SHANGHAI Aug 8 A British investigator and his
American wife will stand trial in Shanghai on Friday in a case
that is seen as key to a bribery investigation against
GlaxoSmithKline Plc and has unnerved the growing
community of corporate sleuths in China.
Peter Humphrey and his colleague and wife Yu Yingzeng, who
were detained over a year ago following work they did for the
British pharmaceutical giant, face charges of illegally
obtaining private information on Chinese citizens, for which
they can receive a maximum sentence of up to three years
Their arrest sent shivers through the country's risk
consultancy community, whose members are much in demand by
multinationals and foreign investors for information on
potential partners or firms in China, where such data is not
"In the past, people were almost encouraged to turn a blind
eye to where the due diligence companies or investigators were
getting their information," said Pooja Nair, a Los Angeles-based
associate at law firm Foley & Lardner.
"(This case) makes it clear that in order to get information
you're taking a huge risk in China."
The court case, which also coincides with a growing number
of Chinese anti-trust probes that have seen authorities raid
offices of Western firms, highlights the obstacles foreign
companies face in navigating China's murky business world.
Foreign investors in China now have to adhere to more
rigorous anti-corruption laws in the West even as information
about their prospective Chinese investments becomes harder to
ChinaWhys, the risk consultancy the couple ran, was part of
the corporate investigations industry in China which has seen a
surge in demand amid more stringent enforcement of the U.S.
Foreign Corrupt Practices Act and an increase in the number of
Chinese firms involved in overseas deals.
The couple's arrest last year coincided with a Chinese probe
into allegations that GSK staff had funnelled hundreds of
millions of pounds through travel agencies to bribe local
doctors and health officials to boost sales and raise prices.
While Chinese authorities have not openly connected the
arrests of the Humphreys to the GSK probe, Peter Humphrey said
in a note last year when he was already in detention that he
felt "cheated" by GSK, adding that the drugmaker had not shared
the full details of the bribery allegations.
A GSK spokesman declined to comment on the trial. The drug
maker said in July that the issues relating to its China
business were "very difficult and complicated."
Peter Humphrey, who has apologised on state television for
breaking any Chinese law, is expected to plead guilty. He worked
for Reuters as a journalist in the 1980s and 1990s.
China has in recent years moved to tighten its privacy laws.
In 2009, it amended its criminal code to ban the transfer, sale
or gathering of Chinese citizens' information by government
firms and companies involved in telecoms, transportation,
education and medical treatment.
"Even before the investigation there had already been a
shift in the industry to focus entirely on public information,
to make everything legitimate...I think the Humphrey
investigation pushed the transition a little faster," said a
Shanghai-based investigator at a foreign-owned research firm.
(Additional Reporting by Engen Tham; Editing by Kazunori Takada
and Raju Gopalakrishnan)