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!!MEMORANDUM!!TO:! ! Andrew!Billard!!FROM:!! Ed!Morrison,!Aleba!Water!Company!!SUBJECT:!! Background!on!confiscation!of!Aleba!Water!Company!!DATE:!!! March!15,!2013!!This!memorandum!provides!background!on!the!confiscation!of!U.S.!investor!property!in!Lantian!County,!Xi’an!Municipality,!Shaanxi!Province.!!We!are!requesting!the!Embassy’s!assistance!in!getting!our!property!registered!under!the!All!China!Land!Survey.!!!
1. Xi’an!Aleba!Water!Company!received!approval!to!establish!a!Joint!Venture!in!1998!to!produce!mineral!water!in!Lantian!County,!Xi’an!Municipality!(Exhibit!A).!Operations!began!that!year!to!produce!mineral!water!in!five!gallon!bottles!for!sale!in!Xi’an.!!The!factory!was!the!first!occupant!in!Lantian’s!first!industrial!park.!!!!
2. The!factory!produces!mineral!water!from!a!750!foot!well!dug!on!the!property!in!1997.!(That’s!about!1.5!times!the!height!of!the!Washington!Monument.)!The!well!is!carefully!constructed!and!the!casing!is!lined!with!cement!to!prevent!ground!water!pollution.!Water!is!pumped!into!large!stainless!steel!settling!tanks!where!it!is!filtered!and!mixed!with!ozone!to!kill!any!bacteria.!The!water!is!then!bottled!for!distribution.!!
!3. The!water!factory!sits!within!a!larger!factory!compound!operated!by!Aleba!
Soya.!The!Joint!Venture!agreement!called!for!the!Chinese!JV!partner,!Aleba!Soya,!to!contribute!7!mu!of!land!to!the!Joint!Venture!to!accommodate!the!water!factory!operation!(Exhibit!B).!!
!4. The!US!Joint!Venture!partner,!Aleba!Water!Company!agreed!to!contribute!
capital!to!develop!and!launch!the!business.!Aleba!Water!Company!is!based!in!Shreveport,!LA.!!
!5. The!Lantian!government!did!not!issue!land!certificates!to!any!operations!in!
the!industrial!park,!because!they!had!not!received!approval!for!the!park!from!provincial!authorities.!This!problem,!common!across!China,!arose!because!the!pace!of!industrial!development!was!taking!place!more!rapidly!than!changes!in!land!regulation.!(The!Central!government!launched!the!2d!All!China!Land!Survey!in!2008!to!cure!these!problems.)!
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6. In!2006,!the!JV!Chinese!partner,!Aleba!Soya,!ran!into!financial!problems,!and!a!criminal!gang,!led!by!former!deputy!police!chief,!Sun!Junhong,!attempted!to!step!into!the!shoes!of!Aleba!Soya!as!the!Chinese!partner!for!the!Joint!Venture.!Sun!Junhong!tried!to!bribe!our!Chinese!manager!to!sell!out!the!U.S.!investors!for!$1.!In!return,!Sun!Junhong!promised!our!Chinese!manager!500,000!RMB.!Our!manager!refused!and!reported!the!incident!to!the!JV!Board.!!
!7. Under!the!JV!agreement,!the!Chinese!partner,!Aleba!Soya,!was!required!to!
offer!its!interests!to!the!US!partner!(Article!19!of!the!JV!Agreement).!!Aleba!Soya!did!not!make!this!offer.!!!
!8. Aleba!Water!refused!to!acknowledge!the!transfer!of!Aleba!Soya’s!JV!interest!
to!Sun!Junhong!and!Runjia.!Under!the!terms!of!the!JV!agreement!(Article!67!of!the!JV!Agreement),!the!US!partner,!Aleba!Water,!sought!an!order!from!the!China!International!Economic!&!Trade!Arbitration!Commission!in!Bejing!to!compel!specific!performance.!!Aleba!Water!received!a!favorable!decision!in!2006.!!Aleba!Soya!may!not!assign!its!obligations!under!the!JV!without!the!written!consent!of!Aleba!Water!(Article!66!of!the!JV!Agreement).!Aleba!Water!has!never!approved!any!transfer!to!Runjia.!!Neither!Lantian!Government!nor!the!Xi’an!Government!have!approved!any!transfer,!either.!Without!the!approval!of!these!two!governments,!any!alleged!transfer!has!no!legal!standing.!!
