BackgroundA global technology company received an anonymous whistleblower report alleging that sales staff in its Chinese subsidiary were offering improper rebates and kickbacks to secure government contracts. The headquarters’ compliance team needed to investigate in China while staying compliant with local labor, privacy, and state‑secrets rules.Challenges
- Sensitive data was stored on servers and devices located in China, subject to Chinese data regulations.
- Key witnesses and subjects were Chinese employees communicating mainly in Chinese and via WeChat.
- The company wanted to coordinate the China investigation with a potential global FCPA review, requiring careful management of privilege and cross‑border data transfers.
Our Approach
- Investigation Plan and Legal Risk Mapping
Working with global counsel, we designed an investigation plan that complied with Chinese labor, privacy, and cybersecurity laws, and considered potential regulatory reporting obligations.
- Document and Data Preservation
We assisted in legally preserving emails, contracts, expense records, and WeChat communications, ensuring that collection methods would be defensible in both Chinese and overseas proceedings.
- Interviews and Fact‑Finding in Chinese and English
Our bilingual team conducted interviews with relevant employees and third‑party distributors, carefully documenting testimony and providing cultural context to the global investigation team.
- Analysis of Deal Structures and Payments
We traced flows of funds and benefits in several high‑risk transactions, identifying patterns of excessive rebates, undocumented marketing support, and relationships with government‑affiliated entities.
- Remediation and Regulator‑Facing Strategy
We helped the client evaluate disciplinary actions, contract terminations, and control enhancements. We also prepared China‑specific input for potential self‑disclosure to foreign regulators, coordinated with international counsel.Results
- The investigation confirmed localized misconduct involving a small group of employees and one distributor, but found no evidence of systemic management involvement.
- The company took targeted remedial actions, revamped its China compliance program, and avoided more disruptive enforcement consequences.
- Lessons learned in China were incorporated into global policies and training.
Key Takeaways
- Handling internal investigations in China requires alignment between global compliance objectives and local legal constraints.
- Early involvement of China‑based counsel helps avoid missteps in data handling, interviews, and disciplinary actions.
- A well‑structured investigation can actually strengthen relationships with regulators and stakeholders.
Call to ActionIf you face allegations or compliance concerns involving your China operations, we can help you design and execute an investigation that is both effective and compliant.