The Princeling of Nanjing (15 page)

“I’ll tell them.”

“And how about May Ling — does she know?”

“Chi-Tze was calling her as I was phoning you. In fact, I just got a text from Chi-Tze,” Amanda said, and then paused. “May said almost exactly the same things you did.”

“So now it’s up to Lane Crawford.”

“The girls will be onto them today.”

“I’m going to be in a meeting with the lawyers most of the afternoon,” Ava said. “You and I can discuss it over dinner tonight.”

“Seven?”

“Perfect.”

“Man Wah?”

“Also perfect.”

“Great. Michael has already made a reservation.”

“Just the three of us, right?”

“Ava, Michael would never invite Marcus without consulting you.”

“I thought so, but I still needed to ask.”

At a quarter to three, Ava left the Mandarin Oriental and began the short climb to Bond Street and the offices of Burgess and Bowlby. She reached the lobby at almost exactly three and was led directly to the same boardroom she’d occupied the day before.

Brenda Burgess and Vanessa Ogg sat with their backs to the window, a stack of files in front of them. They both rose and walked around the table to shake Ava’s hand.

“You’ve been busy,” Ava said.

“There’s a lot that’s kept us busy,” Brenda said.

“I’ve been doing some more looking on my own,” Ava said. “I have some names to add to the chart I gave you yesterday.”

Vanessa glanced sideways at her boss, and Ava thought she detected some uncertainty in her manner.

“Before you do that, would you object if we talked this through a bit?” Brenda said.

“Talked what through?”

“This project.”

“I thought I made it clear yesterday that I don’t want to do that,” Ava said.

“It’s true that you did, but as Vanessa and the Beijing lawyers dug into the companies whose names you provided, it quickly became evident that your project is bigger than we anticipated, and possibly far more sensitive.”

“I’m not surprised that it expanded in size,” Ava said. “But I have no idea why you refer to it as sensitive.”

“Vanessa, why don’t you explain,” Brenda said.

Vanessa opened the file in front of her. “We briefed the Beijing firm as soon as you left yesterday, and they went right to work. I had two interns start from this end. There was some duplication of effort, which I expected, but I thought it would help us cross-reference and confirm the information we found.”

“That makes sense,” Ava said.

“The incorporated companies left a paper trail, but in some cases the shareholder structure was vague, so we tried to go deeper. We made phone calls to other law firms, to some individuals, and to some banks. That’s when it became sensitive.”

“They wouldn’t talk to you?”

“Not all of them refused, and some were actually forthcoming at first, but then around noon today all co-operation ended,” Vanessa said. “When our trainees and the Beijing firm followed up on some calls they’d made earlier, they were told rather bluntly that no further information would be provided. They were then asked who they were working for and if we had any links to a bank called Toronto Commonwealth.”

“Given your Canadian roots, we thought this might involve you,” Brenda said.

“Shit,” Ava said.

“So you know the bank.”

“I had them do some bank-to-bank inquiries.”

“How productive was it?”

“Quite.”

“It was also disruptive.”

“Evidently.”

“Well, it put at least a temporary end to the work you wanted us to do, but we are prepared to share with you the information we did manage to acquire,” Brenda said. “But before we do, I have a question to ask.”

“I’m listening.”

“Is it your intention to use the information in some way to damage the Tsai family?”

“No, not directly.”

“What does that mean?”

“It means you’re getting into areas that I don’t want to discuss.”

Brenda leaned across the table, her eyes focused tightly on Ava. “As a law firm, we represent our clients to the very best of our ability. We aren’t afraid of challenges and we don’t back away from fights, but that doesn’t mean we run blindly into situations that we don’t understand. We also take lawyer–client confidentiality very seriously. What I would like to happen is that you explain why you want this information. There are things we may be able to do that you haven’t considered. We’ve spent many years doing business in China and we have some knowledge of how things operate. Poking around in Tsai family affairs is not something we recommend unless there is a very clear objective.”

