Audit finds $28m fraud in railway project

BEIJING - At least 187 million yuan ($28 million) has been misappropriated by individuals or companies involved in building the Beijing-Shanghai high-speed railway, the National Audit Office (NAO) said in a report released on Wednesday.

China's top auditor stopped short of saying where the money had gone, but said it has forwarded the related cases to disciplinary and judicial departments for further investigation.

The report, summing up an audit carried out in 2010, is the second to be published by the NAO since construction began on the high-speed rail link in April 2008. A previous report was published in February 2010.

So far 138.4 billion yuan - out of a total investment of 217.6 billion yuan - has been spent on the mammoth 1,318-km project, scheduled for completion in June.

The revelations come just a month after Liu Zhijun was removed from his post as railways minister for severe breach of discipline and placed under investigation.

Zhang Shuguang, former railways ministry deputy chief engineer, was also removed from office and placed under investigation for corruption in early March.

The report highlighted other problems, including fake invoices, faulty bidding procedures and mismanagement, said Xu Aisheng, chief of the fixed assets investment audit department at the NAO.

The value of fake invoices - which numbered 1,297 - reached 324 million yuan, according to the report. The invoices, involving 16 construction companies, were for gravel and construction equipment.

"Such a large amount of fake invoices may involve embezzlement of public funds," Tang Hongxin, a Beijing-based lawyer at Yingke Law Firm, told China Daily.

Forging invoices is a crime in China with a minimum two-year sentence, Tang said.

The audit also found that several contractors, affiliated to the Ministry of Railways, profited from their ministry links in bidding for contracts worth a combined 4.9 billion yuan.

The project's chief constructor, Beijing-Shanghai High-Speed Railway Co Ltd, also violated bidding rules, the report said.

In addition, the report found that due to mismanaged contracts concerning subcontractors, the company lost 55.6 million yuan from December 2007 to June 2010.

More frequent audits will be conducted on the project, Lin Zhe, an anti-graft expert and professor at the Central Party School, said on Wednesday.

"The annual audit usually comes too late because misconduct may have already caused massive financial losses," she said.

The NAO will launch another round of auditing on the railway project in June, Xu said. The audit will focus on how previous problems have been solved, he added.

Cao Yin contributed to this story.

China Daily