A man walked in to a company's European headquarters and told the management he could help them do business in China. They would have to invest US$20 million in a joint venture in Hong Kong, he said, but after that, he – being very well-connected on the mainland – could negotiate on their behalf and get their business rolling.
The company, impressed by his credentials, was keen to go ahead; indeed, only the protests of the company's in-house counsel stopped it making the investment right away. So they asked a consultant to perform a basic records check, at the cost of a few hundred dollars. The consultant checked the name of the company the man claimed to represent, and found it didn't exist; called the number on the man's business card, and found it was never answered; and eventually went round to the address printed on the card. It said 14th floor. The building in question had only seven floors.
Twenty million dollars saved, there and then.
Bruce McLaughlin was working for the consultancy, affiliated to a major law firm, at the time, and has since been inspired to launch his own company, Sinogie, precisely because of stories such as this. Sinogie is in part a market research enterprise and a method of finding good business partners, but is also an agency for corporate investigation, particularly in China. The fact a business such as McLaughlin's is needed and even can thrive says something about the nature of modern due diligence by western companies in their dealings with Asia; but in fact, far from the trilby-and-macintosh mystique of a Kroll or a Pinkerton, McLaughlin says his business model is based on common sense.
"People seem to think that China is different: that you can't find anything out, there's no information available, and you have to take everything at face value," he says. "Some random guy will come to them and say: 'make an investment with me, I'll fix everything for you, I've got the connections'. And they'll believe this. Then he'll say: 'you can't check things out, it's different in China, you don't understand'. And it's not. It's the same as everywhere else: there are people out to rip you off, just as there are people out to do sensibly good business. Nobody seems to bother to find out whether people are out to rip them off or not, and that's why I'm there."
McLaughlin has seen people make investments in companies that don't exist, form JVs with people they will never see again once they have written the cheque, and pour millions into sectors whose regulation they do not understand. But the simplicity of checking things out is what makes Sinogie a compelling story. "This is a Communist country that's been a planned economy since 1949 – I mean, they really keep records." One can question the accuracy of local financial record keeping but it is reasonably straightforward to find out who owns a company, who has the scope to make decisions for it, what it is registered to do and whether it actually exists. More detailed searches are also available at a higher fee.