Commentary on Political Economy

Monday 28 October 2019

Pity us, Cowardly Europeans! - This opinion from the Corriere della Sera

Che vergogna, che desolazione, che pena infinita le immagini dei soldati americani in ritirata con i curdi delusi, traditi, umiliati che dal bordo della strada lanciavano in lacrime frutta e ortaggi. E che vergogna dovremmo provare anche noi, europei senz’anima e senza orgoglio che cianciamo di valori universali a assistiamo impotenti e indifferenti al massacro di un popolo sacrificato sull’altare del realismo politico e dell’interesse economico. Erdogan tiene a bada i profughi che rischiano di invadere l’Europa: davvero noi europei senz’anima e senza dignità dovremmo, nel nome dei diritti umani calpestati, far arrabbiare Erdogan? I diritti umani sono stati sradicati dall’agenda internazionale. L’Onu è sempre più un ente inutile che sprofonda nel ridicolo mettendo ai vertici delle commissioni umanitarie regimi tirannici e addirittura sanguinari. Gli Stati Uniti consegnano un’intera area geopolitica alla Russia (altro che le chiacchiere complottiste sul Russiagate) e Assad in Siria, dopo aver sterminato centinaia di migliaia di civili, compresi i bambini, si permette di fare da protettore dei curdi sul punto di essere sterminati.
Che vergogna, che desolazione. Avessimo un soprassalto d’orgoglio, avessimo solo un briciolo di volontà per adeguare i proclami altisonanti alla realtà, per lo meno smetteremmo di raccontarci la bugia pietosa di un’Europa accogliente, cementata da valori comuni. Non staremmo a piagnucolare su Trump che manda via le truppe statunitensi (anche se le sue truppe speciali hanno colpito, finalmente, al-Baghdadi), e cercheremmo di avere un ruolo anche militare in quella zona. La solidarietà iniziale per i curdi è scemata nell’opinione pubblica con una velocità impressionante. Ci piacerebbe sapere quanti contratti nel commercio d’armi con la Turchia sono stati stracciati, come era stato promesso: probabilmente nessuno. Oramai le democrazie occidentali sono diventate inaffidabili e gli ortaggi lanciati con commovente dignità dai curdi abbandonati dai soldati americani ci dicono che la nostra parola è diventata carta straccia, che ogni impegno è solo l’anticamera del disimpegno. Non ci si deve fidare di noi: avessimo un sussulto di decenza potremmo riflettere sulla catastrofe della nostra credibilità perduta. Ma non succederà. E i curdi, lasciati soli.C

Thursday 24 October 2019


25-year-old man from Northern Ireland arrested on suspicion of murder shortly after the discovery

