Interesting content here from a team of two lawyers, Dan Harris and Steve Dickinson, both of Harris and Moure. Their red on red is a pretty intense color scheme, but the content is good. Start with their post China Bribery: Send Lawyers, Guns And Money and go from there.

The Daily Caveat was in that part of the world just about a year ago. Here are some notes from Singapore, Hong Kong and (my favorite) Macau.

-- MDT

Labels: blogs, bribery, China, Harris and Moure

Interesting reading from the NYT via BoingBoing.

-- MDT

Labels: China, hedge fund, surveillance

20 have been let go by Siemens China operation on suspicion of corruption and it is known that Chinese authorities have interrogated at least one Siemens employee. Another person, a hospital employee, has also been arrested.

-- MDT

Labels: bribery, China, Siemens

Details at China Tech News...

-- MDT

Labels: bribery, China, KPMG, Siemens

Documents unsealed by a Delaware court this week revealed Gary Min, a former research chemist with Dupont, was convicted back in November '06 of stealing trade secrets from his former employer. Min had been with Dupont for ten years before leaving to join polymer maker, Victrex, which has offices in the U.S., Europe and China.

In the two month window of Min's (secret) acceptance of his Victrex position and actually leaving Dupont in December '05, Min downloaded or viewed about 40,000 documents from Dupont's internal library - 10 % of Dupont's entire library, making him the number one user, with 15 times more activity that the next nearest employee.

Not being blithering idiots, Dupont took note of this and informed the Feds as well as Min's new employers at Victrex. Dupont also retained investigators to look into Min's behavior. At his home they found garbage bins stuffed with Dupont docs and subsequently more documents were discovered on his personal computer.

In February '06, when his home was raided by authorities, Min was caught in mid-shred and taken in for custody. Court papers have suggested that Min's motive in all this may have been related to a demotion he received at Dupont shortly before accepting the Victrex position...

Definitely check out the full story on Min, here, as the above summary just doesn't do justice to all the twists and turns of the tale. We'll keep an eye out for sentencing info on Min and post it here when it is available

-- MDT

Labels: China, Dupont, espionage, Gary Min, trade secrets, Victrex

Most folks who end up at the Daily Caveat, I understand. IP addresses show upon a regular basis from the SEC, the New York Attorney General's Office, major law firms, investigative firms, etc. These I get. However, how and why someone ended up at The Daily Caveat based on the search phrase "suppliers of hickory handle for hammer in china" leaves me more than a little mystified, I must confess.

I guess I'll have to do the search in BIG G myself to find out.

-- MDT

Labels: China, Google, hickory hammer handles, keywords, mystery

This story was actually breaking while I was in China just a few weeks back. More than 100 investigators are currently on task in Shanghai delving into the scandal surrounding ousted, Chen Liangyu, Shanghai's ranking Communist party official. At issue are suspected missapropriations from China's $670 pension fund to make illegal loans and investments. Scandal? For sure? Politics as usual? Why yes indeed. Read on in this Independent article to find out how all this fits into President Hu Jintao attempts to consolidate power.

-- MDT

Labels: China

Good stuff here, from Dr. Lee Weidong.

Makes me nostalgic for the South China Morning Post, or WSJ Asia. And Dim sum...oh yes, dim sum.

-- MDT

Labels: China

Hong Kong left behind, we're currently hidden away at the southern end of Coloane Island, one of three major islands making up the former Portuguese colony of Macau, situated just of the coast of China and only hour ferry ride from our last berth on the Kowloon side of HK.

Macau is now independent but retains a great deal of its colonial architecture and character. In rambling about the hilly, narrow streets of old downtown you run across plazas (or more acurately, largos) that closely resemble the squares, and fountained alcoves of Barrio Santa Cruz in Sevilla, Spain (apologies, as my travels haven't led me to Portugal yet, so this would be my closest first-person comparison). Standing close upon these squares (and European-style churches, government buildings, etc.) we found a bustling array of Chinese adn Maccanese shops and foodstalls as well as high-fashion joints selling fancy furniture and country club attire.

Curiously, the place feels much more overly Chinese than Hong Kong, which we found more akin in feel to sea-side New York City or London, with global brands dominating everthing almost completely except dcuisine . The one thing that thoroughly places Hong Kong culturally is food, where local, dodgy looking noodle and dumpling shops compete cheek and jowl with all the big international chains. However, that said, I can confess to having been the only foreigner in a crowd of enthusiastic locals grabbing a quick bite at a conveniently located KFC. DON'T JUDGE - I was desperate. And fried chicken is good in any language.

