It’s clear that Fairwell’s founder, Lai Cheong Sing, had become some sort of a godfather figure in Xiamen. By the time the crackdown got serious, Xiamen residents and sources close to the investigation say, Lai was so influential that armed police guards protected his trucks, and Fairwell could arrange naval escorts for tankers of contraband oil arriving in the port. Even traffic cops apparently knew not to stop Lai, who is now believed to be a fugitive overseas. (Repeated attempts to contact Lai and other Fairwell representatives through their lawyers were unsuccessful.) “It’s like a mafia was controlling a city of 600,000, including every traffic policeman,” said a Xiamen executive with knowledge of the case.
China’s economic reforms have unleashed legions of capitalists and crooks, but, if the allegations are true, few capitalists as crooked as Lai. He got his start as a lowly but legitimate entrepreneur in southeastern Fujian province in the ’70s. By the mid-’90s he had built Fairwell into an empire with offices in Fujian and Hong Kong and a stunning roster of patrons. The Xiamen investigators reportedly have made 70 arrests, including bankers and oil executives as well as customs authorities, a deputy mayor and a top public-security official who allegedly helped Lai escape the police dragnet. Western diplomats and Xiamen sources say that even the name of senior People’s Liberation Army Gen. Liu Huaqing has been linked to Lai, and some describe him as Lai’s “godfather.” Liu could not be reached for comment.
China’s anticorruption Internet bulletin boards have posted many stories about Fairwell. According to one, the company blackmailed men to join its smuggling operation by luring them to a bordello called the Red Mansion, and videotaping them en flagrant. Another writer in the same chat room claimed investigators are pursuing “more than 100 generals” who visited the Red Mansion.
In public, Lai cut a straight profile as one of China’s high-flying new businessmen. About two years ago he took a 28th-floor condominium apartment in Hong Kong’s ritzy Cavendish Heights. From his living room, Lai could see through fir trees to the gold and glass tower of the Far East Finance Center, where he reportedly bought one full office floor for $14 million in 1997. Soon, the Chinese authorities were investigating Fairwell for clandestine business dealings–tipped off, according to one report, by a disgruntled employee whose Macau gambling debts Lai supposedly had refused to pay. The collapse followed quickly. Fairwell group had a dozen listings in the 1998 Hong Kong phone book, but this year there is none. Three months ago Lai’s banks took possession of his now empty flat. According to managers at Cavendish Heights, Lai moved out without leaving a forwarding address.
Lai left an even more sudden vacancy in Xiamen, where he was building “Fairwell City.” Today the ambitious complex is moribund. The tourist hotel is a windowless shell. The site of the 88-story international center, which would have been the tallest building in Xiamen, is a gaping pit. On a recent visit NEWSWEEK found the firm’s offices abandoned and ransacked. A brass Fairwell plaque hung next to the shattered plate-glass front door. In the reception area, broken furniture was strewn around a miniature model of Fairwell City.
Graft busters are now giving chase to Lai and his cohorts. Zhu Rongji has instructed his men to “grab the big and release the small.” Those who took only small bribes have been told they can go free if they turn in bigger fish. Sources say the graft busters are even promising a form of “witness protection,” a rare offer in China’s justice system.
Members of the Xiamen elite dread getting caught in the dragnet, even as witnesses. They tell of the day authorities detained the head of a local bank for questioning. After the investigators arrived at the banker’s home, they found his wife hurriedly hanging up the phone, and pressured her to identify the caller. Within 20 minutes they burst into the home of a business friend of the banker’s. They interrogated the businessman all night, and confiscated his computer as evidence. “We look over our shoulders not knowing who else might be involved,” said one executive. “When I’m in a group, we try not to talk about this too much.”
Many Xiamen residents are nonetheless supporting Jiang’s offensive. For more than a year investigators have been traveling in east coast provinces from Jiangsu to Guangdong, busting smugglers and their official patrons. They’ve jailed 100 bureaucrats in Shantou, and won death sentences against six senior Zhanjiang city officers. They’ve pressured the Army to sell off businesses, including its stake in a club in Beijing featuring caged dancers. Now that the Xiamen case appears likely to dwarf all the others, most locals find it disturbing that a suspected criminal could become a prominent public figure–one whose firm reportedly dropped a cool $3.6 million in cash to buy a local soccer team. “It’s obscene,” said a Xiamen resident. But if the scandal has exposed Xiamen as a mafia city, the crackdown at least shows that China is not yet a mafia state.
