On Aug. 8, the founders of China-based business intelligence firm ChinaWhys Co. were convicted by a Shanghai court of buying and selling personal information about Chinese citizens, and were sentenced to prison. The case shows the uncertain legal environment in which private investigation firms operate in China. For the foreign companies—and their lawyers—that retain such firms, the convictions of ChinaWhys’ Peter Humphrey and his wife Yu Yingzeng are likely to make it more difficult to conduct due diligence on Chinese business partners, suppliers, and employees.
“[The conviction] makes people stop and think what does my due diligence process look like in China, how [do] the providers I am using obtain information they are sharing with me, and is there anything potentially problematic with that,” says Kelly Austin, a Hong Kong-based investigations partner with Gibson, Dunn & Crutcher.
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