SHANGHAI - Pan Kaihong, a well-known entrepreneur in Nanjing and deputy director of the Nanjing Charity Federation, was recently arrested after being accused of illegally collecting public savings.

The Beijing-based Procuratorial Daily reported on Wednesday that the 43-year-old entrepreneur, who runs a cosmetics company in Nanjing, was accused by police of illegally collecting at least 4 million yuan ($616,000) from nearly 290 households in the city. Police said he committed the misdeeds between September 2010 and January 2011.

And the case is likely even bigger. A prosecutor, surnamed Sun, who is working on the case in the Baixia district prosecutor's office, told China Daily that the actual amount of money in question is larger than the reported 4 million yuan.

"This case is becoming more complicated as more victims come to us," Sun said. "It has now been transferred to the economic crimes investigation team with the Baixia district police."

Pan pledged to give 30 million yuan to the Nanjing Charity Federation in December 2010. If all of that is ever given, it will be largest donation the organization has ever received. So far he has produced 1.2 million yuan.

But in return for the generous promise, Pan was elected deputy director of the organization.

An official with the Nanjing Charity Federation, who refused to give her name, told China Daily that Pan's election to the deputy director position was in accordance with the organization's rules.

The money for the donation was to come from a cosmetics company, Nanjing Huangpu Lingluzi Biopharmaceutical Company that Pan had established in 2008. He said the company would give 20 to 30 percent of its annual revenue to the charity.

According to the report, consumers who bought the company's products would be asked by a salesperson to give at least 20 yuan to a "philanthropic cause".

The products were classified into four categories according to their prices, the maximum prices for each category being 880 yuan, 2,460 yuan, 5,280 yuan and 8,800 yuan. Customers were asked to buy at least 10 products and were told they would receive a refund equal to 20 percent of the money they had spent, the report said.

Anyone who helped the company find new customers would be awarded a commission.

The company also took in 4 million yuan by telling customers about the benefits of a type of "investment package".

Experts said Pan's doings shows how profiteers can accumulate wealth by cheating kind-hearted people in the name of charity.

"Since the charity industry is in its early stage in China, the supervision of it is still incomplete," said Li Hui, a teacher from the department of political science of Fudan University. "It would be better if the government came out with appropriate laws and regulations to establish a strict supervision of the industry."

China Daily

(China Daily 05/05/2011 page5)