper's earnings and distributed 480,000 Yuan (US$58,000), in particular to Li Minying, former editor of the Daily, who was also imprisoned and sentenced to 11 years in prison by the Dongshan court.
Yu’s sentencing provoked strong international reactions. The Paris-based Reporters Without Borders and New York-based Committee to Protect Journalists issued press releases on March 22 to protest the revenge sentencing of Yu and his colleagues by Guangzhou authorities.

Reporters Without Borders said that Yu never embezzled public funds but rather distributed bonuses to editors. Bonus distributions are quite common among profitable Chinese media enterprises. Yu gave Li money to reward the latter’s contributions, which had nothing to do with bribery.

The international press freedom organization suspected that Southern Metropolitan News seemed to have run afoul of the Guangdong authorities. “The real reason for the authorities to persecute Yu and his colleagues is that the newspaper and its parent company dared to tell the truth and had a knack for investigative reporting. The reporting of the SARS epidemic and beating death of college student Sun Zhigang were popular in China and abroad. Cheng Yizhong, the former editor-in-chief, is a well-known Chinese journalist. The newspaper attracted a group of dedicated and professional journalists and administrators. They have never been against the Chinese authorities but have been critical of the way local bureaucrats handle things.”

According to Article 383 of Criminal Law of the People's Republic of China, those who commit the crime of graft are to be punished according to the following stipulations depending on the seriousness of their cases: (1) Individuals who have engaged in graft with an amount of more than 100,000 Yuan are to be sentenced to more than 10 years of fixed-term imprisonment or life imprisonment and may, in addition, have their properties confiscated. In especially serious cases, those offenders are to be sentenced to death and, in addition, have their properties confiscated.

Yet, Yu’s case only involved 100,000 Yuan, but he was sentenced to 12 years. Observers pointed out that in contrast, Zhou Zhengyi was sentenced to 3 years even though his case involved 700,000 million Yuan. Their verdicts are inversely proportional to the seriousness of their cases. Sources said that Chinese authorities have a free hand in exploiting loopholes in Chinese laws to achieve their political aims.

Many Chinese professionals in journalism think that the contrast between the two verdicts is quite controversial. The cases have affected the images of Shanghai and Guangdong authorities, which have been attempting to become more open.