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Extortion website was ‘pressured’ by parent
Print Edition
THE boss of the business news website at the center of an extortion scandal said his actions were driven by pressure from his parent company.
Liu Dong, president of 21cbh.com, said he was under instruction from Guangdong-based 21st Century Media Co to secure advertising contracts with 70 to 75 percent of the newly listed companies every year.
As a result, Liu ordered his employees to “maximize interests.”
Liu is one of eight people currently being held by Shanghai police investigating an alleged scam in which journalists at the website extorted money from companies for positive coverage.
Also in detention is Zhou Bin, the site’s editor-in-chief, along with reporters and members of its marketing team, and the heads of two public relations firms.
They are accused of working together to extort money from more than 100 companies since November 2013, police said.
Firms that cooperated with the arrangement received only favorable coverage on the website. Those that did not were threatened with the publication of negative news reports and malicious information about them.
The list of victims includes well-known companies from Beijing, Shanghai and Guangdong, several of which are listed on the stock market.
The scam worked by identifying firms that were susceptible to media coverage, police quoted the suspects as saying.
According to Zhou, the website targeted companies that had not “established collaborative relations” with 21cbh.com, and then direct journalists to release negative news reports about them.
When the companies would later contact the site to discuss the situation, they would be told they would be more likely to receive better treatment if they signed an “advertising contract,” usually costing between 200,000 (US$32,600) and 300,000 yuan, Zhou said.
Once the payment was made, all of the negative news stories were removed from the site, he said.
Companies that declined to sign the advertising deals were made the subject of frequent “malicious attacks,” according to police.
Despite the high profile of the target companies, very few ever reported the extortion to police.
The companies paid up because they knew they had little choice, Liu said.
The firms “made concessions to avoid trouble,” he said.
Negative news reports can be very damaging to a company’s image and hinder its efforts to go public, Liu said.
Firms that regularly receive negative coverage in the press are likely to be probed by the China Securities Regulatory Commission and might be blocked from listing on the stock market.
Several journalists working on the website are being investigated for allegedly helping to conceal negative news reports about companies that had paid the protection money.
Hidden rule
According to Wang Zhuoming, one of the journalists being held, the extortion model was well known in the industry,
“Using negative news reports to extort companies is a hidden rule, and it’s a collective action,” he said.
Once a company signed the advertising deal they could relax, as the website’s reporters were told never to run bad stories about them, Liu said.
However, a single contract might not always be enough, and some firms were forced to make extra payments to ensure negative news about them remained buried, police said.
The value of the dubious advertising contracts signed with target companies was hundreds of millions of yuan, they said.
A large slice of that money was paid to two PR firms — one in Shanghai and another in Shenzhen, police said.
Tao Kai, executive director of Roya Investment Services Ltd, the Shanghai-based PR firm implicated in the scandal, is alleged to have confessed to police that his actions had damaged the media sector and professional ethics of journalism.
Under regulations set by the State Administration of Press, Publication, Radio, Film and Television, which manages the practices of all journalists in China, press credentials will be revoked in cases of media organizations acting illegally.
21cbh.com is owned by 21st Century Media, which claims on its website to be “the largest professional media operator in the Chinese financial and business media industry.”
Its publications include 21st Century Business Herald, Money Week and 21st Century Business Review.
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