Alibaba scam busted
by Beijing Steele Business Investigation Center
It was a classic scenario in 1990s
China: The real estate developer running off with clients’ money
before the foundation was barely dug.
Back in the early, get-rich-quick days of China’s real estate
boom, Beijing police official Hai Yang saw several friends
losing their life savings to unscrupulous developers, buying
apartment off the plans.
Hai decided to do something about it – by leaving the force. His
nine years of service gave him the skills to set up Beijing
Steele Business Investigation Center, which today cracks
fraudsters across China.
The local State Administration of Industry & Commerce (SAIC)
gave Hai the name when he handed in his badge and went to
register his firm. “They told me the name means ‘very strong’”,
says Hai. A 20-strong staff steer the firm in Beijing but Steele
has 100 freelance staff on the payroll around Asian. The firm
charges 500 yuan (US＄73) an hour for its investigators. Crime
and criminals have no borders, so Steele outsources
investigations to associate firms in Japan and Malaysia. It’s
also vital for many of his clients; foreign corporations, who go
to Steele for Asia-wide fraud investigations.
Due diligence
Hai’s beefy smile and the salt and pepper hairstyle favoured by
taxi drivers belie a confidence and a sharp-minded business
sense. Steele’s 47-year-old president runs the firm out of
spacious offices overlooking the Bird’s Nest.
When I arrived two uniformed policemen were bantering
good-humoredly with Hai and two of his staff.
One of the officers carried a bulky camera. The duo may have
been formed colleagues or fellow photographers: Hai is also a
keen amateur photographer, his work decorating the white walls
of Steele’s neat office.
Over oolong tea Hai reels off examples of the scams Steele has
busted. An Australian client bought several shipments of sports
apparel on Alibaba, a Chinese website, which turned out to be
counterfeits. “I immediately found it suspicious that the
Chinese firm’s website was all in English. “ The supplier proved
elusive when Steele tried an on-site visit. Its office didn’t
exist. “Doing this kind of due diligence prior to payment would
have saved so much. “
A British client was saved from a potential nightmare
partnership when Steele’s checks with local phone companies and
SAIC offices drew blanks on the address of the client’s
potential business partner, an auto parts suppliers. Hai’s
investigators had found the Chinese side’s premises empty.
It transpired that a moonlighting member of staff had been using
his boss’ name, and the address of another, defunct company, to
sell company products for his own benefit.
Framed certificates and gold-plastic plaques on his desk confirm
Steele as a member of the Association of British Investigators
as well as the Association of Certified Fraud Examiners and the
Council of International Investigators. To drum up business, Hai
joined a plethora of world investigative bodies. The memberships
are reassuring for foreign insurance firms, which supply Steele
with a steady stream of work, typically proofing claims from
clients involved in accidents.
Legal methods
Steele, which claims to be the first private provided of
polygraph examinations in China, get its information the
straight way. “We will never illegally acquire a company’s
sensitive information, such as a list of clients.” Rather, the
firm is adept at tapping into the databases of national and
regional SAIC offices, with whom enterprise must log their
details.
Databases are not only harder to find in China, they’re also
often infrequently updated, “especially the databases of
information on taxes and addresses. “ Still, Hai claims his
company can get the legal records of any Chinese in three to
five working days and can finish due diligence examinations on a
company’s assets within 20 days. Fieldwork is more effective at
filling in the blanks. Steele investigators question current and
serving employees as well as clients at a target company.
“There’s a lot of skills to good interrogation. But number one,
you don’t give your interviewee too much trouble. “ Ninety
percent of the time people won’t talk, says Hai, “but even when
an interviewee refused to answer a question he’s giving you
information.”
An ex-force member like Hai can get things done in China where
geographic mass and regional variations in culture can make
enforcement difficult. A visit to the local police station is
his first call when Hai conducts background checks. “I first ask
the policeman how long he’s been in the administrative area. If
he says 10 years then I’ll ask if he knows the subject. Thirdly
I ask if he’s got a criminal records. Even if he say I can’t
tell you then he’s providing information.” Given his friends’
losses in 1990s, Hai takes great pleasure recounting how he
averted a scam for a real estate management company. Due
diligence on a local partner in a 50 million yuan real estate
project showed the firm’s 20 million yuan registered capital was
debt, stuck in a stalled villa project. The company hadn’t been
able to get a further bank loan because it didn’t get land use
rights.
Gray area
Private investigators like Steele operate in a gray area in
China. He may rub shoulders with fellow private detectives from
around the world at World Association of Detectives gatherings,
but Hai's license describes Steele as a market research agency.
China's law is flexible enough to allow investigators to
operate, says Hai, "though the industry is nothing like as
developed as it is in Japan." Steele's brochures offer clients
services like a Business Risk Assessment and steer clear of
things like debt collection and surveillance, normal chores for
private investigators elsewhere. "There is no legal approach to
investigating marital infidelity in China. There is only one
legal approach to collecting debt, through litigation. The rest
is illegal."
With new laws in place on money laundering and extra pressure
from WTO trading partners to fight counterfeiters, China may be
warming to the notion of private eyes. "They welcome us, they
want us to help," says Bob Youill, a retired Hong Kong police
officer who investigates counterfeiting in China for Asia Risks.
Hai thinks China can learn a lot from foreign lawmen. He is full
of praise for the ubiquity of CCTV cameras in the UK. "China
will eventually build such a system."
But Hai is also worried that a backlash in the EU toward
protecting personal information will spread to China. "We don't
need that kind of law in China because already there are few
reliable databases for tracing companies' credit history."
The bane of cheating spouses, thieves and all-around bad guys,
private eyes are a dependable if sometimes murky fodder for
decades of Western pulp fiction. It's not surprising that China
has its own emerging legion of PIs.
It's clear from his well-appointed offices and his uniformed
visitors, that Hai is a straight shooter enjoying the approval
of officials as much as from satisfied customers. Fraudsters and
general lowlifes watch out: Hai Yang has an enviable track
record of getting his man.
Worse, Steele discovered that the vice president of its clients
was doing an insider deal with the manager of the troubled
company.
For more:
Brief Talk on Investigation in China
China Cracks Down on Illegal Online Trading of Contraband
7 Must Know Tips If You Are Going to Do an Email Address Search
How to Conduct a Complete Background Check on Anyone
How to verify Hong Kong Offshore Company
3 Easy Steps to Help You Build Good Business Credit
Criminal Records Check for Background Investigation
Protecting Your Most Important Asset
National identification number
How to Successfully Manage Risk
Protecting Your Intellectual Property in China
The First Case on Foreign Shareholder
Representative Litigation in China
Background Checks for Small Business
Reliable Chinese Suppliers
Due Diligence for Foreign Joint Ventures
in China
Criminal Background Checks
Employee Background Check
Intellectual property--The Best Protection
is Prevention
China Joint Ventures: Legal Due Diligence
The Importance of Comprehensive Business
Information Services
The What and How of Background Checking
Resident Identity Card
Intellectual Property Protection in China
China
weighs credit database options (Ⅱ)
Growing
of China Credit Database
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