The Belt, The Road And The Money
ROB SCHMITZ, HOST:
This story today, it's going to take us around the world, but it starts in New York City. About a year ago, there was this conference in a fancy room - some diplomats, a senator from Virginia, a former senator from Alaska, bunch of policy nerds.
JULIA SIMON, HOST:
This guy comes up to the podium. He's wearing a purple shirt.
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PATRICK HO: Distinguished guests, ladies and gentlemen, good afternoon.
SIMON: His name is Patrick Ho. He's from Hong Kong. And he's becoming a regular fixture at these types of events. It's not quite clear what he does. But he does run a think tank, seems to have a ton of money to spend.
HO: One of his favorite subjects is China's entry onto the global stage. He says it's crucial in this increasingly unequal world.
(SOUNDBITE OF ARCHIVED RECORDING)
HO: The top 10 percent of earners have fared exceedingly well while the bottom 10 percent have continued to fall further behind. Ultimately, everyone is harmed by inequality.
SCHMITZ: Ho says the rise of China is a force for good.
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HO: The world is in a dire need of globalization 2.0.
SCHMITZ: Globalization 2.0 - a reorganization of the world's balance of power. And Patrick Ho was on a mission to make it happen.
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HO: We are a think tank. We are dedicated to addressing issues relating to the emerging positions of China. Besides being a think tank, we are also a do tank, which - we don't only think. We do things. So...
SIMON: Not just a think tank - a do tank. And Patrick Ho was doing a lot. What people at that event didn't know is that over the past few years, according to federal authorities, Patrick Ho had been trying to make globalization 2.0 happen with millions of dollars in bribes.
(SOUNDBITE OF LAURENCE HOLCOMBE & KEEFE DAVIDSON-WEST'S "THE CRAFT")
SIMON: Hello and welcome to PLANET MONEY. I'm Julia Simon in New York.
SCHMITZ: And I'm Rob Schmitz, China correspondent for NPR in Shanghai.
SIMON: Seven months after that speech in November 2017, FBI agents arrested Patrick Ho. The U.S. attorney's office was charging him with multiple counts of money laundering and bribery.
SCHMITZ: We're going to tell you what Patrick Ho did around the world to land himself in prison. His story opens a rare window into how China works and how it works abroad - a game of trying to gain power in smaller countries.
SIMON: Today's show, it's a classic onion structure. Each time we peel away a layer, we find something else.
SCHMITZ: Including secret bank transfers to world leaders, a mysterious tycoon and the global rush to control Africa's oil and infrastructure.
SIMON: And that first layer, we find it right near us, here in New York, with an arrest almost no one notices.
SCHMITZ: OK, so if this story is an onion, that first onion layer is an arrest. At JFK, on a cloudy afternoon last November, Ho gets picked up by the FBI.
SIMON: They pick him up because federal authorities say Ho wasn't just a talker. He was a major fixer. We called Ho's lawyer. He declined to comment. But according to the U.S. attorney, this fixer, Patrick Ho, was bribing foreign officials. In one transfer through a New York bank, he allegedly sent $500,000 dollars to a guy from East Africa. To find out why, we're going to Uganda.
(SOUNDBITE OF GIOVANNI KIYINGI'S "KALEEBA")
SIMON: I talked to a Ugandan journalist in Kampala. We're calling him by his middle name Apuuli (ph). We're not going to use his full name because Uganda's not a safe place for journalists right now. A lot of them are getting arrested lately. Apuuli told me that recently he noticed something changing in his city. And it has to do with the barber. Normally when he goes to the barber in Kampala, he sees these photos on the outside.
APUULI: You will definitely find Ludacris, Will Smith, Usher.
SIMON: American celebrities with stylish haircuts.
APUULI: If they collected royalties from the barbers in Africa, those guys would make a ton of money.
SIMON: (Laughter) That's true. But recently Apuuli has seen barbers popping up around Kampala with no Usher on the outside, no Ludacris.
APUULI: There's a a barber shop, but there are Chinese words. And the barbers are Chinese.
SIMON: It makes sense. A lot of Chinese people are moving to Uganda. They need haircuts. But the Chinese people in Uganda, they're building more than just barber shops.
APUULI: Everything from roads to buildings to malls to hotels - the Ministry of Foreign Affairs was built by the Chinese - the president's office.
SIMON: Wait. They built the president's office?
SIMON: Oh, man. And they built the Ministry of Foreign Affairs?
APUULI: Yes, they did build the Ministry of Foreign Affairs.
SCHMITZ: That's like the equivalent of the State Department in the U.S.
SIMON: Yeah. And remember Patrick Ho from Hong Kong - the fixer? He has a connection to the minister of foreign affairs of Uganda. The criminal complaint against Ho says that he sent a half a million dollar bribe to that minister - a guy named Sam Kutesa.
