China uncovers blackmail scam in Shanghai fund scandal

BEIJING, Nov 28 (Reuters) China has arrested a man who passed himself off as an investigator and blackmailed more than 100 officials in Shanghai where a pension fund scandal has netted the city's Communist Party boss, a newspaper said today.

Beijing has sent more than 100 investigators to Shanghai to trace money siphoned off from the financial hub's 10 billion yuan social security fund for illicit loans and investments.

More than 50 government officials and businessmen, including Chen Liangyu, the city party chief, and Zhang Rongkun, one of China's richest men, have been taken into custody since the scandal erupted months ago.

In late October, a 50-year-old man sent threatening mail in the name of one of the Beijing investigators to ''leading officials in various party and government organs in Shanghai'', citing their involvement in Chen's case, the Yanzhao Metropolis Daily said.

Police tracked the man down when he checked his bank accounts provided in the letters on ATM machines near his rural home in the northern province of Hebei and manged to confirm his handwriting, the newspaper said.

The man, whom the newspaper named and said had blackmailed managers at China's top appliance maker Haier Group in 2003, was arrested last week, the paper said on its Web site.

Police found unsent letters and government directories in his house, the newspaper said. It did not say if any of the threatened officials had handed over money.

Chinese newspapers regularly report details of a defendant's supposed guilt before a verdict has been reached, and courts are commonly viewed as venues merely for passing sentence.

Chinese media have reported similar extortion cases, in which the blackmailers randomly select a number of officials, make up several graft allegations and demand hush money.

Analysts say the phenomenon illustrates widespread corruption and the lack of meaningful checks and balances of power with officials are accountable only to their superiors.

REUTERS SP PM1020