Macau is also a more hopping gambling locale than Las Vegas, with some $6 billion spent here on gaming last year. The country is currently going through the family-friendly, mega-resort changes that Las Vegas has already experienced, with twins of popular Vegas attractions like The Sands, The Venetian and The Wynn popping up alongside local joints like The Golden Dragon or the Lisboa. You can also take in the dog track, go-karting, Grand Prix racing or the new Fishermans' Warf complex, which, with the paint not even yet dry, feels like a Disney attraction - an Epcot Center for Asia with mini versions of ancient Egypt, a volcano, Portugal, New Orleans and Miami (how these particular locations came together, I'll never know - continental drift, perhaps?).

Frankly, I love it here. Macau is the most charming spot I've seen accross three countries and ten thousand miles or so of travel. Getting around the islands is easy, the people are generous and kind, the scenery - both urban and rural - is amazing; the food, exceptional. And today, I (poorly but enthusiastically) winged 120 golf ball into the Ocean, walked on a black sand beach and also, found a family of wormy, germy, bedraggled beach cats with which to be friends. These are things vacations are made of...

Catch you again back in Hong Kong.

-- MDT

Labels: China, Macau, travel

So says the Christian Science Montitor by way of The Stalwart:

"A recent Ministry of Science study of 180 PhD candidates in China found that 60 percent admitted plagiarizing, and the same percentage admitted paying bribes to get their work published."

More here.

-- MDT

Labels: China

Interesting.. For Blackberry, one IP fight done and another just begun?

Via The Globe and Mail:

China's got RedBerry - Cheaper rival hits the market on eve of RIM's long-delayed debut

By Geoffrey York & Simon Avery
The Globe and Mail
April 11, 2006

On the eve of its long-delayed China launch, BlackBerry is facing a sudden challenge from a cheaper Chinese rival called, unapologetically, RedBerry.

The new service, aimed squarely at BlackBerry, was launched this month by China Unicom Ltd., the state-controlled telecommunications giant that ranks as China's second-biggest mobile operator.

The new RedBerry service could pose a major challenge to Research in Motion Ltd., which is planning to launch BlackBerry in China by the end of next month. Its China launch has been delayed by two years of negotiations and regulatory obstacles, and RedBerry has now been introduced ahead of it.

China Unicom left no doubt that it is brazenly attempting to capitalize on BlackBerry's global fame. "The RedBerry name extends the vivid name of BlackBerry that people are already familiar with, and it also combines the new red symbol of China Unicom," the company said in a press release.

China Unicom spokesmen refused to comment yesterday on whether they expected any disputes over trademark infringement. RIM did not respond to requests for comment made through its New York-based public-relations firm...

More here.

-- MDT

Labels: China

An interesting CNNMoney article on the ever-growing international market for corporate P.I. services. Featured in the article are fellow investigator-bloggers, Fortress Global.

U.S. private eyes are snooping in China

By Parija Bhatnagar, CNNMoney.com staff writer
March 16, 2006: 4:51 PM EST

Not all U.S. companies are bemoaning the potential for fraud that comes with doing business in China. Corruption is a good thing for the growing number of private eye firms setting up shop in the Far East. New York-based private investigations firm Fortress Global has been in China for less than two years but the region already accounts for up to 30 percent of the company's international business. Besides China, Fortress Global also has offices in South Africa, London and Canada.

"Many U.S. companies are looking to do business in the Far East, predominantly in China, and they're retaining our services to make sure that they won't lose money down the road," said Donald Leo, vice president of Fortress Global's operations in Asia. Leo said the nature of the firm's investigative work in China typically pertains to intellectual property and copyright violations, as well as vetting local business partners for joint venture proposals.

A typical background check involves investigating for any record of criminal activity either in China or in the United States, said Leo. "We also see that there are no U.S. sanctions imposed against the local company, or even if the company was cited by the Federal Trade Commission for shipping violations in the past," Leo said...

More here.

-- MDT

Labels: background checks, China

Via the Epoch Times:

Former Bank Director Embezzled 400 Million Yuan

The Epoch Times
Mar 11, 2006

A financial scandal occurred again recently in Heilongjiang branch of the Bank of China, According to the latest issue of Finance (Caijing) magazine, Hu Weidong, former director of Simalu sub-branch, Heilongjiang branch, Bank of China, colluded with a local private enterprise, and wrote 96 bank drafts with a total amount of 914.6 million yuan (US$113.6 million) to the enterprise in two years. To date, 432.5 million yuan ($53.7 millon) has not yet been repaid. All the suspects have been caught.

