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Chongqing Officials Mired in Web of Sex, Lies and Video

Struggling Businessman’s Million-Yuan Scam Used Women to Compromise Government Figures

When a sex video involving a Chongqing official went viral on the Internet on November 2012, like millions of others, Tan Linling clicked out of curiosity.

To her surprise, Tan recognized the woman in the video as a former colleague and friend named Zhao Hongxia. Tan immediately contacted Zhao and told her about the nation’s hottest news: a video recording of Lei Zhengfu, Communist Party secretary of Beibei District in the large southwestern region of Chongqing, having an extramarital affair. The video was put online by a Beijing-based citizen journalist.

Tan and Zhao decided to meet at a sports stadium to discuss how to handle the reemergence of an unpleasant episode both thought was long over: a scheme to blackmail more than twenty Chongqing officials with sex videos. The two women, who both married in recent years and had children, talked for an hour and decided to do nothing. They had no idea the video would eventually put them in the national spotlight, trigger a legal storm that affected more than twenty officials and reopen a case once sealed by the city’s now disgraced police chief Wang Lijun.

A screen grab from the leaked sex tape of Lei Zhengfu, a former C.C.P. secretary of Chongqing’s Beipei District.

On September 5, the second trial in the sex video case started in Chongqing. In late June, six defendants, including Zhao and Tan, received up to ten years in jail for extortion. Some have appealed, and some argued that what they did amounted to combating corruption.

Indictments and evidence presented by prosecutors present an intriguing story involving sex, business and politics. The cast includes a businessman, more than ten women and a dozen officials, and Chongqing’s police boss. The story was set in a city at the center of a political storm.

Xiao, the Boyfriend’

It started with a Sichuan businessman born in Linchi County originally named Yan Zongyi. Believing the name to be unlucky he changed his name to Yan Su, then to Xiao Ye. Initially unsuccessful in his hometown and the nearby city of Guang’an, Xiao moved to Chongqing.

In 2005, Xiao and his cousin Yan Peng set up a company called Hong Kong Hualunda Apparel in Chongqing with registered capital of 1 million yuan. Including “Hong Kong” in the name was a ploy by Xiao, the executive director of the company, to fabricate his personal history. Xu Sheqing, a friend of Xiao’s from Henan Province, was the director of trustees. Xu, the human resources manager, recruited only young and beautiful women.

In 2007, Zhao was looking for a job and met Xiao at a dinner. She was impressed when people described Xiao as a rich boss with powerful connections in the city government. Xiao asked for Zhao’s phone number after the dinner and called her several days later. Zhao rejected the first several calls, but later agreed to attend a hotpot dinner with Xiao and several of his employees.

“I had just one beer and completely passed out,” Zhao told prosecutors. She was taken to a hotel room by Xiao’s employees, and later Xiao forced himself on her. Zhao said she was very upset the next morning, but Xiao said he was in love and asked to be her boyfriend. Zhao agreed.

About a month later, Xiao gave her 5,000 yuan and asked her to work in Hualunda. There was one condition: don’t let others know the two were intimate. Zhao took the offer and obeyed the rule. 

A few months later, something similar happened to Tan: a dinner, alcohol, sex, a new boyfriend, and a job offer. Tan became an administrative assistant at Hualunda. Through a similar process, the company recruited more than ten girls, prosecutors said, and most saw themselves as Xiao’s girlfriend. Xu told the police: “Girls like rich guys.”

From Xu, Yan and other figures at the company, Zhao and Tan learned about Xiao’s fabricated back story, falsely claiming he was a Hong Kong native who moved to the mainland when he was eight years old but still had many rich relatives in the former British colony. The story also went that Xiao was ambitious and passionate, but was an unlucky widower whose wife died years earlier.

In fact, Xiao married four times. His current wife, who is eighteen years younger than him, is Chai Si. She often became upset when she found messages on Xiao’s phone that he had sent to other women. The women only helped the company deal with business matters, Xiao told his wife. Chai also worked for the company, but was known as Xiao’s sister and used the name Xiao Cai.

Zhao, Tan and other female employees had a simple job: perform secretarial chores in the daytime and entertain officials at dinners and karaoke bars at night. Each adopted a fake name—Zhao went by Zhao Xiaoxue—and a false back story, usually that they were recent college graduates looking for jobs.

