Bloomberg News

Shanghai Court Finds Foreign Investigators Guilty

August 08, 2014

A Shanghai court yesterday found two foreign investigators guilty of illegally obtaining personal information about Chinese citizens, calling their offenses “serious” and giving them prison time.

Briton Peter Humphrey was sentenced to 2 1/2 years and a 200,000 yuan fine and will be deported from China, Tang Liming, a spokeswoman for the Shanghai No. 1 Intermediate Court, said at a press conference yesterday evening. Humphrey’s wife Yu Yingzeng, a U.S. citizen, was sentenced to two years at a 150,000 yuan fine, Tang said.

“The two defendant’s actions are considered serious,” Tang said in a statement to reporters. “The pair not only engaged in such offenses for a long time, they also did it several times, and infringed many citizens’ personal information.”

GlaxoSmithKline Plc (GSK:US), which has said it hired Humphrey’s firm last year, wasn’t mentioned in the court’s microblog posts about the trial. Prosecutors accused the couple of illegally obtaining more than 250 pieces of personal information and selling them to multinational companies, according to the microblog.

The couple told the judge during the trial that they didn’t knowingly violate Chinese laws when they sought personal information about the subjects of their inquiries.

“From the face of things the facts aren’t wrong, but to the allegations, I don’t understand China’s laws, so I am not in the position to discuss,” the court’s microblog cited Humphrey as saying in response to court questions on whether allegations made toward him were true or not. During the proceedings, prosecutors questioned the couple on methods used by their firm, ChinaWhys, to obtain information.

No Purchases

Humphrey said that he didn’t buy information, according to the microblog transcript, adding that the money he paid was for services provided by vendors. Yu took the stand in the afternoon.

“I never knew that information obtained from a third party is violating the law,” she said. “Our information is third hand, we didn’t know the original source.”

The trial began at 9:30 a.m. yesterday and ended about 12 hours later, with breaks for meals.

Other Countries

In places like Hong Kong, it’s possible to obtain information about citizens, “so we didn’t think that doing the same thing in China would be against the law,” she said.

Since Xi took over China’s Communist Party in 2012, government agencies have unveiled investigations into prominent targets such as the country’s former security chief, a popular television host and Glaxo’s former China head, Mark Reilly. In doing so, it has displayed a willingness to act against even well-connected officials and foreign business people, who are often seen as having greater immunity.

“It’s pretty clear that no one -- from government officials to foreigners -- is immune to the party’s campaign to clean up shop,” said Kevin Jones, Shanghai-based partner at law firm Faegre Baker Daniels LLP ahead of the trial. “Companies and executives need to be more aware that just because something was tolerated in the past doesn’t mean that it will continue to be tolerated in the future.” Jones isn’t involved with their case.

Since coming into power, Xi has pursued potential wrongdoing by companies and executives while also tightening information controls. The Communist Party last month revealed its most high-profile target yet, announcing an investigation into former security czar Zhou Yongkang.

Seeking Information

The couple’s indictment is the first Chinese prosecutors have announced of foreigners for an illegal investigation, according to China’s official Xinhua News Agency.

Their trial has attracted attention in China’s foreign community as it highlights both the increasing pressures on operating in China and because of Humphrey’s links to GlaxoSmithKline. After initial concern that the trial would take place behind closed doors, the court announced it would be held in public. Throughout the day, transcripts of the proceedings were posted on the court’s microblog in long sections.

Calls to China’s State Council Information Office, the Ministry of Public Security and the Ministry of Justice weren’t answered yesterday. The phone numbers listed on the website of the couple’s firm were disconnected.

Humphrey had worked in China for decades. He was a foreign correspondent with the Reuters news agency -- now part of Thomson Reuters Corp. -- and was later head of China investigations with PricewaterhouseCoopers.

The British national started ChinaWhys with his wife in 2003, offering services such as vetting of business partners and “discreet gathering of timely business intelligence,” according to the ChinaWhys website.

The couple was detained in July last year about three months after Glaxo says it hired the firm.

In May this year Chinese police accused Glaxo and Reilly of ordering sales people to bribe doctors and hospitals to boost sales, handing the case to prosecutors. Reilly couldn’t be reached for comment on his mobile phone. In a July 3 statement on its website, Glaxo said it was cooperating with authorities.

Diverging Accounts

Glaxo said in the July 3 statement that its China unit hired ChinaWhys in April last year to investigate a security breach linked to its then China head, not to investigate whistle blower allegations. Glaxo spokesman Simon Steel declined to comment beyond that statement on the company’s relationship with Humphrey or on the bribery case.

The U.K.’s Sunday Times reported in June that Humphrey was hired by Glaxo last year after a clandestinely-recorded sex-tape of Reilly was sent to the drug maker’s senior staff. “We can confirm there is a tape,” Steel said by phone in June, declining to comment on its contents.

Knowledgeable

Of 1.1 million criminal defendants whose cases were closed in 2011, only 891 were acquitted, according to data from the Supreme People’s Court website, putting the conviction rate in China at 99.9 percent.

The Humphrey case is one of the most high profile cases involving foreigners in at least four years. A Shanghai court sentenced Stern Hu, an Australian executive who led Rio Tinto Group’s China iron ore unit, to 10 years jail in 2010 after he was found guilty of taking bribes from steel mills and infringing commercial secrets.

To contact Bloomberg News staff for this story: Natasha Khan in Hong Kong at nkhan51@bloomberg.net; Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editors responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net; John Liu at jliu42@bloomberg.net Nicholas Wadhams


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