The Financial Times carried a story of fraud that is not unusual in China:  Employees setting up separate companies to divert business and funds.  The FT’s case in point is that Business Media China’s management has discovered that some of its employees in China have set-up a “shadow company” and diverted funds and contracts to that company.

Business Media China (BMC) is a German-listed media group with most of its operations in mainland China. The company operates an outdoor advertising network, an exhibitions business as well as smaller online, print and broadcast business units.

The corporate identity theft scheme appears to be focused primarily on BMC’s outdoor advertising business. Key employees, including the secretary of company founder, Klaus Hilligardt, set-up BMC Heli and diverted key advertising contracts into that shadow company.  BMC’s CEO Heinz Zuercher commented “It appears that at least since the start of this year, BMC was paying all the costs while this shadow company was earning all the money. BMC was even paying that company’s travel costs, printing costs and most of their salaries.” 

Source: Financial Times article   –  Courtesy BSG Hong Kong

BIIA Newsletter September 2009 Issue