SHENZHEN, China — The head of a financially troubled insurer was pushing Chinese officials to relax rules that required breaking up the company in the aftermath of the Asian financial crisis.
Prime Minister Wen Jiabao's relatives invested quietly inPing An through a series of investment vehicles. It is not clear whether the relatives still own stock in the company.
The survival of Ping An Insurance was at stake, officials were told in the fall of 1999. Direct appeals were made to the vice premier at the time, Wen Jiabao, as well as the then-head of China's central bank — two powerful officials with oversight of the industry.
"I humbly request that the vice premier lead and coordinate the matter from a higher level," Ma Mingzhe, chairman of Ping An, implored in a letter to Mr. Wen that was reviewed by The New York Times.
Ping An was not broken up.
The successful outcome of the lobbying effort would prove monumental.
Ping An went on to become one of China's largest financial services companies, a $50 billion powerhouse now worth more than A.I.G., MetLife r Prudential. And behind the scenes, shares in Ping An that would be worth billions of dollars once the company rebounded were acquired by relatives of Mr. Wen.
The Times reported last month that the relatives of Mr. Wen, who became prime minister in 2003, had grown extraordinarily wealthy uring his leadership, acquiring stakes in tourist resorts, banks, jewelers, telecommunications companies and other business ventures.
The greatest source of wealth, by far, The Times investigation has found, came from the shares in Ping An bought about eight months after the insurer was granted a waiver to the requirement that big financial companies be broken up.
Long before most investors could buy Ping An stock, Taihong, a company that would soon be controlled by Mr. Wen's relatives, acquired a large stake in Ping An from state-owned entities that held shares in the insurer, regulatory and corporate records show. And by all appearances, Taihong got a sweet deal. The shares were bought in December 2002 for one-quarter of the price that another big investor — the British bank HSBC Holdings — paid for its shares just two months earlier, according to interviews and public filings.
By June 2004, the shares held by the Wen relatives had already quadrupled in value, even before the company was listed on the Hong Kong Stock Exchange. And by 2007, the initial $65 million investment made by Taihong would be worth $3.7 billion.
Corporate records show that the relatives' stake of that investment most likely peaked at $2.2 billion in late 2007, the last year in which Taihong's shareholder records were publicly available. Because the company is no longer listed in Ping An's public filings, it is unclear if the relatives continue to hold shares.
It is also not known whether Mr. Wen or the central bank chief at the time, Dai Xianglong, personally intervened on behalf of Ping An's request for a waiver, or if Mr. Wen was even aware of the stakes held by his relatives.
But internal Ping An documents, government filings and interviews with bankers and former senior executives at Ping An indicate that both the vice premier's office and the central bank were among the regulators involved in the Ping An waiver meetings and who had the authority to sign off on the waiver.
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Only two large state-run financial institutions were granted similar waivers, filings show, while three of China's big state-run insurance companies were forced to break up. Many of the country's big banks complied with the breakup requirement — enforced after the financial crisis because of concerns about the stability of the financial system — by selling their assets in other institutions.
Ping An issued a statement to The Times saying the company strictly complies with rules and regulations, but does not know the backgrounds of all entities behind shareholders. The company also said "it is the legitimate right of shareholders to buy and sell shares between themselves."
In Beijing, China's foreign ministry did not return calls seeking comment for this article. Earlier, a Foreign Ministry spokesman sharply criticized the investigation by The Times into the finances of Mr. Wen's relatives, saying it "smears China and has ulterior motives."
After The Times reported last month on the family's wealth, lawyers representing the family said the article contained unspecified errors and that the family reserved the right to take legal action.
In addition, the Chinese government blocked access to the English-language and Chinese-language Web sites of The Times in China — and continues to do so — saying the action was "in accordance with laws and rules."
Neither Mr. Wen, who is expected to retire in March, nor Mr. Dai, who is now the head of the National Social Security Fund, could be reached for comment.
Western and Chinese bankers and lawyers involved in Ping An's 2004 Hong Kong stock listing and a subsequent 2007 listing in Shanghai said they did not know that relatives of Mr. Wen had acquired large stakes in the company.
Executives at Morgan Stanley and Goldman Sachs, which once held sizable stakes in Ping An and served as lead underwriters for the Hong Kong public offering, also said they were never told of the holdings. At Ping An's urging, the two investment banks had also appealed in 2000 to Mr. Wen and other regulators for the waiver from the breakup rule. The private equity divisions of the two investment banks sold their combined stakes to HSBC in 2005 for about $1 billion — a 14-fold increase on their initial investment.
Thousands of pages of publicly available corporate documents reviewed by The Times suggest that the Ping An stakes held by the prime minister's relatives were concealed behind layers of obscure partnerships rather than being held directly in their names.
