A Corporate Drama of Perfidy

A friend pointed me to a real-life story reported in the Financial Times by Jamil Anderlini entitled "A Cautionary Tale from China".

Here is a recap of the article:-

It is a story about how a Mr. Klaus Hilligardt, founder of German-based Business Media China (‘BMC’), had his trust betrayed by his secretary and her husband, both native mainlanders. His erroneous belief - that putting local Chinese in charge of his business would let him reap the benefit of utilizing Chinese drive and knowledge of the market – almost cost him his entire company that he had built up from scratch.

Hilligardt hired his secretary Teresa Tu in 2001, who has been looking after his business dealings, his personal finances and investments and other details. In 2003 he recruited a young executive named Li Yangyang whom he meant to groom as his successor. Then in 2006, the two employees got married.

As Hilligardt continued to put his trust in the couple, Li began to hire his former university classmates into the company. Everything looked fine until after the Olympics. It was then that Hilligardt was beginning to suspect something fishy was going on. He found out that Li had set up a shadow company to bucket the most lucrative advertising contracts of BMC. Li and his former classmates even found a way to getting BMC to pay for all the operating expenses of the shadow company while swallowing all the profits made. Meanwhile, the couple arranged for Hilligardt to meet with an attractive, middle-aged former model to keep him under the “spell”.

When the German board of BMC started to get suspicious, it forced Hilligardt and Li to resign from the board and brought in a veteran Swiss entrepreneur with extensive Asian experience as the chief executive to deal with the mess created. With the tip-off from an employee pointing to Li’s shadow company stealing BMC’s clients, the CE was able to plan a raid on the company.

One day in early June, accompanied by lawyers and a police escort, the CE raided the Beijing headquarters of BMC and retrieved paperwork from the finance department that provided evidence of the ongoing fraud.