Fugitive Sentenced in China to Life Imprisonment in Landmark Corruption Case

Factual Background
Xu Guojun, along with co-conspirators Xu Chaofan and Yu Zhendong, were managers at the Kaiping sub-branch of the Bank of China at various times between 1992 and 2001. The three managers exploited their positions at the bank to steal bank funds and cover unauthorized foreign exchange losses. The three diverted proceeds overseas through a conduit company in Hong Kong. They caused the Bank of China to lose $482 million USD.

In October 2001, when the Bank of China and the Chinese authorities discovered their crimes, the three managers fled to the United States with visas under false names, which they had fraudulently obtained based on false marriages. China issued Interpol red notices for the arrest of the three fugitives.

Cooperation between the United States and China
U.S. authorities arrested Yu in Los Angeles in December 2002 for visa fraud. With cooperation from Chinese authorities, the U.S. Department of Justice prosecuted Yu, followed by the 2004 arrests of his co-conspirators Xu Guojun and Xu Chaofan, along with their spouses. Yu agreed to cooperate with the authorities and, as part of his plea agreement to U.S. criminal charges, agreed to return to China, where he was sentenced to 12 years imprisonment.

Xu Chaofan, Xu Guojun and their spouses proceeded to jury trial in the United States in 2008, and after a three-month trial, were convicted of all charges, including racketeering, money laundering and immigration fraud. Xu Chaofan agreed to return to China during the service of his U.S. sentence, and upon his return, a Chinese court sentenced him to 13 years imprisonment. Xu Guojun did not enter into any agreement and instead was deported to China in 2021 after his U.S. immigration appeal was dismissed. (Guojon Xu v. Barr, No. 18-60708 (5th Cir. Aug. 8, 2019).) After two years of Chinese court proceedings, on December 13, 2023, Xu Guojun was sentenced to life imprisonment by the Jiangmen Intermediate Court of the People's Republic of China.

According to Pillsbury China litigation and white collar partner Ronald Cheng, who was on the U.S. prosecution team when he was a federal prosecutor, the U.S. criminal case involved an unprecedented level of cooperation between the two countries. The cooperation among law enforcement authorities in China, the United States and Hong Kong resulted in a detailed presentation of evidence to prove the fraud and immigration scheme, which included remote videotape depositions of witnesses in China from the United States and the testimony of witnesses who traveled from both China and Hong Kong to testify in the U.S. criminal trial.

Recent Developments and Other Avenues to Seek Relief
Since the U.S. trial, there has not been a U.S.-China investigation that has led to a prosecution and trial on a similar scale and with these results. Although recent challenges to the U.S.-China relationship have affected bilateral law enforcement cooperation, the U.S.-China summit meeting, which was held on the margins of 2023’s APEC conference, has yielded results, including in the area of combatting unlawful fentanyl trafficking. Observers are hopeful that there will be a similar re-opening as to white collar offenses, including embezzlement and fraud committed against Chinese businesses and other institutions.

In the meantime, victims of overseas fraud continue to have other tools to seek redress from corruption and embezzlement fugitives who have absconded from China and other foreign jurisdictions to the United States. These tools include actions for RICO violations, fraud and fraudulent conveyance. Foreign judgments and arbitration awards are also enforceable in the United States, and these tools may also be employed to execute upon a confirmed judgment or award. Indeed, as we have reported, the U.S. Supreme Court has recently affirmed the applicability of RICO to transnational schemes to evade a foreign arbitral award. Pillsbury continues to monitor court rulings and other official announcements for any policies or trends that may be of interest to overseas individuals and businesses that are victims of fraud.

Pillsbury’s China team of skilled litigators and its International Arbitration group, including our Russia and CIS-related disputes team, regularly deal with these issues in cases involving overseas awards and judgments, including judgments from courts of the People’s Republic of China and arbitral awards, as well as awards issued by the China International Economic and Trade Arbitration Commission and Hong Kong International Arbitration Centre. Recent successes include obtaining confirmation in the U.S. District Court for the Southern District of New York of a $457 million Chinese arbitration award, one of the largest confirmed Chinese arbitration awards in U.S. history.