Police at the scene where 39 bodies were discovered in a truck container, in Essex, U.K., on October 23. PHOTO: PETER NICHOLLS/REUTERS
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LONDON—British police said the 39 people found dead in a refrigerated trailer on an industrial park near London were believed to be Chinese nationals, as investigations into how they came to the U.K. spread to Northern Ireland and Belgium.
Police in Essex, where the bodies were found in the early hours of Wednesday morning, said in a statement Thursday that eight of the deceased are women and 31 are men. “All are believed to be Chinese nationals,” the statement said.
Police arrested a 25-year-old man from Northern Ireland on suspicion of murder shortly after the discovery was made at the Waterglade Industrial Park, just east of London. Detectives have searched three properties in County Armagh in connection with the investigation, but police said they wouldn’t speculate on the identity of the driver after local press reports named him, citing police and other sources.
Prosecutors in Belgium said separately they had begun an investigation into how the truck trailer was transported from the port of Zeebrugge to Purfleet in Essex.
“Our lines of inquiry are extensive and will be thorough. This means that we might not have all the answers straight away,” Essex police said.
Chinese state broadcaster China Central Television said the Chinese Embassy in the U.K. is in communication with the British police and has sent officials to the site of the incident to confirm details.
Authorities opened a murder investigation after emergency responders alerted police to the discovery of the bodies shortly before 1:40 a.m. on Wednesday. All were pronounced dead at the scene and police teams are still in the process of identifying the victims, which officials warned could be a lengthy process.
The incident has sharpened concerns about the reach and methods of criminal trafficking gangs. Investigators are focusing their inquiry on the exact route 39 victims took to get to the U.K. in the hope it will provide further clues to their identity and the identity of those who helped them enter the country.
Prosecutors in Belgium Thursday said preliminary investigation showed that the trailer arrived at Zeebrugge port on Oct. 22 and left the same afternoon, arriving in Purfleet at around 1 a.m. on Oct. 23.
“It is not yet clear when the victims were placed in the container and whether this happened in Belgium,” the Federal Public Prosecutor’s Office in Brussels said.
The rig unit, meanwhile, traveled from Northern Ireland, passing into Ireland before crossing over the Irish Sea to disembark at Holyhead port in Wales on Oct. 20.
The rig then collected the trailer at Purfleet before stopping at the Waterglade Industrial Park, before the ambulance service was alerted at 1:40 a.m. Emergency responders then informed police.
The rig, a Scania, carried Bulgarian plates and was registered in the Bulgarian seaside city of Varna by a company owned by an Irish citizen, according to the Bulgarian Foreign Ministry. National radio in Sofia reported that the truck left the country on June 20, 2017, a day after it was registered.
Bulgarian Prime Minister Boyko Borisov told media Wednesday that since then it had never returned to Bulgaria. He also said the owner of the company that registered it has two more trucks registered in Bulgaria.
Thousands of people have died attempting to cross the Mediterranean in recent years, according to the International Organization for Migration. Their journeys can be precarious, even if they make it to land.
There is also a flow of people from China who attempt to enter Britain illegally.
Fifty-eight Chinese nationals suffocated to death in the back of a lorry at the port of Dover in 2000.
The problem was highlighted further in 2004 when 21 illegal immigrants, again from China, drowned or succumbed to hypothermia when they were cut off by the tide when harvesting cockles in Morecambe Bay in northern England. Police investigations later showed they had entered the country through shipping containers.
Write to James Hookway at

Tuesday 15 October 2019


Ford EV partner in China faces lawsuit over unpaid bills Electric carmaker Zotye sued by battery supplier as slowdown grips industry

Chinese electric carmaker Zotye, which has a joint venture with Ford in the country, is facing a lawsuit over delayed payments to a supplier as the impact of shrinking vehicle sales ripples across the car industry. Shenzhen-based lithium battery maker Bak Power has filed a civil suit for breach of contract over outstanding payments, seeking to freeze more than Rmb40m ($5.7m) in assets of Zhejiang province-based Zotye Automobile and three subsidiaries, according to a filing on the Shenzhen Longgang District People’s Court website. Zotye confirmed that the case was going ahead but declined to comment on how much it owed to suppliers. The case comes as the Chinese former chief executive of electric car start-up Faraday Future filed for personal bankruptcy in the US, the latest development in what has become a cautionary tale of the risks indebted Chinese companies can bring to their partners.

 Ford and Zotye in 2017 announced that they planned to invest $756m in a 50:50 joint venture to manufacture electric vehicles for the Chinese market. However, Chinese state media have said the partnership is being reconsidered due to the market slump. Ford did not respond to requests for comment. The case against Zotye, which was filed in May, came to light this week as Chinese media debated the authenticity of a leaked bank memo that identified four Chinese electric car companies, including Zotye, as likely to enter bankruptcy proceedings by the end of the year. All four companies denied they were considering filing for liquidation, amid rumours of suspension of business and downsizing. New energy vehicle sales in China fell 34 per cent last month. That was the third consecutive month of decline, fuelling fears of a sharp slowdown that analysts said could hit dozens of electric vehicle companies with crippling and potentially fatal debts.

