United States DOJ Gets 3.5-year prison Sentence for Yan & Zhou for Marshall Islands Bribery Scheme
Bribes, booze and bombs: The brazen plan to create a Pacific tax haven
By Pete McKenzie
February 15, 2023 at 1:00 a.m. EST
MAJURO, Marshall Islands - On a tropical Pacific atoll irradiated by U.S. nuclear testing and twice since evacuated because of the fallout, Cary Yan and Gina Zhou planned to create a unique paradise for Chinese investors.
They wanted to turn Rongelap - an atoll in the Marshall Islands totaling eight square miles of land and 79 people - into a tax-free ministate with its own legal system that, they claimed, would be able to issue passports enabling visa-free travel to the United States.
It would have a port, luxurious beachfront homes, a casino, its own cryptocurrency, and a full suite of services for offshore companies registered in Rongelap. With 420 miles of sea between it and the capital, Majuro, it would be relatively free of oversight.
All the couple had to do to make this a reality was bribe a swath of politicians in the Marshall Islands, once occupied by the United States and now a crucial U.S. ally in the Pacific, to pass laws to enable the creation of a “special administrative region” - the same classification given to the Chinese territories of Hong Kong and Macao.
Yan and Zhou, both Chinese nationals who have also become naturalized Marshall Islands citizens, almost succeeded in their audacious plan. Their scheme crumbled in 2020 when they were arrested in Thailand and extradited to New York on corruption and money-laundering charges. They pleaded guilty in December and are now awaiting sentencing. U.S. prosecutors became involved because Yan and Zhou used a New York-registered organization to carry out their bribery and money-laundering scheme.
In their filings, federal prosecutors in the Southern District of New York did not allege that the pair were operating on Beijing’s orders, and some Marshall Islands locals believe they were just old-fashioned scammers.
Nonetheless, the case encapsulates many of the challenges facing the Pacific, where poverty and corruption are widespread. It also offers a rare glimpse into how people linked to China are capitalizing on Beijing’s efforts to gain an economic and strategic foothold in the region amid deepening geostrategic competition with Washington.
Marshall Islands, feeling neglected by the U.S., enjoys new leverage
The Rongelap case began in 2016 when Yan, 51, and Zhou, 35, started courting Marshallese officials, apparently to try to win support for their scheme.
First, according to U.S. prosecutors, Yan and Zhou began arranging meetings in New York with Marshallese officials - paying for their flights to the United States and their accommodation in fancy hotels. According to prosecutors, around this time Yan and Zhou also began investing in a company owned by a prominent Marshallese official.
Next, in 2018, Yan offered to build the Marshall Islands a new jail. The existing one was cramped; prisoners had to bring their own electric fans. Replacing it free, however, seemed odd.
Hilda Heine, the country’s president at the time, said in an interview here that she told her justice minister not to accept until officials had assessed the proposal. But weeks later, according to Heine and Giff Johnson, the editor of the local newspaper, a ship unloaded building materials at the port. “People don’t do that kind of investment for nothing,” Heine remembered thinking. She fired her justice minister for proceeding without approval; the cheap prefabricated units now lie decaying in heaps outside his home.
A photo taken in Hong Kong and shared on a public Facebook group shows some of those present at a meeting to discuss the creation of a tax haven on the Marshallese atoll of Rongelap. Those present include Cary Yan, second from left; former Marshallese president Kessai Note, center, in red tie; and Rongelap Atoll Mayor James Matayoshi, second from right. (Obtained by The Washington Post)
In April of that year, an organization controlled by Yan and Zhou paid for Marshallese lawmakers and officials to fly to Hong Kong, where the couple formally unveiled their proposed special administrative region and hosted elaborate banquets to celebrate.
Although Yan and Zhou insisted that their proposal wouldn’t involve selling Marshallese citizenship, the special zone was being advertised in Hong Kong as a way to get Marshallese passports, and therefore U.S. residency, according to media reports from Hong Kong. (The residency is conferred under a treaty brokered partly as compensation for U.S. nuclear tests in the islands.)
Heine’s government soon rejected the proposal. “They would have their own court system, they would have their own immigration system,” she said. They were effectively suggesting “a country within a country.”
China's growing reach is transforming a Pacific island chain
The opposition politicians, however, were determined to pass the law creating the special zone. They plotted to replace Heine because of her hostility to the proposal, according to Johnson, and brought a no-confidence vote against her. She dispatched a minister to negotiate a compromise over a meal at a local Chinese restaurant.
When neither side budged, Yan slid an envelope of cash across the table, according to Heine and another person familiar with what occurred, who spoke on the condition of anonymity for fear of being tarnished with corruption allegations. The minister left and reported the attempt to Heine, sparking investigations by the Marshallese attorney general and American law enforcement.
Heine later eked out a narrow victory in the no-confidence vote. But the next month, according to U.S. prosecutors, one official who had accepted bribes promised Yan to seek “revenge.”
U.S. prosecutors later concluded that Yan and Zhou had been paying tens of thousands of dollars to Marshallese lawmakers and officials since at least 2018.
Edward Kim, an attorney for Yan, declined to comment. It is not clear who is representing Zhou.
While prosecutors did not name the officials in their indictment, photos from the Hong Kong event - some of which were posted on public Facebook pages, including one belonging to a group critical of the current government - show the couple sipping wine with former Marshallese president Kessai Note and Rongelap Atoll Mayor James Matayoshi.
Former Marshallese president Kessai Note, in red tie, with Cary Yan, right, at a dinner in Hong Kong, as seen in a photo posted to the Kewan Jela group on Facebook. Yan has pleaded guilty to corruption charges over a plan to create a tax haven on the Marshall Islands atoll of Rongelap. (Obtained by The Washington Post)
Other photos posted to Facebook show Yan presenting Note with cigars and the two of them eating together at a rooftop dinner. In a short interview, Note declined to comment. Matayoshi denied taking bribes or any other wrongdoing.
