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.
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