We've got Enron, China has...

Is China catching up to the US in white-collar crime?

The Washington Post reports on a Chinese fraud scheme involving ant farms:

The company's advertisements called out to investors with an enticing offer: Invest the equivalent of about $1,300. Get two boxes of "rare" ants. Raise them for the company, and 10 times a year get $52 for your work. In one year, a participant would make about $520, a whopping 40 percent return.

People did get paid, at first, but it turned out that those high returns were being financed not by profits from real economic activity but by money flowing in from subsequent investors. The term doesn't exist in China, but in the United States, that would be called a Ponzi scheme, after Charles Ponzi, a Boston scammer who briefly became a millionaire in 1920 by using such a fraud.

If China is moving towards a "capitalist" economy, they definitely need to come up for a word for Ponzi scheme.

The authorities are taking it seriously - the perpetrator has been sentenced to death.

As China moves fitfully from a planned economy to a free-market system, cracking down on fraud, embezzlement and other financial schemes has become a major priority for the government. Among the cases taken most seriously are ones that harmed common people.

"This crime has seriously disrupted the financial order, social environment and the interests of ordinary people," said Wang Xinquan, vice director of financial affairs for the province.

In China, where more than 60 types of crimes -- including economic ones like tax fraud and bribery -- are punishable by death, the government has been criticized for its broad application of the death penalty. Some estimates put the number of court-ordered executions at as high as 10,000 a year. In 2005, Amnesty International logged 1,770 executions, or about 80 percent of the known total worldwide.

And you thought Sarbanes-Oxley was tough!