Chinese E-Retailer JD.com Faces Trouble as CEO’s Arrest Draws Attention

By Annie Wu, Epoch Times
September 6, 2018 Updated: October 8, 2018

The CEO of one of China’s largest online retailers, JD.com, was arrested in the United States recently on rape charges—and the ugly repercussions for his company are now beginning to take shape.

Richard Liu, through his lawyer, has denied any wrongdoing. He was arrested by police in Minneapolis, Minnesota, then released from custody on Sept. 1. Liu has since returned to China. Minneapolis police are still investigating the case.

In the two days of trade since Liu’s arrest, JD.com, which is listed on the Nasdaq stock exchange, has lost $7.2 billion or 16 percent of its market value.

Several U.S. law firms have also announced that they would be investigating legal complaints on behalf of JD.com investors.

Rosen Law Firm based in New York City said in a Sept. 4 press release that it is preparing a class action lawsuit “to recover losses suffered by JD.com investors,” on the basis of  “allegations that JD.com may have issued materially misleading business information to the investing public.”

Pomerantz, also based in New York City, said in its press release that it is investigating claims of “whether JD and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices.”

The California-based Schall Law Firm’s announcement said that the firm would investigate whether JD.com had committed securities fraud.

All three firms mentioned the fall of JD.com share prices upon news of Liu’s arrest in Minnesota during the early hours of Sept. 1. A request to the three firms for further details was not returned.

Meanwhile, company rules that give Liu tight control have raised concerns that it would be difficult for the board to make any decisions without him present.

Liu owns about 16 percent of JD.com’s stock. But his power is amplified by weighted voting rights that give him nearly 80 percent of the company’s votes. In addition, JD.com rules prohibit the board from making binding decisions unless Liu is present, either in person or by teleconference, so long as he is a director.

Jacob Williams, corporate governance manager for the Florida State Board of Administration, which oversees pension assets including about 158,000 JD.com shares, told Reuters that Liu’s control over the company means there is more risk for outside investors when problems crop up.

“It really does create restrictions for minority shareholders in terms of what options we have available,” he said, such as making it harder to remove the CEO or change directors.

Little would change unless larger JD.com shareholders weigh in, Williams said.

New Details

Although state media have kept quiet on Liu’s case and even removed their initial reports on his arrest, other Chinese media have been abuzz with new details.

Previous media reports, including from local U.S. media, said that Liu was in the United States to attend a PhD course in business administration at the University of Minneapolis.

Several Chinese media, including the Hong Kong-based Phoenix TV, have since cited someone familiar with the incident, who gave additional information about what happened prior to Liu’s arrest:

On the evening of Friday, Aug. 31, Liu went to a private dinner at a local restaurant. The alleged victim, who was sitting beside Liu and was the only woman among the ten people in the party, is a Chinese student and model attending the same university.

After the diners consumed 32 bottles of wine late into the night, Liu offered to drive the alleged victim back to her apartment.

Soon after, the alleged victim called the police to report that she had been raped, according to the source.

Special Treatment

Liu is known to be a vocal advocate for the Chinese Communist Party. He is a member of a national political advisory body, the Chinese People’s Political Consultative Conference.

The Chinese regime has been paying close attention to Liu’s case. Chinese Foreign Ministry spokeswoman Hua Chunying said in a Sept. 3 press briefing that the Chinese Consulate General in Chicago was keeping an eye on the case, and was in contact with the relevant U.S. organizations for updates on the situation. It is rare for Beijing to take such public interest in the fate of a Chinese businessman overseas.

Epoch Times staff member Nicole Hao and Reuters contributed to this report.

Follow Annie on Twitter: @annieeenyc
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