“And if the objective is clear?”

“Then we’ll work with you to create a strategy to accomplish it, as long as we stay within the law.”

The look on Brenda’s face was grim, but out of the corner of her eye Ava saw Vanessa smiling encouragingly at her.

“May Ling thinks highly of you,” Ava said.

Brenda nodded.

“It is an odd situation,” Ava said carefully.

“A circumstance to which we’re not unaccustomed.”

“Me neither. I’m just not that accustomed to sharing these kinds of confidences.”

Brenda leaned in even closer. “Ava, you were partners with Uncle Chow, weren’t you?”

“Yes,” she said, not hiding her surprise at the question.

“Our law firm was well aware of the two of you and the kind of business you ran. In fact, there weren’t many law firms in Hong Kong that didn’t know about you. It was hard not to, when so many clients who weren’t happy with the results we got for them turned to you. There was a lot of gossip about him and you, and about your business. But we never pay attention to gossip, and more than once we quietly referred clients to you.”

“I had no idea.”

“We were discreet about it, and we were equally discreet when May Ling Wong came to us and asked us to incorporate the Three Sisters. Not once, not even obliquely, did we hint to her that we knew of you and your past. Like I said, we don’t gossip and we know how to keep a confidence.”

Ava nodded as Brenda sat back.

“So, what do you want to do?” Brenda asked.

Here it was again, Ava thought, the eternal question of whether or not to trust. Uncle had maintained that it was a question that couldn’t be quantified or justified rationally. He said it came down to instinct. She wasn’t sure her instincts were as sharp and refined as his had been, but it was one of his lessons that she had taken to heart. She looked across the table at Brenda, who returned her steady gaze. Vanessa sat calmly, waiting for Ava to answer her boss’s question.

“I have a friend in Shanghai who is being pressed by the Tsai family to go into a business that he wants nothing to do with,” Ava said, speaking deliberately. “But he’s already enmeshed with them through other businesses and they have leverage over him.”

“Is the business he’s currently doing with them legal?”

“I’m beginning to understand that the word ‘legal’ doesn’t have the same application in China as it does in other parts of the world.”

“I have an opinion on that, but I would like to hear yours.”

“His current businesses are a bit shady but they are condoned by the Jiangsu government. In fact, they gave him the licences and permits he needed and they continue to support his companies.”

“And their leverage is that they can revoke the licences and permits?”

“Partially, but by itself that is enough.”

“When you say he’s ‘enmeshed,’ are you saying they’re partners?”

“No, he simply pays them bribes disguised as commissions and management fees.”

“That’s not uncommon.”

“So I’m discovering.”

“Does he want to stop paying them?”

“No, he considers it the cost of doing business with some semblance of quid pro quo.”

“So it is this proposed new venture that’s causing the problem?”

“It is.”

“Is he afraid that if he doesn’t play along they’ll shut down his present businesses?”

“Exactly.”

“What is this new venture?”

“They want him to start manufacturing synthetic drugs.”

Brenda turned to Vanessa, shook her head in disbelief, and then turned back to Ava. “I wasn’t expecting anything that venal.”

“Well, there you are.”

“I can certainly understand his reluctance.”

“To say he is reluctant is an understatement. There are other consequences — in addition to and beyond what the Tsai family might do — that worry him as much if not more. Those consequences disappear if he doesn’t go ahead with the factory.”

“I’m not going to ask what those are specifically,” Brenda said. “What interests me more is what you thought you could do to help your friend.”

“I wasn’t sure I could do anything. I was simply trying to gather information, hoping that somewhere in the mix there was something I could use to put pressure on the Tsais.”

“To accomplish what?”

“Get them to back off.”

“Not bring them down?”

“Of course not. I’m not completely naive. I understand that the family is above the law. I was just hoping to find something that would persuade them that being circumspect was better than being identified as the crooked, money-sucking vampires they are.”

“Persuade them how, through embarrassment?”

