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Fake charity

By Wang Fei (Global Times)

08:25, September 07, 2011

A man peers through the gate of the company that was selling residential apartments developed by an affiliated company under the Soong Ching Ling Foundation in Henan Province. Photos: CFP

Charity organizations in China have recently come under close scrutiny after it was discovered that a foundation in Henan Province, operating under the name of former Chinese honorary president Soong Ching Ling, was involved in a scandal.

The Soong Ching Ling Foundation in Henan Province under question is based in Zhengzhou, and currently has more assets than any other charity in the country.

The Henan foundation was reported to have made its fortune by giving loans through public donations, and developing real estate projects on land that was supposed to be used for charitable projects, the Guangzhou-based Southern Weekend reported.

In 2005, the Henan foundation launched a plan to build an activity center for children and young people. The project's original construction plan consisted of 148,000 square meters, and had 800 million yuan ($125.2 million) in investments, the report said.

But the construction of the youth center was eventually reduced to one fifth of its original size, and it was discovered six years later that the remaining land was used for luxury apartment buildings.

According to the developer's plan, the residential compound that occupies the majority of what was supposed to be the youth center was expected to gain 2 billion yuan ($313.2 million) once all the apartments were sold.

It was also later revealed that the real estate developer was actually an investment company affiliated with the Henan foundation.

According to the China Foundation Center, the Henan foundation was ranked first by the end of 2010 out of the country's 2,000 charitable foundations, with largest assets totaling at almost 3 billion yuan, while the Chinese Red Cross Foundation under the country's largest charity group Red Cross Society of China (RCSC), had only 700 million yuan worth of assets.

Big money

For a provincial charity organization, the donations it has received have been unbelievably high. It received 1 billion yuan in 2010, twice that of the Chinese Red Cross Foundation and the China Foundation for Poverty Alleviation that same year.

The Henan foundation's high revenue contradicted what it was required to spend on public welfare according to regulations on the management of foundations, which state that public foundations have to spend at least 70 percent of its annual income on charity programs.

It was discovered that the Henan foundation had only spent a third of its total revenue last year, and in 2009 the amount was even less as their spending only accounted for one-sixth of what they were supposed to spend.

Furthermore, after such limited spending occurred while earning large amounts of money, the foundation only had 100 million yuan in cash by the end of 2010, while large sums had been loaned out, the report revealed.

The financial discrepancies were exposed in a lawsuit last year, when the Henan foundation sued a local company for defaulting on a loan. In a contract signed by both parties, the foundation loaned the company 8 million yuan ($1.25 million) over the course of three months, while the company had to repay the amount in the form of a 1.6 million yuan donation that was to be considered "interest" on the loan.

The court eventually overruled the case by saying that the foundation had no right to grant loans with public funds.

Coming clean

Declaring that some media reports have been inaccurate, Liu Guangjie, an official with the Henan foundation said they were set to hold a press conference this week while they claimed that they are waiting for further instructions from the China Soong Ching Ling Foundation (CSCLF) headquarters.

However, the CSCLF issued a statement Saturday claiming that "no ties exist between the two foundations."

It is still unclear how the Henan foundation could have been registered under the famed charitable name.

The country's philanthropy organizations suffered a heavy blow in June, when a 20-year-old woman named "Guo Meimei" flaunted her wealth on the Internet, claiming that she was the general manager of the RCSC. The RCSC later denied any involvement with her.

"These scandals have tarnished charity organizations in China. And I may feel hesitant about giving my next donation," Tong Jun, a graduate of Beijing Foreign Studies University, told the Global Times.

The RCSC received 12.5 million yuan and 12.7 million yuan respectively in donations during June and July. However, charitable donations dropped to 420,000 yuan during the first 19 days of August, the Beijing News reported.

"Charity organizations can conduct business activities and are allowed to make money so that the value of their assets can be maintained or increased. It's a practice that is also permitted in Western countries. However, earnings should be used for charitable projects, and are not for personal use," said Wang Zhenyao, dean of the Philanthropy Research Institute at Beijing Normal University.


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