Cisco Investigating Former Staff in China for Taking Part in ‘Self-Enrichment’ Scheme

February 22, 2021 Updated: February 22, 2021

U.S. tech giant Cisco Systems is investigating its former employees in China for allegedly taking part in a “self-enrichment” scheme, the firm wrote in a recent filing to the SEC (Securities and Exchange Commission).

“Some of those employees are also alleged to have made or directed payments from the funds they received to various third parties, including employees of state-owned enterprises,” the filing stated.

Cisco Systems, a San Jose-headquartered company, entered the China market in 1994 and has about 4,000 employees, spanning sales, customer service, research and design, and manufacturing, according to Cisco Systems China’s official website.

The company didn’t provide details about the amount or the method that these former employees used to pay the Chinese firms.

“We take such allegations very seriously and we are providing results of our investigation to the DOJ (Department of Justice) and SEC,” the filing stated.

In an email, a Cisco spokesperson said that the firm could not elaborate beyond the details of the SEC filing due to the ongoing investigation. 

In China, doing business often requires building “guanxi,” or social networks and relationships with influential people that can facilitate business and other dealings. That often includes developing “guanxi” with senior government officials and local powerful businesspeople.

The practice has facilitated the widespread phenomenon of bribery and graft. In recent years, the Chinese regime has sought to crack down on such corruption, with many Chinese officials being sacked or punished for bribery crimes.

In an ironic example, Liu Jianye was the former director of Maanshan city’s anti-corruption bureau in eastern China’s Anhui Province.

According to authorities’ official announcement, Liu’s wife was hired by a local businessman surnamed Chen, for a job that earned a high salary from 1996 to 1998. But she didn’t do actual work. In exchange for giving his wife a lucrative job, Liu helped Chen to win contracts by launching “anti-corruption” investigations into Chen’s rivals.

Liu was sentenced to 10.5 years in prison on Dec. 31, 2020.