 A hotspot in the market just four years ago, electric vehicles are now “exacerbating fallout from a weak car market because the R&D costs for carmakers have increased significantly due to investing in EVs”, said Tu Le, of advisory Sino Auto Insights. Recommended Electric vehicles China new energy vehicle sales drop 34% Mr Le said smaller suppliers to electric carmakers would be the first to be hit due to their rapid turnover and the difficulty they face raising capital from banks, leaving lawsuits as their best hope of getting paid. “They want a place in line. If you are the last to sue, it’s harder to get more money back,” he said. Jia Yueting, the founder and former chief executive of Faraday Future, an electric car company with ambitions to take on Tesla, filed for bankruptcy in the US this week and plans to hand over his stake in the company to help repay personal debts in China amounting to about $3.6bn. In 2017, Faraday gave up on plans to build a $1bn factory in Nevada after some of Mr Jia’s assets were frozen and his Chinese technology conglomerate LeEco suffered a cash crunch.

 Mr Jia’s bankruptcy filing would not affect the company’s business operations, Faraday Future said in a statement. Mr Jia has been on a blacklist of individuals who failed to pay their court-mandated debts in China since 2017, when a Beijing court seized millions of dollars worth of his assets.

This App Helps You Learn About China, While China Learns All About You

Two recent reports suggest increased sophistication by Beijing in harnessing vast reams of information for political ends

The smartphone app Xuexi Qiangguo has become the most downloaded app in China following its January debut. PHOTO: JASON LEE/REUTERS
BEIJING—China is using a widely downloaded mobile app and a translation service to hoover up billions of pieces of data inside its borders and around the world, according to reports published in recent days by researchers in Australia and Germany.
While policy makers in the West have trained their focus on China’s advances in next-generation cellular technology and invasive cyber-surveillance capabilities, the new research suggests that Beijing has broadened its mass-data-collection efforts to include relatively innocuous technologies, such as language translation.
A Chinese propaganda app that has been likened to a digital-age “Little Red Book” of Chairman Mao’s quotations and that has racked up more than 100 million registered users provides a potential backdoor for the Chinese Communist Party to log users’ locations, calls and contact lists, according to a report published Saturday by German cybersecurity company Cure53. The report was commissioned by the Open Technology Fund of U.S.-financed Radio Free Asia.
Xuexi Qiangguo—known in English as “Study the Great Nation”—has been touted as an education app, replete with content centered around Chinese President Xi Jinping’s namesake ideology, Xi Jinping Thought. Many government employees, students and civilians have been required to download the app, and some employers are asking workers to actively engage by earning points on the app by, among other activities, taking quizzes and watching videos, according to announcements by various companies, trade groups and government bodies.
Meanwhile, a little-known Chinese state-owned company specializing in big data and artificial intelligence can mine the equivalent of five trillion words in 65 different languages every day from sources such as social and traditional media for use by China’s national-security apparatus, according to research from the Australian Strategic Policy Institute in Canberra, which is backed by the Australian government and Western defense contractors.
Together, they represent an increased sophistication by Beijing in harnessing vast reams of data for political ends, the reports’ authors say.
