Insight: Corporate sleuths on edge after China detains foreign consultants

Wed Jul 31, 2013 6:14am EDT
 
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By Alexandra Harney

SHANGHAI (Reuters) - The detention by Chinese authorities of a British corporate investigator and his American wife in the wake of a corruption probe into pharmaceutical giant GlaxoSmithKline has had a chilling effect on other risk consultants working in China.

It's unclear why Peter Humphrey and Yu Yingzeng, whose firm ChinaWhys has done work for GSK and other drug makers, were detained. But corporate investigators said they were concerned about the repercussions for the industry.

Multinationals, banks and investors rely on corporate investigators for information about potential partners and investments in China, where a lack of transparency is a hurdle to doing business. Restrictions in the flow of such background information could potentially leave foreign investors exposed to greater risk in the world's second-largest economy.

ChinaWhys offers "discreet risk mitigation solutions, internal process audits, due diligence and commercial investigation services", according to the firm's website.

"(Humphrey's) detention is really disturbing. It gives me an uneasy feeling that people who, on the face of it, are trying to help companies and individuals navigate their way around the system are being targeted," said Gary Miller, litigation partner and head of the fraud group at London law firm Mishcon de Reya.

Mike Vermillion, senior director of third party risk management solutions at Oregon-based consultancy Navex Global, called the detentions chilling.

"I am certainly not getting on a plane to China next week," Vermillion said.

Two sources with direct knowledge of the matter have said Humphrey and Yu were detained by Chinese authorities in Shanghai on July 10. They did not specify who was holding the couple.   Continued...

 
A Chinese national flag flutters in front of a GlaxoSmithKline (GSK) office building in Shanghai, in this July 12, 2013 file photo. The detention by Chinese authorities of a British corporate investigator and his American wife in the wake of a corruption probe into pharmaceutical giant GlaxoSmithKline has had a chilling effect on other risk consultants working in China. REUTERS/Aly Song/Files