INVESTOR PROTESTS ROCK SHENYANG

C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000220

SIPDIS

SIPDIS

DEPARTMENT FOR EAP/CM, DRL

E.O. 12958: DECL: 11/21/2017
TAGS: PHUM PINR PINS SOCI CH
SUBJECT: INVESTOR PROTESTS ROCK SHENYANG

Classified By: CONSUL GENERAL STEPHEN B. WICKMAN. REASONS: 1.4(B),
1.4(D)


1. (C) SUMMARY: A relatively small group of protestors
assembled outside Consulate General Shenyang early in the
afternoon of 21 November to protest the failure of
ant-farming health-product company Yilishen to pay dividends.
The protests were not directed at the United States, but
rather at the Chinese government, which the investors believe
should be helping them to recoup their losses. Police were
aware of the planned protest well in advance and had added
extra guards in riot gear to the consulate perimeter prior to
opening of business. The police, including both Public
Security Bureau and Diplomatic Security Bureau personnel,
were effective in moving the protestors away from the
consulate. While there was some violence, it appeared
relatively minor. The police herded the people out of the
area, but did not appear to make any arrests. Taxi drivers
told consulate staff that a protest numbering in the
thousands was taking place outside Shenyang City's Party
Headquarters. End Summary


2. (U) On the heels of protests outside of the Liaoning
provincial government the preceding day, approximately
125-200 Chinese assembled in ShenyangQ,s small diplomatic
district on November 21 to protest the failure to pay
dividends and the expected closure of Ant Power (Yili Shen),
a Shenyang-based company that for the past nine years has
spearheaded a nationwide pyramid scheme promising riches to
investors who bought shares in their black-ant-based,
traditional Chinese medicine product company. Rumors that
arrests and seizure of assets were imminent may have prompted
investors to take to the streets.


3. (SBU) Crowds of both angry investors and curious
onlookers started to appear outside the U.S. and Japanese
consulatesQ*-adjacent to one another on the south side of the
square that hosts the various consulates--at roughly 1240 and
continued to swell. PeopleQ,s Armed Police (PAP),Public
Security Bureau (PSB) and Diplomatic Security Bureau (DSB)
personnel quickly streamed into the area, setting up security
cordon around all five consulates in the immediate area. (CG
spotted a convoy of at least seven buses and police vehicles
carrying fully armed riot police streaming toward the street
as he walked back from a popular Japanese restaurant.)


4. (C) Poloff walked the crowds before 1400, encountering
many angry investors who pleaded with him to Q&reportQ8 about
their situation to the U.S. government. Despite undercover
police snapping photos and uniformed PSB personnel watching
from a close distance, one initially reluctant crowd of 30-40
protestors shed its shyness and shared its stories. One
peasant woman, crying, explained that she had lost all RMB
300,000 (USD 40,000) that she had invested in the scheme,
leaving her without any promise of a Q&future.Q8 (Many
others Poloff encountered had invested less--RMB 100,000 (USD
13,300) was one figure that kept recurring.) Most appeared
to be working-class, Shenyang urbanites, but Poloff also
encountered a handful of clearly well-educated, well-dressed
Shenyang residents. All of them bitterly accused the
government of Q&permittingQ8 Ant Power to swindle them and
then refusing to compensate them for their losses. Asked why
they had assembled before the U.S. Consulate, protestors
explained that while Ant Power had no American ties, an
Q&international impactQ8 was needed to force the PRC to
intervene. A plainclothes DSB officer intervened after
roughly five minutes and demanded Poloff return to the
Consulate, pulling him by the arm out of the crowd,
explaining disingenuously that he was doing so to Q&assureQ8
PoloffQ,s safety; the police officer refused to answer all
questions put to him about the protest. Once back at the
ConsulateQ,s entry control point, PAP officers demanded that
Poloff and other assembled staff enter the Consulate proper.



5. (C) At 1400, crowds began to periodically chant Q&return
our money.Q8 PSB and PAP forces started to physically clear
the crowds from the area over the next twenty minutes.
Several brief clashes erupted. Econoff witnessed PSB
officers kicking one protestor already on the ground. Poloff
and other ConGen staff watched from the ConsulateQ,s third
floor as PSB traded punches with several angry protestors.
Staff saw PSB personnel push and punch several protestors,
including women. Generally, however, the violence was
minimal, and we did not observe anyone being arrested. The
protestors simply walked away heading north along the main
street perpendicular to the blocked street in front of the
Consulate. Perhaps because of the visible PSB presence near

SHENYANG 00000220 002 OF 002


the Russian and South Korean Consulates (nearly twenty
vehicles full of crowd control personnel),the protestors
made no effort to approach these consulates.


6. (U) Ant Power was originally founded in 1998 as Shenyang
Jingxin Science-Technology Industrial Company. In August
1999 the company founded a subsidiary, Shenyang Changgang
Yibao Liquor Company. In September 2002, Liaoning Xuyan
Yilishen Ant Breeding Company, the subject of the recent
protests was founded. The entire operation was funded by
investments in ant farming for which investors were promised
huge returns. In November 2006, investors requested help
from Shenyang City Government when Yilishen quit paying
dividends. By February of 2007, both provincial and central
government law enforcement agencies had begun investigations
of the company. Online reports about the investigation
suggested that central and provincial authorities did so to
stem Q&potential future social problems."


7. (SBU) Bloggers have protested vigorously over the last
two days about the scam and the city government's inaction
and/or complicity in the scheme. One blogger encouraged
protestors to consume lots of Q&baijiuQ8 (the local Q&whiteQ8
liquor of choice) to ward off the cold. Bloggers complain
that city police and government officials have protected the
company and left the investors with no option but to take to
the streets. Bloggers went on to say that news of the
protests was being suppressed The blogs themselves were taken
down within hours of being posted.



8. (U) Company founder and President Wang Fengyou has
certainly been a darling of the local establishment until
recently. He was elected Deputy Director of the Northeast
China Wine Culture Research Association and is also Deputy
Director of the China Healthcare Association, and the China
Industrial and Commercial Association. In December 2006, he
was recognized as one the top 100 Private Science and
Technology Entrepreneurs. Rumors abound that the company is
closed and Wang arrested, but Econoff was able to contact the
company by phone and company staff gave every indication that
they were still in business.


9. (SBU) The company has not had such good recognition in
the United States. The U.S. FDA warned in 2004 that two of
Ant Power's products, "Actra-RX" and "Yilishen", which
purport to be natural supplement for treating erectile
dysfunction, actually contain sildenafil, the patented active
ingredient in Pfizer's Viagra. The FDA warning, according to
bloggers, caused the Hong Kong Stock Exchange to scrap plans
for an Ant Power IPO. This, in turn, prompted Ant Power to
embark on a pyramid investment scheme to keep the company
going. However, by fall of 2006 the company could not
attract enough new investors to keep the scheme afloat.


10. (U) This is not the first time that Liaoning Province
has faced a major ant farming swindle. In February 2007,
Wang Zhendong, President and Founder of Yingkou Donghua
Trading Company, of Yingkou City, Liaoning Province, was
sentenced to death for swindling investors in his ant farming
scheme out of roughly USD 350 million. Fifteen other senior
employees of the company were sent to prison. Like Ant
Power, Yingkou Donghua was promising returns of thirty-five
percent. One local observer noted that it would be very
difficult to find investors at thirty-five percent, since it
can be beaten easily in the Shanghai Stock Market.
WICKMAN