The Marshall Islands’ attorney general is now investigating Matayoshi, Note and Kenneth Kedi, the speaker of the National Parliament and senator for Rongelap, among others.
Speaking in hushed tones over omelets beside the lagoon in Majuro, Kedi said that he attended the Hong Kong event but that Rongelap’s local government - not the Chinese couple - had paid for his flights. He insisted he never took any money from the pair, although he said it was likely that other Rongelap officials did. Kedi did, however, throw his substantial support behind the scheme from the beginning. But, he said, he got cold feet when Yan asked him to write to China’s foreign minister praising the proposal - making him think the whole scheme was connected to the Chinese government.
Mike Kabua, an influential Marshallese chief and uncle of the current president, said Yan also sought his support over meals at a Chinese restaurant in Majuro. In an office crammed with small gifts from people seeking his favor, Kabua said he never took bribes, but saw no issue with people who did. “If he gave them money, that’s okay, because he just wanted to speed up the process. Why is the U.S. so worried?” he asked.
In 2020, Heine’s coalition lost the election, damaged by smears surrounding the Rongelap proposal. Her government was replaced by one that U.S. prosecutors said included lawmakers who accepted bribes. Within months, a resolution approving the Rongelap proposal was passed.
But by then, the American investigators were on the Chinese couple’s case.
Rongelap Atoll and its lagoon. (Asahi Shimbun/Getty Images)
In late 2020, Yan and Zhou were arrested in Thailand and extradited to New York. Prosecutors accused them of bribing at least five Marshallese officials with payments of up to $22,000 at a time, and said Yan promised one official in an email that his family would be “one of the most powerful” in the Marshall Islands if the Rongelap zone was created.
Although she has no proof, Heine can’t shake the suspicion that China backed the couple, noting that Rongelap is relatively close to Kwajalein Atoll, which hosts a U.S. military base - and would therefore be of significant interest to Beijing.
More likely, said Johnson, the newspaper editor, Yan was an independent trickster. “But from Beijing’s point of view, they stand to benefit without being a player,” he said. “If he opened up a door allowing for Asian investment, Chinese companies could set up a presence.”
Given the Marshall Islands’ strategic value as a buffer against China, Johnson said, “it would be huge for the Chinese to have some inroads here.”
China fails on Pacific pact, but still seeks to boost regional influence
Yan and Zhou now face up to five years in prison. But the consequences in the Marshall Islands are less clear.
Johnson said this was a wider issue for the Pacific, since underdevelopment and colonization have left many in the region impoverished.
“You’re on a little island and people say, ‘How can we make some money?’ Somebody shows up and says, ‘I can do something.’ Okay, great.”
In 2021, Transparency International research indicated that a third of Pacific people had paid bribes within the previous year, and that 56 percent thought corruption was worsening.
Kedi said he initially supported Yan’s proposal because the country’s future was “bleak.” “There’s not much opportunity,” he said. Development proposals were “appealing” to his community “when on a weekly basis you’re trying to figure out where your basic needs come from.”
To preserve their influence and address some of that vulnerability, the United States and its allies have increased their support for the region. That has sparked cynicism among some locals, who see little difference except scale between that funding and offers of money from people linked to China. “Look how much money America gives,” Kabua, the chief, said with a touch of irony. “It’s not a bribe, it’s because they want to help.”
Whether that will be sufficient to maintain American influence and crowd out Chinese appeals remains unclear.
The United States shouldn’t be worried about China’s increasing involvement in the region, Kabua said. “Well, if China is involved, what’s wrong with that? We need help.”
https://www.washingtonpost.com/world/2023/02/14/china-united-states-marshall-islands-rongelap/
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Pair plead guilty to bribery in attempt to create semi-autonomous Pacific region
US Attorney says the pair sought to undermine democratic processes in the Marshall Islands.
Stephen Wright
2022.12.05
Wellington, New ZealandShare on WhatsAppShare on WhatsApp
Pair plead guilty to bribery in attempt to create semi-autonomous Pacific region
Marshall Islands President Hilda Heine gestures during an interview with AFP in Geneva, June 21, 2019. Heine in 2018 defeated an attempt to create a special administrative region that was proposed by Cary Yan and Gina Zhou, who last week pleaded guilty in a U.S. court to conspiracy to bribe Marshall Islands officials.
A Chinese pair who tried to create a semi-autonomous region in the Marshall Islands with no tax and relaxed immigration rules have pleaded guilty in the United States to conspiring to bribe officials.
Cary Yan and Gina Zhou, who use several aliases and have Marshall Islands passports, each face up to five years in prison, the U.S. Department of Justice said in a Dec. 1 statement. They were extradited to the United States from Thailand in September after allegedly carrying out a multi-year effort to establish the semi-autonomous region that involved bribing and attempting to bribe half a dozen officials in the North Pacific nation.
“As they have now admitted, the defendants sought to undermine the democratic processes of the Republic of the Marshall Islands through bribery in order to advance their own financial interests,” said U.S. Attorney Damian Williams.
The U.S. indictment of Yan and Zhou doesn’t assert that the pair were acting on behalf of Beijing. The bribes paid were relatively small. The largest mentioned in the U.S. indictment is U.S. $22,000.
They each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). While the maximum penalty is five years, a sentencing date has not been set. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors, according to the department news release.
The Marshall Islands, home to about 80,000 people spread across numerous atolls, is one of the 14 states that recognize Taiwan instead of China. It is currently renegotiating its Compact of Free Association with the United States, an arrangement under which it has ceded defense and security to Washington in exchange for economic assistance and the right for its citizens to live and work in the United States.