!9. In!2006,!Sun!Junhong!began!interfering!with!the!operation!of!the!business!by!
periodically!locking!the!gates!to!the!factory!driveway.!!The!factory!manager!made!numerous!appeals!to!local!police!to!prevent!this!harassment.!The!Lantian!police!have!done!nothing.!!
!10. At!the!time!Sun!Junhong!began!interfering!in!the!JV!business,!the!business!
served!30,000!customers!with!14!retail!shops,!80!employees,!and!an!inventory!of!over!100,000!bottles.!The!Xi’an!government!rated!the!JV’s!water!as!the!highest!quality!mineral!water!in!Xi’an.!!!!!
!11. Instead!of!putting!Aleba!Soya’s!land!up!for!public!auction,!the!Land!Bureau!
arranged!a!private!sale!to!Runjia.!This!sale!included!Aleba!Water’s!property.!The!proceeds!of!the!land!sale,!about!1.8!million!RMB,!ended!up!in!the!Lantian!Land!Bureau,!not!the!Lantian!Financial!Bureau.!Zhao!Ji!Di,!the!head!of!the!Lantian!Land!Bureau,!then!wired!these!funds!away.!Zhao!Ji!Di!used!the!proceeds!of!this!sale!to!purchase!his!current!position!in!the!Xi’an!Land!Bureau.!Lantian!Communist!Party!Secretary,!Li!Yi,!confirmed!this!account.!!
!12. In!2008,!China!launched!the!All!China!Land!Survey!to!cure!the!problems!
created!by!out!of!date!land!regulations.!Through!a!perversion!of!the!Land!Survey!by!the!Lantian!government,!Runjia!acquired!Aleba!Soya’s!land!interest!with!an!illegal!land!transfer!sanctioned!by!the!Lantian!Land!Bureau.!Here’s!how!the!confiscation!took!place:!!
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a. Under!the!Land!Survey,!all!existing!uses!were!supposed!to!be!documented!in!order!to!update!China’s!land!use!regulations.!The!State!Council!issued!an!order!prohibiting!the!fraudulent!preparation!of!documents!in!connection!with!the!Survey.!!!
b. Despite!repeated!requests!by!Aleba!Water!Company!to!be!included!in!the!Survey!as!the!registered!owner!of!7!mu!of!land,!the!Lantian!Land!Bureau!officials!refused!our!requests.!!
c. On!March!5,!2008,!the!Lantian!Land!Bureau!issued!an!internal!memorandum!to!review!the!transfer!of!property!from!Aleba!Soya!to!Runjia!(Exhibit!C).!!
d. On!March!28,!2008,!the!Lantian!Land!Bureau!issued!a!form!making!no!mention!of!Aleba!Water’s!continuing!occupancy!of!7!mu!of!land.!By!wiping!Aleba!Water’s!land!interest!clean,!the!form!indicated!that!Runjia!owns!all!of!Aleba!Soya’s!property,!including!Aleba!Water’s!7!mu!(Exhibit!D).!!
e. Despite!clear!evidence!to!the!contrary,!on!April!7,!2008,!the!Land!Bureau!and!Mayor!Li!Yi!certified!that!there!were!no!disputes!regarding!the!Aleba!Soya!property!and!that!the!property,!including!the!7!mu!of!land!on!which!the!water!factory!operated,!was!now!registered!under!Runjia.!!!
13. The!Lantian!Government!has!assigned!Vice!Mayor!Chen!Xiwen!to!handle!the!Aleba!controversy.!From!the!beginning!of!his!engagement!with!our!case,!Chen!Xiwen!has!consistently!advocated!the!position!of!Sun!Junhong!and!Runjia.!!He!supervised!the!construction!of!a!wall!that!completely!cut!off!access!of!the!factory!driveway!to!the!street.!He!has!repeatedly!misinformed!Xi’an!municipal!staff!that!the!Aleba!JV!is!a!“sham”!joint!venture!and!that!the!Aleba!Water!complaints!have!nothing!to!do!with!official!corruption.!Chen!argues!that!it!is!simply!a!dispute!between!private!parties!in!which!the!Lantian!government!has!no!role.!!!