The Australian report, published Monday, found strong indications that the Chinese company, Global Tone Communications Technology Co., or GTCOM, generated military and other state-security intelligence using the data it collected. The data could help “support the party-state’s development of tools for shaping public discourse,” the report says.
The company’s parent entities, China Translation Corp. and China Publishing Group, are under the direct supervision of China’s Central Propaganda Department. GTCOM has cooperation agreements with foreign universities in Sydney, Vienna and elsewhere in the West.
Samantha Hoffman, author of the Australian report, cited the mining of Facebook data by U.K.-based consulting company Cambridge Analytica around the time of the 2016 U.S. presidential election and the subsequent advances in data collection and analytics as “transforming how public sentiment is monitored, analyzed and manipulated.”
In a 2017 presentation available on its website, GTCOM’s director of big data, Liang Haoyu, indicated that the company was trying to build up technologies such as voice and facial recognition for “real-time monitoring” of security risks.
“In the future, [GTCOM] will be able to find the requested facial structure through image recognition and provide technical support and assistance for state security,” Mr. Liang said. The presentation also claimed that “90% of military-grade intelligence data can be obtained from open data analysis.”
GTCOM didn’t respond to requests for comment.
Xuexi Qiangguo became the most downloaded app in China following its January debut, part of a comprehensive campaign under Mr. Xi to tighten ideological control in the smartphone era. The app was developed by the Communist Party’s Propaganda Department with help from Alibaba Group Holding Ltd., according to a person familiar with the matter. China’s State Council Information Office, the publicity arm of China’s cabinet, didn’t immediately respond to a request for comment.
A spokesman for Alibaba’s messaging app DingTalk, whose software underpins the Xuexi Qiangguo app, said that it is an open technology platform whose technology tools could be used for third-party development but said it didn’t have any “backdoor code” that would allow users’ devices to be infiltrated.
An analysis by the Open Technology Fund, which accompanied the German report on Xuexi Qiangguo, said that code found in the app provides “superuser” access to smartphones, which includes the ability to modify files and install software that logs keystrokes. To run the app, users must also agree to allow access to a trove of personal data, as well as to cameras, microphones, call logs and locations.
The app also contains weak encryption software that can be easily cracked, leaving email, biometric data and other information exposed, the report said. That provides a path to efficiently collect and analyze messages and other data on millions of users. There has been no evidence that data have been gathered this way or collected through “super-user” access.
The amount of data gathered by Xuexi Qiangguo isn’t unusual for commercial apps, the report said, but this app was developed by the Communist Party and has a huge user base—potentially giving the government access to vast amounts of personal data.
The report focuses only on devices operating on the Android operating system, which underpins the vast majority of China’s smartphones. The app is also available for download on Apple Inc. ’s iPhones. In a statement, Apple said the Xuexi Qiangguo app can be downloaded on its devices, but that “this type of ‘superuser’ surveillance could not be conducted on its operating system.”
Ms. Hoffman, the Australian report’s author, said the emergence of companies like GTCOM highlights how innocuous devices and services can serve as tools for the Chinese party-state’s “tech-enhanced authoritarianism” ambitions.
“While there’s an important focus on technologies such as 5G, surveillance or cyber-enabled espionage, this narrow focus misses the bigger picture,” she said.