According to the U.S. indictment, Yan and Zhou offered and paid bribes in 2018 to Marshall Islands officials to support legislation that would have created the Rongelap Atoll Special Administrative Region.
The special administrative region would have operated under rules to attract foreign investors, such as by lowering or eliminating taxation and relaxing immigration regulations.
Between 2016 and 2018, Yan and Zhou also paid for the travel of Marshall Islands officials to New York and Hong Kong, and their hotel bills and entertainment. They succeeded in getting legislation sponsored in 2018, but it was blocked by the Marshall Islands’ president at the time, Hilda Heine. One of the unnamed officials who worked with Yan and Zhou, promised the pair in an email that he would get “revenge” on Heine, according to the indictment.
Heine was defeated in a November 2019 election and in March 2020, a resolution supporting the concept of the special administrative region was passed by the Marshall Islands legislature with the support of lawmakers who Zhou and Yan bribed or provided with other incentives.
Shailendra Bahadur Singh, an associate professor and head of journalism at the University of the South Pacific, said in an analysis published after Yan and Zhou’s extradition that their tactics were “reminiscent of ‘elite capture’, often associated with the Chinese state and Chinese businesses.”
“Although the involvement of Chinese state officials is unclear at this stage, there’s no denying that the Marshall Islands would be a prime target and major prize for them,” he said.
Part of the reason for U.S. jurisdiction in the case was that Yan was president and chairman of a New York-based non-governmental organization, which also claimed affiliation with the United Nations. Zhou was his executive assistant. The NGO organized a conference in Hong Kong in 2018 to promote the special administrative region and flew in Marshall Islands officials to Hong Kong for it and to New York at other times.
BenarNews is an RFA-affiliated news service.
https://www.rfa.org/english/news/pacific/bribery-12052022102736.html
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FOR IMMEDIATE RELEASE
Tuesday, May 16, 2023
Former Head of Non-Governmental Organization Sentenced for Bribing Officials of Republic of Marshall Islands
The former president of a New York-based non-governmental entity (NGO) was sentenced today to three years and six months in prison for paying bribes to elected officials of the Republic of the Marshall Islands (RMI) in exchange for passing certain legislation.
According to court documents, beginning in or around 2016 and continuing until at least August 2020, Cary Yan, 51, conspired with others - including his assistant, Gina Zhou - in connection with a multi-year bribery scheme. Yan offered and paid tens of thousands of dollars in bribes to high-level RMI officials, including members of the RMI legislature, in exchange for supporting legislation creating a semi-autonomous region within the RMI called the Rongelap Atoll Special Administrative Region (RASAR) that would benefit the business interests of Yan and his associates. Yan carried out the bribery scheme using the New York-based NGO, including the physical use of its headquarters in Manhattan, to meet and communicate with RMI officials.
In December 2022, Yan and Zhou each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practice Act. On Feb. 16, Zhou was sentenced to two years and seven months in prison for her role in the scheme.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Damian Williams for the Southern District of New York, and Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division made the announcement.
The FBI New York Field Office investigated the case. The Royal Thai Government, the U.S. Department of State’s Diplomatic Security Service, the Embassy of the United States in Bangkok, and the Justice Department’s Office of International Affairs provided substantial assistance in securing the arrest and extradition of Yan.
Assistant Chief Gerald M. Moody, Jr. and Trial Attorney Anthony Scarpelli of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Hagan Scotten, Lara Pomerantz, and Derek Wikstrom for the Southern District of New York prosecuted the case.
The Fraud Section is responsible for investigating and prosecuting Foreign Corrupt Practices Act (FCPA) matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
https://www.justice.gov/opa/pr/former-head-non-governmental-organization-sentenced-bribing-officials-republic-marshall
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Yan Sentenced To 3.5 Years For Marshall Islands Bribery Scheme
May 17, 2023
As highlighted in this prior post, in September 2022 the DOJ announced that two Marshall Island nationals (Cary Yan and Gina Zhou) arrived in the U.S. after being extradited from Thailand based on 2020 criminal charges that the individuals violated the Foreign Corrupt Practices Act (and other laws) in connection with an alleged scheme to bribe elected officials in the Republic of the Marshall Islands (RMI) in exchange for passing certain legislation.
According to the indictment, Yan and Zhou acted as officers, directors, employees, and agents of a New York City based non-governmental organization (World Organization of Governance & Competitiveness (WOGC)) and, while in New York City and other locations in U.S. territory, to offer and pay bribes to government officials in the RMI to pass certain legislation that would benefit the business interests of Yan, Zhou and their associates. Specifically, to establish a semi-autonomous region within a region of the RMI known as the Rongelap Atoll.
In December 2022, Yan and Zhou pleaded guilty to one count of conspiracy to violate the FCPA’s anti-bribery provisions.
Yesterday, the DOJ announced that Yan was sentenced to 3.5 years in prison. As noted in the DOJ’s release, earlier this year “Zhou was sentenced to two years and seven months in prison for her role in the scheme.” Sentencing submissions in FCPA matters often make for interesting reads and surely did in this matter.
In seeking a time served sentence, Yan’s sentencing submission states:
“Cary Yan is a good man who is genuinely remorseful for his offense. He has accepted responsibility for his conduct and makes no excuses for it. His path to this courtroom has been an extraordinary one.
Born in China into extreme poverty, he grew up begging on the streets. [Redaction]. Despite these challenges, he built a successful career as a consultant and adviser and has devoted considerable time and money to helping the less fortunate.
