A Personal History of U.S.-China Law Enforcement Cooperation

“The history of U.S.-China cooperation is short,” he acknowledged at the start of his presentation last week, sponsored by Columbia Law School's Center for Chinese Legal Studies. Cheng detailed three examples from recent decades, showing how differences in the legal systems had both helped and hindered prosecutions, while drawing insights from his extensive personal experience.

 

Professor Benjamin Liebman, the Robert L. Lieff Professor of Law and director of the Center for Chinese Legal Studies, counted Cheng among a “golden era” of distinguished Columbia alumni now working on legal issues in China. “There were a bunch of graduates who were here in the late 1980s who have gone on to really fascinating and prominent careers interfacing with China,” said Liebman in his introductory remarks. “Ron is one of them.”

 

But Cheng related a circuitous path to China. “When I was at Columbia in the late 1980s, China was actually not the flavor – it was Japan,” he recalled. “Everybody was studying the Japanese language – I studied Japanese for a couple of years because I thought I might need it.”

 

 

After working as an associate at his present firm, Cheng joined the U.S. Attorney’s Office for the Central District of California in 1992. He worked there for nearly two decades and eventually headed its criminal appeals section. By then, many of his colleagues’ Japan plans had fizzled in the aftermath of the Asian financial crisis. “But while all of this was happening,” Cheng noted, “China was growing.”

 

China began to send delegations to observe U.S. legal proceedings. On one delegation's last day in Los Angeles, Cheng received a call from a colleague at Main Justice in Washington, D.C., telling him to take the visitors to see the arraignment of a man named Yu Zhendong. “I did not appreciate the significance at the time,” said Cheng.

 

Yu Zhendong was the first defendant arrested in the Bank of China fraud case, in which three branch managers embezzled hundreds of millions of dollars from the state-owned bank and then fled to Canada and the U.S. There they engaged in sham marriages with U.S. naturalized citizens.

 

Soon Cheng was working on that case, and over time he became more involved with China. In 2005 he was selected as the resident legal advisor at the U.S. Embassy in China. He later returned to the U.S. Attorney’s Office, serving in the cyber and intellectual-property crimes section, where he focused on criminal activity originating in the Asia-Pacific region.

 

 

The Bank of China trial marked a turning point in U.S.-China law-enforcement relations, which had soured more than a decade before in “the Goldfish Case.”

 

In that case, U.S. customs officials had seized seven pounds of heroin smuggled inside ornamental goldfish from China. U.S. Drug Enforcement Agents shared information with the People's Security Bureau in China, and the two nations apprehended suspects in San Francisco and Shanghai. A federal prosecutor asked to borrow the Chinese suspect to testify in the U.S. case, guaranteeing that this suspect, Wang Zong Xiao, would be returned to the Chinese criminal justice system, where “conviction rates are quite high, well over 99.5 percent,” Cheng said. China also considers many violations to be capital offenses.

 

“Mr. Wang took the stand and said, 'Everything I told the Chinese police was the product of physical coercion, and I am requesting asylum,'” Cheng said. The criminal case disintegrated, and, to China's dismay, its prisoner was allowed to stay in the U.S.

 

 

The U.S. and China signed a mutual legal assistance agreement in 2000, allowing each country to request documents and assistance in investigating criminal activity, but Cheng said cooperation had “stagnated” until Operation Spring, a 2005 case that concerned an American in Shanghai who ran a counterfeit DVD business.

 

At the request of the U.S., China investigated and prosecuted the American counterfeiter, expelling him once the conviction changed his immigration status. American authorities greeted the man upon his arrival home and prosecuted him in U.S. federal court for copyright infringement.

 

Operation Spring set the stage for the prosecution of the Bank of China case. China was promoting bank reforms and a crackdown on official corruption, and losses from the bank fraud were put at $485 million. The defendants had invested some of the stolen money in real estate, but they also lost a lot of it on currency speculation and gambling. They tried to launder the remainder through the U.S. financial system and casinos.

 

These crimes were U.S. offenses: Money laundering, immigration fraud, and racketeering. A case was instituted under U.S. criminal law, and prosecutors requested and received extensive evidence from Chinese authorities, who also located witnesses. But recalling the Goldfish Case, the Chinese offered their witnesses for deposition only by overseas videoconference, when they were also cross-examined by defendants’ counsel in the U.S. The subsequent convictions led to lengthy prison sentences, though, just last month, the U.S. returned Kuang Wanfang, the wife of one of the former bank managers, to face graft and fraud charges in China.

 

 

China got what it wanted with the return of Kuang Wanfang despite the absence of an extradition treaty. But many issues remain open between the countries, including how to prosecute Chinese hackers and China’s refusal to take back almost 40,000 nationals convicted of crimes in the U.S.

Cheng believes that deeper and continued cooperation is in the United States’ interest, especially in light of the vulnerability of America’s large Chinese immigrant communities.

 

“They’re so big that they are almost self-sufficient economic entities,” he said. “If you have a corrupt individual come over to the United States who is not subject to prosecution, that person will be inclined to continue to behave the same way that he or she did in the home country. That’s unhealthy not just for the specific ethnic community but for the greater polity at large.

 

“My personal view is that the United States has to address these issues. Given the status of the United States as a global economic power, even activities that are purely overseas will inevitably have an effect at home.”