Problem
A European risk consultancy company, working on behalf of their China-based client, tasked PSA to help conduct a background check. Their client wanted to rent a significant amount of office space from a local real estate firm, the staff and CEO of which were largely foreign nationals. The deal brokered and the accompanying services offered by the firm appeared to be very attractive. Before entering into a contract, however, the client asked PSA to provide more information on the real estate firm’s history.
PSA Assessment
An initial overview of the real estate firm reveals impressive credentials, with the CEO in particular claiming to be from an extremely wealthy, well-known property background overseas. However, further investigation began to reveal significant causes for concern.
PSA Solution
PSA began to dig deeper into the firm’s history, registration records, and management team. We soon discovered that the company was not legally registered in China and was operating illegally through a Chinese shell entity that had a real estate license. In doing so, the company was bypassing some significant joint-venture capital investment and taxation requirements.
The company’s three different addresses were examined in detail, with ownership records checked and each location visited by PSA investigators under a variety of guises. A complete reputational profile of the CEO was then compiled from his early childhood to the present. The profile focused in detail on the CEO’s previous work experience, current standing in China’s real estate community, and the qualifications he purported to have.
The PSA team then contacted a number of well-known companies and embassies that the real estate firm had claimed were clients. Further investigation revealed that the firm had approached many of the companies but had not signed contracts. The clients that had worked with the firm provided mixed reviews on its performance. Via discreet enquiries PSA learned that the real estate company sometimes offered clients opportunities to collude on minor fraudulent transactions.
Result
PSA advised the client that the real estate firm’s illegalities and ethical lapses outweighed the attractiveness of the deal. The client assessed the risks described in our report and ultimately entered into an agreement with a more reputable real estate company.
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