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| Arrested Chinese Journalists Describe Extortion of Companies | |
| (about 2 hours later) | |
| HONG KONG — Journalists who worked for a business news website under investigation in Shanghai have described a scheme of extorting Chinese companies, which were pressed to pay in return for the production of flattering articles or the burying of damaging ones, according to reports in the state-run news media. | HONG KONG — Journalists who worked for a business news website under investigation in Shanghai have described a scheme of extorting Chinese companies, which were pressed to pay in return for the production of flattering articles or the burying of damaging ones, according to reports in the state-run news media. |
| The accusations against the site, 21st Century Net, followed the arrests of eight people last week in the case. On China Central Television on Thursday, the president of the website and several arrested reporters described how they had colluded with public relations firms to identify vulnerable Chinese companies. | The accusations against the site, 21st Century Net, followed the arrests of eight people last week in the case. On China Central Television on Thursday, the president of the website and several arrested reporters described how they had colluded with public relations firms to identify vulnerable Chinese companies. |
| China’s corporate landscape is pitted with scandals involving corruption, nepotism, bribery and false company results. The CCTV accounts from the 21st Century Net journalists added vivid detail to claims that some members of China’s news media have become a part of the problem by turning self-censorship and skewed reporting into a source of revenue. | China’s corporate landscape is pitted with scandals involving corruption, nepotism, bribery and false company results. The CCTV accounts from the 21st Century Net journalists added vivid detail to claims that some members of China’s news media have become a part of the problem by turning self-censorship and skewed reporting into a source of revenue. |
| “These kinds of problems have kicked around for a long time,” said Paul Gillis, a professor at the Guanghua School of Management of Peking University, who follows Chinese corporate and accounting problems. “As widespread as corruption can be in China, I’m sure somebody’s also figured this out.” | “These kinds of problems have kicked around for a long time,” said Paul Gillis, a professor at the Guanghua School of Management of Peking University, who follows Chinese corporate and accounting problems. “As widespread as corruption can be in China, I’m sure somebody’s also figured this out.” |
| The site’s president and the reporters said the targets were presented with a proposition: Pay up in the form of advertising orders or become the subjects of damning reports that could unsettle investors and deter regulators from approving plans for initial public offerings or restructuring. | The site’s president and the reporters said the targets were presented with a proposition: Pay up in the form of advertising orders or become the subjects of damning reports that could unsettle investors and deter regulators from approving plans for initial public offerings or restructuring. |
| “Using negative reports to extort businesses is a hidden rule of the industry,” Xinhua, the state-run news agency, paraphrased Wang Zhuoming, one of the arrested reporters, as saying. “This was collective behavior, and companies all did it, from top to bottom.” | “Using negative reports to extort businesses is a hidden rule of the industry,” Xinhua, the state-run news agency, paraphrased Wang Zhuoming, one of the arrested reporters, as saying. “This was collective behavior, and companies all did it, from top to bottom.” |
| The legal affairs office for the website and newspaper declined to comment on Thursday. Last week, the website issued a statement that it would cooperate with the police investigation. | The legal affairs office for the website and newspaper declined to comment on Thursday. Last week, the website issued a statement that it would cooperate with the police investigation. |
| Also among those arrested on Sept. 3 were staff members of two public relations companies in Shanghai. | Also among those arrested on Sept. 3 were staff members of two public relations companies in Shanghai. |
| In the broadcast, the arrested journalists did not appear to be speaking freely as they contritely described the misdeeds. The interviews, in which the journalists wore orange T-shirts, appeared to be more of the paraded confessions that have become a staple of law enforcement in China. Suspects in China often have no access to lawyers until nearly the time of their trials, and such public confessions have become a regular occurrence. But the journalists’ descriptions of corrupted coverage nonetheless rang true, said several people who follow business journalism in China. | |
