Summary
Two senior local managers at a foreign-owned company in China spent eight years quietly building personal ownership over the company’s entire distribution network. A whistleblower alerted headquarters. PSU’s investigation confirmed the scheme, and both managers resigned immediately when confronted with the evidence.
| Key Stats | |
|---|---|
| Duration of Scheme: | 8 Years |
| Scope of Control: | Entire Distribution Network & Key Suppliers |
| Estimated Annual Revenue via Distribution: | 80M+ CNY |
| Estimated Total Exposure (8 Years): | 50M+ CNY |
| Outcome: | Scheme Exposed / Both Managers Removed |
The Problem
A foreign-owned company operating in China relied on two senior local managers to run its domestic business, including an established chain of distributors and suppliers.
Over the course of eight years, the two managers — directly or through family members — gradually acquired ownership of the company’s entire distribution network. This gave them effective control over both the supply chain and the commercial channel, allowing them to capture distributor margins and profit personally from the company’s operations without detection.
The scheme went unnoticed because no regular background screenings or ownership reviews were conducted on key personnel or business partners. It was only when a whistleblower contacted the company’s European headquarters that suspicions were raised.
Our Action
PSU was engaged to investigate the allegations and collect verifiable evidence:
- Ownership Mapping: Using open-source intelligence and corporate registry research, PSU systematically traced the ownership structures of the company’s distributors and key suppliers, revealing direct and indirect ties to the two managers and their family members.
- Evidence Collection: PSU compiled a comprehensive evidence package documenting the full extent of the hidden ownership network, providing the client with a clear and actionable basis for confrontation.
The Outcome
When presented with PSU’s findings, both managers chose to resign immediately. With an estimated 80 million yuan in annual revenue flowing through the compromised distribution network, the total financial exposure over the eight-year period is estimated at over 50 million yuan in diverted profits.
The case highlights the importance of regular background screenings and ownership reviews — not only at the point of hiring, but as an ongoing practice. In China, where personal and commercial interests often overlap, what looks like a stable business relationship may in fact be a carefully constructed conflict of interest.