While Cary committed a serious crime for which he is deeply sorry, he has already been adequately punished. He is a first-time offender, and as of the date of sentencing, he will have been incarcerated for a total of 30 months, 21 of which were spent in horrendous conditions in a Thai jail. Cary is 51 years old and suffers from serious health conditions, and after completing his sentence, he will be deported and likely face a period of immigration detention. Furthermore, a time-served sentence would be consistent with sentences in comparable cases. Given these factors, a sentence of time served satisfies the objectives of 18 U.S.C. § 3553(a).
[…]
In 2016, Cary founded a non-governmental organization: the World Organization of Governance and Competitiveness (“WOGC”). Its mission was to provide strategic planning services to countries and private companies in order to promote investment and sustainable development and combat poverty and hunger. Between 2016 and 2020, when Cary was arrested in this case, WOGC donated food and other supplies to impoverished communities in Sri Lanka, Vanuatu, Honduras, El Salvador, Zambia, Kiribati, Panama, and the Marshall Islands, of which Cary is a naturalized citizen. In addition to its charitable donations, WOGC has advised various governments and private businesses on development and anti-poverty initiatives. WOGC’s strategic planning activities have included a development plan for the government of Liberia, a medical marijuana project in Thailand, and the Rongelap Atoll initiative (“RASAR”) at issue in this case.
[…]
WOGC and its partners in the Marshall Islands worked together to promote RASAR, a legislative initiative to create a special administrative region in Rongelap. RASAR was intended to encourage investment in Rongelap and promote resettlement of the area. As with any development initiative, both the investors and the recipients of those investments stood to gain financially. While Cary planned to invest in Rongelap, he did not have any immediate financial stake in the initiative. For him to have benefited financially, RASAR would have needed to pass and future investments that he had yet to make would have needed to be profitable. While personal gain was a possibility, it was speculative and not Cary’s primary reason for supporting RASAR. He supported the initiative because he - like RASAR’s local supporters - believed it would stimulate development in the Marshall Islands and help lift people out of poverty.
[…]
In determining a just sentence, the Court should also consider the circumstances of Cary’s incarceration, much of which has been spent in terrible conditions in Thailand during some of the worst periods of the pandemic.
[…]
The trauma Cary experienced in Thailand has left a lasting impact on his physical and emotional health.
From November 2020 to August 2022, a period of 21 months, Cary was an inmate at the Bangkok Remand Prison. The horrifying conditions of Thailand’s jails have been documented by international rights organizations and recounted to the Court in detail by Ms. Zhou. Unfortunately, Cary’s experience in Thailand was consistent with those of Ms. Zhou and many others incarcerated there.
At the Bangkok Remand Prison, where Cary was incarcerated, 70 to 80 inmates lived in a single room of around 450 square feet. Due to the lack of space, the inmates slept side-by-side on the floor. The 70 to 80 inmates shared a single toilet, for which there was no privacy. When inmates could not wait to use the toilet, they would defecate on themselves and feces would overflow into the shared cell. The facility was infested with vermin. Cary had neither shoes nor proper clothing. He was dressed only in underwear.
Despite the sweltering heat of Bangkok, where the average high is over 90 degrees Fahrenheit during almost all of the year, showers were sometimes limited to less than a minute, and the dirty shower water was recycled. The combination of heat, humidity, lack of ventilation, frequent power outages, and overcrowding meant that inmates at the jail were often perspiring heavily in close quarters.
[…]
The Court should sentence Cary to time served. The offense conduct was an aberration in an otherwise praiseworthy life. Having escaped poverty himself, Cary has spent much of his life helping others do the same. A sentence of time served - the equivalent of about 35 months, accounting for good time - would be in keeping with sentences in comparable cases and would properly account for Cary’s history and characteristics, the conditions of his confinement in Thailand, and the immigration consequences of his case.”
The DOJ sought a sentence of 4.75 years for Yan and stated in its sentencing submission, among other things, as follows:
“While the Guidelines in FCPA cases are typically driven by large bribe amounts and anticipated benefits, here the defendant was able to bribe officials from the RMI relatively cheaply. Yet bribery-in large and small amounts alike-causes significant global harm.
[…]
While Yan has accepted responsibility, his superficial claims of a benevolent motive are reason to doubt that he recognizes the gravity of his offense. So is Yan’s claim that his offense was “an aberration.” This crime was not a momentary lapse in judgment. Yan played a long game. He acquired a unaffiliated NGO, in order to position himself to bribe numerous RMI officials. When those initial bribes failed to accomplish Yan’s goal of establishing the RASAR, he sought to boot the RMI’s then-President from office. And although that attempt failed, when there was a change in administrations, Yan worked with the officials he had bribed to try again. It was only the combination of the pandemic and the charges in this case that ultimately foiled Yan’s efforts. Given Yan’s persistent illegal and anti-democratic conduct, and his apparent failure to now recognize its seriousness, a substantial sentence is appropriate to send the message, both to the public and to Yan himself, that foreign bribery will be met with serious punishment.”
[…]
Yan’s incarceration during the extradition process does not justify the leniency he requests. That is not to say that Yan’s time in custody between his November 2020 arrest and his September 2022 extradition is irrelevant. To the contrary, the Government agrees with the Court’s remarks at co-defendant Gina Zhou’s sentencing that incarceration anywhere during the height of the pandemic merits some leniency. And as the Government has previously noted to the Court, the Federal Bureau of Investigation inquired into the conditions of the defendants’ incarceration, but was not able to either confirm the defendants’ claims about the harshness of their incarceration or uncover evidence that those claims were inaccurate. However, in light of those factors, the Government made what it viewed as a generous and reasonable plea offer in this case: an offer with a five-year statutory maximum and Guidelines that were capped by that maximum. In other words, Yan’s plea deal already accounts for this mitigating factor.”
https://fcpaprofessor.com/yan-sentenced-3-5-years-marshall-islands-bribery-scheme/
By Pete McKenzie
February 15, 2023 at 1:00 a.m. EST
MAJURO, Marshall Islands - On a tropical Pacific atoll irradiated by U.S. nuclear testing and twice since evacuated because of the fallout, Cary Yan and Gina Zhou planned to create a unique paradise for Chinese investors.
