Stanford MBA grad's case focuses on corruption in China
IMPRISONED ENTREPRENEUR REFUSES TO CONFESS, DEMANDS SHANGHAI RETRIAL
By Karl Schoenberger
MERCURY NEWS
July 21, 2003
Talk to any high technology manufacturer in the Valley and they'll tell you that Chinese officials will woo, wheel and deal to bring business to China. And, particularly over the past five years, they've been highly successful.
Jude Shao tells his friends he wished he hadn't been so arrogant that fateful day in July 1997, when tax auditors came to inspect the books at the Shanghai office of his medical equipment trading company.
The Stanford Business School graduate had received an urgent fax that morning setting his date to be sworn in as a U.S. citizen in San Francisco. He was excitedly preparing to fly home in a few days for the ceremony, and brushed off the tax men.
Shao got his American citizenship without a hitch. But he marked his 41st birthday July 11 in Shanghai's Qing Pu Prison, where he's serving a 16-year sentence for tax evasion following a nightmarish journey through the Chinese judicial system.
The violations of due process in Shao's 1998 detention and subsequent trial were so egregious, legal experts say, that his case stands out as a symbol of the corruption and the arbitrary rule of law that are still rampant in China - even in a seemingly progressive oasis for international business like Shanghai.
Shao's case also suggests that the problem of questionable arrests of overseas Chinese over commercial disputes with local Chinese partners, which gained notoriety in the mid-1990s, remains a potential risk for investors and traders in China.
Shao has denied any wrongdoing and has stubbornly resisted pressure from Chinese authorities to reduce his sentence by confessing. Letters from jail show his regret on one point only: sticking perhaps too rigidly to the principles he learned in his ethics class at Stanford, instead of playing by corrupt local business customs. But Shao tells his friends he's determined to fight for a retrial and clear his name, even if it means postponing his release from prison.
Gathering evidence
Shao has gathered exculpatory evidence that proves he paid disputed taxes and suggests his Chinese business partners cheated and framed him, and has doggedly filed appeals to the Shanghai High Court and the Chinese Supreme Court seeking a retrial to exonerate himself. The effort has been futile so far, but Shao isn't giving up, say his frineds, many of whom express bewilderment and frustration over what they see as Shao's self-imposed martyrdom.
"Jude is so Americanized he refused to follow the local corrupt culture in China," said Sam Liu, a friend from Shao's years at Jiao Tong University in Shanghai. "Otherwise he'd be free right now."
Phone calls to the Chinese Embassy in Washington and the Chinese consulate in San Francisco earlier this month requesting government comment on the Shao case were not returned.
Shao's classmates at Stanford's Graduate School of Business celebrated their 10th anniversary in May with a campus event aimed at raising awareness of his predicament.
John Kamm, a San Francisco business consultant who lobbies for the release of prisoners of conscience in China, told the gathering that some 80 American business people are imprisoned in China, most of them ethnic Chinese like Shao. He warned that business people need to concern themselves with human rights in China because "the same arbitrary abuses of power used to silence political dissent can be used for other purposes."
Shao's friends from Stanford started a campaign to lobby for his release and recently launched a web site (www.freejudeshao.com) where they've posted documents and background information on his case.
Tony Biz, one of Shao's Stanford roommates, said he invested $5,000 in Shao's startup because he was impressed by his energy and his vision to "bridge the two countries." The first year's dividend was a thermal beach towel Shao had made in a Chinese factory for Wal-Mart. Things took off when Shao focused on medical appliances, but disaster struck before investors saw significant returns.
"I don't care about the $5,000 anymore," said Biz, a software engineer who designed the Free Jude Shao Web site. "I just want to get Jude out of prison and hopefully out of China, too."
