Chinese officials embezzled away more than US$34 billion in government funds in the first 11 months of 2009, according to figures released country’s National Audit Office.

Covered 99,000 companies, government bodies, and public institutions in China, the office found that 234.7 billion yuan (around US$34.4 billion) were misused by government officials from January to November. So far, around 16.3 billion yuan have been recovered, according to a report which appeared in China Daily.

More than 230 people, including 67 government officials, have been handed over to disciplinary authorities as a result of the investigation, according to the report. The investigation interviewed more than 20,000 government officials – including provincial-level cadres, and heads of large state-owned companies, and 55 Chinese central government departments.

According to the report, the National Audit Office’s director Liu Jiayi said that there have been improvements in the fight against corruption in China. However, embezzlement, waste of money, and false fiscal reporting still existed in many central government departments, he added.

“Criminals are now more intelligent, and covert,” said Mr Liu, according to the New York Times. The office said that money was being lost through money laundering, and the issuance of fraudulent loans. In some cases the government was being cheated through the sale or purchase of land or mining rights.

Chinese Premier Wen Jiabao, who was attending the national auditing conference where results of the investigation were announced, has urged the agency to remain vigilant in monitoring public investment projects – an area which has been traditionally prone to embezzlement and waste.

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US-based network equipment maker UTStarcom has been fined US$3 million for bribing employees at state-owned telecommunications firms in China.

The fine includes payments of US$1.5 million each to the US Department of Justice (DoJ) and Securities and Exchange Commission (SEC). According to a complaint filed by the SEC, a wholly-owned Chinese subsidiary of UTStarcom paid close to US$7 million between 2002 and 2007 for hundreds of trips for employees of state-owned telecommunications companies in China who were UTStarcom’s customers.

The trips, which included popular US tourist destinations such as Hawaii, Las Vegas, and New York, were supposedly for training purposes, and were recorded as such in UTStarcom’s financial accounts, according to the DoJ. However, the company did not have any facilities in the said locations, and conducted no training. The true purpose of these trips, according to the agencies, was sightseeing, and for UTStarcom to obtain and keep lucrative supply contracts.

The SEC has also alleged that UTStarcom gave lavish gifts and all-expenses paid executive training trips in the US for existing and potential customers in China and Thailand. The company also hired, and provided them with work visas, individuals who were affiliated with foreign state-own companies that were customers. In reality, the individuals did no work for UTStarcom. The California-based company also made improper payments to sham consultants in China and Mongolia, with the knowledge that funds would eventually be used to bribe foreign government officials.

“UTStarcom spent millions of dollars on illegal bribes to win and keep customers in Asia. It is important for corporate America to recognise that resorting to these methods of boosting profits contributes to a culture of corruption that cannot be condoned under US law,” said Marc Fagel, director of the SEC’s San Francisco office.

As part of an agreement, which did not require the company to admit or deny the wrongdoings, UTStarcom will also be required to implement stronger internal controls, and will be required to make annual FCPA (Foreign Corrupt Practices Act) compliance reports to the SEC. The DoJ said it has taken into account the fact that UTStarcom internally investigated and then self-disclosed the violation, cooperated with a probe by the department, and undertook remedial actions. Because of this, the agency said it will not prosecute the company or its subsidiaries for making the improper payments, provided it continues to satisfy the terms of the agreement.

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