“I don’t know if they’re capable of being embarrassed,” Ava said. “My instincts are telling me that if they become the focus of considerable publicity, they might want to pull in their horns and not risk getting involved in any new ventures that could be messy and have a negative impact on their current business.”

Vanessa smiled. “How interesting.”

“What does that mean?” Ava asked.

Vanessa tapped one of the files that sat in front of her. “When one of the interns came to me with this information, the very first thought that crossed my mind was that it wasn’t something the Tsai family would want publicly broadcast.”

“Why? What did you find?”

Vanessa glanced at Brenda.

“Go ahead,” Brenda said.

Vanessa opened the file. Ava saw
SHELL
written in capital letters on the front cover.

“We thought we were initially looking at a shell company,” Vanessa said. “We thought the name was a tease, a play on words, because we couldn’t find anything it actually did. But the intern did a lot of research, got Beijing involved, and we quite suddenly found ourselves looking at a very substantial business.”

“How large?”

“By our estimates, the companies owned by and affiliated with Shell did over four billion U.S. dollars’ worth of sales last year and turned a profit of close to four hundred million.”

“Wow.”

“That’s what I said when I first heard the numbers, but when I reviewed the details, the amounts seemed real enough.”

“What kind of business?” Ava asked.

“Shell is an umbrella company for the importation, marketing, and distribution of a lot of steel, copper, and other metals used in construction. It doesn’t do any of this work directly, but it owns fifty-one percent of a company called Mega Metals, which in turns owns at least eight companies that do. Those companies engage in quite a bit of trading among themselves, and our intern took great pains to separate those transactions from those that were actual sales to end users. The four billion is the end-user number.”

“How did the intern find out what Shell did?”

“Her father is in that business. She mentioned the name to him last night and he got very angry. He told her that several years ago he had a modest sales volume in Jiangsu, but then along came Shell and Mega Metals and he got blown away.”

“How did they manage that?”

“According to him, no construction company got a government contract unless they bought metal through a Mega Metals affiliate. And when it came to non-government construction, it was hard to get a permit to build unless a Mega company was going to be a supplier.”

“Could you confirm his allegations?” Burgess asked.

“A friend of the father, who is also in the business, verified how things operated. Then we lucked out with the bank and got some valuable information from them. We were scheduled to speak to the bank again when they slammed that door shut.”

“Starting a business that size takes a lot of money,” Ava said.

“From what we’ve seen and been told, it was all put up by a British partner.”

“British?”

“Calhoun Metals, in Newcastle.”

“How was it structured?” Ava asked, sensing she already knew the answer.

“Mega and all the affiliates were set up at the same time. Calhoun put five million U.S. dollars into Mega as working capital, and then provided all of the inventory on ridiculous terms — payment wasn’t due after the delivery date for 120 to 180 days. In essence, the inventory was as good as cash, and the company started with two hundred million dollars’ worth. Mega eventually parcelled out the inventory to the subsidiaries.”

“How much money and goods did the Chinese partner put in?”

“It looks like nothing.”

“And you say that Calhoun got what, a forty-nine percent stake for being so generous?”

“Yes.”

“And Shell got the rest?”

“It did.”

“What name is attached to Shell?”

“A woman named Lau Ai.”

“And she is?” Ava asked.

“Tsai Men’s wife.”

Ava sat quietly for a moment, her head lowered and her eyes on her notebook. She wasn’t completely taken aback by anything Vanessa had related, but the immensity of the Tsai family empire was beginning to sink in, and there were almost too many questions bouncing around in her head.

“Are you all right?” Brenda asked.

“I’m fine,” Ava said, raising her head. “I’m just trying to come to grips with the complexity of it all.”

“The family has been in power for a long time, so they’ve had the opportunity to accumulate assets,” Brenda said.

“I know. It’s just bigger than I ever imagined, and then there are the international elements. I wouldn’t have thought the family would be trusting enough to have foreign partners.”

