By Michael Martina and Yew Lun Tian
WASHINGTON/BEIJING (Reuters) – Chinese authorities raided the office of U.S. corporate due diligence firm Mintz Group in Beijing and detained five local staff, the company said, putting foreign companies in China on alert just as the country hosts an international economic forum.
News of the raid and detentions comes as Sino-U.S. relations have spiraled downwards following months of diplomatic tensions, including over the U.S. military downing in February of a suspected Chinese spy balloon and a planned U.S. transit next week by the president of Taiwan, the self-governed island China claims as its territory.
“We can confirm that Chinese authorities have detained the five staff in Mintz Group’s Beijing office, all of them Chinese nationals, and have closed our operations there,” the company said in an emailed statement to Reuters late on Thursday.
It said it was ready to work with the Chinese authorities to “resolve any misunderstanding that may have led to these events”, and that its top concern was the safety and wellbeing of colleagues in China.
“Mintz Group has not received any official legal notice regarding a case against the company and has requested that the authorities release its employees,” the company said.
Chinese foreign ministry spokeswoman Mao Ning said on Friday she was not aware of this case. The Beijing public security bureau did not respond to a request for comment.
A source at the New York-headquartered firm earlier told Reuters on condition of anonymity that the company’s local legal counsel said the raid occurred on the afternoon of March 20, and that the employees were being held incommunicado somewhere outside of Beijing.
As per Mintz Group’s website, the Beijing office is its only one in mainland China. The website says the company specialises in background checking, fact gathering and internal investigations. Its wide-ranging clients include the National Football League, New York City and The Beatles, according to media reports.
Mintz has 18 offices around the world and hundreds of employees. Randal Phillips, a partner at the firm who heads its Asia operations but is based outside of China, is listed on its website as the Central Intelligence Agency’s former chief representative in China.
Phillips worked in Beijing for years after leaving the CIA. There was no indication the incident was related to him, and Reuters was unable to reach him for comment.
The news of the raid and detentions comes as Beijing is gearing up to hold the three-day China Development Forum from Saturday, where executives from multinationals and representatives from international organisations will be among the more than 100 overseas delegates present.
One U.S. business community person told Reuters the Mintz Group incident sent a “remarkable signal” that Beijing wants foreign money and technology but that it won’t accept credible U.S. firms conducting due diligence on Chinese partners or the business environment.
“Red alerts should be going off in all boardrooms right now about risks in China,” the source, who did not wish to be identified due to the sensitive nature of the matter, said.
China has said it welcomes foreign trade and investment but stressed that security comes before development.
U.S. businesses operating in China are increasingly pessimistic about their prospects in the world’s second-largest economy, according to a survey released this month by the American Chamber of Commerce in China.
Two-thirds of the respondents cited rising U.S.-China tensions as the top business challenge.
Western due diligence companies have got into trouble with Chinese authorities before. British corporate investigator Peter Humphrey and his American wife Yu Yingzeng, who ran risk consultancy ChinaWhys, were detained in 2013 following work they did for British pharmaceuticals group GSK.
Humphrey, who spent two years in jail for allegedly acquiring personal information by illegal means, which he denied, told Reuters that providing due diligence in China was even harder now because of a “massive tightening in access to information.”
“The foreign business community needs due diligence in order to conduct safe business, to pick the right partners and the right hires, to invest in the right companies without losing their shirt … But Beijing has made it impossible to do this,” he said in an email.
“This is at a time when Western companies need transparency more than ever,” he added.
(Reporting by Michael Martina in Washinton and Yew Lun Tian, Laurie Chen and Joe Cash in Beijing; Editing by Raju Gopalakrishnan, Muralikumar Anantharaman and Jane Merriman)