China detains Anbang chief
US court overturns cap on calls in prison
THE chairman of a Chinese financial conglomerate who tried to forge a business relationship with President Donald Trump’s son-in-law has been detained by police.
Wu Xiaohui, the chairman of Anbang Insurance Group, was taken away by the police on Friday in Beijing, according to Caijing, a respected newsmagazine. In a statement early yesterday morning in China, the company said that Wu was “for personal reasons no longer able to perform his duties”.
Two people briefed on the matter – a company executive and a business partner of Anbang – confirmed that Wu had been detained.
Wu, who piloted Anbang’s rapid rise to global prominence with splashy purchases like the Waldorf Astoria hotel in Manhattan, is the latest Chinese tycoon to be ensnared in an anti-corruption drive that has swept the country in recent years. Another of China’s wealthiest and most politically connected financiers, Xiao Jianhua, was reportedly seized from his luxury hotel in Hong Kong by Chinese police officers and taken over the border in January. He has not been seen publicly since.
The detention of Wu is likely to reverberate through business circles in China and the United States.
Anbang, which claims to have almost $300 billion in assets, had recently been on a worldwide buying spree, and Wu counted Wall Street executives like Stephen A Schwarzman as among his business partners in the US.
The article in Caijing said that Wu was detained as part of a Chinese government investigation into Anbang. The two people confirming that Wu had been detained asked for anonymity because they were not authorised to speak to the media.
Anbang is also one of the biggest issuers of speculative wealth management products, which have attracted a tidal wave of money from Chinese investors. Wu’s detention follows a move last month by China’s insurance regulator to bar the company from offering new insurance products for three months as part of a wider clampdown. The regulator said at the time that it was taking disciplinary measures against the company over the improper sale of insurance products.
It was not clear on Tuesday what would happen to Wu. Some executives caught up in the government’s crackdown on corruption in the financial sector, which began last year, have vanished for a few days only to reappear, back in charge of their companies. Others, like Xiao, have been held for months in undisclosed locations without any charges being publicised.
Xu Ming, a billionaire caught up in a 2012 political scandal, vanished and died in prison in late 2015 at 44, according to a report in one Chinese government-owned newspaper in Hong Kong.
Sterling political connections on both sides of the Pacific Ocean might have worked to Wu’s advantage in his business dealings. He married a granddaughter of Deng Xiaoping, China’s paramount leader in the 1980s, and in November met with Jared Kushner, Trump’s son-in-law and a top adviser, in a bid to buy a stake in a Manhattan office building partly owned by Kushner’s family company. The deal was eventually abandoned after media coverage highlighted a perceived conflict of interest. Kushner’s purview at the White House includes relations with China.
Anbang has taken the money it raised from Chinese savers and invested much of it abroad. Last year, Anbang spent more than $6 billion for a collection of luxury hotels across the United States. The seller of those hotels was the Blackstone Group, whose chairman and chief executive, Schwarzman, is one of Trump’s closest business advisers.
In a separate effort, Anbang offered more than $13 billion for Starwood Hotels and Resorts before abandoning its bid early last year following media scrutiny of its opaque ownership structure.
China’s insurance sector has been in turmoil in recent months. In April, anti-corruption investigators announced that they were focusing on the insurance sector and specifically, the country’s top insurance regulator. Xiang Junbo, the chairman of China Insurance Regulatory Commission, was later removed from office after the government placed him under investigation for “severe violations of discipline”.
Wu’s detention comes at a politically sensitive time in China. The ruling Communist Party is set to convene a leadership meeting this year that will pick a new generation of top officials, and the party puts the preservation of stability – both financial and political – at a premium in the months ahead of the conclave, held once every five years.
“The framing question here is, has he been behaving badly by Chinese standards?” asked Derek Scissors, a resident scholar and China economist at the American Enterprise Institute. “If it’s just him doing something the party doesn’t like, it doesn’t matter. The question is whether the whole firm has been used to do things the party doesn’t like.”
In its statement, Anbang said that the company would continue to operate as usual without Wu. But it is unclear if Anbang can still pursue its global ambitions if Wu does not return to the helm. A FEDERAL court on Tuesday struck down regulations that cap the soaring cost of phone calls made by prison inmates, in another rollback of Obama-era telecommunications rules.
In a 2-1 decision, the US Court of Appeals for the District of Columbia Circuit said that while the rates charged for in-state prison phone calls could be extraordinarily high, the Federal Communications Commission exceeded its legal authority in 2015 when it created rate caps for such calls.
The decision was a blow to a 15-year effort by advocates for prisoners and their families to bring down the cost of calls from prisons, which can reach as high as $10 a minute. The calls are typically placed through private telecommunications firms.
The FCC rules were challenged by telecom firms that argued against the FCC’s economic calculations for price caps and told the court that the agency did not have the authority to regulate the in-state prison phone rates.
The agency had been preparing a legal defence of its rules, but that effort abruptly stopped when Ajit Pai was appointed by President DonaldTrump to chair the FCC. In February, Pai said agency lawyers would not argue to defend its rules in the court.
“Following the presidential inauguration in January 2017, counsel for the FCC advised the court that, due to a change in the composition of the commission, ‘a majority of the current commission does not believe that the agency has the authority to cap intrastate rates’,” the court’s opinion noted.
Since his appointment, Pai has led a charge to overturn Obama administration regulations at the FCC. He has scrapped several media ownership rules and is in the process of overturning net neutrality regulations that require service providers to allow equal access to all internet content.
A free-market-oriented regulator, Pai consistently cites the need to roll back heavy-handed rules created by his predecessor that he argues go beyond the agency’s mandate.
As a commissioner, Pai was against the 2015 prison phone rate rules. He said in a statement on Tuesday that he would work with Congress and other members in the FCC to address the high cost of prison phone calls “in a lawful manner.”
Mignon Clyburn, the sole Democratic commissioner, has been the leading champion of prison phone rate restrictions.