Most of the suspects involved in the misappropriation of more than 3 billion yuan (US$386 million) from Shanghai's social security fund have been turned over to judicial departments for prosecution, Mayor Han Zheng was quoted by the Shanghai Securities News as saying.

Prosecutors' offices in Shanghai, Jilin and Anhui provinces are working on the case, Han said during the ongoing Shanghai Municipal People's Congress.

In addition to the 11 suspects in Shanghai, authorities in Jilin and Anhui are dealing with about a dozen others.

Han said all of the suspects had been involved in influence peddling and bribery.

"They did not simply get out of the line," Han was quoted as saying.

"They abused power for their own gain, sought bribes and received bribes."

In July, investigators discovered that 3.45 billion yuan had been misappropriated from Shanghai's social security fund, which is meant to cover a population of 12 million people, for illegal loans and investment.

A company operated by the municipal labor and social security bureau illegally lent the money to Shanghai Feidian Investment Development Co Ltd, a company controlled by business tycoon Zhang Rongkun, who ranked No 16 on the Forbes China Rich List in 2005. Zhang was the first person arrested in the scandal, which eventually ensnared Shanghai's former Party chief, Chen Liangyu.

For his role in the scandal, Chen, 59, became the highest level Party official to be sacked in more than a decade.

Shanghai set up a work panel to help central government investigators track down the misused funds. By the middle of last month, Shanghai had successfully recovered 3.7 billion yuan ($476 million), including interest, Han said in his government work report on Sunday.

Han also gave a brief account of the arrest of the real estate tycoon Zhou Zhengyi, who had been involved in bribery and the forgery of VAT receipts.

Zhou was the 11th richest person in the country, according to the Forbes 2002 list. He had previously been arrested in September 2003 for fraud and manipulating the stock market and was released in May 2006.

However, while investigating the pension fund scandal, prosecutors discovered that Zhou might have been involved in bribery relating to the case, the Shanghai Municipal Prosecutors' Office announced in January. Zhou was detained in October 2006.

Investigators discovered that Shanghai Nongkai Development Group had forged VAT receipts for large amounts of money at Zhou's order. Zhou was the group's chairman.

(China Daily February 1, 2007)