Monday 14 October 2019


Los Angeles Lakers forward LeBron James made his first comments about the N.B.A.’s conflict with China on Monday.


A Brazen Scheme, and a Minor Penalty, for Winning Business in China

CreditCreditChris Mcgrath/Getty Images
It was a brazen campaign to win business in China by charming and enriching the country’s political elite.
The bank gave a Chinese president a crystal tiger and a Bang & Olufsen sound system, together worth $18,000. A premier received a $15,000 crystal horse, his Chinese zodiac animal, and his son got $10,000 in golf outings and a trip to Las Vegas. A top state banking official, a son of one of China’s founding fathers, accepted a $4,254 bottle of French wine — Château Lafite Rothschild, vintage 1945, the year he was born.
Millions of dollars were paid out to Chinese consultants, including a business partner of the premier’s family and a firm that secured a meeting for the bank’s chief executive with the president. And more than 100 relatives of the Communist Party’s ruling elite were hired for jobs at the bank, even though it had deemed many unqualified.
This was all part of Deutsche Bank’s strategy to become a major player in China, beginning nearly two decades ago when it had virtually no presence there. And it worked. By 2011, the German company would be ranked by Bloomberg as the top bank for managing initial public offerings in China and elsewhere in Asia, outside Japan.
The bank’s rule-bending rise to the top was chronicled in confidential documents, prepared by the company and its outside lawyers, that were obtained by the German newspaper Süddeutsche Zeitung. The previously undisclosed documents, shared with The New York Times, cover a 15-year period and include spreadsheets, emails, internal investigative reports and transcripts of interviews with senior executives.
The documents show that Deutsche Bank’s troubling behavior in China was far more extensive than the authorities in the United States have publicly alleged. And they show that the bank’s top leadership was warned about the activity but did not stop it.
Josef Ackermann, the bank’s chief executive until 2012, said in an interview with The Times and separately in answers to written questions that he was not familiar with many of the details contained in the documents. But he defended the bank’s broader practices.
“This was part of doing business in this country,” Mr. Ackermann said. “At the time, this was the way things were done.”
CreditThomas Lohnes/DDP, via Agence France-Presse — Getty Images
For years, Deutsche Bank has been a poster child for misconduct in the finance industry. Regulators and prosecutors around the world have imposed billions of dollars in penalties against the bank for its role in a wide range of scandals. Most recently, the bank has been under investigation for the facilitation of money laundering in Russia and elsewhere.
Deutsche Bank — which for two decades was the primary lender to President Trump — also has been under scrutiny by two congressional committees and by state prosecutors in New York who are investigating Mr. Trump’s finances.
In August, the bank agreed to pay $16 million in a settlement with the United States Securities and Exchange Commission related to allegations that it had used corrupt means to win business in both China and Russia, violating anti-bribery laws, though it did not admit wrongdoing.
That penalty, the documents show, amounted to a small fraction of the revenues gained in China from business stemming in part from the activities. The bank’s outside lawyers had warned executives in 2017 that they could face a penalty of more than $250 million from the S.E.C. related to China. There is no evidence that German regulators investigated the bank’s activities in China, though they were alerted to some of it, according to the documents.
[Here are six key takeaways from the investigation.]
Reasons for concern appear throughout the documents, which include internal investigations conducted by two law firms, Gibson, Dunn & Crutcher and Allen & Overy, at the time of the S.E.C.’s action.
Deutsche Bank, the documents show, dispensed hundreds of thousands of dollars to secure meetings for top executives with China’s leadership. An obscure company received $100,000 to arrange a 2002 meeting between Mr. Ackermann and Jiang Zemin, then the country’s president.
In all, the documents show, the bank paid seven consultants more than $14 million, including for help buying a stake in a Chinese bank and winning coveted assignments from state-owned companies. Some of the payments were flagged internally as problematic but allowed to go through.
On multiple occasions, according to the documents, Deutsche Bank tried to win business by collaborating with family members of Wen Jiabao, China’s premier from 2003 to 2013. The Wens’ enormous accumulation of wealth was the focus of a 2012 investigation by The Times that found family members had controlled assets worth at least $2.7 billion.