This is the second scandal in China's banking system since 2005. In the previous one, Gao Shan, director of Hesong Street sub-branch, Bank of China in Harbin City of Heilongjiang Province, embezzled more than one billion yuan ($124 million) of enterprise deposits...

More here.

-- MDT

Labels: China, GAO

Or so claims the U.S. trade representative in conjunction with President Bush's upcoming visit to China.

Via The Seattle Times:

Inside China's teeming world of fake goods

By Kristi Heim
Seattle Times business reporter
February 13, 2006

...Counterfeiting has become deeply entrenched in China's economy as a source of income for both small-time hawkers and powerful local tycoons. With millions of jobs dependent on the counterfeit trade, many in China think cracking down would mainly benefit foreign companies. While authorities recently have strengthened anti-piracy laws, economic and cultural forces will make change slow and difficult.

The U.S. trade representative claims that 90 percent of virtually every form of intellectual property in China is pirated. (Intellectual property includes copyrights on creative works such as music and software, patents on inventions and formulas, and trademark for logos.) China was the source of two-thirds of all counterfeit goods seized at U.S. ports in 2004.

U.S. and other foreign companies complain they are losing billions of dollars as their ideas and inventions are copied for sale within China and for export across the globe...

While the U.S.'s diplomatic visit makes it clear that there are some macro-level issues involved in China cleaning up it's act in profiting from pirated goods, there are also micro level tacits that savvy companies can employ to frustrate would-be pirates. Retaining the services of with corporate investigative firm is one, often useful, course of action. We often work in concert with attorneys (both in-house and outside counsel) seeking to file cease and desist motions, establish relevant jurisdictions and identify infringements abroad.

Check out the full SeattleTimes article here.

--MDT

Labels: China

Tang Wanxin, founder of China's D'long conglomerate, which was once China's largest stockholder is going on trial for various alledged illegalities. Wanxin first fell into trouble in 2004 when creditors began demanding repayment of laons for which Wanxin had pledged equity in various companies in collateral. Up to ten others, including Wanxin's brother Tang Wanli, may also face charges in the alledged fraud. The China Standard has further details.

-- MDT

Labels: China

And one more from the IHT...how the market for hedge funds continues to change. Both in the U.S., and in Europe as this article illustrates, hedge funds are opening their doors to the average investor. The question is, do these folks know what they're getting into:

Funds: This club is no longer exclusive

By David Clarke

Bloomberg News
TUESDAY, JANUARY 10, 2006

Hedge funds, loosely regulated investment pools designed for people worth more than $1 million, are becoming available to Europe's not-so-rich. In Germany, investors can buy into a hedge fund from Deutsche Bank for as little as E124, or $150. In Britain, individuals are able to avoid restrictions on such investing by buying shares of funds that track hedge funds. Regulators in Britain and Spain are considering opening the industry to more individual investment.

Hedge funds worldwide have more than doubled their assets since 2000 to about $1.1 trillion, according to Hedge Fund Research in Chicago. They tend to take larger bets than conventional funds, aiming to make money in falling as well as rising markets. For Europeans, hedge fund investments may lift returns. Over the five years through November, the CSFB/Tremont hedge fund index advanced 48 percent, compared with a 2.4 percent return for the MSCI world index during the same period.

The funds can also be risky. The Bailey Coates Cromwell Fund, in London, which had about $1.3 billion at its peak, closed in June after losing 20 percent of its value. Severn River Capital Management, a hedge-fund manager, said last week that it would close its two funds and return the remaining cash to investors after declining 8 percent since opening in July 2004. Eric Wood, the chief operating officer, said the principal assets of the company, which had raised $750 million from investors, were the office's two phone systems.

Such troubles are not deterring hedge funds in Europe. Germany introduced new rules allowing asset managers to sell them to individuals in 2004, though advertising is prohibited. At the DWS fund management unit of Deutsche Bank, individuals can invest in the Hedge Long-Short Equity Market Neutral Fund and Hedge Long-Short Equity Opportunistic Fund for as little as E124.

