"Shadow shareholders" have become a new method of corruption among party members and cadres, with a legal "guise" that cannot conceal the essence of corruption.

Defendant Fei Ping was sentenced to 12 years in prison and fined 2 million yuan for bribery... Recently, the Wuxi Intermediate People's Court delivered a first-instance verdict on the bribery case of Fei Ping, former deputy mayor of Jiangyin City. Wanting both power and wealth, he disguised extortion as investment, with single bribery amounts reaching as high as 11.5 million yuan.

The downfall of Fei Ping has uncovered the tip of the iceberg of hidden corruption involving "shadow shareholders." In recent years, "shadow shareholders" have frequently appeared in cases of official crimes, becoming a new way for some party members and cadres to seek personal gain. What are "shadow shareholders"? Compared to blatant power-for-money transactions, what kinds of "deceptive methods" does this hidden corruption use? How can the veil be lifted and precise measures applied?

The deep alliance of power and profit

At 57, Fei Ping rose through hard work from a technician in the process department of a bicycle factory to become the top official of a township in Jiangyin City, eventually serving as a member of the Jiangyin Municipal Party Committee and executive deputy mayor. Because of the "lesson learned" from his brother-in-law Chen's imprisonment for bribery, Fei Ping set four bottom lines for himself: never accept money from people whose relationships are unclear, never accept money from construction project owners especially those from outside the area, never accept money in small amounts piecemeal, and never accept money from subordinates.

But behind the scenes, Fei Ping schemed to extort money in various ways. A company encountered difficulties during its IPO application process; after agreeing to Fei Ping's investment, it received smooth approvals. Later, Fei Ping learned that the company's share reform was completed, and although it was impossible for him to invest directly, he still transferred 1 million yuan through a third party, creating the appearance of capital contribution. By July 2020, when Fei Ping heard that the investment returns exceeded 10 million yuan, he felt afraid. "I dared not take the money directly, but I didn't want to give it up either," Fei Ping said. At that time, he found a third party to receive the investment returns in their name, then transferred the money to his wife's company account under the pretext of investing in a joint venture. In this way, the huge bribe was laundered through several turns and finally ended up in Fei Ping's pocket.

This case is not isolated. Reporters learned from the Jiangsu Provincial High People's Court that in recent years, courts at all levels across the province have tried an increasing number of official crime cases involving "shadow shareholders." As of March this year, the Wuxi Municipal Commission for Discipline Inspection and Supervision has investigated 102 clues related to hidden corruption involving shadow shareholders, disciplining 56 people with party and administrative sanctions. In official crimes, state staff who become "shadow shareholders" often use abnormal government-business relationships, leveraging their authority or influence to seek benefits for petitioners, while obtaining company shares or dividends through third-party shareholding or anonymous investment.

"Where there is grease, it is easiest to slip," research by multiple discipline inspection and supervision commissions points out that departments and fields with intensive funds and rich resources such as construction projects, resource transactions, and material procurement are often the easiest hiding places for "shadow shareholders."

The Changshu Municipal Commission for Discipline Inspection and Supervision found in case handling that with the strong promotion of citywide safety production standardization in recent years, safety production authorities who play a leading role in daily inspections, project bidding, and acceptance are easy targets for illegal "hunting." For example, to win over Xu, former head of the Safety Production Management Section of Changshu Economic Development Zone, Chen, the legal representative of a safety engineering firm, generously gave shares in his company, and Xu reciprocated by setting biased bidding parameters favoring Chen's company, helping it win multiple projects. In February last year, Chen gave Xu 50,000 yuan as a pre-dividend. In April last year, Xu was expelled from the party and transferred to the procuratorate for suspected bribery.

"Some cadres often have a fluke mentality, thinking that wearing a seemingly legal 'cloak' will make them safer and more concealed, and if investigated, it would at most be considered a violation of business activities. This is a typical case of covering one's ears to deceive oneself," a long-time anti-corruption discipline inspection officer told reporters. "Most 'shadow shareholders' do not participate in actual company operations; their shareholder status is just a guise and a 'shame cover' for abusing power for personal gain."

A relevant official from the Wuxi Municipal Commission for Discipline Inspection and Supervision summarized the city's investigation of more than 80 "shadow shareholder" cases, categorizing the use of "shadow shareholders" for power monetization into three types:

First, nominal registration by relatives and friends with behind-the-scenes control. For example, Liu Junwei, former deputy district mayor of Huishan District, Wuxi, invested 500,000 yuan in February 2004 to co-found Wuxi Zhongxin Machinery Manufacturing Co., Ltd. with Hua and others. Liu held 33.4% of shares in his mother's name, while Hua and others managed the business. Over more than ten years, Liu treated the company as his personal "wallet," withdrawing nearly 5 million yuan in total.