“Why not?” Brenda said. “As far as any one of them is concerned, they’re doing perfectly legal business together, and the Tsais do retain a majority position in the company.”

“Mega Metals isn’t the only company that they used partners to finance,” Ava said.

“There are more?”

“At least one. Mother of Pearl is the majority shareholder in Jiangsu Insurance. Its junior partner is Patriot General Insurance, out of Connecticut.”

“Jiangsu is a private or public company?” Vanessa asked.

“Private, but Patriot isn’t, and the investment is reflected in their financial reports. That’s where we found the details.”

“How was the investment structured?”

“From what I can see, Patriot was the only one to put any money into the business. It provided all the cash that allowed Mother of Pearl to buy Jiangsu.”

“And, like Calhoun, it was content with a minority position?” Brenda asked.

“Yes, it got forty percent, but within a year of the acquisition, Jiangsu’s sales exploded, thanks to a flood of business from the provincial government, and Patriot’s initial investment more than quadrupled in value.”

“The same kind of thing happened with Calhoun,” Vanessa said. “Mega Metals became highly profitable almost instantly, and Calhoun’s U.K. stock price has more than tripled since it partnered with the Tsai family.”

“There’s another company that I hoped you would find more about as well: California Asian Trust.”

Vanessa reached for another file. “It is a wholly owned subsidiary of the California Technical Trust Bank, out of San Francisco.”

“That’s good work,” Ava said. “The California bank is a public company?”

“Yes.”

“What else did you discover?”

“Not much. We didn’t have time.”

“That doesn’t matter. You’ve given me a lead I can pursue.”

“According to your chart, this California Asian Trust is a part owner of Kitchen Giant,” Brenda said.

“It is.”

“I know of Kitchen Giant. It’s a big operation that has to be worth four or five billion.”

“It’s a private company, and we haven’t been able to access its sales numbers and profits yet, but we should be able to come up with an estimate now that we know who the U.S. partner is. They’ll have numbers on their books.”

As Ava was speaking, Brenda had started writing on a foolscap pad.

“Going back to Mega and Calhoun,” Ava said to Vanessa, “how do the Chinese company and the affiliates operate?”

“What do you mean?”

“Who runs them?”

“Each of the affiliates seems to have its own management, but they all report to Mega Metals, which is run by a Chinese Brit, Vincent Yin. He’s been there from the start, and I imagine he was put in place by Calhoun, with the Tsai family’s blessing. He may actually be the one who put together the deal with the family in the first place.”

“Where does Yin live?”

“Nanjing.”

“How active is Lau Ai in the business?”

“She seems to be a figurehead.”

“An expensive one.”

“Not if you look at what she was able to deliver to Calhoun through the family.”

“I was just putting together some rough numbers,” Brenda Burgess said, putting down her pen. “From my calculations, the Tsai family has at least ten billion dollars in assets.”

“Assets that we’ve found,” Ava said. “There’s tons of cash that’s not accounted for — the money that’s been flowing into Hallmark Consulting, Evergreen Trading, Gold Star Investments, and AKG. Much of it was transferred to Mother of Pearl and New Age Capital and Shell, but I thought it had been used to make acquisitions. Evidently it hasn’t been, since Calhoun Metals and Patriot Insurance and California Asian Trust seemed to have funded them all. Where’s that cash?”

“It could be offshore or it could have been used to make other acquisitions.”

“Either way, I think even your ten billion could be a modest estimate,” Ava said.

“Either way,” Brenda said mildly, “I don’t think we should be searching for those missing dollars right now. We’ve put the family on alert and it might be wise to step back for a while.”

“I don’t know if I can. My friend needs help rather quickly.”

“We may have enough information already.”

“All we know is that the Tsai family is probably one of the wealthiest in China,” Ava said.

“There are a few individuals and families who are richer, but not many of them are in government, and that may be the pressure point you’re looking for,” Brenda said.

“Tsai Lian isn’t attached directly to any of those companies,” Ava said. “There’s a wall around him.”