| “In the Chinese financial media, there’s usually no firewall between the business side and the editorial side,” Zhao Jing, a journalist who writes regularly for Caixin, a weekly business magazine based in Beijing, said in a telephone interview. Mr. Zhao, better known by his pen name, Michael Anti, said Caixin had safeguards to deter such practices. | “In the Chinese financial media, there’s usually no firewall between the business side and the editorial side,” Zhao Jing, a journalist who writes regularly for Caixin, a weekly business magazine based in Beijing, said in a telephone interview. Mr. Zhao, better known by his pen name, Michael Anti, said Caixin had safeguards to deter such practices. |
| “There’s too much pressure for reporters to go along with business demands, and so you’re certainly going to get problems like this,” he said. “Under a business model like this, it would be very easy for soft stories or extortion stories to spread, because demand for advertising revenues determines coverage.” | “There’s too much pressure for reporters to go along with business demands, and so you’re certainly going to get problems like this,” he said. “Under a business model like this, it would be very easy for soft stories or extortion stories to spread, because demand for advertising revenues determines coverage.” |
| The 21st Century Net website operates under The 21st Century Business Herald, a broadsheet based in the southern city of Guangzhou. The newspaper is in turn operated by the Nanfang Media Group, a state-owned company. The website was spun off into a separately managed unit in 2010. The Herald and the website must, like all other Chinese news media, survive in fickle conditions that combine heavy state censorship and predominant state ownership with intense commercial competition for audiences and advertising. | The 21st Century Net website operates under The 21st Century Business Herald, a broadsheet based in the southern city of Guangzhou. The newspaper is in turn operated by the Nanfang Media Group, a state-owned company. The website was spun off into a separately managed unit in 2010. The Herald and the website must, like all other Chinese news media, survive in fickle conditions that combine heavy state censorship and predominant state ownership with intense commercial competition for audiences and advertising. |
| According to the website’s journalists, however, habitual self-censorship and the pressure for revenue turned into a business opportunity. With the help of the two public relations firms in Shanghai, the editors and journalists identified Chinese companies hoping to list on local stock exchanges or make other changes requiring regulatory approval, Liu Dong, the president of the website, said on CCTV. | According to the website’s journalists, however, habitual self-censorship and the pressure for revenue turned into a business opportunity. With the help of the two public relations firms in Shanghai, the editors and journalists identified Chinese companies hoping to list on local stock exchanges or make other changes requiring regulatory approval, Liu Dong, the president of the website, said on CCTV. |
| The website then put pressure on the companies to pay “protection money,” often in the form of advertising orders of 200,000 to 300,000 renminbi, or about $32,500 to nearly $50,000, in return for furnishing positive stories, abandoning unpublished negative reports or removing negative articles already published. | The website then put pressure on the companies to pay “protection money,” often in the form of advertising orders of 200,000 to 300,000 renminbi, or about $32,500 to nearly $50,000, in return for furnishing positive stories, abandoning unpublished negative reports or removing negative articles already published. |
| “Companies preparing to list in I.P.O.s were treated like a fat piece of meat or a cake to be carved up,” said Tao Kai, an executive director of one of the public relations firms that acted as an intermediary in the deals. | “Companies preparing to list in I.P.O.s were treated like a fat piece of meat or a cake to be carved up,” said Tao Kai, an executive director of one of the public relations firms that acted as an intermediary in the deals. |
| One of the arrested journalists, Zhou Bin, said there was no lack of companies nervous enough about their accounts and image to pay the money. Beginning in 2010, 21st Century Net took in tens of millions of dollars in advertising orders, said the reports Thursday in the state-run media, although they left unclear how much of that counted as extortion payments. | One of the arrested journalists, Zhou Bin, said there was no lack of companies nervous enough about their accounts and image to pay the money. Beginning in 2010, 21st Century Net took in tens of millions of dollars in advertising orders, said the reports Thursday in the state-run media, although they left unclear how much of that counted as extortion payments. |
| “Not every company preparing to list is fraudulent,” Mr. Zhou said in the television report. “But after all, many companies do have problems with their numbers.” | “Not every company preparing to list is fraudulent,” Mr. Zhou said in the television report. “But after all, many companies do have problems with their numbers.” |