Second, hidden shareholding with cunning and plunder. Liu Yamin, former director of the Yixing Municipal People's Congress Standing Committee, during his tenure as party secretary and director of the Jingjiang Park Management Committee, under the arrangement of Ren, chairman of Jiangsu Yangtze River Shipyard Co., Ltd., invested 400,000 yuan to purchase 200,000 shares before the company's IPO, held by others on his behalf. After investing, through dividends, distribution of shares, high-price buybacks, illegal shareholding, and financial investments, he illegally profited over 10 million yuan like a snowball effect. 40万元购买20万股，并由他人代持，入股后通过股息分红、配送干股、高价回购、非法参股、投资理财等一系列操作，滚雪球般非法获利1000余万元。

Third, one family, two systems, integration of government and business. Wu Yu, former director of the Wuxi Municipal Government Liaison Office in Beijing, used his position to invest 980,000 yuan in his son's name to establish a catering company with a Jiangyin businessman in Beijing, providing assistance during business development and receiving company dividends totaling over 1.24 million yuan in 12 installments. 98万元与江阴某老板在北京成立餐饮公司，并在业务发展中提供帮助，先后12次获取公司分红共计124万余元。

According to Li Jianming, professor at the Law School of Nanjing Normal University, whether it is "getting something for nothing," relatives and friends holding shares on one's behalf, or paying an obviously below-market price, the evolution of dividend distribution plots essentially derives from rent-seeking, "which is essentially still a power-for-money transaction, a deep alliance of power and profit."

Even the most concealed corruption leaves traces.

Over 20 years, using 12 bank cards opened in relatives' names, transactions and investments often "circulated" among different accounts. One dividend of 550,000 yuan passed through 18 accounts. Shares in a family-owned warehousing company changed hands multiple times over 16 years, held successively by different relatives, even "investing" bribes in non-listed company shares, then using authority or influence to introduce business and provide assistance...

From a recent corruption case involving a county-level city official disclosed by the Suzhou Municipal Commission for Discipline Inspection and Supervision Committee, one can glimpse the strong concealment and difficulty in investigating "shadow shareholders."

Compared to the blatant power-for-money transactions such as "you give money, I handle affairs" and "handing over money and handling affairs simultaneously," "shadow shareholders" represent a "transaction under the transaction," making it significantly harder to combat and investigate. "The entire corruption process is disguised through a series of steps, the accounts appear clean, and clues are hard to find. In practice, it is usually uncovered through case linkage or conflicts arising from uneven profit distribution among shareholders," said Li Jianming.

Under the high-pressure anti-corruption stance, some corrupt individuals even deliberately employ a "time difference": using their authority while in office to seek improper benefits for petitioners, then tightening the "net" and demanding returns after leaving office or retiring. For example, Jia Guoxiang, former chairman of the Political Consultative Conference in Jingkou District, Zhenjiang City, began helping some business owners seek benefits before retirement. When they offered him shares and other benefits, he usually deferred by saying "let's talk after retirement," and the business owners understood and made promises. Just one year after retirement, he "borrowed" 1 million yuan from a business owner citing a need for money to buy a house.

No matter how concealed the corrupt methods are, they always leave traces. A relevant official from the Wuxi Municipal Commission for Discipline Inspection and Supervision introduced that after studying the cases, investigators do not get lost in the maze of shadows but instead start from the source, sorting out obviously abnormal decision-making matters involving the suspects, then specifically investigating the benefiting enterprises and their connections to accurately pinpoint the core corruption issues.

Facing the "facelift" of corrupt methods, supervision and discipline enforcement methods are also being "upgraded." Reporters noticed that in combating hidden corruption such as "shadow shareholders," many local discipline inspection and supervision commissions fully utilize big data and other technological means that cover a wider scope, have stronger timeliness, and higher accuracy to create "precise portraits" of corruption. Many discipline inspection and supervision cadres also told reporters that no matter how concealed or complex the corrupt methods are, as long as the essence of power-for-money transactions and privatization of public resources is grasped, evidence and facts can ultimately pierce the so-called "market behavior" veil.

In judicial practice, whether it is bribery crimes involving "shadow shareholders" or market investment behavior, the key to review and judgment is whether public officials actually invested funds, participated in company management, bore business risks, or sought benefits for others. A relevant official from the Criminal Division II of the Provincial High Court cited the bribery case of Liu: to cover up the crime, the briber Zhang established a company in Hong Kong and transferred part of the shares of a domestic company he actually controlled to the Hong Kong company at a low price. Then, a Hong Kong resident Chen established a company in another country and transferred the shares held by the Hong Kong company in the domestic company to the foreign company at a low price. Finally, Liu's son Liu signed a trust agreement with Chen, who held the domestic company shares on his behalf. "Although Liu accepted the company shares given by Zhang through multiple layers of structure, which was concealed, a thorough investigation and analysis of the behavior's essence still shows it was a power-for-money transaction and hidden corruption."