In an interview last month, Duan Weihong, a wealthy Wen family friend, said that the shares in Ping An actually belonged to her and that it was an accident that Mr. Wen's relatives appeared in shareholding records. The process involved borrowing their government identity cards and obtaining their signatures.
China and Hong Kong have detailed regulations on the disclosure of corporate information deemed material to a publicly listed company's operation, like the identities of large shareholders and details about whether companies controlling large stakes are related parties. But legal experts say enforcement is often lax, particularly inside China. There is also, they say, a culture of nominee shareholders — when one person holds shares on behalf of someone else — that is difficult for even the most seasoned lawyers and accountants to penetrate.
The Times found no indication such regulations or any law was broken, nor any evidence that Mr. Wen held shares in Ping An under his own name.
After reviewing questions from The Times, the Securities and Futures Commission of Hong Kong and the Hong Kong Stock Exchange declined to comment. The China Securities Regulatory Commission in Beijing did not respond to inquiries.
HSBC, today Ping An's largest shareholder with about 15.5 percent of its stock, declined to comment. The company announced last week that it is considering selling its stake in Ping An as part of a broad effort to raise capital.
Ping An today is a hugely successful conglomerate with revenue of $40 billion last year and about 500,000 insurance agents across China. It is China's only fully integrated financial institution, with the second largest insurer, a trust company and brokerage house.
In late 2010, Ping An added more firepower, announcing a $4 billion deal that has since given it control of the Shenzhen Development Bank, one of China's midsize commercial banks. Ping An is now building a new headquarters here in Shenzhen, a spectacular 115-story office tower that was designed by the New York architectural firm Kohn Pedersen Fox.
Ping An's Close Call
Ma Mingzhe, the Ping An chairman and chief executive, was a high school graduate who got his start as an aide to Yuan Geng, a pioneering figure in some of China's earliest economic reforms and an early leader of Ping An.
Impressed with Mr. Ma's intellect, Mr. Yuan put him in charge of human resources at a state-managed industrial park, and eventually at a new insurance firm, Ping An, which took root in Shenzhen, a coastal boomtown.
Mr. Ma's timing was opportune. China was just beginning to restructure its state-led economy. The government began dismantling the iron rice bowl system, which had guaranteed pensions, social insurance and living quarters to Communist Party cadres.
Although Ping An was founded as a state entity, it was one of the first Chinese insurance companies to experiment with Western management systems, including the use of actuaries and back-office operations, as well as foreign shareholders.
Mr. Ma helped manage the tiny company when it was founded in 1988. Several years later, he was looking for big-name shareholders from the United States.
In 1994, the private equity divisions of Morgan Stanley and Goldman Sachs each paid about $35 million to acquire 7.5 percent interests in Ping An. At the time, they were the largest foreign investments ever made in a Chinese financial institution.
Much of the company's early success was attributed to Mr. Ma, a hard-charging executive who was admired for his management and political skills — and for taking risks.
"He had all the qualities of a great entrepreneur," says Yan Feng, who helped run Ping An's Shanghai office in the 1990s. "He was a quick learner, knew how to adapt to new situations and was really determined. He'd do whatever it takes to get what he wants."
But the company's growth drive ran into trouble in the late 1990s, when China's economy weakened after the 1997 Asian financial crisis.
The bloated state sector began to collapse, and by 1998, some of the nation's biggest banks were nearly insolvent.
Ping An's hard-won fortunes were also evaporating. Like most big Chinese insurers, Ping An had won new clients with investment products that guaranteed big returns over long periods based on the high interest rates banks offered for deposits during a time of inflation. When interest rates plummeted in the mid-1990s, losses piled up.
In 1999, senior executives at Ping An began to acknowledge that the company could soon be insolvent. As a joint-stockholding company, Ping An had big institutional investors, mostly state companies. But many of them refused to come to the company's aid by purchasing additional shares, which would have provided needed capital.
"They weren't sure Ping An would survive," said one former Ping An executive who spoke on the condition of anonymity.
There was also mounting pressure from the government. Worried about systemic risks to the financial system, regulators in Beijing stepped up their enforcement of laws that required financial institutions to limit the scope of their business activities.
Banks were told to sell their stakes in brokerage houses or trust companies; and insurance companies had to choose to operate in life or property insurance, but not both.
After China's new insurance regulatory agency was established in 1998, it began pressing Ping An to shed its trust and securities business, and to split its life and property insurance divisions into separate companies.
At a news conference in November 1999, Ma Yongwei, then the chairman of the China Insurance Regulatory Commission, said the agency had already drawn up plans to split up Ping An and other insurers.
