March 24, 2000

State auditors unravel Three Gorges web of corruption – A top executive with the largest Three Gorges dam subcontractor was fired in January for his decision to buy second-hand, dilapidated construction machinery to build the world’s largest hydrodam. Dai Lansheng, the former general manager of the Three Gorges Industrial Company, is also under investigation for graft and embezzlement of state funds, according to a February 29th article in the Chinese language Hong Kong Commercial Daily.

With offices in Beijing, Shanghai, Wuhan, and Shengzhen, the Three Gorges Industrial Company is the largest subsidiary of the Gezhouba Corporation, which is responsible for over sixty percent of the Three Gorges dam’s construction.

At a meeting to announce Dai’s dismissal, Sun Yucai, the newly appointed head of the Gezhouba Corporation said, “Dai has left us with many legal suits and huge debts.”

The second-hand machinery scandal dates back to 1994 when construction of the Three Gorges dam began. Dai imported hundreds of used trucks, bulldozers, excavators, and loading vehicles, some of them over 20 years old, to be used for excavating the massive dam site. According to Nie Hongliang, a retired senior engineer with the Gezhouba Corporation, the old machinery should have been scrapped because it didn’t meet international construction standards. Engineers and workers at the dam site complained that the machinery didn’t work properly and kept breaking down, which meant costly repairs and delays while workers tried to find spare parts. The construction teams using Dai’s machinery saw their unit costs increase by 20 percent.

Meanwhile, the Three Gorges Project Development Corporation – the state company in charge of the $30-billion megaproject – has refused to cover the extra costs because the Three Gorges Industrial Company imported the machinery without approval from TGPDC. According to TGPDC communications officer Zheng Bin, TGPDC initially proposed to import the necessary machinery itself and then lease it to subcontractors. “But [Dai’s company] didn’t listen to us,” said Zheng. “They spent 1 billion yuan [$122 million] to import these machines via a Hong Kong dealer from the United States. After that, they just informed us.”

Dai Lansheng has not been formally charged yet but his case marks the first time that state auditors have exposed details of corruption inside the companies responsible for building the Three Gorges dam. In the last year, state prosecutors have charged over 100 local officials, mostly for embezzling Three Gorges resettlement funds. (See Three Gorges Probe, February 21)

Dai’s investigation has so far revealed the following:

One-third of the $122 million Dai charged to the Three Gorges Industrial Company for second-hand machinery remains unaccounted for. Dai has a network of officials that received kickbacks from the used machinery deal, which extends beyond the Gezhouba Corporation to provincial and central levels of government, according to a retired Gezhouba official. The official also said that Dai would often boast: “If I am going to go down, a lot of other people will go down with me.” Dai exchanged cement intended for the Three Gorges dam for two luxury apartments in one of Shanghai’s most exclusive neighbourhoods. Dai controlled all accounts and ran the Three Gorges Industrial Company like his personal enterprise. Even the Gezhouba Corporation’s auditors and accountants were denied access to the company’s accounts. The Wuhan branch of the Three Gorges Industrial Company gave Dai about $50,000 in earnings for deposit to the Three Gorges Industrial Company’s account, but Dai never deposited the money. Dai claims that the Three Gorges Industrial Company spent $9 million renovating the Gezhouba hotel in 1995, which it owns, but there are almost no receipts for the work done. When the hotel’s accountants pressed Dai for receipts, he fired most of them. Dai used company funds to pay the personal expenses of his boss, Qiao Shengxiang, the former head of the Gezhouba Corporation. According to a local prosecutor – who has investigated Dai in the past for falsifying documents and sexual harassment – Dai paid for Qiao’s private travel, a marriage ceremony, and even his son’s education in Shanghai. Qiao ran the Gezhouba Corporation for 16 years until his dismissal last March and is also under investigation.

The Gezhouba Corporation built the Three Gorges dam’s forerunner, a 2,700-megawatt hydrodam across the Yangtze, 40 kilometres downstream. Completed in 1989, the Gezhouba dam was supposed to take five years to build but took almost two decades and cost four times the original budget.

Three Gorges Probe welcomes submissions. However, it is not a forum for political debate. Rather, Three Gorges Probe is dedicated to covering the scientific, technical, economic, social, and environmental ramifications of completing the Three Gorges Project, as well as the alternatives to the dam.

Publisher: Patricia Adams Executive Editor: Mu Lan ISSN 1481-0913