14. Once!the!Lantian!Government’s!corrupt!officials!illegally!confiscated!and!sold!our!property!to!Runjia,!they!also!supervised!the!complete!blockage!of!our!factory!driveway!from!the!main!road.!This!blockade!included!paving!over!the!driveway!access!and!constructing!a!permanent!wall.!Once!this!complete!blockage!was!in!place,!our!business!collapsed.!The!JV!has!sold!off!its!fleet!of!vehicles,!eliminated!it!retail!shops,!and!dismissed!most!of!its!workers.!The!factory!now!sells!water!to!less!than!100!customers!in!a!relatively!small!geographic!area!around!the!factory.!!!!!
15. Sun!Junhong!and!his!gang!has!repeatedly!assaulted!Aleba!staff.!The!latest!assault!came!on!March!5,!2013.!Despite!regular!requests!for!protection,!the!Lantian!police!have!done!nothing!to!protect!Aleba!personnel!or!property.!!!
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16. After!Ambassador!Locke’s!engagement!in!this!issue,!we!were!able!to!arrange!a!meeting!with!Wang!De!An,!the!Chief!of!Staff!to!the!Mayor!of!Xi’an.!In!our!meeting!on!June!1,!2012,!we!made!five!demands:!!
!a. Remove!the!obstructions!to!our!factory!operation!and!protect!the!
safety!of!our!factory!staff;!!b. Register!Aleba!Water!under!the!2d!All!China!Land!Survey!in!
accordance!with!China’s!Land!Control!laws.!!c. Issue!a!land!certificate!to!the!Joint!Venture!to!cover!the!7!mu!of!land!
on!which!we!have!been!operating!continuously!since!1998.!!d. Investigate!and!punish!officials,!including!Zhao!Ji!Di!and!Chen!Xiwen,!
who!have!been!responsible!for!falsifying!Land!Bureau!documents!in!violation!of!the!Sate!Council’s!Order!518!and!using!their!public!office!for!private!gain.!Former!Lantian!Communist!Party!Secretary!Li!Yi!reached!this!conclusion!in!his!investigation,!but!this!investigation!was!halted.!!
e. Compensate!the!Joint!Venture!and!Aleba!Water!for!the!loss!of!business!for!over!seven!years.!!
!17. !We!requested!action!in!thirty!days.!Wang!De!An!and!his!staff!requested!more!
time!to!resolve!the!issues!we!raised.!We!agreed!to!show!patience,!as!long!as!we!were!confident!that!action!was!being!taken.!!In!September,!the!Lantian!Government!reconnected!the!factory!driveway!to!the!street.!!!
18. On!February!21,!2013!–!8!months!after!the!June!meeting!–!the!Lantian!Government!removed!the!last!lock!on!the!factory!gates!to!provide!full!access!of!the!factory!to!the!road.!!!
!19. The!Xi’an!government!has!taken!no!steps!to!resolve!the!other!issues.!Despite!
their!promise!to!contact!our!China!representative!to!discuss!a!resolution,!they!failed!to!contact!our!representative.!!!
20. On!March!5,!Sun!Junhong’s!gang!assaulted!our!factory!manager!as!he!worked!to!repair!the!factory’s!door!to!the!driveway.!!
!Next!Steps!!We!request!the!Embassy’s!assistance!in!the!following!ways:!!!
1. We!need!your!assistance!to!have!our!company!properly!registered!under!the!2008!All!China!Land!Survey.!This!request!follows!State!Council!Order!518!regarding!the!All!China!Land!Survey;!China!Ministry!of!Land!and!Resources!Order!45!regarding!the!All!China!Land!Survey;!and!Shaanxi!Provincial!Government!Document!34!regarding!the!All!China!Land!Survey.!!
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2. We!need!your!assistance!in!protecting!our!property!and!employees.!We!request!your!assistance!to!inform!the!Lantian!Police!of!their!obligation!to!protect!our!employees!and!property!according!to!international!law.!!!
3. We!would!like!your!assistance!in!filing!a!letter!of!complaint!against!Zhao!Ji!Di!to!the!Chinese!Communist!Party’s!Discipline!Committee!for!misusing!his!public!office!for!private!gain.!Zhao!Ji!Di’s!corruption!has!cost!us!over!five!years!of!business!losses,!as!well!as!imposing!great!losses!on!the!citizens!of!Lantian!County.!!
4. We!would!like!your!guidance!in!moving!this!issue!to!Washington.!We!are!interested!in!requesting!hearings!on!this!matter.!!
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