By Cao LI (China Daily)
Updated: 2008-03-27 07:54

SHANGHAI - More than 20.1 billion of the nearly 33 billion yuan ($4.68 billion) misappropriated from Shanghai's social security fund was invested in the property sector, the 21st Century Business Herald yesterday quoted the National Audit Office as saying.

A report released by the office concluded an 18-month investigation into the scandal, for which Shanghai's former Party chief Chen Liangyu has been arrested.

The embezzlement was first uncovered in June 2006. At first, it was thought the misused funds totaled 3.4 billion yuan, but yesterday's report by the Herald said the amount was 32.9 billion yuan.

The money was loaned to various companies, including Shanghai-based Bailian Group and Feidian Investment, which invested it mainly in property and highways.

The investments took place despite central government policy issuances from 2003 aimed at controlling soaring property prices.

As of June 2006, 44 real estate companies had received 20.1 billion yuan from the misused fund, the report said.

Most of the misused money was loaned to property developers from 2002, when the boom in the Shanghai property market began.

Some of it was invested in lavish villas, shopping malls and office complexes in Capital Square at Shanghai's People Square, and Shanghai Tomorrow Square on East Nanjing Road, the report said.

In July 2006, about a month after the scandal was uncovered, 25.5 billion yuan had not been paid back. As of April last year, 8.77 billion yuan was still outstanding, it said.

The scandal has since led to the arrest of more than 20 senior officials and State-owned company heads in the municipality.

Most of the trials have started in Shanghai, and Anhui and Jilin provinces.

Zhu Junyi, the former director of the Shanghai municipal labor and social security bureau, was sentenced to 18 years in prison. Qin Yu, Chen's long-term secretary, received a life sentence.

So far, only a few suspects, including Chen, have not yet been tried.

Since the incident became public, the government has worked to improve the efficiency and transparency of the social security fund's management.

New regulations covering the management of the fund were released in 2006.

Also, last January, government department employees and experts formed a group to supervise the fund's management.

In May, Shanghai authorities also created a company to oversee part of the social security fund.

Earlier this year, the Standing Committee of Shanghai Municipal People's Conference said it would supervise land purchases to prevent such illegal conduct reccurring again.

Mayor Han Zheng said on Tuesday that authorities in Shanghai will step up their efforts to fight corruption.

Shanghai established its social security system in the 1990s.