Xu, the Mastermind

But dining and entertainment were only the beginning of Xiao’s plan. Zhao said that Xiao often complained about the company’s dire situation, indicated he was short on cash and asked her to “help him and the company to get out of trouble.” She didn’t think she was capable of helping, until one day Xiao showed her how. It involved a video clip.

The video he played in his office featured sex scenes recorded by a secret camera. Zhao watched the clip with Xiao and Yan. Yan told Zhao that the woman in the video was his wife, a previous employee of the company. Sleeping with officials blessed the company with contracts, Zhao recalled Yan saying. He summed it up this way: “Now we have houses and cars. It’s a lucrative business.” To convince Zhao to play along, Xiao promised to marry her and split the company’s profits with her.

It took days of persuading, but Zhao finally agreed. Tan was also enlisted. She declined at first, but relented when Xiao threatened to kill her entire family.

Xu devised the scheme as early as 2007. By secretly recording sex videos of government officials, then confronting the officials, the company could build powerful connections to drive its business forward, Xiao told investigators.

Xu recruited the women, then was responsible for arranging hotel rooms and setting up the cameras. The scheme usually involved Xu, Yan and Wang Jianjun, an assistant of Xiao’s, breaking into a room at some point to catch an official in bed with a women. Xiao would play a good guy who came along later and handled negotiations.

Xu bought the private cell phone numbers of more than 200 Chongqing officials from a government employee. Xiao and Xu selected a handful of targets, mostly the first- and second-in-command at government offices or state-owned enterprises (SOEs). They then had the girls sent out scripted messages from company cell phones.

The initial message went like this: “Dear leader, I met you before and was very impressed by you. I just graduated from university, changed jobs and stopped working at a modeling company. Now I’m at Hualunda Group. Hope we can have dinner when you are free.” And the follow up message after a week was: “Dear leader, a week has passed. Are you busy with work?” The women sent messages on holidays, weekends and other seemingly opportune times until they got a response.

Yan handled purchases of equipment at a large wholesale market in Chongqing. He bought lighter-size spy cameras and connected them with MP4 players to store the video file. The gadgets were put in the women’s handbags, whose gaudy patterns disguised a hole for the camera. Yan trained Zhao and the other women to operate the cameras. The key, he told them, was to get the man’s face in focus.

Lei, the Victim’

Zhao’s first target was Lei Zhengfu, the party secretary of Beibei District. Lei told the police that he received many messages from a woman named Zhou Xiaoxue in October 2007. She described herself as a salesperson at Hualunda and repeatedly asked to meet Lei. Lei said he refused many times, but finally agreed to meet at a tea house in January 2008. They talked for a few hours and parted company, Lei said. The second meeting was at karaoke room, which ended with the pair agreeing to date.

Zhao, however, told the police a different story. She said Lei asked her out after she sent the first message. They indeed met for tea, she said, but afterward Lei gave her more than 1,000 yuan to check into a hotel and they had sex. The camera in her bag recorded everything, she said, but Xiao later decided that the video quality was poor, meaning Zhao and Lei would have to meet again.

So, Zhao said, she asked for another meeting at the same hotel a week later. This time the recording was clear. Other meetings followed. Chongqing police found that since 2008 Zhao checked into hotels thirty-two times using her ID card.

On February 14, 2008—Valentine’s Day—Zhao called Lei again and asked to see him. They had tea, Zhao checked into a hotel and sent Lei the room number. The otherwise romantic meeting was interrupted by a knock on the door, which Zhao answered. Two men rushed in and beat Lei. They yelled at Zhao, saying she had been unfaithful. One man claimed to be Zhao’s boyfriend, and the other said he was a private detective. They showed Lei video clips of Zhao and Lei having sex.

The two men told Lei that they would make the video public. Lei was nervous, and asked Zhao what to do. Zhao, now in tears, said “big brother Xiao” could handle the situation. About twenty minutes later, Xiao arrived at the hotel room. He sent the two men away and told Lei that he could handle the problem. “You can leave first,” Xiao told Lei.

Lei thought his troubles were over. But they had just begun. Two days later, Xiao asked Lei to meet him in the lobby of the same hotel. Xiao told him he had destroyed the recording and gotten the matter under control, but his company was in financial difficulty and he hoped Lei could get him 5 million yuan.