Winning Over the Wens

Among its many ties to China’s political elite, Deutsche Bank cultivated a deep relationship with the family of Wen Jiabao during his term as premier of China. Mr. Wen himself received gifts from the bank valued at more than $15,000. But it was a family affair, involving his son, daughter and their spouses, as well as a close business associate of the family.
Wen Jiabao
Zhang Beili
Diamond expert
Lee Zhang
Head of
finance in Asia
Source: Documents compiled in internal Deutsche Bank investigation.
By Guilbert Gates
The bank, at least in part through its hiring of people with political connections, won hundreds of millions of dollars in Chinese deals. Such hires can be illegal if they are done in exchange for business. The bank’s outside lawyers calculated that just 19 of its so-called relationship hires helped bring in $189 million in revenue, including a plum assignment in 2006 managing a state bank’s market debut, then the biggest initial public offering in history.
Most of the Chinese government officials entangled in the bank’s activities have since retired, among them Mr. Jiang and Mr. Wen. But two parents of people the bank employed are now members of the Politburo Standing Committee, the country’s pinnacle of power. And the country’s vice president, Wang Qishan, accepted gifts from the bank when he held previous positions, such as mayor of Beijing.
Efforts by The Times and Süddeutsche Zeitung to reach Mr. Jiang, Mr. Wang and Mr. Wen — as well as other Chinese officials, executives and relatives mentioned in the documents — either were unsuccessful or received no response. Several current and former Deutsche Bank employees declined to comment.
Tim-Oliver Ambrosius, a spokesman for the bank, did not respond to specific questions about the documents. In a written statement, he said that the company had “thoroughly investigated and reported to authorities certain past conduct,” adding that the bank had “enhanced our policies and controls, and action has been taken where issues have been identified.”
“These events date back as far as 2002 and have been dealt with,” the statement said.
Mr. Ackermann said that he had cautioned the bank’s staff that “no business is worth risking the bank’s reputation.” Though he pushedemployees to increase revenue and profits, he said, “feeling pressure cannot excuse violating compliance rules and regulations or the law of the land.”
When Mr. Ackermann was picked in 2000 as the next chief executive, his ambition was for Deutsche Bank to be universally recognized as a global leader. And he wanted it done fast.
China was critical. It was the most populous country in the world and on its way to becoming the second-largest economy. Yet Deutsche Bank was far behind its rivals there.
Goldman Sachs and Morgan Stanley had been at the forefront of helping China modernize its moribund financial system and network of state-owned businesses. In 1995, Morgan Stanley helped set up the country’s first investment bank, China International Capital Corporation. Goldman won the rights in 1997 to bring China Telecom, the country’s phone monopoly, to the international market through an initial public offering in Hong Kong.
Mr. Ackermann had to play catch-up.
A first step for the bank was poaching Lee Zhang, the head of Goldman Sachs’s Beijing office. Mr. Zhang was fluent in the ways of both China and Western business. Born and raised in China, he had studied in Canada and later moved to California, where he worked for Hewlett-Packard and studied business administration. He then went to Hong Kong, eventually landing at Goldman.
Mr. Zhang’s mandate was to transform Deutsche Bank into a player in China. That required winning over the Communist Party.
Mr. Zhang began hiring aggressively. Many of his recruits — dozens and dozens of them, according to spreadsheets compiled by the bank’s lawyers — were young, inexperienced and well connected. They came to know him as Uncle Zhang.
Ma Weiji, whose parents were senior executives at state-owned companies, interviewed for a job in 2007. It did not go well. A senior Deutsche Bank executive emailed Mr. Zhang that Mr. Ma “was probably one of the worst candidates.”
He got the job nevertheless. Soon, Mr. Ma was using his family connections to secure meetings for the bank with his parents’ companies, according to a memo by Allen & Overy.
Another job candidate was a son of Liu Yunshan, then China’s propaganda minister. He “cannot meet our standard,” a Deutsche Bank employee wrote in an email about the company’s equity capital markets group. He was offered a job anyway.
The younger daughter of Li Zhanshu — now a top member of the Politburo Standing Committee — was judged unqualified for the bank’s corporate communications team. She got an offer, too.
Even for qualified candidates, political connections were taken into account.
Wang Xisha, whose father was the top official in Guangdong Province when she applied in 2010, was a veteran of the rival bank UBS and had also interned at Goldman Sachs. During her recruitment process, one banker noted that she would “have access” to a state-owned automaker, according to Allen & Overy. Her father, Wang Yang, is now a member of the Politburo Standing Committee.