Jan Viebig oversees the funds at DWS, based in Frankfurt. In the Market Neutral fund, Viebig keeps his bets on rising and falling stocks, so-called long and short positions, equally weighted. His Opportunistic fund can wager on rising markets by bulking up on long positions, or on a falling market by taking on more short positions. In a short sale, investors borrow a stock and sell it on the expectation they will be able to buy the shares back in the future at a lower price, pocketing the difference. Viebig currently is betting on rising stocks, expecting economic growth in China and India to lift shares.

Both his funds gained more than 16 percent last year, buoyed by a decision to sell short the stocks of U.S. homebuilders like Toll Brothers starting in July. His expectations that rising interest rates would reduce home sales proved true. Shares of Toll Brothers, based in Horsham, Pennsylvania, fell 32 percent in the second half of 2005.

The volatility of hedge funds has kept regulators like the Financial Services Authority in Britain from allowing the funds to be sold directly to individuals. Fund companies like Pacific Alternative Asset Management of Irvine, California, also are wary of selling hedge funds to individuals. "There are problems with understanding the products," said Stephen Oxley, who runs the European arm of Pacific Alternative Asset Management.

In the United States, the Securities and Exchange Commission requires that hedge fund investors have a minimum net worth of at least $1 million or an annual income of at least $200,000. Most hedge funds have a minimum investment requirement that is typically $1 million or more.

In Europe, regulators and companies aim to limit the risks by allowing investments only in a range of hedge funds, known as funds of funds. In Germany, the BaFin regulator allows such funds to be marketed while prohibiting publicity for those that invest in securities directly, like the DWS funds.

The best-performing equity hedge fund based in Europe in the 12 months ended Nov. 30 was the $210 million Polar Capital Paragon Fund, according to data compiled by Bloomberg. It is managed by Julian Barnett in London. It gained 52 percent after investing in mining companies like Xstrata, the world's biggest exporter of coal used in power plants. That stock rose 41 percent in the period.

Unlike the DWS funds, it is not available to the general public and was sold to "a small number of investors" when it was started in April 2004, Barnett said. "It has got to have clients who understand it can go up 50 percent but can also fall 50 percent," Barnett said.

The original article appears here.

-- MDT

Labels: China, John Whittier, Wood River Capital

Several great stories today. More interesting than the weekly Wells Notice rundown, in any event. So how long until one of the Law & Order series (with which The Daily Caveat's wife is thoroughly obsessed in all their incarnations) picks up this story and runs with it. Via the Sunday Times, Britain:

Russian girl at top school probed over 'hot money'

Abul Taher and Ed Habershon
October 09, 2005
The Sunday Times

A RUSSIAN teenager who was studying at an independent boarding school in Britain has had her bank account frozen on suspicion of money laundering. Tamara Platash, 18, who until last summer was a pupil at Sherborne school for girls in Dorset, was studying for A-levels when she and her mother were questioned by officers over the payment of more than £300,000 into her bank account from sources in China and Hong Kong.

When Platash — described as attractive, assertive and “a model pupil” — allegedly tried to transfer £200,000 back to an account in China, police were alerted and immediately froze the money. Dorset police questioned Irina, Platash’s mother, when she flew to Britain at the end of the summer term. Police say seven cash sums totalling £303,730 were deposited in Platash’s account over five months.

Both she and her mother, who are believed to be in Russia, are being investigated by the Assets Recovery Agency (ARA), which last week said it believed “the funds are linked to money laundering”. The police have dropped their inquiries for lack of evidence.

“We could not prove where exactly the money had come from or where it was going,” said Detective Sergeant Andrew Strong of Dorset police. “We might have been able to make more progress if we had been given more access to information in both China and Russia.”

The ARA, a government agency that pursues cases through the civil courts, has obtained a High Court order that allowed it to keep Platash’s account frozen. The agency plans to present its full case to the High Court in the near future. The burden of proof is lower in a civil court than at a criminal hearing and a judge will determine, on the balance of probabilities, whether the money is the proceeds of crime

Jane Earl, director of the ARA, said: “So far, the respondents have not put forward a convincing explanation of how these funds were acquired.” Platash is understood to be from Pyatigorsk, a city at the foot of the Caucasus mountains in the Stavropol region of southern Russia. Her mother is believed to run a travel business in the city...

...A source close to the Platash family said the money in Tamara’s account may have come from legitimate sources in China, as her mother owns businesses in that country. Platash is believed to have spent the summer in China working as a translator. Neither she nor her mother could be reached for comment this weekend...

More detail can be found in the original article on exactly how what was quite obviously Tamara's lunch money for the semester fits into Britain's overall anti-money laundering regime.

