Goldman link to China corruption probe
An education company co-founded by Goldman Sachs is at the center of a corruption probe that has ensnared the head of a leading Chinese state-owned corporation.
Lei Yi, chairman of Yunnan Tin, the world's largest producer of the industrial metal by volumes, has been charged with accepting bribes worth Rmb 20 million ($3.3 million), according to a state media report on the Yunnan provincial government's website.
The case against Mr Lei is the latest in a series of investigations launched by China's new leadership as it attempts to address deep-seated corruption among government officials and their allies in powerful state enterprises.
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The drive has so far brought charges against former and current executives at national oil company PetroChina as well as probes of international pharmaceutical companies including GlaxoSmithKline. Foreign banks have largely avoided scrutiny to date.
State media alleged that Mr Lei had received bribes from, among others, Li Hongtao, chairman of Leed International Education Group, and that the money had been used to clear the way for Mr Li's company to buy a majority stake in Dianchi College, a private postsecondary institution in which Yunnan Tin held a 45 per cent share.
The official report did not mention Goldman Sach, but publicly available company information reviewed by the Financial Times reveals the connection between the bank and Mr Li.
Lead was formed in May 2008 through a partnership between Goldman Sachs and Beijing National Education Group, Mr Li's original company. The initial size of Goldman's investment was not published, but it invested $41.5 million in Leed via a follow-on investment, according to a 2010 record published by AsiaLaw profiles, a guide to Asian law firms.
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Goldman declined to comment on the case. People familiar with the matter said that Goldman owned less than 50 per cent of Leed.
The official media report did not point a finger at Goldman, directing the bribery allegations at Mr Li personally. It said that Mr Lei, the Yunnan Tin chairman, had received money between 2008 and 2013 from Mr Li and others "to exploit [Mr Lei's] position to facilitate, support and help" their business concerns in Yunnan.
Guosen Securities, one of China's biggest brokerages, was also alleged to have paid bribes to Mr Lei for matters unrelated to Dianchi College. The brokerage was unavailable for comment.
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Leed's head office in Beijing said that the company was not clear on the details of the case and that work was continuing as usual.
With a network of private schools in the provinces of Yunnan, Henan and Jiangsu, Leed is one of the many companies investing in the Chinese education sector.
Soaring demand for higher education and large gaps in the state-run school system have made it a profitable field for private businesses. Leed has roughly 25,000 students at its schools. Dianchi College is its biggest institution, with 17,000 students.
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According to the Hong Kong companies register, two Goldman employees sit on Leed's board of directors: Andrew Wolff, head of Goldman's European merchant banking division who ran its Asian merchant bank from 2004 to 2012; and Liu Qing, a Goldman managing director.
The Yunnan provincial government said that all the information in the official reports was accurate and that it had nothing further to add. Yunnan Tin has been managed by the company's vice-chairman since Mr Lei was first detained in July, the company said earlier.
Calls to Yunnan Tin were not answered on Tuesday.