OWEN KIBENGE: Whatever issue of corruption that comes up in the country, Sam Kutesa's fingerprints are all over that project.
SIMON: This is Owen Kibenge, a Ugandan journalist. He's working on a story about Chinese business in Uganda. We met up in New York. He had just gotten back from Kampala. And he has met Sam Kutesa.
KIBENGE: He's one of the - what you'd call the untouchables. I mean, he's well-connected. He's a very wealthy man. He knows all the players. And he's smart. He's at the top of the food chain if I may say that.
SIMON: And there's another reason he's untouchable. He's in-laws with the president - can't get fired. And the president, he's run the country longer than I've been alive - since 1986.
KIBENGE: His argument, which is valid, is that he is elected whenever he runs as president.
SIMON: But elected in air quotes or like elected.
KIBENGE: Now, that is debatable.
SIMON: He's gotten rid of term limits. He controls the army. But they do have elections in Uganda. And this is where the half a million dollar bribe comes in. When that fixer Patrick Ho sent emails about that half a million dollars he was sending to Uganda...
SCHMITZ: He called it a donation to the re-election of the president.
SIMON: So Sam Kutesa, he takes this donation to his in-law the president. He's happy. The president's happy. And they win an election.
SCHMITZ: And what do the Chinese get? In one of those emails, Ho writes, just give me a list of all the major projects from infrastructure, energy, agriculture to finance and banking. And we will bring the relevant heads to your country to kick-start each project.
SIMON: See. This is the thing - is that many of these companies bidding to get these contracts from the Ugandan government to build all this infrastructure, these are Chinese companies.
SCHMITZ: And guess where they're getting their money?
KIBENGE: The Ugandan government is going to borrow money from the Chinese banks to undertake major construction of an infrastructure project.
SIMON: Whoa, whoa, whoa, whoa, whoa. If I'm the Ugandan Ministry of Roads, I will get a loan from a Chinese bank and then use that money from a Chinese bank to pay a Chinese construction company.
KIBENGE: Right. And the government of Uganda is going to go through a transparent process of calling out for bids.
SIMON: You used air quotes again.
SIMON: It's actually called the Uganda National Roads Authority, but you get the idea.
SCHMITZ: The Chinese companies always seem to get the bids.
SIMON: And it's not just infrastructure. It's also natural resources because the thing about Uganda, it has oil - not a ton. They've only gotten into the game relatively recently. But China needs oil.
SCHMITZ: They need a lot of oil. Nearly 1.4 billion people live here.
SIMON: That's a legit amount of people. China wants to get in on the ground floor of Uganda's oil industry just as it's starting. They want access to these potential energy resources.
SCHMITZ: And these resources are all over Africa. The country of Chad also has oil. And guess what.
SIMON: Federal authorities say Patrick Ho bribed the president of Chad, too. And this is why Patrick Ho was bribing these guys. He wants things for his think tank, yes, but he also wants things for China. Next, we find out where all this money is coming from.
SCHMITZ: Right. It comes from a huge Chinese oil company that appeared out of nowhere in the last few years. They've spent money all around the world. They're worth $40 billion. They're called CEFC. Patrick Ho's think tank was funded by and worked for CEFC.
SIMON: OK, so we're leaving Uganda.
SCHMITZ: And headed to Prague, Czech Republic, where they sometimes play accordions.
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SCHMITZ: Over one week in autumn of 2015, this new company, CEFC, went on a shopping spree in Prague.
MARTIN HALA: Out of nowhere came this Chinese company that nobody's ever heard of.
SCHMITZ: That's Martin Hala. He's a journalist and a China scholar in Prague.
HALA: They started buying assets, you know, seemingly randomly, in quick succession. There was a football club. There was a brewery. There was a media company.
SCHMITZ: They also bought a bunch of real estate, a hotel and a 30 percent share of a bank. Later on, they realized they forgot something.
SIMON: So they bought part of an airline, too.
SCHMITZ: And after all that, the head of this Chinese company, a 38-year-old guy named Ye Jianming, a dapper young businessman with slicked-back hair - he's suddenly named as the newest adviser to the president of the Czech Republic.
Martin, the China scholar - he admits to feeling a little embarrassed because everyone is turning to him for answers about this mystery man from China. He should know who this guy is, and he didn't. Nobody did. Well, the Czech president obviously did.
SIMON: So who is Ye Jianming, this dapper dude?
SCHMITZ: Ye Jianming is the CEO of CEFC, the same company that the FBI says hired the fixer Patrick Ho to bribe the foreign minister of Uganda. Ye Jianming, the young insta-tycoon, appeared to be behind all of this.
SIMON: After the break, we go to China to find out how a 30-something dude appeared out of nowhere to control billions of dollars, and why.
