The week of November 18, Chinese media were reporting that an investigation in corruption charges against executives in mobile carrier China Mobile has now spread to an executive with Ericsson. An article from November 25 in another Chinese publication, nfdaily.cn, says that the report first arose in American media, but I’ve not seen reports in US media on this matter previously – have others?
In any case, the investigation in Sichuan Province apparently started way back in June and was initially focused on executives in the Chengdu branch of China Mobile. By October, the investigation had spread to senior China Mobile executives in Chongqing (another city in Sichuan Province) and involved bribery in connection equipment procurement. A major provider of mobile network equipment in that region is Ericsson and they became implicated. News reports indicate that one of their China company employees is now being investigated. As of November 25th, Ericsson’s spokesperson refused to comment.
The expanding web of this case reflects a tried and true investment strategy followed by Chinese enforcement agencies: use a tip/hunch/whistleblower report to go after an initial target, then work that trail to bring in a score of other targets. Prime example of this approach: the Huang Guangyu case, which apart from resulting in a 14 year prison sentence for Mr. Huang (former chair of China’s equivalent of Best Buy – Gome) has so far netted the Director of Economic Criminal Investigation Bureau in the Public Security Bureau, the Guangdong Party Secretary, the Mayor of Shenzhen, the Director of the Inspection Bureau for the State Administration of Taxation, the Deputy Director of the Shanghai Public Security Bureau. Whew.
As we noted earlier this year, telecommunications and FCPA compliance are potent brew. Who will next be drawn into this investigation into telecommunications procurement in southwestern China?