In 2006, Deutsche Bank began to engage in what it called referral hiring. The goal was to drum up business for the bank by doling out personal favors to current and prospective clients, the S.E.C. found. Premier Wen Jiabao’s son-in-law, who was a senior official at China’s banking regulator, referred one candidate. Mr. Wen’s daughter-in-law referred another. Both were hired.
A state railway executive in China referred the son of a judge on the Supreme People’s Court. The assistant president of the oil refiner Sinopec referred a candidate, too. So did the general manager of the state-owned Industrial and Commercial Bank of China.
Mr. Zhang, reached by phone, declined to be interviewed for this article. He also did not respond to written questions sent through a business associate.
“It’s a relationship country,” Mr. Ackermann said in the interview. “Of course we cultivated these people.”
The roster was set. The first nine foursomes to tee off at Deutsche Bank’s Beijing golf invitational in October 2003 were a predictable mix of German and Chinese executives.
The 10th group was different. It included Winston Wen, son of the newly appointed premier, as well Huang Xuhuai, a close business associate of the Wen family. They were joined by a top official from PetroChina, a state-owned oil company.
The fourth player was Mr. Zhang. The following month, he, Mr. Huang and Mr. Wen would be off to Thailand for more golf, and later to Germany, according to documents compiled for the bank’s internal investigation.
The relationships that Mr. Zhang built with the golfers were microcosms of how the bank made a name for itself in China beyond its strategic hiring. They were showered with gifts. They were enlisted to introduce Deutsche Bank executives to Chinese decision makers. And they were hired as consultants to help win the bank work.
Among dozens of gifts to political leaders and heads of state-run companies, the oil executive received golf clubs and a bag valued at more than $2,500.
Executives at China Life Insurance, which picked Deutsche Bank to help manage its I.P.O. in 2003, were treated to Louis Vuitton luggage, cashmere overcoats, golf clubs, even a sofa, totaling more than $22,000, according to a memo by Gibson, Dunn & Crutcher.
The bank prohibited gifts to public officials unless the legal and compliance departments signed off, and Gibson Dunn found that Mr. Zhang, who generated many of the expenses, had violated that policy.
The law firm’s research showed that from 2002 to 2008, bank officials gave more than $200,000 in gifts to Chinese officials, their relatives and executives of state-owned companies. More than a fourth went to people on the Politburo or their relatives, including Mr. Jiang, the president; and Mr. Wen, the premier.
Some of the gifts, like the crystal tiger for Mr. Jiang, who was born in 1926, the year of the tiger, were “provided” by Mr. Ackermann, according to the internal investigation.
Mr. Ackermann said that while he didn’t recall personally giving the items, he was aware that the bank’s staff thought it a good idea. He has not been accused of wrongdoing in China.
“They said that’s what Goldman and JPMorgan are doing, so we should do it,” Mr. Ackermann said in the interview. “I don’t think Wen Jiabao would be somehow influenced by a gift of a few thousand.”
In 2016, JPMorgan was fined $264.4 million by the Justice Department for its Chinese hiring. Other banks were also known to engage in similar practices. The Swiss bank Credit Suisse paid $77 million last year in criminal penalties and other fines. Goldman Sachs has not been accused of wrongdoing in its China business.
The plan to increase Deutsche Bank’s clout in China also included buying a big stake in a midsize Beijing bank, Huaxia.
The acquisition plan, code-named Project Rooster, involved hiring Mr. Huang, one of Mr. Zhang’s golf partners. Mr. Huang had no experience in banking but had worked in a diamond company run by the wife of the premier, according to a background check that was done for the bank at the time. He was paid the equivalent of more than $2 million.
The bank’s compliance department didn’t stand in the way of the consulting role, but some senior executives were uneasy.
“Based on the information from the search firm, if this person is not known to the market and industry, why are we paying for the service and what are we paying for?” Polly Lee, the bank’s head of compliance in Hong Kong, wrote in an email to Till Staffeldt, a regional executive who was pushing for Mr. Huang’s hiring. “My concern is this individual is fronting for someone else.”
Mr. Staffeldt is now Deutsche Bank’s global chief operating officer for regulation, compliance and preventing financial crime.
Deutsche Bank’s bid for Huaxia was successful. In late 2005, the bank secured a 9.9 percent stake, which later increased to almost 20 percent. It was unclear what Mr. Huang did to help the deal go through, but Gibson Dunn later found that the circumstances around his hiring raised “red flags” that might have violated the Foreign Corrupt Practices Act, in part because of Mr. Huang’s ties to the family of the premier, Mr. Wen.
In 2006, Deutsche Bank again brought Mr. Huang on as a consultant. This time, his task was to “study in-depth the financial safety of China’s banking industry.” He received $3 million.
Inside the bank, concerns had been mounting about Mr. Zhang’s use of consultants to win business. Frank Nash, who ran the bank’s Asian corporate finance division until 2004, warned a top executive, Michael Cohrs, about the problematic use of politically connected consultants.