They wanted to turn Rongelap - an atoll in the Marshall Islands totaling eight square miles of land and 79 people - into a tax-free ministate with its own legal system that, they claimed, would be able to issue passports enabling visa-free travel to the United States.
It would have a port, luxurious beachfront homes, a casino, its own cryptocurrency, and a full suite of services for offshore companies registered in Rongelap. With 420 miles of sea between it and the capital, Majuro, it would be relatively free of oversight.
All the couple had to do to make this a reality was bribe a swath of politicians in the Marshall Islands, once occupied by the United States and now a crucial U.S. ally in the Pacific, to pass laws to enable the creation of a “special administrative region” - the same classification given to the Chinese territories of Hong Kong and Macao.
Yan and Zhou, both Chinese nationals who have also become naturalized Marshall Islands citizens, almost succeeded in their audacious plan. Their scheme crumbled in 2020 when they were arrested in Thailand and extradited to New York on corruption and money-laundering charges. They pleaded guilty in December and are now awaiting sentencing. U.S. prosecutors became involved because Yan and Zhou used a New York-registered organization to carry out their bribery and money-laundering scheme.
In their filings, federal prosecutors in the Southern District of New York did not allege that the pair were operating on Beijing’s orders, and some Marshall Islands locals believe they were just old-fashioned scammers.
Nonetheless, the case encapsulates many of the challenges facing the Pacific, where poverty and corruption are widespread. It also offers a rare glimpse into how people linked to China are capitalizing on Beijing’s efforts to gain an economic and strategic foothold in the region amid deepening geostrategic competition with Washington.
Marshall Islands, feeling neglected by the U.S., enjoys new leverage
The Rongelap case began in 2016 when Yan, 51, and Zhou, 35, started courting Marshallese officials, apparently to try to win support for their scheme.
First, according to U.S. prosecutors, Yan and Zhou began arranging meetings in New York with Marshallese officials - paying for their flights to the United States and their accommodation in fancy hotels. According to prosecutors, around this time Yan and Zhou also began investing in a company owned by a prominent Marshallese official.
Next, in 2018, Yan offered to build the Marshall Islands a new jail. The existing one was cramped; prisoners had to bring their own electric fans. Replacing it free, however, seemed odd.
Hilda Heine, the country’s president at the time, said in an interview here that she told her justice minister not to accept until officials had assessed the proposal. But weeks later, according to Heine and Giff Johnson, the editor of the local newspaper, a ship unloaded building materials at the port. “People don’t do that kind of investment for nothing,” Heine remembered thinking. She fired her justice minister for proceeding without approval; the cheap prefabricated units now lie decaying in heaps outside his home.
A photo taken in Hong Kong and shared on a public Facebook group shows some of those present at a meeting to discuss the creation of a tax haven on the Marshallese atoll of Rongelap. Those present include Cary Yan, second from left; former Marshallese president Kessai Note, center, in red tie; and Rongelap Atoll Mayor James Matayoshi, second from right. (Obtained by The Washington Post)
In April of that year, an organization controlled by Yan and Zhou paid for Marshallese lawmakers and officials to fly to Hong Kong, where the couple formally unveiled their proposed special administrative region and hosted elaborate banquets to celebrate.
Although Yan and Zhou insisted that their proposal wouldn’t involve selling Marshallese citizenship, the special zone was being advertised in Hong Kong as a way to get Marshallese passports, and therefore U.S. residency, according to media reports from Hong Kong. (The residency is conferred under a treaty brokered partly as compensation for U.S. nuclear tests in the islands.)
Heine’s government soon rejected the proposal. “They would have their own court system, they would have their own immigration system,” she said. They were effectively suggesting “a country within a country.”
China's growing reach is transforming a Pacific island chain
The opposition politicians, however, were determined to pass the law creating the special zone. They plotted to replace Heine because of her hostility to the proposal, according to Johnson, and brought a no-confidence vote against her. She dispatched a minister to negotiate a compromise over a meal at a local Chinese restaurant.
When neither side budged, Yan slid an envelope of cash across the table, according to Heine and another person familiar with what occurred, who spoke on the condition of anonymity for fear of being tarnished with corruption allegations. The minister left and reported the attempt to Heine, sparking investigations by the Marshallese attorney general and American law enforcement.
Heine later eked out a narrow victory in the no-confidence vote. But the next month, according to U.S. prosecutors, one official who had accepted bribes promised Yan to seek “revenge.”
U.S. prosecutors later concluded that Yan and Zhou had been paying tens of thousands of dollars to Marshallese lawmakers and officials since at least 2018.
Edward Kim, an attorney for Yan, declined to comment. It is not clear who is representing Zhou.
While prosecutors did not name the officials in their indictment, photos from the Hong Kong event - some of which were posted on public Facebook pages, including one belonging to a group critical of the current government - show the couple sipping wine with former Marshallese president Kessai Note and Rongelap Atoll Mayor James Matayoshi.
Former Marshallese president Kessai Note, in red tie, with Cary Yan, right, at a dinner in Hong Kong, as seen in a photo posted to the Kewan Jela group on Facebook. Yan has pleaded guilty to corruption charges over a plan to create a tax haven on the Marshall Islands atoll of Rongelap. (Obtained by The Washington Post)
Other photos posted to Facebook show Yan presenting Note with cigars and the two of them eating together at a rooftop dinner. In a short interview, Note declined to comment. Matayoshi denied taking bribes or any other wrongdoing.
