GUANGZHOU: Authorities in this southern city have so far recovered a little more than a third of the 1 billion yuan ($128 million) worth of misappropriated social security funds in an ongoing investigation.

Cui Ranquan, director of the Guangzhou Labor and Social Security Bureau, said officials from his agency had recovered 360 million yuan ($46.2 million) so far and expected to track down another 105 million yuan ($13.5 million) this year.

"The funds in question have been mismanaged. We have found it hard to recover them since most were invested in property development, and most of the projects are half finished," Cui said.

He added that labor and social security authorities would "do their utmost" to recover money that had been siphoned off for risky investments and business deals.

"Beyond trying to recover the huge sum of misused funds, we will also make sure that any officials responsible for the loss are prosecuted," said Cui.

In one example, Cai Kunyao, former deputy director of the Guangzhou Social Security Fund Management Office, was sentenced to 10 years in jail early in 2003 for diverting some 50 million yuan ($6.4 million) from the fund and accepting bribes.

Police detained another high-ranking official, this one a former manager of the Guangzhou social and labour security company surnamed Liu, at the end of last year.

Police reportedly tied Liu to about 80 percent of the 1 billion yuan ($128 million) worth of social security funds that were misused in the 1990s.

"All of the funds were misused in the 1990s. They involved 25 risky investments and business deals, like real estate development and treasury bond purchases. Since that time, no funds have been misappropriated," Cui was quoted as saying by the Guangzhou Daily yesterday.

According to the 1993 pension fund law, social security funds can only be used in business deals to "increase its added value".

Cui pledged that the city will take "legal actions" to further investigate half-finished property projects.

A working group made up of officials from a handful of labour and social security, finance, audit, land resources and public security agencies was set up to oversee the investigation.

"We will have to make up the shortfall using local government funds to protect the interests of the people who have contributed to the fund," Cui said.

Since 2001, the Guangzhou government has set aside 50 million yuan ($6.4 million) from its annual fiscal budget as a kind of reserve to ensure full pension payments to beneficiaries.

(China Daily 04/06/2007 page4)