GSK-linked investigator found guilty in China trial

A British investigator linked to the U.K. drug giant GlaxoSmithKline was convicted in China on Friday in a case that many in the international business community believe highlights the risks of conducting due diligence on Chinese companies and investments.

The investigator, Peter Humphrey, and his American wife Yu Yingzeng werefound guilty of illegally acquiring personal information of Chinese nationals, an offense the Shanghai No.1 Intermediate People’s Court said on its official microblog account could warrant a sentence of up to three years in prison.

Humphrey was sentenced 2½ years in prison, a fine of 200,000 yuan ($32,490) and deportation. Yu, on the other hand, was fined 150,000 yuan and given a two-year prison sentence.

Carlos Barria | Reuters An internal court video shows British investigator Peter Humphrey arriving at a courtroom after a lunch break, during his trial at Shanghai No.1 Intermediate People's Court August 8, 2014.

Carlos Barria | Reuters
An internal court video shows British investigator Peter Humphrey arriving at a courtroom after a lunch break, during his trial at Shanghai No.1 Intermediate People’s Court August 8, 2014.

The Chinese government says the case is the first of its kind against foreign investigators.

According to the court’s online posts, prosecutors had accused the couple of illegally obtaining and selling more than 250 items of information. “Generally speaking … I don’t dispute,” Humphrey was quoted as saying.

Humphrey and Yu are well-regarded corporate detectives in China. They founded ChinaWhys in 2003, a research firm that conducts due diligence into commercial matters for both local and multinational companies. According to the court, Humphrey explained how his firm was hired to do background checks on partners, suppliers, or employees as part of its overall business.

Yu, who worked with Humphrey, said she had “no dispute with the evidence provided by the prosecution.” However, she denied that the couple’s methodology was used for anything other than to write reports. “If we had known at the time obtaining information in that way was illegal, we would have told our clients that we couldn’t use those methods,” she said, according to the court’s online posts.

Chinese authorities did not officially link the trial to GSK. The company has not been mentioned on the court microblog account.

However, the couple was detained in July 2013 soon after the drugmaker was accused of funneling hundreds of millions of dollars to doctors and hospital staff in a massive bribery scandal.

Humphrey and Yu had been hired by GSK before the scandal broke out to investigate a former employee the company suspected could be the source of emails alleging wrongdoing at the company sent to upper management as well as a tape filmed secretly of ex-China chief Mark Reilly being intimate with a girlfriend in his home.

The Chinese court, which has a 99 percent conviction rate, described the trialas “open,” allowing the court to live Tweet the proceedings, though the posts were filtered. Foreign media were allowed to read the online posts from a separate room.

The couple’s son, Harvey, was in attendance. British and American officials were also present in the courtroom.

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