-- MDT

Labels: China, money laundering

Investigative firm, Kroll's data recovery unit, Kroll Ontrack is helping businesses crawl out form under the muck...one hard drive at a time.

Via the Minnesota Star Tribune:

Rescuing the data from the morass

H.J. Cummins
Star Tribune
Published September 11, 2005

There's still mud as thick as gumbo roux in and around much of New Orleans. But as people begin thinking beyond survival to recovery, some are wading into their businesses to salvage the records they will need to start over. Don't think muddy file cabinets. They're as outdated as the rotary phone. Think computers -- specifically, the hard drives inside them whose spinning disks are now the repository of everything from employee pay scales to customer addresses to the secret formula to the company's success.

Last week, the first of the drives pulled from the bayou muck started arriving at Kroll Ontrack, a data-recovery company based in Eden Prairie. Kroll Ontrack is a unit of Kroll Inc., which is part of risk consultant Marsh & McLennan Co., both based in New York. A crescendo of phone calls started up, too, mostly from people asking, if they get their hard drives up to Kroll Ontrack, is there any hope of retrieving anything on them?

At least one business had the bad luck of Hurricane Katrina hitting both its headquarters and its backup storage site, said Jim Reinert, senior director of software and services at Kroll Ontrack. "It was just such a huge storm," Reinert said. When those calls come in, he is in fact very encouraging. "Every case is different, but in general we expect those drives to be highly recoverable," he said. "Even if they're buried in nasty water, they are mostly recoverable."

The first thing Kroll Ontrack does is advise customers how to handle the drives: Don't try to turn on the computer. Package them like they were fine china. And don't let them dry out -- a sealed plastic bag usually does the trick. At the Eden Prairie laboratories, the drives go through diagnostics to find out how many files have survived. Much of the cleaning needs to be done in a special "clean room," where air quality, temperature and humidity are hyper-controlled. A speck of dust can disable the disks.

The company manages to retrieve part or all of almost 90 percent of the drives that come through, said Jeff Pederson, manager of data recovery operations. Floods and fires often do less damage than internal problems, such as another part of the hard drive hitting the disks, Pederson said. The files under any scrape are gone, he said. Kroll Ontrack retrieved 99 percent of the contents of two laptop drives from the space shuttle Columbia, which broke apart in its return to Earth in February 2003. The drives were found at the bottom of a lake, Reinert said. Some of the other requests coming from the Gulf region involve recorded tapes, still the most common form of backup, Pederson said.

One credit union got its tapes safely out of New Orleans, he said, but then had to bring them to Kroll because it didn't have the equipment to run them. Kroll Ontrack transfers the recovered files to CDs, DVDs or external hard drives. For some idea of the volume of information involved, the company explained: The typical drive comes in with about 20 gigabytes of data. It would take more than 4 million sheets of paper to cover that much material. Those sheets, in a stack, would be taller than the Empire State Building.

For a standard PC or laptop, the company charges about $100 for the diagnosis and $1,000 to recover files, Reinert said. Prices vary for more complicated drives and for batches of 20, 50 or more drives from a client company. The diagnosis usually takes a day or two. The whole process, start to finish, usually takes two to five days. Kroll Ontrack is gearing up for a jump in business because of the hurricane, though Reinert said they really don't know yet what to expect. "It could be hundreds of jobs, or thousands; it's too soon to know," he said. "But our business usually tracks with the recovery in cases like this, so we're looking at months, for sure."

The original article appears here.

-- MDT

Labels: Bayou Group, China, Kroll

The Daily Caveat loves The Standard, China's Business Newspaper. There is always an interesting article to be found. And it doesn't hurt that they get exactly what it is we do.

Check out their profile of Jeremy Kroll, heir apparent to Kroll Worldwide, the investigative firm founded by his father and perhaps the largest purveor of investigative services in the world.

Kroll Worldwide was recently sold to embattled insurance giant Marsh, but as you'll see from the article, it still remains a bit of a family business.

Wall Street's private eye

Vanson Soo
The Standard
August 29, 2005

Jeremy Kroll rolls his eyes when someone attempts to portray him as a second-generation private eye, even though his family name is as synonymous with the modern profession of risk consultancy and investigations as Pinkerton's once was with detection.

Still, the 34-year-old son of the man who founded Kroll Associates, who works under his father as managing director of global business development and strategy of the company's consulting services group, acknowledges that something akin to the film noir gumshoe spirit does run in his family.