“That’s the same game that his fellow governors, the mayors of the major cities, and the members of the Politburo Standing Committee in Beijing all play. I daresay there isn’t one of them who isn’t looking after his family’s interests before the state’s interests. They’re all trying to accumulate wealth and they’re doing it the same way — at arm’s length.”

“So how do you get through, around, or over the wall?”

“Even the rich and the powerful can get jealous, and when they do, they have the means to create havoc,” Brenda said.

“What are you saying?”

“I doubt that many of his friends in Beijing are playing the money game as well as Tsai Lian, and I doubt that they know what kind of wealth he’s accumulated. If the information were made public, it might cause a stink,” Brenda said. “At the very least, Tsai Lian might find himself having to answer some questions that he doesn’t want asked. And who knows — some of his colleagues might resent his success enough that they would try to generate more serious repercussions.”

“I was told it’s a waste of time trying to get any of the Chinese media to report on corrupt officials unless they have the approval of the government to do it.”

“It is.”

“So what are you thinking? Releasing it in Hong Kong?”

“An equal waste of time.”

“Then where?”

“I’m not really sure, but the Tsai name is known outside of Asia, and there is growing foreign interest in what goes on inside China, especially when there’s scandal involved. There has to be someone who would be interested.”

“Scandal?”

“Aside from the money, laws have been broken.”

“What laws? I’ve been told that Chinese law doesn’t apply to men like Tsai Lian.”

“That’s true enough in most cases, but there are times when it is to the state’s benefit to apply the law. They always lie about the real reason, of course. Instead they use corruption as a vehicle because it’s popular with the public. It normally happens when someone becomes dangerous politically. They usually go after a young person, and in China that means someone in their forties or fifties who’s threatening the status quo. It’s also inevitably true that the person has been corrupt, because they all are.”

“But Tsai Lian is part of the establishment. He’s no radical and no threat.”

“We have to make him such an embarrassment that they won’t want him in the club anymore,” Brenda said.

“Is the money that he’s accumulated enough to do that?”

“Perhaps, but I think some of his family members have broken several laws, and that would discredit them.”

“Are we back to talking about Chinese law?” Ava said.

“No. Vanessa believes that they and their partners have broken British laws, and I agree with her assessment.”

“The U.K. has a bribery act,” Vanessa said. “It is against the law for British companies or individuals to bribe foreign nationals to acquire business. The law is quite severe, and those found guilty face substantial fines and even jail terms.”

“How does it apply in this case?” Ava asked.

Vanessa shrugged. “From what we know, the family was given a fifty-one percent stake in Mega Metals without putting in a dollar of their own. Their partner put in more than two hundred million dollars in cash and inventory for a forty-nine percent stake. The family then ensured that the partner was compensated by forcefully compelling any company doing construction in Jiangsu to buy metals from the new venture. It seems to me that quite a few legal terms could describe that kind of behaviour, and the words ‘bribery’ and ‘coercion’ would be among them.”

“As I said before, a similar pattern was used with Jiangsu Insurance,” Ava said. “The Tsais got a majority share in a viable insurance company for absolutely nothing because they most certainly promised to direct the province’s insurance business to the company. There’s no other reason why Patriot would simply hand over forty million dollars for a minority position in a company that was valued at only a hundred million.”

“That brings the American Foreign Corrupt Practices Act into play as well,” Vanessa said. “It can be as tough as the U.K. law.”

“Who would the laws target?”

“Calhoun Metals and Patriot Insurance. They can’t touch the Tsai family directly.”

“Well, assuming that both American and British laws have been violated, it seems the Tsai family’s partners could be in some trouble,” Ava said. “Although I’m not sure what impact this would have on the family. They may not care about problems that their partners have.”

“Then we have to find a way to make them more vulnerable,” Burgess said.

Ava smiled. “Do you have some ideas?”

“We do.”

“I think I may have some as well,” Ava said.