A Shanghai native with a modest family background, Jude Jingzu Shao was at the head of the pack of ambitious engineering school graduates who left China in the 1980s seeking their fortunes in the U.S. high technology industry. in 1986 he obtained a student visa to attend Johnson & Wales University in Providence, R.I., then quickly landed a job at Digicom Computers, a now-defunct, networking firm in Boston, where he impressed his boss with his technical skills, high energy and dogged determination.
Shao pursued a Master's of Business Administration degree at Stanford, say friends from the Class of 1993, because he wanted to make a lot of money as a trans-Pacific entrepreneur and, at the same time, help in China's development. He found a niche selling used X-ray machines and other U.S. medical devices to provincial Chinese hospitals that could not otherwise afford the equipment. Shao said in a letter from jail that he was grossing more than $100,000 in monthly sales when the tax debacle struck in 1997.
What started out as a surprise tax audit of CBV Trading (Shanghai), a subsidiary of Shao's San Francisco-based China Business Ventures, turned into a battle of wills between Shao and a tax auditor named Yu Jiaming. On the second day, Yu offered to dismiss the case in exchange for a $60,000 "tax audit bond," Shao claims, saying he rejected the veiled solicitation of bribery.
Letter from prison
"I was so busy doing things that I didn't really pay attention to the tax auditors when they showed up at the door," Shao wrote from prison in April 2002 in a handwritten account of his troubles to Stanford classmate Chuck Hoover. Shao put the auditors in a room with his accountant and left the office for the day, not realizing that the officials might consider such behavior a personal affront.
"I didn't come back and take the auditors to dinner and maybe the clubs. I was very, very rude too the auditors, because any other Chinese company would have treated them like kings. But I never thought I needed to entertain them," Shao wrote.
While Shao was in the United States, Shanghai authorities confiscated CBV's ledgers and froze its assets in China. The trading company collapsed after Shao couldn't pay his 15 employees in Shanghai.
Back in San Francisco, Shao had trouble obtaining a Chinese work visa, which he needed as a U.S. citizen. He finally returned to Shanghai in April 1998 to try to salvage his ruined business. Acting on a tip, police detained Shao at his hotel and held him incommunicado for more than a year while concerned officials at the U.S. Consulate in Shanghai filed diplomatic protests to gain access to him.
Shao did not meet a defense lawyer until a few days before his two-day summary trial in June 1999, and had no chance to gather evidence in his defense. The following March, Shanghai No.1 Intermediate Court convicted him of fabricating tax invoices and underreporting his income, and sentenced him to a total of 16 years in prison.
Shao's cause has been taken up by U.S. Ambassador to Beijing Clark Randt, who has cited him among promoinent victims of human rights abuse in China in public remarks. New York University law Professor Jerome Cohen, a leading expert on the Chinese legal system, was alarmed enough to volunteer his services as an adviser in the case.
"The more I've been looking into the case, the more disturbed I am, but hopefully the Supreme Court will hear his appeal," Cohen said in a phone interview. "He claims that during the course of his tax audit he was asked to pay a bribe and refused. That's a very serious charge."
China has a long history of quietly releasing American prisoners and human rights victims as a concession to Washington when it serves its diplomatic interests. But friends lament that Shao's rigid principles hurt his chances of early release.
Glimmer of hope
There was a glimmer of hope recently when Shao's Chinese lawyers hired a panel of six prominent legal scholars and retired judges at People's University in Beijing to review reams of evidence in the case. The panel concluded unanimously that exculpatory evidence, such as documents proving he paid disputed value-added tax on imported medical equipment, is so persuasive that Shao deserves a retrial.
Yet that opinion may have little sway over the hide-bound bureaucrats in Shanghai's judicial system, who risk losing face if Shao's conviction is overturned.
"Jude wants to be vindicated. He has a fierce belief that he's been wronged, and he's willing to do the extra jail time to prove it," said Cohen, the NYU law professor. He added that Shanghai has been a model for judicial reform in China, but "this is a case where you have to say Shanghai justice failed."
Contact Karl Schoenberger at kschoenberger@sjmercury.com or (415) 477-2500.