``Back when my dad started the business, my grandma spent a week tailing a subject in her car, changing her outfit every day to make herself harder to spot,'' he says, smiling at the recollection.

``My family is full of curious people, and that has not changed.'' The patriarch, Jules Kroll, now 64, is a former Manhattan assistant district attorney who came to believe that a lot of the time and money spent prosecuting corporate crime would be better spent trying to prevent it. With that in mind, he set up the company in 1972.

Though the company was sold last year to insurance giant Marsh & McLennan, Jules Kroll remains its executive chairman. The younger Kroll, who was in Hong Kong earlier this month to visit clients, graduated in French, Italian and fine arts from Georgetown University in Washington, DC, the same school where his father got his law degree.

A family man, he's the eldest of four children; his sister, Dana Kroll, also works at New York headquarters as an associate managing director. In nine years with the firm, Jeremy Kroll has risen from investigator in the areas of corporate intelligence and due diligence to head of a division with more than US$500 million (HK$3.9 billion) in annual revenue.

If Kroll Associates enjoys some cloak-and-dagger mystique, it's probably because of the large number of ex-police, military and intelligence officers Jules Kroll originally hired to lend his new company credibility.

Nowadays, its recruits are just as likely to be computer nerds, lawyers, accountants and investment bankers. The company has spread far beyond its beginnings in investigative and security services. Today, its four primary business segments are consulting, corporate advisory and restructuring, background screening and technology services.

"Technology is a big growth area,'' Jeremy Kroll says. "Computer forensics is a major weapon in our arsenal.'' The company glories in its reputation as "Wall Street's private eye,'' a firm that multinationals, and on occasion even the US government, are comfortable entrusting with their most sensitive affairs.

It burnished its reputation in the early 1990s, successfully tracking down millions of dollars of assets concealed by political outlaws like Jean-Claude Duvalier of Haiti, Ferdinand and Imelda Marcos of the Philippines, and Saddam Hussein of Iraq. Less glamorous, but probably more typical of the way Kroll earns its bread and butter, is its mandate, bestowed in 2002, to restructure Enron, the fallen angel of the US energy business.

Kroll booked US$900 million in turnover last year and currently employs more than 4,000 people in 65 offices worldwide. Kroll files says the company's security work revolves mainly around emerging markets. ``In some industries, such as oil and energy, there is a need for companies to be in `bad neighborhoods' where it's dangerous to business.''

Does that include China? Not really, he says. If China were considered that dangerous, he adds, would Yahoo! ever have invested, as it did recently, US$1 billion (HK$7.8 billion) to acquire a 40 percent stake in Alibaba, a narrowly focused Internet outfit in a speculative industry that last year earned just US$46 million?

``Overall, we have seen a maturing view of Greater China over the past five to 10 years, as experience and confidence have increased,'' he says. Though in earlier years, China may have been just another bandwagon on which globetrotting companies were expected to jump, it has since moved up the charts to become an integral part of many global strategies.

With that, the level of risks has risen proportionately. ``We get daily phone calls from American and European companies about troubles that are threatening their joint ventures in China,'' Kroll says. The China concerns of Kroll's clients today fall very broadly into three categories - transactional risks, regulatory risks and operational risks. Transactional risks relate to joint ventures and partnerships.

Regulatory risks are those inherent in a company's dealings with Chinese authorities, and operational risks involve issues like technology, supply chains and general ambiguities associated with doing business in the mainland, for example, intellectual property protection.

Kroll also advises on political and societal risks that tend to become more important for companies as their mainland roots deepen. "Kroll helps clients understand their markets a lot better, and to recognize that China is becoming an influential player in the global marketplace,'' he says.

Financial institutions are also rushing headlong into the mainland but many are plagued by doubts about their clients - as basic, in some cases, as whether they are real or fictitious. "The real ownership structure of a company and who's behind them are issues that must be dealt with.''

Establishing title is a major headache for real estate investors. Shell companies abound, and it is often unclear just who owns what. I ask Kroll what, after a decade in the company, is his most memorable experience? Surprisingly, it has nothing at all to do with catching someone red-handed in a headline-grabbing scandal. "No. It's the recovery of a kidnapped child. It happened when I was in my late 20s. The feeling of returning a child safely to his family is beyond description.''

Finally, I can't help asking him if it's true, as some people have suggested, that Kroll people carry guns when they're in China. "No way,'' he says, laughing. ``The only people in the company who ever carry guns are those involved in personal security protection, but they've never been deployed anywhere in Greater China.''