"The separation plans have been submitted to the State Council for approval," Ma Yongwei told the media, adding that they would "deepen reform of the insurance system."
Pushing Back the Regulators
With his company about to be broken up, Ma Mingzhe, also known as Peter Ma, fired off letters to leaders in Beijing, dictated memos reminding himself to "buy golf clubs" for high-ranking officials, and kept detailed charts outlining the lobbying responsibilities of each top executive at Ping An, according to a copy of those records verified by former Ping An executives.
Mr. Ma focused much of his personal energy on China's highest government administrative body, the State Council, a 38-member group whose senior leaders were Prime Minister Zhu Rongji and Wen Jiabao, then vice premier. The company also sought the support of Dai Xianglong, the nation's central bank chief, who also had oversight over the insurance industry.
Mr. Wen was in a unique position. He was head of China's powerful Central Financial Work Commission, which had been established in 1998 to oversee the country's banking, securities and insurance regulators, as well as China's biggest financial institutions.
When Mr. Ma met regulators, he told them his company was facing insolvency and asked them to help shore up the company's balance sheet by approving a Hong Kong stock offering, according to transcripts of Ping An meetings and interviews with participants.
"Now, Ping An's life insurance is in a loss, and property insurance and the trust company have thin margins," Mr. Ma wrote in the Sept. 29, 1999, letter to Mr. Wen. The contents were confirmed by two former top Ping An executives.
Rather than an out-and-out breakup, Mr. Ma offered a middle road. After seeking advice of other investors, Mr. Ma proposed the formation of a holding company that would effectively separate life insurance from property but keep them under one corporate umbrella, along with the securities and trust division.
The company, he said, would re-establish itself as the Ping An Group, according to Ping An documents reviewed by The Times. He then began looking for allies to promote his proposal.
In January 2000, with Mr. Ma's backing, executives from Morgan Stanley and Goldman Sachs wrote a joint letter to Mr. Wen arguing that a breakup would "violate China's policy to encourage and protect foreign investment," according to a copy of the letter reviewed by The Times. The letter's authenticity was verified by former executives at the two investment banks.
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The American investment banks warned that "as a listed company in the U.S., we could be required to disclose our losses relating to the investment in Ping An, which would not be helpful for the image of China's policy of reform and opening to the outside."
The letter came after months of aggressive lobbying on the part of Ping An executives and the two American banks to persuade other high-ranking officials in Beijing, including the central bank and the insurance regulator, to hold Ping An together, according to corporate documents reviewed by The Times.
As early as 1999, executives at Ping An also began making contact with the relatives of Mr. Wen.
Hu Kun, a former Ping An employee who served as Mr. Ma's staff assistant from 1997 to 2000, recalled a 1999 meeting between Mr. Ma and Zhang Beili, the wife of Mr. Wen.
Mr. Hu said he was not told what transpired at the meeting, but he recalled his boss's reaction. "Because of that meeting, Chairman Ma got very excited," said Mr. Hu, who is now living in the United States and who has quarreled with Ping An over 52,000 shares he claimed he was owed.
Corporate records reviewed by The Times indicate that Mr. Ma held an afternoon meeting and then dinner with the prime minister's wife and Li Chunyan, who ran Ping An's office in Beijing, on June 17, 1999.
It is not known what they discussed, but the relationship seemed to flourish. Around the same time, a diamond company partly controlled by the relatives of Ms. Zhang began occupying office space at the Ping An office tower in Beijing, according to records the diamond company filed with regulators. Later, a start-up co-founded by Wen Yunsong, the son of Ms. Zhang and the prime minister, won a lucrative technology contract from Ping An, according to interviews with former Ping An executives.
Mr. Ma, who is 56 and still runs Ping An, declined to comment for this article. Interviews with four senior executives who worked with Mr. Ma and Mr. Hu at the corporate headquarters in Shenzhen during the same period corroborate Mr. Hu's recollections and the content of the documents reviewed by The Times concerning Ping An's lobbying efforts and meetings with the relatives of Mr. Wen.
In addition, Li Chunyan, who ran the Beijing office, confirmed in a telephone interview that during that period he had brought Ms. Zhang to meet the Ping An chairman, Mr. Ma.
The documents and interviews shed no light on whether those meetings played a role in the decision by government regulators to abandon plans to split up Ping An. But in April 2002, the nation's top regulators delivered their verdict. With approval of the State Council and insurance regulators, Ping An began the process of transforming itself into a financial conglomerate.
The company was not only allowed to retain property and life insurance licenses, but also licenses that permitted it to operate a brokerage and a trust company. It was also allowed to obtain a bank license.
