Crisis-hit charity faces fresh scandal

The crisis-hit Red Cross Society of China (RCSC) has once again been embroiled in a scandal, after a report by finance.qq.com revealed it has been leasing its warehouse in suburban area of Beijing for profit for the past two years.

The RCSC's warehouse, which cost 117 million yuan ($19 million) in government funds to build after an 8.0-magnitude Wenchuan earthquake in Sichuan province in 2008, was built for storing disaster relief supplies, media reported on August 18.

The report, based on a four-month undercover investigation, claims that there are no tents, quilts, blankets or other materials in the warehouse, which opened in October 2010.

The warehouse, located in Shunyi district, was rented to the Beijing Zhongxu Yuhua Commercial Management Company, which promised to donate 900,000 yuan per year to the RCSC, since 2012, according to the report.

According to the finance.qq.com reports, the company is a bogus one, as the registered addresses were false. The company reportedly subleases the warehouse to several logistic companies at the price of 4.5 million yuan per year.

Soon after being published online, this report was deleted from the finance.qq.com website. However, the report has still attracted great attention, as they questioned whether the RCSC has violated the law and whether corruption is involved.

Unclear response

Two days after the media report went viral online, the RCSC issued a statement on August 20, admitting they have signed contracts with the company but pointed out that the cooperation ended in May, according to the Xinhua News Agency.

"Under the premise of not affecting the storage and delivery of relief supplies, the Disaster Prevention and Relief Center has cooperated with the companies for two years, to offer them training, exchanging, consulting and some storage services," the statement said.

But the contract ended in May, and 75 percent of the warehouse that was used for such cooperation has been returned to charitable uses while the rest of it will be cleared before September, according to the statement.

It also emphasized that no corrupt official has been found to be involved in the case.

However, there has been no response from the RCSC about the legal basis of leasing the warehouse, how the company was selected and supervised, and how the "donation" received was spent.

Caixin magzine quoted a university professor of public management as saying that government organs are banned from engaging in commercial activities and RCSC can be viewed as a government organ.

The professor said that the RCSC's move is the same as the government leasing its offices to private firms, according to Caixin on Thursday.

Yue Yunsheng, a lawyer from the Beijing Yuecheng Law Firm, told the media portal people.cn that although there is no direct evidence at this stage to prove the lease contract and the charity violated the law, it definitely breached the government regulations.

As a property built with government funds for charitable purposes, it should not be used for commercial purposes, Yue said. He added that the contract was not signed after public bidding and the public should be suspicious about possible corruption behind the deal.

Gu Liaohai, a lawyer from Beijing Liaohai Law Firm, also told the media portal that the RCSC needs to pay compensation to the authorities if they want to change the purpose of the land. Gu pointed out that the RCSC's warehouse was built on land which was approved by the authorities for charitable uses, not commercial ones.

Zhao Baige, the RCSC's executive vice president, told finance.qq.com that all warehouses for storing disaster relief supplies were not allowed to be leased for profit, according to the rules. "But in this contract, their money becomes a donation which can be used by the charity for developing disaster preparedness."

Gu said that if the charity organization did use the money for disaster preparedness, they should have disclosed the details, and received approval from the Ministry of Finance.

Common practice nationwide

Zhao, speaking for the RCSC, said that leasing of the warehouse was done to provide salaries for employees, as the government funds were not enough.

Government funding only covers two-thirds of the charity's expenditures, Zhao said. She claimed that the charity "does not even have enough money to pay salaries sometimes."

Zhao also said that not only RCSC rent disaster preparedness warehouse in Beijing, but also many other centers across the country, are leased to cover their expenses. According to her, the lack of government funds is to blame.

"There are two problems in the entire disaster prevention system. One is that there are many goods in the warehouse that cannot be used and the other is that the centers and their staff lack public service funds," Zhao said, adding that they have to rent the warehouse for money to make a living.

A RCSC branch in Wuhan, Hubei Province, got the right to use 19.35 mu (1.29 hectares) of land under the guise of "launching a disaster prevention warehouse" in 1993, according to a China National Radio report. However, the charity rented out the land for 100,000 yuan per year to a company with a 50-year contact. The deal was disclosed by the media in 2005 after the firm attempted to sublease the land.

Zhao's statement then triggered public outcry, as many expressed disappointment and questioned whether the charity is oversized and called for transparency of its expense and donations.

Experts suggested that an investigation is needed while calling to separate RCSC from the government.

The charity's name has been mud ever since a young woman named Guo Meimei, who claimed to work for the RCSC, showed off her luxury goods online. Guo, who was charged over a gambling scheme on Thursday, "confessed" on television that she had lied about her relationship with the charity and apologized for damaging its reputation.