That's a pretty good indication that Hong Kong and China are not all that dangerous as places to do business.

The original article appears here.

-- MDT

Labels: background checks, China, Enron, Kroll, New York AG

Via Corporate Counsel Online:

Big Business Turns to Plaintiffs Lawyers for Help: Trial skills, lower costs are winning corporations over

Tresa Baldas
The National Law Journal
07-13-2005

Though once considered a thorn in the side of corporate America, plaintiffs attorneys say big businesses are hiring them with increasing frequency to help fight their legal battles.

• For example, in Florida, personal injury lawyer Jack Scarola was the lead counsel in billionaire Ronald O. Perelman's recent $1.4 billion win in a securities fraud suit against investment bank Morgan Stanley.

• In New York, personal injury attorney Bob Clifford of Chicago's Clifford Law Offices is representing General Electric Co.'s insurance arm in the World Trade Center litigation where insurers are suing American Airlines and airport security to recoup costs paid out for damages from Sept. 11.

• And in Illinois, asbestos litigator Jeff Cooper's Chicago firm CooperSimmons, which has seen an "explosion of interest from corporations," recently formed a business-to-business, contingency fee-based litigation practice in partnership with New York's Hanly Conroy Bierstein & Sheridan.

"Corporate America is more willing now to dance with the devil -- that being your plaintiffs lawyers -- in bet-the-company cases to represent them because there is no longer the stigma that there used to be," said Scott Marrs, an intellectual property lawyer with Houston's Beirne Maynard & Parsons who helped a company win a $130 million verdict in a patent case involving a vegetable slicer two years ago.

"You would never, ever find a corporation hiring a plaintiffs lawyer 20 years ago to represent it in litigation," Marrs said. "It's a new phenomenon."

In the past, attorneys note, most business-to-business lawsuits were handled by traditional, full-service law firms that charge by the hour, as well as large defense-oriented firms with strong ties to the business community. Hiring a plaintiffs lawyer, such as a wrongful death or personal injury attorney, was considered taboo.

But that stigma has subsided, they assert, mainly because of two factors: rising legal fees, which have prompted companies to look for less expensive legal options; and tort reform, which has forced plaintiffs attorneys to get more creative with their services.

"I think that in part, this is a response to what we all see as a mounting assault on the tort system and a means by which to begin to build into our practices a safeguard against some draconian tort reform measures," said Scarola, the lead attorney in the Perelman case. "It's not business seeking out the skills of personal injury lawyers, but us going after them as a safeguard."

Scarola, a litigator with West Palm Beach, Fla.'s Searcy Denney Scarola Barnhart & Shipley, said Jenner & Block recruited him in 2001 to assist in Arthur Andersen litigation, and then in the Perelman case, both in Palm Beach, Fla. He said his name came up as someone to consider as local counsel.

Jerold Solovy, chairman of Chicago-based Jenner & Block, recalls bringing Scarola on board. He said that calling on a personal injury litigator to handle a complex business matter didn't concern him.

Instead, he saw Scarola's trial experience as an asset. "What you want is somebody who can try cases. Mr. Scarola knows how to try cases. That's why we picked him," Solovy said.

READY FOR THE JURY

Scarola said that in recent years he has seen a growing reliance upon lawyers with personal injury skills to present business matters before juries. Of course, he speaks from personal experience.

In the Perelman case, Scarola said he had to simplify complex business concepts before the jury and show how Morgan Stanley covered up the failing finances of Sunbeam Corp. so Perelman would sell his Coleman camping-equipment company to Sunbeam in exchange for cash and Sunbeam shares. Accustomed to explaining complicated medical procedures in his personal injury cases, Scarola said he was prepared for the challenge.

Scarola's tactics worked. The jury in May hit Morgan Stanley with $850 million in punitive damages and $604.3 million in compensatory damages. Coleman Parent Holdings v. Morgan Stanley, No. 2003 CA 005045 AI (Palm Beach Co., Fla., Cir. Ct.).

Attorneys for Morgan Stanley include Mark Hansen of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington and Joseph Ianno of Carlton Fields' West Palm Beach office. Neither was available for comment.

While many attorneys agree that corporations are turning to the plaintiffs bar, they don't agree on why.

Michael Slack, managing partner at Slack & Davis, a personal injury and wrongful death firm in Austin, Texas, said it is not that tort reform is driving plaintiffs lawyers to big companies, as some suggest, but that big businesses are chasing plaintiffs lawyers.