The Marshall Islands’ attorney general is now investigating Matayoshi, Note and Kenneth Kedi, the speaker of the National Parliament and senator for Rongelap, among others.
Speaking in hushed tones over omelets beside the lagoon in Majuro, Kedi said that he attended the Hong Kong event but that Rongelap’s local government - not the Chinese couple - had paid for his flights. He insisted he never took any money from the pair, although he said it was likely that other Rongelap officials did. Kedi did, however, throw his substantial support behind the scheme from the beginning. But, he said, he got cold feet when Yan asked him to write to China’s foreign minister praising the proposal - making him think the whole scheme was connected to the Chinese government.
Mike Kabua, an influential Marshallese chief and uncle of the current president, said Yan also sought his support over meals at a Chinese restaurant in Majuro. In an office crammed with small gifts from people seeking his favor, Kabua said he never took bribes, but saw no issue with people who did. “If he gave them money, that’s okay, because he just wanted to speed up the process. Why is the U.S. so worried?” he asked.
In 2020, Heine’s coalition lost the election, damaged by smears surrounding the Rongelap proposal. Her government was replaced by one that U.S. prosecutors said included lawmakers who accepted bribes. Within months, a resolution approving the Rongelap proposal was passed.
But by then, the American investigators were on the Chinese couple’s case.
Rongelap Atoll and its lagoon. (Asahi Shimbun/Getty Images)
In late 2020, Yan and Zhou were arrested in Thailand and extradited to New York. Prosecutors accused them of bribing at least five Marshallese officials with payments of up to $22,000 at a time, and said Yan promised one official in an email that his family would be “one of the most powerful” in the Marshall Islands if the Rongelap zone was created.
Although she has no proof, Heine can’t shake the suspicion that China backed the couple, noting that Rongelap is relatively close to Kwajalein Atoll, which hosts a U.S. military base - and would therefore be of significant interest to Beijing.
More likely, said Johnson, the newspaper editor, Yan was an independent trickster. “But from Beijing’s point of view, they stand to benefit without being a player,” he said. “If he opened up a door allowing for Asian investment, Chinese companies could set up a presence.”
Given the Marshall Islands’ strategic value as a buffer against China, Johnson said, “it would be huge for the Chinese to have some inroads here.”
China fails on Pacific pact, but still seeks to boost regional influence
Yan and Zhou now face up to five years in prison. But the consequences in the Marshall Islands are less clear.
Johnson said this was a wider issue for the Pacific, since underdevelopment and colonization have left many in the region impoverished.
“You’re on a little island and people say, ‘How can we make some money?’ Somebody shows up and says, ‘I can do something.’ Okay, great.”
In 2021, Transparency International research indicated that a third of Pacific people had paid bribes within the previous year, and that 56 percent thought corruption was worsening.
Kedi said he initially supported Yan’s proposal because the country’s future was “bleak.” “There’s not much opportunity,” he said. Development proposals were “appealing” to his community “when on a weekly basis you’re trying to figure out where your basic needs come from.”
To preserve their influence and address some of that vulnerability, the United States and its allies have increased their support for the region. That has sparked cynicism among some locals, who see little difference except scale between that funding and offers of money from people linked to China. “Look how much money America gives,” Kabua, the chief, said with a touch of irony. “It’s not a bribe, it’s because they want to help.”
Whether that will be sufficient to maintain American influence and crowd out Chinese appeals remains unclear.
The United States shouldn’t be worried about China’s increasing involvement in the region, Kabua said. “Well, if China is involved, what’s wrong with that? We need help.”
https://www.washingtonpost.com/world/2023/02/14/china-united-states-marshall-islands-rongelap/
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Pair plead guilty to bribery in attempt to create semi-autonomous Pacific region
US Attorney says the pair sought to undermine democratic processes in the Marshall Islands.
Stephen Wright
2022.12.05
Wellington, New ZealandShare on WhatsAppShare on WhatsApp
Pair plead guilty to bribery in attempt to create semi-autonomous Pacific region
Marshall Islands President Hilda Heine gestures during an interview with AFP in Geneva, June 21, 2019. Heine in 2018 defeated an attempt to create a special administrative region that was proposed by Cary Yan and Gina Zhou, who last week pleaded guilty in a U.S. court to conspiracy to bribe Marshall Islands officials.
A Chinese pair who tried to create a semi-autonomous region in the Marshall Islands with no tax and relaxed immigration rules have pleaded guilty in the United States to conspiring to bribe officials.
Cary Yan and Gina Zhou, who use several aliases and have Marshall Islands passports, each face up to five years in prison, the U.S. Department of Justice said in a Dec. 1 statement. They were extradited to the United States from Thailand in September after allegedly carrying out a multi-year effort to establish the semi-autonomous region that involved bribing and attempting to bribe half a dozen officials in the North Pacific nation.
“As they have now admitted, the defendants sought to undermine the democratic processes of the Republic of the Marshall Islands through bribery in order to advance their own financial interests,” said U.S. Attorney Damian Williams.
The U.S. indictment of Yan and Zhou doesn’t assert that the pair were acting on behalf of Beijing. The bribes paid were relatively small. The largest mentioned in the U.S. indictment is U.S. $22,000.
They each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). While the maximum penalty is five years, a sentencing date has not been set. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors, according to the department news release.
The Marshall Islands, home to about 80,000 people spread across numerous atolls, is one of the 14 states that recognize Taiwan instead of China. It is currently renegotiating its Compact of Free Association with the United States, an arrangement under which it has ceded defense and security to Washington in exchange for economic assistance and the right for its citizens to live and work in the United States.