SCHMITZ: After CEFC's shopping spree in Prague, journalists here in China began wondering, who are these people? And who is this insta-tycoon in his 30s - this Ye Jianming? They began digging around. They learned from the company's website that Ye used to be connected to China's military. And then when they asked the company about this, it responded by deleting that information from its website. At the time, Scott Cendrowski was working for Fortune in Beijing. He was baffled.
SCOTT CENDROWSKI: Companies just had gotten very scant coverage. Even in the Chinese press, no one really knew anything.
SCHMITZ: Scott spent two years trying to land an interview with Ye Jianming. Finally, in 2016, he became the first and only foreign journalist to interview him.
CENDROWSKI: You know, my impressions of him - he was young. He had kind of a nervous air around him.
SCHMITZ: Scott says Ye was surrounded by minders, people whispering in his ear who called him the chairman.
CENDROWSKI: It was a pretty stilted interview. You know, right off the bat, he asked it to be off the record, and we had traveled from Beijing to Shanghai. And that's the last thing you want to hear before you ask your first question, so I quickly say, I don't know. The deal was on the record. He turns, you know, to the side both ways and says, OK, OK.
SCHMITZ: And Scott had the same questions journalists in Prague had - the same ones I have about Ye and his company. How did a private oil company like CEFC rise so quickly in a country where the energy sector is controlled so tightly by China's government? And how is a guy like Ye, a young man with a murky past, behind a company now worth more than $40 billion?
SIMON: Was this guy a business genius, or had China's government engineered all of this?
SCHMITZ: Well, Scott actually asked Ye this, and Ye denied being part of a secret government plot. He said, basically, all the other companies in this industry are government companies, and we need to compete with them, so we need to look like them. And that made sense to Scott. I mean, CEFC did look like a state-owned company, right down to Ye Jianming's office.
CENDROWSKI: Let me see if I actually have pictures of it.
SCHMITZ: Scott searches his photo library and finds a photo.
CENDROWSKI: There's a gilded frame portrait of Ye as soon as you walk into the office. There's a sort of Ye with some dignitaries - him shaking Henry Kissinger's hand on the wall, a photo of him leaning against a tree smoking a pipe, a large portrait of Mao.
SCHMITZ: There was also a statue of a reclined Buddha, a framed piece of calligraphy by the Chinese leader Xi Jinping, head of the Communist Party. And there, on an ornate desk, Scott sees something else - a red phone.
CENDROWSKI: When I noticed that, my eyes lit up.
SCHMITZ: Only the most powerful men in China have red phones on their desks - top leaders and the heads of state-owned enterprises. It's so they can call each other up quick without worrying about being bugged. The most famous red phone sits on the desk of President Xi Jinping. It's behind him whenever he delivers an address to the nation. Scott asked Ye's minders about the phone.
CENDROWSKI: They, of course, said, no, no, no. That's just the internal line. But the impression is the guests know that Xi also has a red phone in his office, so it's impressive that Ye has one as well.
SIMON: And that leads us to Xi Jinping, a leader with big plans for China - plans that the insta-tycoon and the jailed fixer are putting in jeopardy.
SCHMITZ: To explain these plans, I bring you a bedtime story sponsored by the Chinese government.
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ERIK NILSSON: Once upon a time, several routes led from China through Central Asia to Europe. It was called Silk Road. People would put things...
SCHMITZ: Julia, you got to see this video. It's a geeky-looking blond guy who starts reading this very odd bedtime story to his daughter, who seems way too interested.
SIMON: I'm watching this, and this is very weird.
SCHMITZ: Well, the guy just looks weird. I know.
SIMON: It's just - and they got a map, Rob.
SIMON: And he's, like, showing the girl with the map.
CENDROWSKI: We've got camels, yeah.
SIMON: They got a camel. OK. Rob, what is this?
SCHMITZ: It's a propaganda video on the website of the state news outlet the China Daily. It's official government communication meant to reach a foreign audience.
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NILSSON: Few years ago, China's President Xi Jinping proposed making new routes like the old routes, but even bigger. It's called the Belt and Road Initiative. More stuff...
SIMON: The Belt and Road Initiative.
SCHMITZ: When he took power five years ago, Xi Jinping wanted China to play a more prominent role in global affairs. The Belt and Road Initiative was how he planned to do it, a global trading network led by China, its banks and its companies - a way to spread Chinese investment and influence abroad. It aims to be the largest infrastructure and investment project in history.
SIMON: But people start paying attention when you're working on the largest global investment project in history and may be buying influence to do it.
SCHMITZ: After a Chinese company won the bid to build a high-speed rail network in Hungary, an investigation into bidding violations was opened. Same thing happened in Nepal with a Chinese dam.