A judge who has long been engaged in adjudicating official crimes told reporters that when public officials seek benefits for others but do not actually invest or participate in company management, and accept company shares or dividends from others, it is a typical bribery behavior. However, during case trials, some defendants often argue that they did invest and that the shares and dividends obtained are legitimate income. "In such cases, the court will trace back to the essence of the behavior. If the defendant made false investments or used investment as a 'cover' to accept bribes, then their behavior is essentially different from market investment behavior."

Putting power into the cage of the system

Recently, various units in Wuxi City have successively held warning education meetings and watched the warning education special film "Don't Let "Being Smart on Your Own Ruins Your Life." "I now deeply realize that no matter what tricks you use or how many new ways you use to cover up corruption, it is actually being outsmarted by your own cleverness, and the end result is self-destruction!" The tearful confession of Fei Ping in the special film brought a strong spiritual shock to the attendees.

While deeply investigating and thoroughly checking corruption cases involving "shadow shareholders," discipline inspection and supervision commissions at all levels across the province adhere to the philosophy of "solving one problem, summarizing a type of pattern, and governing one field." They look for problems and weak links in systems, mechanisms, and supervision management from the cases investigated, propose discipline inspection and supervision recommendations, promote the main responsible departments to advance reforms in key fields and critical links, and compress the survival space and breeding ground for corruption.

From the situation of petition reports and case investigations, the top leaders are most prone to hidden corruption involving "shadow shareholders." The Huai'an Municipal Party Committee conducted special research and formulated implementation measures to strengthen supervision over the "top leaders" and leadership teams, focusing on strictly observing political discipline, implementing decision-making deployments, practicing new development concepts, fulfilling the responsibility of strict party governance, and exercising duties and powers. It clarified 38 supervision measures and established three guarantee mechanisms: shared responsibility, information sharing, and shared results. The Huai'an Commission for Discipline Inspection and Supervision took on the special supervision responsibility, formulated and issued work measures to effectively perform assistance duties and strengthen supervision over the "top leaders" and leadership teams, incorporating whether the execution of "three important and one major" decisions and democratic centralism is standardized into the important content of municipal inspections and stationed supervision, timely discovering and correcting violations such as major projects not being submitted for meetings or "top leaders" setting the tone first in meetings; exploring personal matter verification of "top leaders" in inspected party organizations, and verifying the personal matter reports of "top leaders" in eight units during the first round of routine inspections of the eighth municipal party committee.

The "shadow companies" in which "shadow shareholders" reside are carriers and channels for leading cadres to engage in hidden corruption. For cases involving long-term, fixed bribery and benefit transfer behaviors, the Wuxi Municipal Commission for Discipline Inspection and Supervision insists on deeply investigating the clues behind the "shadow shareholders," urging industry regulatory departments to establish a "shadow company" blacklist, apply credit penalties, implement qualification restrictions, and industry bans to form a joint force for punishment.

Focusing on the fields and links where "shadow shareholders" easily hide, the Jurong Municipal Commission for Discipline Inspection and Supervision vigorously promotes reform through cases, adopting multi-person supervision and key monitoring methods in key economic areas such as project bidding, property rights transactions, and government procurement, regularly auditing involved projects and funds, and establishing regular rotation and avoidance mechanisms for key positions.

A relevant official from the Criminal Division II of the Provincial High Court pointed out, The crime of bribery involving "shadow shareholders" not only involves large amounts of bribery but also features long-term "collaboration" between state officials and companies or enterprises, forming a solid chain of interest transmission. This easily solidifies into an alliance of interests, undermining a fair and just market competition environment and polluting the regional political ecology. To address both symptoms and root causes and to govern the crime of bribery involving "shadow shareholders" from the source, it is necessary to "build a system and mechanism that simultaneously promotes deterrence, incapacity, and unwillingness to engage in corruption," always maintaining a high-pressure stance in the anti-corruption struggle, adhering to institutional anti-corruption, tightening the institutional cage that "prevents corruption," and punishing corruption through legal thinking and legal methods.

Professor Zhang Guizhen, Director of the Integrity Education Research Center at the Jiangsu Provincial Party School, believes that governance "Shadow shareholders" is a systematic project that requires comprehensive treatment and persistent effort. "Putting power into the cage of the system requires setting up a more reasonable power structure and operating mechanism, improving the power supervision system, enhancing the effectiveness of supervision and governance, and also establishing and improving mechanisms for public participation in supervision, allowing the people to supervise power and letting power operate under the sunshine."