Chinese authorities raided the office of a US corporate due diligence firm and detained five local staff, in a move that has put foreign companies in the country on ‘red alert’.
Sources said authorities raided the Beijing office of New York-headquartered firm Mintz Group on the afternoon of March 20. The detained employees were being held incommunicado somewhere outside of Beijing, sources said, citing the company’s local legal counsel.
“We can confirm that Chinese authorities have detained the five staff in Mintz Group’s Beijing office, all of them Chinese nationals, and have closed our operations there,” the company said in an emailed statement.
The US firm said it was ready to work with the Chinese authorities to “resolve any misunderstanding that may have led to these events”, and that its top concern was the safety and wellbeing of colleagues in China.
“Mintz Group has not received any official legal notice regarding a case against the company and has requested that the authorities release its employees,” the company said.
Chinese foreign ministry spokeswoman Mao Ning said on Friday she was not aware of the case. The Beijing public security bureau did not respond to a request for comment.
The news of the raid and detentions comes at a time when Beijing is holding its three-day China Development Forum starting Saturday. More than 100 overseas delegates are attending the event, including executives from multinationals and representatives from foreign organisations.
Top executive formerly at CIA
As per Mintz Group’s website, the Beijing office is its only one in mainland China.
The website says the company specialises in background checking, fact gathering and internal investigations. Its wide-ranging clients include the National Football League, New York City and The Beatles, according to media reports.
Mintz has 18 offices around the world and hundreds of employees. Randal Phillips, a partner at the firm who heads its Asia operations but is based outside of China, is listed on its website as the Central Intelligence Agency’s former chief representative in China.
Phillips worked in Beijing for years after leaving the CIA. There was no indication the incident was related to him. Reuters was unable to reach him for comment.
The Mintz Group incident sent a “remarkable signal” that Beijing wants foreign money and technology but that it won’t accept credible US firms conducting due diligence on Chinese partners or the business environment, said one US business community person.
China has said it welcomes foreign trade and investment but stressed that security comes before development.
“Red alerts should be going off in all boardrooms right now about risks in China,” the source, who did not wish to be identified due to the sensitive nature of the matter, said.
Western due diligence companies have got into trouble with Chinese authorities before.
British corporate investigator Peter Humphrey and his American wife Yu Yingzeng, who ran risk consultancy ChinaWhys, were detained in 2013 following work they did for British pharmaceuticals group GSK.
Humphrey spent two years in jail for allegedly acquiring personal information by illegal means but has denied the allegations.
Providing due diligence in China was even harder now because of a “massive tightening in access to information,” Humphrey said.
“The foreign business community needs due diligence in order to conduct safe business, to pick the right partners and the right hires, to invest in the right companies without losing their shirt … But Beijing has made it impossible to do this,” he said in an email.
“This is at a time when Western companies need transparency more than ever,” he added.
Falling business sentiment
The development comes amid spiralling Sino-US relations, following months of diplomatic tensions, including over the US military downing a suspected Chinese spy balloon in February and an upcoming visit to the United States by the president of Taiwan, the self-governed island China claims as its territory.
US businesses operating in China are increasingly pessimistic about their prospects in the world’s second-largest economy, according to a survey released this month by the American Chamber of Commerce in China.
Two-thirds of the respondents cited rising US-China tensions as the top business challenge.
- Reuters, with additional editing by Vishakha Saxena