"I think somebody held a business conference somewhere and said, 'You know what, we're not being very smart about shopping for legal services if we're not hiring contingent fee-based plaintiffs lawyers," Slack said. "We were chuckling about it in-house the other day ... where it seems the inner circles at businesses are now saying, 'The same people that we've been bashing in the tort arena are our new best friends.'"

Slack said that in recent months, his personal injury firm, which deals mainly with aviation accidents and pharmaceutical cases, has been inundated with phone calls from businesses seeking contingent fee-based legal services.

"We've had more inquiries in the last six months than we have had since this firm was established," said Slack, who is planning to hire a top commercial litigator to handle this new demand for litigation services. "All of a sudden, the negative connotations that have been directed to contingent-fee lawyers over the last decade seem to have been overcome."

Then again, some plaintiffs firms find they are not up to the challenge.

Patent attorney Fred Tecce, who specializes in contingency fee-based commercial litigation, said he has seen plaintiffs attorneys cutting in on his turf in recent years.

"From what I've seen and know from talking to some of my clients, they're seeing an uptake in med-mal guys who are worried about tort reform," Tecce said. "A lot of these med-mal guys are trying to fashion themselves and repackage themselves as business-to-business litigants. But I don't mind the competition at all."

Tecce of McShea & Tecce in Philadelphia noted that in the last few years, he's picked up four referrals from plaintiffs law firms that took a shot at commercial contingency fee cases, but found out they couldn't handle them.

"If these guys take these cases, they take one of them. They get burned. And I end up getting referral work," Tecce said.

CONTINGENCY FEE APPEAL

Marc Moller of the aviation litigation and personal injury firm Kreindler & Kreindler in New York believes mounting legal fees are leading companies to plaintiffs firms that operate on a contingency fee basis.

Moller's firm is currently handling five business-to-business cases, and has settled another five in recent years.

"[Contingency fees] are very attractive for companies that are trying to control their litigation costs," Moller said. "A contingent fee lawyer only gets money if he wins."

He added that this fee makes lawyers more picky in the cases they decide to take. "There's a higher premium on winning if you're only going to get paid if you win," he noted.

Jim Beasley, managing partner of Philadelphia's Beasley Firm, which handles many products liability claims, noted that his firm represents many small businesses that have problems with Fortune 500 companies. He said the contingency fee model helps small companies that want to sue other companies, but can't afford to.

"It gives them the same key to the courthouse that a poor person would have," said Beasley, adding that contingent fee billing is also more efficient. "If you run on a contingent fee model, you know that attorneys representing you are going to be efficient. They're not just here to bill, they're here to work."

IT'S THE BIG VERDICTS

But defense attorney Levi McCathern of McCathern Mooty in Dallas believes corporations are selling themselves out to the plaintiffs bar. He argues that plaintiffs attorneys are winning businesses over because of the lucrative verdicts they get.

Companies are impressed with these big verdicts, he said, so they're willing to hire plaintiffs attorneys to take on their big cases.

"I just think they'd be better served by using the defense bar," McCathern said. "Commercial litigation has long been the work of the defense bar. But not anymore. ... I've seen it go south."

McCathern also questions plaintiffs attorneys' motives in helping corporate America.

"Sometimes most of the good plaintiffs attorneys are what I call true believers -- they really believe that corporations are the evil empire that control the country," McCathern said. "It's interesting to see them get on their side and work these kinds of cases. I certainly think that tort reform has placed them in that position."

There's no denying that, contend several plaintiffs attorneys.

"There's no questions that this business model can help firms become tort-reform proof," said Cooper, whose Chicago firm started the business-to-business litigation practice two months ago.

Since then, he said the firm has received more than 200 phone calls from companies of all sizes looking for legal representation. He said the stigma of hiring plaintiffs lawyers appears to be over.

"One CEO we spoke to in his office said, 'Having you guys in my office is like Nixon going to China,'" Cooper said. "We're seeing a loss of that stigma. When we first entered, we thought we'd have to sell a lot harder, and that hasn't been the case."

He said further, "There's a niche in this market that we're able to fill, and I expect other plaintiffs firms to do this."

Despite plaintiffs lawyers' claims that corporations are warming up to them, officials at many companies declined to comment for this story.

Officials at Industrial Risk Insurers, General Electric's insurance arm in the World Trade Center litigation against American Airlines, declined comment on why they picked Clifford as counsel.

The original article appears here.

-- MDT

Labels: China, Morgan Stanley, New York AG