According to the U.S. indictment, Yan and Zhou offered and paid bribes in 2018 to Marshall Islands officials to support legislation that would have created the Rongelap Atoll Special Administrative Region.
The special administrative region would have operated under rules to attract foreign investors, such as by lowering or eliminating taxation and relaxing immigration regulations.
Between 2016 and 2018, Yan and Zhou also paid for the travel of Marshall Islands officials to New York and Hong Kong, and their hotel bills and entertainment. They succeeded in getting legislation sponsored in 2018, but it was blocked by the Marshall Islands’ president at the time, Hilda Heine. One of the unnamed officials who worked with Yan and Zhou, promised the pair in an email that he would get “revenge” on Heine, according to the indictment.
Heine was defeated in a November 2019 election and in March 2020, a resolution supporting the concept of the special administrative region was passed by the Marshall Islands legislature with the support of lawmakers who Zhou and Yan bribed or provided with other incentives.
Shailendra Bahadur Singh, an associate professor and head of journalism at the University of the South Pacific, said in an analysis published after Yan and Zhou’s extradition that their tactics were “reminiscent of ‘elite capture’, often associated with the Chinese state and Chinese businesses.”
“Although the involvement of Chinese state officials is unclear at this stage, there’s no denying that the Marshall Islands would be a prime target and major prize for them,” he said.
Part of the reason for U.S. jurisdiction in the case was that Yan was president and chairman of a New York-based non-governmental organization, which also claimed affiliation with the United Nations. Zhou was his executive assistant. The NGO organized a conference in Hong Kong in 2018 to promote the special administrative region and flew in Marshall Islands officials to Hong Kong for it and to New York at other times.
BenarNews is an RFA-affiliated news service.
https://www.rfa.org/english/news/pacific/bribery-12052022102736.html
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FOR IMMEDIATE RELEASE
Tuesday, May 16, 2023
Former Head of Non-Governmental Organization Sentenced for Bribing Officials of Republic of Marshall Islands
The former president of a New York-based non-governmental entity (NGO) was sentenced today to three years and six months in prison for paying bribes to elected officials of the Republic of the Marshall Islands (RMI) in exchange for passing certain legislation.
According to court documents, beginning in or around 2016 and continuing until at least August 2020, Cary Yan, 51, conspired with others - including his assistant, Gina Zhou - in connection with a multi-year bribery scheme. Yan offered and paid tens of thousands of dollars in bribes to high-level RMI officials, including members of the RMI legislature, in exchange for supporting legislation creating a semi-autonomous region within the RMI called the Rongelap Atoll Special Administrative Region (RASAR) that would benefit the business interests of Yan and his associates. Yan carried out the bribery scheme using the New York-based NGO, including the physical use of its headquarters in Manhattan, to meet and communicate with RMI officials.
In December 2022, Yan and Zhou each pleaded guilty to one count of conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practice Act. On Feb. 16, Zhou was sentenced to two years and seven months in prison for her role in the scheme.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Damian Williams for the Southern District of New York, and Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division made the announcement.
The FBI New York Field Office investigated the case. The Royal Thai Government, the U.S. Department of State’s Diplomatic Security Service, the Embassy of the United States in Bangkok, and the Justice Department’s Office of International Affairs provided substantial assistance in securing the arrest and extradition of Yan.
Assistant Chief Gerald M. Moody, Jr. and Trial Attorney Anthony Scarpelli of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Hagan Scotten, Lara Pomerantz, and Derek Wikstrom for the Southern District of New York prosecuted the case.
The Fraud Section is responsible for investigating and prosecuting Foreign Corrupt Practices Act (FCPA) matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.
https://www.justice.gov/opa/pr/former-head-non-governmental-organization-sentenced-bribing-officials-republic-marshall
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Yan Sentenced To 3.5 Years For Marshall Islands Bribery Scheme
May 17, 2023
As highlighted in this prior post, in September 2022 the DOJ announced that two Marshall Island nationals (Cary Yan and Gina Zhou) arrived in the U.S. after being extradited from Thailand based on 2020 criminal charges that the individuals violated the Foreign Corrupt Practices Act (and other laws) in connection with an alleged scheme to bribe elected officials in the Republic of the Marshall Islands (RMI) in exchange for passing certain legislation.
According to the indictment, Yan and Zhou acted as officers, directors, employees, and agents of a New York City based non-governmental organization (World Organization of Governance & Competitiveness (WOGC)) and, while in New York City and other locations in U.S. territory, to offer and pay bribes to government officials in the RMI to pass certain legislation that would benefit the business interests of Yan, Zhou and their associates. Specifically, to establish a semi-autonomous region within a region of the RMI known as the Rongelap Atoll.
In December 2022, Yan and Zhou pleaded guilty to one count of conspiracy to violate the FCPA’s anti-bribery provisions.
Yesterday, the DOJ announced that Yan was sentenced to 3.5 years in prison. As noted in the DOJ’s release, earlier this year “Zhou was sentenced to two years and seven months in prison for her role in the scheme.” Sentencing submissions in FCPA matters often make for interesting reads and surely did in this matter.
In seeking a time served sentence, Yan’s sentencing submission states:
“Cary Yan is a good man who is genuinely remorseful for his offense. He has accepted responsibility for his conduct and makes no excuses for it. His path to this courtroom has been an extraordinary one.
Born in China into extreme poverty, he grew up begging on the streets. [Redaction]. Despite these challenges, he built a successful career as a consultant and adviser and has devoted considerable time and money to helping the less fortunate.