SIMON: Last year in Sri Lanka, a Chinese company bought one of the country's largest ports - a 99-year lease. It started a riot.
SCHMITZ: That Fortune writer, Scott Cendrowski, he says that in much of the developing world, China's state-owned enterprises - they're called SOEs - were becoming synonymous with corruption.
CENDROWSKI: Chinese SOEs don't have the sparkling reputation in Africa or other parts of the world where they've done business. And in fact, they've tarnished the reputation of Chinese companies that come in after them.
SCHMITZ: I interviewed several China experts for this story. All of them had come to the same conclusion about Ye and his mysterious company. They said because China's state-run companies had developed such bad reputations worldwide, China's government may have essentially chosen CEFC, a private company with seemingly no government connections, to begin taking their place because the optics were better.
SIMON: If China's government is behind CEFC, this might explain why Patrick Ho, who worked for Ye in the U.S., gave so many presentations about China's Belt and Road Initiative. At that event in New York, even then he was talking about the Belt and Road.
SCHMITZ: And when CEFC was sending money to the president of Chad, it wasn't just to secure a lease or build a road. It was to help a larger Chinese state-run company reduce a billion dollar fine, and that's really weird. Normal companies don't help the competition.
SIMON: CEFC seems kind of like a Trojan horse for China. They make friends with these guys, like the foreign minister of Uganda, the president of Chad, so that the Chinese government and its companies can march in.
SCHMITZ: And this is what happens when your power hits its peak. You get involved in countries across the world.
SIMON: Yeah. You end up propping up some less than democratic governments, as we've seen in Uganda, because it's easier to bribe them and get what you want.
SCHMITZ: And the same thing happened with the British Empire, the U.S. And the details can get pretty ugly. And seeing how the sausage gets made, it can undermine all your global ambitions.
SIMON: This right here is a real look into the sausage making. Robert Precht is a former New York criminal defense attorney who divides his time between the U.S. and Hong Kong.
ROBERT PRECHT: What's striking about this case is how complete the picture is that's supplied by these emails. It's almost as if the emails and the criminal complaint - it reads like a Hollywood script it's so complete.
SCHMITZ: He's read the indictment of Patrick Ho, and he says the case against him is so damning he thinks it's likely Ho will have little choice but to cooperate with prosecutors and tell them what he knows about CEFC's activities and its connections inside China's government.
SIMON: And about China's global plans.
PRECHT: So this case and the whole question of foreign corruption by Chinese companies has huge implications for the Belt and Road Initiative. If it turns out that Chinese companies are routinely bribing foreign officials, then that is a stain on the Belt and Road Initiative. And it's a huge embarrassment.
SCHMITZ: It is already pretty embarrassing for China's government.
SIMON: And that may be why, lately, it's been pretty hard to find the insta-tycoon, Ye Jianming.
SCHMITZ: He has now disappeared. He's reportedly under investigation by Chinese authorities. Nobody seems to know where he is now. A state firm has taken over the company and has begun selling off all its properties.
SIMON: As for our fixer Patrick Ho, he's in jail in New York. Robert Precht says there are clues that he's cooperating with federal prosecutors. Ho's agreed to a trial date in November of this year. Precht thinks Ho's lawyers want to negotiate with U.S. officials.
PRECHT: It's a terrible dilemma because if he goes to trial, it's very likely he'll be convicted and face years in jail. On the other hand, if he pleads guilty and he implicates others, that's going to have a fallout as well. It could mean that people will turn against him. They will label him a traitor. It could put pressure on family members in Hong Kong who might be the targets of actions by powerful people in the mainland.
SCHMITZ: Precht says given what Patrick Ho may know about CEFC, its connections to China's government and its role in Xi Jingping's Belt and Road Initiative, the safest place for him might just be his current address - a jail cell in lower Manhattan.
(SOUNDBITE OF GARY NEUMANN AND KATIE CANDIDA THOMPSON'S "TAKE THE LEAD")
SIMON: We love to hear your story ideas and thoughts about the show. We're at firstname.lastname@example.org You can also find us on Twitter, Facebook and Instagram.
SCHMITZ: Today's show was produced by Sally Helm with help from Alexi Horowitz-Ghazi. Our supervising producer is Alex Goldmark. Bryant Urstadt is our editor.
SIMON: Thanks to Giovanni Kiyingi for the music from Uganda. The song we used was "Kaleeba." And thanks to Alexandra Gillies (ph), Sarah Nakintu (ph) and Hilder Kraga (ph).
SCHMITZ: Also to Yuan-Chu (ph), Nishant Yeah (ph), Ho-Fung Hung (ph), Andrew Chubb (ph) and Mark Stokes (ph). I'm Rob Schmitz in Shanghai.
SIMON: And I'm Julia Simon in New York. Thanks for listening.
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