All these sleights of hand reportedly happened under the nose of Yang Qianxian, former director general of Xiamen's customs office and an old acquaintance of Lai from the 1980s. Yang told a Chinese court that Lai gave him a lover and a Lexus in return for looking the other way. He's since been handed a commuted death sentence. For his part, Lai denies such offerings were bribes: "Sure, I gave my friends gifts, but not because I wanted anything from them."

The difference between bribes, gifts and loans often seems merely semantic in China. "If a foreign business that wants approval from the local government is strongly encouraged to donate money to a government-run charity," asks a FORTUNE 500 executive in Shanghai, "is that a gift or a bribe?" Lai himself admits he loaned dozens of government officials cash over the years but insists these weren't bribes. In the mid-'90s, for instance, he lent the wife of Deputy Minister of Public Security Li Jizhou $121,000 to open a restaurant in Beijing. A year later, he lent Li's daughter $500,000 while she was living in San Francisco. None of the money was ever paid back, nor were the transactions recorded on paper. Lai also admits to having lent $250,000 to Xiamen vice mayor Lan Pu, for his son to build a house in Australia. The reason he never requested the loan be repaid? "[I had to] give him some face," says Lai. In addition, Lai admitted to giving nearly $2 million in outright gifts to Public Security and customs officials from 1991 to 1997. "I am a generous person," he says. "Why should that be held against me? I was just giving to my friends."

Nowhere was Lai's largesse more evident than in his hometown of Shaocuo. Lai practically rebuilt the scraggly village, spending $12 million by his own estimate. He donated everything from a new hospital to an old-age home, from the Changxing Kindergarten to the Yuanhua Middle School. On Chinese New Year, Lai would hand out red packets filled with $250 to each village resident over 60 years old. His family became village heroes; when Lai's mother died in 1996, the local primary school closed for two days. The grieving was even more pained when Shaocuo residents heard rumors of Lai's downfall. "We all mourned for days when we heard what happened to Lai Changxing," says a distant relative Lai Ruining. "Now, who will take care of our village?"

On a stifling summer day in August 1999, Lai took an urgent phone call from an old friend, Zhuang Rushun. As head of public security in nearby Fuzhou, Zhuang had heard that the cops in Xiamen were planning to arrest Lai the next day. He told Lai to run. Hundreds of Premier Zhu's investigators had been in town for four months already, but Lai had assumed he could handle them. Now, he wasn't so sure. He hopped a speedboat out of Xiamen, landing in Hong Kong on Aug. 11. Lai and his family fled to Vancouver three days later. For tipping off his friend, Zhuang was later jailed; he was also convicted of accepting $65,000 in bribes from Lai.

Today, Lai claims to have been the innocent victim of a political witch-hunt. As he tells it, the Public Security Bureau in Beijing was taken over by a new police chief hell-bent on clearing out hundreds of officials from a rival camp—including Lai's old buddy Deputy Public Security Minister Li. Officially, Li was in charge of China's top anti-smuggling task force, but the new police chief Jia Chunwang accused him of being in cahoots with the smugglers he was meant to catch. Li was given a commuted death sentence late last year, in part for accepting bribes from Lai. Not surprisingly, Beijing dismisses Lai's claim that he was merely caught up in this purported power struggle.

At first, Lai lived it up in Canada, buying a luxury mansion in Vancouver and indulging in gambling jaunts across the country. He visited the Niagara Casino in Ontario more than 30 times, becoming a VIP member. Then, in May 2000, four members of a Chinese business delegation walked through the lobby of Vancouver's glitzy Delta Hotel on their way to a secret meeting with him. It turned out that three of these delegates were not businessmen at all but members of the 4-20 investigation team; the other was Lai's older brother Lai Shuiqiang, who Chinese authorities claim had run Lai's cigarette-smuggling business. Shuiqiang had been in jail for several months before his trip to Canada, and the 4-20 team thought his presence might persuade Lai to return home, sparing the rest of the family from heavier sentences.

Lai met with the negotiators three times and even paid their hotel and cell phone bills. But he ultimately decided not to strike a deal with the Chinese government. "In China, the Communist Party controls everything, including the law," says Lai. "I wasn't going to be tricked." A couple of weeks later, he applied for political asylum in Canada. Back in China, Shuiqiang was sentenced to seven years' imprisonment. Another of Lai's brothers, Lai Changtu, and four of his nephews were also jailed, as were his wife's parents and two of her siblings.

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