China Said to Be Holding British
Fraud Investigator
GlaxoSmithKline Said to Be Client of Man Being Held
The people identified him as British national Peter Humphrey. Mr. Humphrey is the founder and managing director of ChinaWhys Co., a Hong Kong-based investigation firm that focuses on fraud and accounting for multinational businesses operating in China.
According to the people familiar with the matter, one of Mr. Humphrey's clients wasGlaxoSmithKline GSK.LN -0.69% PLC, which is under investigation in China for alleged bribery and related charges. Glaxo has said it is cooperating with the Chinese investigation and that such conduct is against its policies.
On Saturday, a spokesman for Britain's Foreign Office said: "We are aware of the arrest of a British national in Shanghai, China on the 10th of July. We are providing consular assistance to the family." British authorities later said the British national had been detained, not arrested.
Police in China can legally detain people for extended periods without charge as they conduct investigations and build a case, and it doesn't necessarily signal authorities will prosecute an individual. By contrast, formal arrest usually leads to charges and a conviction in China. People held by Chinese police aren't typically granted access to lawyers or—in the case of foreigners—consular officers until formal arrest is made.
Chinese authorities didn't respond to requests for comment.
Mr. Humphrey's mobile phones were switched off and he didn't respond to email messages. It is unclear where he is being held, whether he has been charged, or whether he has retained a lawyer.
Efforts to contact Mr. Humphrey's company were unsuccessful. People who have worked with him on past investigations said they didn't know reasons for his detention.
Reasons for the investigator's detention are unclear. A spokesman for Glaxo on Saturday said the detained Briton has "never been a GSK employee." Asked whether the person being held by authorities had ever worked as a contractor for Glaxo, the spokesman declined to comment further.
Mr. Humphrey, a former reporter who speaks fluent Mandarin, founded the firm with his wife, a specialist in forensic accounting; she couldn't be reached. Word of the detention of a British investigator was reported on Saturday by the Times of London.
Speaking over the weekend, other executives in the investigation industry said they learned last week that Mr. Humphrey was in police custody but said they were unaware of the circumstances.
Mr. Humphrey's firm pursues the kind of work that is a specialty of such firms as PricewaterhouseCoopers and Kroll Inc., which at different points both employed Mr. Humphrey in China. One big business for such firms is known as risk mitigation, which involves designing systems for multinational companies to limit chances they could run afoul of antibribery legislation like the U.S. Foreign Corrupt Practices Act and similar laws in Britain.
Mr. Humphrey's detention has caused concern among investigation firms working in China. "He is one of the last real investigators," said Frank Casey, a Florida-based forensic accountant who has partnered with Mr. Humphrey over the years.
Speaking over the weekend, executives at other due-diligence firms said Beijing is growing less tolerant of their activity. Still, some said there is little to indicate Mr. Humphrey's troubles signal a broader crackdown on their industry.
"There's been a tightening" of access to the kinds of information needed to conduct fraud investigations and carry out due diligence, the China chief of one firm said Saturday.
In the past year or so around China, government bureaus have begun sealing files that, for example, record who owns particular businesses. The government in Beijing last year challenged on privacy grounds some aspects of how business information group Dun & Bradstreet Corp. DNB +0.22% gathers data. And China's Internet regulators responded to foreign news reports about the wealth of Chinese leaders and their families by blocking websites and individual news stories online
In public, Mr. Humphrey has often spoken about how fraud in China affects his clients, typically multinational companies that are looking to expand or are concerned about internal problems.
In a presentation last year to the Texas-based Association of Certified Fraud Examiners, Mr. Humphrey said he had spent 15 years examining the impact of fraud on multinational companies.
Of China, he said, "When I look at the country today and think about the nation where I arrived in 1979—a country driven by horse-carts and mired in deep poverty—it's impossible to ignore its stunning progress," according to the text of the presentation. "Yet, China's super economic achievements have come at a cost—with the dramatic resurgence of corruption and widespread fraud being among the manifestations."
In April 2004, ChinaWhys and Glaxo teamed up to deliver a jointly run antifraud- and corruption-related seminar in Shanghai. According to a summary of the event published on the ChinaWhys website, Mr. Humphrey discussed "the reasons why the supply chain shift can heighten business risks, ways to tackle fraud and corruption, war stories of firms that learned the hard way, and a tool kit to reduce the risks of white-collar crime."
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