Mr. Cohrs shared those concerns with the bank’s lawyers, including Richard Walker, a general counsel. They concluded that Mr. Zhang was operating inside the law, three people familiar with those discussions told The Times.
Mr. Zhang kept going. In 2006 he turned to another consultant named Huang to help the bank secure a role in the I.P.O. of Industrial and Commercial Bank of China. The stock offering was set to be the world’s largest ever. The banks handling the transaction reaped not only huge fees but also coveted bragging rights.
That man, Huang Xianghui, was lacking in banking experience, and a background check found that the Beijing company he claimed to work for did not appear to exist at the address on his business card. But what he did have, according to the bank’s documents, was a previous affiliation with PetroChina, the state oil company. Mr. Zhang hired him.
Mr. Huang’s original contract said he would receive $3 million for services that were “solely focused on the energy industry.” In a draft, someone crossed out “the energy industry” and wrote “ICBC,” a reference to the giant state-owned bank. Deutsche Bank went on to win a high-profile role in the I.P.O.
The success ingratiated Mr. Zhang with his superiors, especially Mr. Ackermann. Mr. Zhang would escort him to meetings with top Chinese leaders, including the president and premier, as well as to gatherings with cultural and academic experts, Mr. Ackermann said. While at Deutsche Bank, Mr. Zhang was appointed to a top government advisory body, signaling his insider status.
“He introduced me to all sorts of people,” Mr. Ackermann said in the interview. “He was always an honest person and had good ethical standards.”
But Mr. Cohrs, who was the head of investment banking, warned the company’s lawyers that he was “scared of how Lee Zhang was doing business and whether there was money being passed around in envelopes,” the documents show.
There was reason to be concerned.
In 2010, the head of I.C.B.C. approached Mr. Ackermann and said he wanted to hire Mr. Zhang, citing his excellent work at Deutsche Bank, according to Mr. Ackermann. He became senior executive vice president at the giant Chinese bank.
Two years later, Mr. Ackermann stepped down as chief executive. A top executive warned his successor, Anshu Jain, that the bank had grown overly reliant on winning business from state-owned companies, an area rife with corruption risks, according to a person with direct knowledge of the warning.
In 2013, when the United States began investigating JPMorgan’s hiring practices in China, Deutsche Bank initiated an internal review. It found a troubling pattern of politically connected hiring, and reported the findings to the S.E.C. and the Justice Department.
The S.E.C. subpoenaed the bank in April 2014. Months later, Deutsche Bank sued Mr. Zhang, accusing him of profiting from one of the consulting companies he had hired because it was owned by a relative. Mr. Zhang denied wrongdoing in the suit.
The Times and Süddeutsche Zeitung found two other consulting companies used by Deutsche Bank that appeared to be owned by Mr. Zhang’s wife.
CreditTeh Eng Koon/Agence France-Presse — Getty Images
Amazing Channel Holdings and Speedy Link Holdings, both registered in the British Virgin Islands, list Ji Zhengrong as the owner, according to documents found in the Panama Papers. Mr. Zhang’s wife has the same name, and her birth date, listed in Hong Kong court records, matches the birth date in the offshore company records.
Speedy Link was paid $3.65 million by Deutsche Bank to assist in its successful bid to help manage the I.P.O. of China Life Insurance Company in 2003, according to the bank’s documents. Amazing Channel Holdings was paid $100,000.
At the time, Deutsche Bank’s top lawyer was Mr. Walker, who had been warned of executives’ concerns about politically connected consultants in China.
Before joining Deutsche Bank, Mr. Walker had been the head of the S.E.C.’s enforcement division. Now, as the agency’s investigation unfolded, bank officials were feeling optimistic.
Lawyers for Deutsche Bank traveled to the S.E.C.’s office in Salt Lake City to give a presentation on the company’s internal investigation. They argued that its hiring of Chinese princelings was far less extensive and systematic than at other banks, according to a person briefed on the meeting.
The lawyers told Mr. Walker afterward that the S.E.C. seemed to share the bank’s perspective, the person said. The agency’s investigators had concluded that when the bank hired politically connected employees, they were generally well qualified — something the bank’s internal reviews had cast doubt on.
This August, the S.E.C. announced that it was closing its investigation and had settled with the bank without requiring an admission of wrongdoing. Asked about the previously undisclosed Deutsche Bank documents, Chandler Costello, an S.E.C. spokeswoman, said, “The S.E.C. does not comment on details of any investigation, but, as always, the S.E.C. is committed to pursuing violations of federal securities law, wherever or by whomever they may occur.”
Earlier this year, the bank disclosed that it remained under investigation by the Justice Department for its hiring practices and use of consultants in foreign countries.
The German public broadcaster WDR contributed reporting.