While Cary committed a serious crime for which he is deeply sorry, he has already been adequately punished. He is a first-time offender, and as of the date of sentencing, he will have been incarcerated for a total of 30 months, 21 of which were spent in horrendous conditions in a Thai jail. Cary is 51 years old and suffers from serious health conditions, and after completing his sentence, he will be deported and likely face a period of immigration detention. Furthermore, a time-served sentence would be consistent with sentences in comparable cases. Given these factors, a sentence of time served satisfies the objectives of 18 U.S.C. § 3553(a).
[…]
In 2016, Cary founded a non-governmental organization: the World Organization of Governance and Competitiveness (“WOGC”). Its mission was to provide strategic planning services to countries and private companies in order to promote investment and sustainable development and combat poverty and hunger. Between 2016 and 2020, when Cary was arrested in this case, WOGC donated food and other supplies to impoverished communities in Sri Lanka, Vanuatu, Honduras, El Salvador, Zambia, Kiribati, Panama, and the Marshall Islands, of which Cary is a naturalized citizen. In addition to its charitable donations, WOGC has advised various governments and private businesses on development and anti-poverty initiatives. WOGC’s strategic planning activities have included a development plan for the government of Liberia, a medical marijuana project in Thailand, and the Rongelap Atoll initiative (“RASAR”) at issue in this case.
[…]
WOGC and its partners in the Marshall Islands worked together to promote RASAR, a legislative initiative to create a special administrative region in Rongelap. RASAR was intended to encourage investment in Rongelap and promote resettlement of the area. As with any development initiative, both the investors and the recipients of those investments stood to gain financially. While Cary planned to invest in Rongelap, he did not have any immediate financial stake in the initiative. For him to have benefited financially, RASAR would have needed to pass and future investments that he had yet to make would have needed to be profitable. While personal gain was a possibility, it was speculative and not Cary’s primary reason for supporting RASAR. He supported the initiative because he - like RASAR’s local supporters - believed it would stimulate development in the Marshall Islands and help lift people out of poverty.
[…]
In determining a just sentence, the Court should also consider the circumstances of Cary’s incarceration, much of which has been spent in terrible conditions in Thailand during some of the worst periods of the pandemic.
[…]
The trauma Cary experienced in Thailand has left a lasting impact on his physical and emotional health.
From November 2020 to August 2022, a period of 21 months, Cary was an inmate at the Bangkok Remand Prison. The horrifying conditions of Thailand’s jails have been documented by international rights organizations and recounted to the Court in detail by Ms. Zhou. Unfortunately, Cary’s experience in Thailand was consistent with those of Ms. Zhou and many others incarcerated there.
At the Bangkok Remand Prison, where Cary was incarcerated, 70 to 80 inmates lived in a single room of around 450 square feet. Due to the lack of space, the inmates slept side-by-side on the floor. The 70 to 80 inmates shared a single toilet, for which there was no privacy. When inmates could not wait to use the toilet, they would defecate on themselves and feces would overflow into the shared cell. The facility was infested with vermin. Cary had neither shoes nor proper clothing. He was dressed only in underwear.
Despite the sweltering heat of Bangkok, where the average high is over 90 degrees Fahrenheit during almost all of the year, showers were sometimes limited to less than a minute, and the dirty shower water was recycled. The combination of heat, humidity, lack of ventilation, frequent power outages, and overcrowding meant that inmates at the jail were often perspiring heavily in close quarters.
[…]
The Court should sentence Cary to time served. The offense conduct was an aberration in an otherwise praiseworthy life. Having escaped poverty himself, Cary has spent much of his life helping others do the same. A sentence of time served - the equivalent of about 35 months, accounting for good time - would be in keeping with sentences in comparable cases and would properly account for Cary’s history and characteristics, the conditions of his confinement in Thailand, and the immigration consequences of his case.”
The DOJ sought a sentence of 4.75 years for Yan and stated in its sentencing submission, among other things, as follows:
“While the Guidelines in FCPA cases are typically driven by large bribe amounts and anticipated benefits, here the defendant was able to bribe officials from the RMI relatively cheaply. Yet bribery-in large and small amounts alike-causes significant global harm.
[…]
While Yan has accepted responsibility, his superficial claims of a benevolent motive are reason to doubt that he recognizes the gravity of his offense. So is Yan’s claim that his offense was “an aberration.” This crime was not a momentary lapse in judgment. Yan played a long game. He acquired a unaffiliated NGO, in order to position himself to bribe numerous RMI officials. When those initial bribes failed to accomplish Yan’s goal of establishing the RASAR, he sought to boot the RMI’s then-President from office. And although that attempt failed, when there was a change in administrations, Yan worked with the officials he had bribed to try again. It was only the combination of the pandemic and the charges in this case that ultimately foiled Yan’s efforts. Given Yan’s persistent illegal and anti-democratic conduct, and his apparent failure to now recognize its seriousness, a substantial sentence is appropriate to send the message, both to the public and to Yan himself, that foreign bribery will be met with serious punishment.”
[…]
Yan’s incarceration during the extradition process does not justify the leniency he requests. That is not to say that Yan’s time in custody between his November 2020 arrest and his September 2022 extradition is irrelevant. To the contrary, the Government agrees with the Court’s remarks at co-defendant Gina Zhou’s sentencing that incarceration anywhere during the height of the pandemic merits some leniency. And as the Government has previously noted to the Court, the Federal Bureau of Investigation inquired into the conditions of the defendants’ incarceration, but was not able to either confirm the defendants’ claims about the harshness of their incarceration or uncover evidence that those claims were inaccurate. However, in light of those factors, the Government made what it viewed as a generous and reasonable plea offer in this case: an offer with a five-year statutory maximum and Guidelines that were capped by that maximum. In other words, Yan’s plea deal already accounts for this mitigating factor.”
https://fcpaprofessor.com/yan-sentenced-3-5-years-marshall-islands-bribery-scheme/