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Top multinationals caught up in Chinese graft probe

(AP/chinadaily.com.cn)
Updated: 2007-01-20 14:14

Shanghai authorities have detained 22 company executives, some working for major multinationals such as McDonald's and Whirlpool, in connection with a bribery investigation, local reports said Friday, citing a police notice.

The probe comes amid a wider crackdown on economic crimes and a citywide probe into corruption allegations against top city leaders that resulted in the ouster of Shanghai's Communist Party secretary, Chen Liangyu.

Foreign companies are facing increased scrutiny over compliance with government regulations, with powerhouses like Wal-Mart Stores Inc., for example, installing labor unions.

The police notice was sent to local media by the Shanghai General Team of Economic Investigation and reported in several state-run newspapers including the Shanghai Youth Daily and Xinmin Evening News.

It said bribes worth 4 million yuan (US$514,000) allegedly were given to staff at seven companies by local computer network operators, in return for equipment orders.

The reports did not name the suspects, but said those accused of taking bribes headed the information technology departments at the local offices of US consulting firm McKinsey & Co., McDonald's, Swiss engineering firm ABB Ltd. and American appliances maker Whirlpool Corp., among other companies.

Police would not immediately comment on the report and requested questions in writing.

McDonald's Corp. said in a statement, "This incident occurred several months ago. As result, Mr. Tao was immediately terminated," apparently referring to an employee implicated in the investigation. It provided no further comment.

Whirlpool's Shanghai office and Asian spokeswoman would not comment, referring inquiries to the company's headquarters.

"We will look into the reported cases. ABB does not tolerate any improper business conduct and we apply globally the highest business standards," Thomas Schmidt, spokesman for ABB, said in a statement.

McKinsey issued a statement saying "we are not aware of any information other than that printed in the press. McKinsey has not in any way been accused of any bribery or corruption."

The company's Shanghai office declined further comment.

The reports in the media said that at the request of the authorities, they provided only false names for the suspects detained. They said investigators had recovered 944,400 yuan (US$121,000) of the money allegedly offered as bribes.

According to the state-run newspaper Shanghai Daily, investigators were tipped off by an anonymous caller claiming that a manager at a local computer company allegedly had bribed two information technology staffers at McKinsey's Shanghai office.

Two executives at a Chinese computer company, the paper said, had confessed to offering US$57,000 in bribes to two McKinsey employees and that further investigation had found that the two had collected about US$250,000 in bribes from 2003 and 2006 from four computer network companies.

Corruption allegations against staff at foreign companies in China are relatively rare, considering the pervasiveness of bribery, kickbacks and other abuses in the country's business and political circles.

In 2004, telecommunications gear maker Lucent Technologies fired four top executives in its China operations after finding possible violations of US bribery laws during an international audit.



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