“I immediately knew that I was being blackmailed with the cheating thing and the sex videos,” Lei told police. He complied, but bargained the payment down to 3 million yuan. Soon afterward, the founder of Yongzhi Group, a trading company in Lei’s jurisdiction, wired Xiao 3 million yuan.

Lei was not alone. At the end of 2008, Zhou Yuntian, the chairman and party chief of state-owned Chongqing Real Estate Group was Tan’s target. In that episode, Xiao asked for 2 million yuan.

“I found the girl very lovely and trustworthy,” Zhou said. “She didn’t ask me for anything and I thought she enjoyed being with me. Once Xiao has evidence against me, for the sake of my career I borrowed 2 million yuan from relatives to give him.”

In late 2012, the sex video of Lei was put online. Two months later, eleven government officials and executives of SOEs were sacked for their involvement in the scandal. By May this year, the number rose to twenty-one: fifteen from government and six from SOEs.

Lei lost his membership in the Communist Party and was charged with taking 3 million yuan bribes. Two other officials were investigated for corruption, and the rest received warnings for “violating socialism’s moral rules.”

Wang, the White Knight

While Xiao was busy trapping officials, Chongqing police were building a massive intelligence network. Wang Lijun, then the police chief, told the media in 2009 that the system would allow police to search the information of all 1.3 billion people in the country. Within four minutes, he bragged, the information of at-large criminals could be searched.

Wang later fell out with his boss, former Chongqing party chief Bo Xilai, an episode that saw Wang flee to the U.S. consulate in nearby Chengdu, Sichuan Province. (In 2012, Wang was sentenced to fifteen years in prison for bribery, abuse of power and defection.)

It is not known how Wang came to know of the sex tape case. One explanation was that Lei grew tired of Xiao’s repeated blackmailing and reported it to Wang. Other insiders say Wang intercepted phone messages between the women and officials with his vaunted surveillance system.

What is certain is that Wang told his deputy, Guo Weiguo, to set up a special task force. He wanted Guo to wrap up an investigation in two weeks and hand over all the video recordings. Wang told Guo that he would report the case to the Chongqing party committee before making any decisions, but there is no evidence he did this. Evidently, Wang used the scandal to bring the officials involved under his control. (Last year Guo was sentenced to eleven years in prison for covering up the murder of British citizen Neil Heywood for Gu Kailai, Bo’s wife.)

In 2009, Xiao and several of his employees were arrested for extortion. However, Wang never gave his underlings clear directions on handling the case and Chongqing police never contacted the victims. A local court convicted Xiao of illegally using an official government stamp and gave him a suspended jail term. His employees were released on bail.

Yonghuang, the Reborn Enterprise

Xiao sent Lei a message as he left a detention center, telling Lei was returning home. “It’s good to be home,” Lei replied. “Live your life well.”

Two months later, Xiao and Lei met in a tea house. Xiao pledged to return 1 million yuan.

The 3 million yuan helped Xiao to pay off his credit card bills, buy a large office space and move into more lucrative businesses. In 2008, Xiao set up a company that carried out housing demolitions. The firm, called Chongqing Taihe, acquired Hualunda in the same year and expanded into eighteen types of registered business, ranging from real estate to selling construction materials.

Xiao renamed the company Yonghuang. From 2008 to 2010, the company’s number of employees jumped from fifty to 604, and its assets ballooned from 52 million yuan in value to more than 1 billion yuan. Part of the secret was government projects. Xiao’s company easily won bids for infrastructure project through information collected by his female employees or help from officials trapped in his scheme. 

After his release, Xiao acquired an organic farming company. He sold Yonghuang to his assistant for 20 million yuan, and made himself a deputy manager of the firm with an annual salary of 400,000 yuan. He also charged Yonghuang 600,000 yuan per year for renting office space. The company, however, was still under Xiao’s control.

Who Leaked the Tape?

Xiao received an urgent call from Yan, his cousin, on November 22 last year. After being caught by the Chongqing police in 2010, Yan left Yonghuang and had not been in contact. Before his arrest, Yan had asked Xiao to return some money he borrowed years earlier, but Xiao refused. In response, Yan stole a sex video from Xiao’s home.

“Every disk had characters on it,” Yan said. “I took the one with Lei’s name because I only knew Lei Zhengfu. I wanted to ask Lei to investigate Xiao’s company.”