Together, analysts say, the licenses were worth a fortune in China's tightly regulated marketplace.
"They were one of the few who got to enjoy these gold-digging benefits," said Bob Leung, a longtime insurance analyst at UBS in Hong Kong.
By late 2002, Ping An had not simply survived the downturn, its prospects had begun to look bright. The company's restructuring bolstered revenue and profits. In October of that year, one of the world's biggest banks, HSBC, agreed to pay $600 million to acquire a 10 percent stake in the company from Ping An. Just over a year later, regulators approved the company's application to list and sell shares on the Hong Kong Stock Exchange.
While Ping An was preparing for its listing in Hong Kong, a group of investors with close ties to senior officials in Beijing, including Wen Jiabao, were quietly accumulating large blocks of Ping An stock.
Buying Into Ping An
On Dec. 26, 2002, Ping An filings show, a company run by Duan Weihong, a Wen family friend from the prime minister's hometown, acquired Ping An stock through a company called Taihong. Soon after, the relatives of Mr. Wen and colleagues of his wife took control of that investment vehicle, the records show.
According to documents Ping An filed ahead of its Hong Kong listing, Taihong acquired 77.7 million shares of Ping An from the China Ocean Shipping Company, a global shipping giant known as Cosco, and 2.2 million more shares from Cosco's Dalian subsidiary. A two-for-one stock split doubled the number of shares Taihong owned. So in June 2004, just before Ping An's Hong Kong offering, Taihong held 159.8 million shares, or about 3.2 percent of Ping An's stock, according to public filings.
In an interview, Ms. Duan said she had paid about 40 cents a share at current exchange rates, or a total of $65 million, to acquire the shares.
The price seems to have been a huge and unusual discount, analysts say, since HSBC had two months earlier acquired its 10 percent stake for about $1.60 a share, according to public filings.
Cosco did not return calls seeking comment.
For Taihong, it was a blockbuster purchase. By 2007, when the price of Ping An's stock peaked, the 159 million shares were valued at $3.7 billion — though by 2007 Taihong had already significantly reduced its stake, according to public filings.
While Taihong was the shareholder of record, the beneficiaries of the Ping An deal were cloaked behind more than a dozen investment vehicles controlled by the relatives of Mr. Wen, including two brothers-in-law, a sister-in-law, as well as several longtime colleagues and business partners of his wife, Zhang Beili, according to corporate and regulatory documents. All of them were listed, along with Ms. Duan, as the owners of Taihong.
And by 2007, the prime minister's mother, who is now 91, was listed on public documents as holding $120 million worth of Ping An stock through a pair of investment companies linked to Taihong.
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Ms. Duan, who says she got to know the prime minister's family in 2000, said that she bought the Ping An shares for her own personal account. The Wen relatives only appear in the Taihong shareholding records, she said, because her company borrowed the government-issued identity cards of other people — mistakenly, she said, from relatives of the prime minister — to help mask her own Ping An stake from the public.
"In the end," Ms. Duan said, "I received 100 percent of the returns."
In 2001, China issued new regulations that put restrictions on trading in listed shares by Communist Party members and their families.
For instance, the rules barred party officials in charge of a state-owned company from using their parents, children — or even their children's spouse's relatives — to trade stocks of a listed state-owned company.
The Times found no indication that Mr. Wen shared inside information with family members.
But there are many unanswered questions about the relatives' holdings, analysts consulted by The Times said, like who might have known about the relatives' purchases and whether anyone had a legal obligation to disclose that information.
Executives at Morgan Stanley and Goldman Sachs say they were unaware of the share purchases and were not involved in the transactions.
The companies also said that a typical I.P.O. process is unlikely to uncover the ultimate identity of shareholders who are hiding behind layers of investment vehicles using unrecognizable names.
According to regulations in Hong Kong and China, publicly listed companies and their professional partners who help sell shares to the public are legally obligated to disclose the identities of only those shareholders controlling a stake larger than 5 percent. The Times found that at its peak, Taihong, the investment vehicle tied to the Wen family, never held more than a 3.2 percent stake.
Another question that remains unanswered is how Taihong was able to buy shares of Ping An at a price that appears to have been highly discounted. By late 2002, Ping An had already become a hot I.P.O. prospect following a big investment by HSBC.
The answers to some of the questions, legal experts say, may turn on who was involved in brokering the deal that led to the relatives' acquiring shares in Ping An in the period before the company's public offering in 2004, and whether the deal-makers were seeking to gain favors from the regulators.
"The key questions are: why were these people chosen, and on what terms did they get the shares?" said Jerome A. Cohen, a professor at New York University Law School and an expert on China's legal system. "Obviously, everyone would like to get in before a hot I.P.O."