The members of Xiao’s old team disappeared after police released them in 2009. Tan had access to a bank account of Xiao’s that had 800,000 yuan in it. She and Zhao each took 300,000 yuan; another three people took the rest. They were all upset that they got so little for working at the company so long.
 
When Yan called Xiao he asked a startling question: “Did you put Lei’s sex video online?”

Xiao was surprised. He did a quick Internet search and found the video. Both Xiao and Yan panicked. They met in Xiao’s office and started yelling at each other, each claiming they were unaware how the video made it on the Internet. The clash lasted for a few minutes, then they thought of another person who might have done it: Xu, the human resources manager. Yan heard Xu had visited Beijing recently, and the independent journalist who posted the video, Zhu Ruifeng, was based in the capital. They asked Xu for a meeting.

Xu was by now chairman of Yongbo, a company he set up after his partnership with Xiao ended. The firm ran the same sort of scam that Hualunda had. Xu even hired some of Xiao’s former employees and asked Tan and Zhao to train employees. They refused.

Xu told Xiao and Yan that he went to Beijing, but said he was not involved in the leak. The three agreed on a solution: hunkering down. Since Web users had already identified Zhao, Xiao said if the police track them down again, Xu should pretend to be Zhao’s boyfriend. He should say he released the tape after a quarrel.

The next day, Yan drove to his ex-wife’s home and asked her for some materials he had told her to keep. It was a stack of video disks wrapped in tape. Yan broke them all and burned the pieces. Yan told police that Xiao had asked him to keep copies of the sex videos. Since police had not asked for them during the 2009 investigation, he kept them all.

Thousands of miles away, Henan resident Wang Qunjiang saw the video and understood what was happening. In October, 2010, Wang had a visitor: Xu.

Xu told Wang that he had left Yonghuang because Xiao failed to follow through on promises to turn over a 10 percent stake in the company, houses and cars as a reward for the sex video scam.

“My boss was not a good guy,” Xu told Wang. “Can you find someone trustworthy to help me punish him?”

Wang said he knew some people in Beijing, including a well-connected journalist.

Xu told police he never trusted Xiao, so he had snuck into his office in early 2008 and took copies of sex videos from Xiao’s computer. They were put on a USB drive and forgotten. Then Xu came across the drive while cleaning house last year.

Xu told police that the reason he chose to release the video with Lei was that he had not been one of the people who broke into the room to confront the official. Also, “getting Lei sacked would definitely be negative for Xiao,” Xu said.

So Wang and Xu drove to Beijing, and Xu met Zhu, the journalist, over lunch. Xu told him that he had many sex tapes of Chongqing officials, including Lei. Xu played clips of the Lei video on his cell phone, and Zhu asked for a copy.

“What would you do with it,” Xu asked.

“You don’t need to worry about it,” Zhu replied.

After lunch was over, Xu put a copy of the video on Zhu’s computer. The next day Xu and Wang drove back to Henan. Days later, Xu saw the clip online.

Within days, Chongqing’s party discipline watchdog confirmed that the man in the video was Lei, who was removed from his public post and put under investigation. Meanwhile, Zhu was lauded as a national hero. He said he had many more videos to release and the leak was assisted by sources in the Chongqing police department.

Lei became a national laughingstock, not only because the scandal, but also because his sexual efforts were somewhat brief. Web users took to calling him the “twelve-second brother.” He contacted Zhu to have the video removed from the Net, but Zhu brushed him off.

On June 28, Lei was sentenced to thirteen years in jail. “I chose the wrong woman and that had a negative impact on the party, the government, society, my family and myself, but it wasn’t a crime,” he said.

The same day, Xiao and five others stood trial. Xiao was accused of extorting 5 million yuan from Lei and Zhou and sentenced to ten years in jail. Xu received a four year term; Yan got three and a half years. Zhao, Tan and Wang Jianjun got suspended sentences.

Xiao, Xu and Yan appealed and faced the court again on September 5. The court adjourned and said it would announce a decision later. Lei’s appeal was heard on September 6. Zhao returned home after spending six months in a detention center.

Caixin Media Company Limited is a media group dedicated to providing high-quality and authoritative financial and business news and information. Through periodicals, online content, mobile apps,...

By Caixin Staff Reporter Pang Jiaoming. This article was first published by Caixin.

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