China attorneysIn China to Charge Three Australian Crown Resorts Executives The Wall Street Journal (Wayne Ma) reports that Chinese authorities will be pursuing criminal charges against at least three employees of Crown Resorts Ltd., an Australian gambling company. The article states that three Australians — among 18 people initially detained last month — remained in custody in Shanghai and …. [that one] of the Australians detained was Jason O’Connor, vice president of Crown Resorts’ international VIP operations. The status of the other 15 taken into custody is not clear.

As noted in the article by Peter Humphrey, who himself served time in a Chinese prison for alleged violations involving corporate investigations, “after someone has been charged, ‘the chances of getting them out have diminished by several times,’ said Mr. Humphrey, who maintains his innocence. ‘Whoever laid these charges now has a political stake in making them stick,’ he added.”

The kicker in all this actually comes from a quote by co-blogger Steve Dickinson in this Bloomberg article:

“In the old days, people would insist to me that the only risk was deportation. This is no longer the case,” said Steve Dickinson, a lawyer at Seattle-based Harris Bricken, which produces the China Law Blog and has advised companies in the gaming sector. “Foreigners can expect to be treated exactly like Chinese nationals.”

And here’s the thing about the Crown case: the Chinese government had for some time been signaling its intentions:

Under Chinese law, casinos aren’t allowed to promote gambling in China. Organizing a group of more than 10 Chinese nationals to go to casinos overseas also is a crime.

Overseas casino operators sidestep that ban by marketing only their hotels and entertainment in public promotions.

The detainments appeared to be foreshadowed last year in comments made by Hua Jingfeng, deputy chief of China’s Ministry of Public Security.

Mr. Hua told reporters that his department was investigating a “series of cases” involving foreign casinos in China.

“Overseas, a few countries are treating our country as a big marketplace,” Mr. Hua said, adding that he was aware overseas operators were establishing offices in China with the goal of luring citizens abroad to gamble.

Eight months later, Chinese authorities arrested more than a dozen South Korean casino managers and a number of local agents allegedly for the practice.

Why should you not look away from this post if you are doing business in China? Because it is vitally important to you and to your company that you understand that China will arrest and imprison foreigners and that it has only become increasingly willing to do so.

In a post we wrote back in 2014, China’s Anti-Corruption Drive. What Next? we mused about China’s then nascent anti-corruption drive what it all might mean, and we noted the following:

  • China is serious about corruption and it is starting with the pharmaceutical industry because corruption is so entrenched there. China is going after both domestic and foreign companies, but we are just hearing more about the foreign companies. This is just part of China’s desire to reduce corruption because the Chinese people are really sick of it.
  • Nobody really knows where and when the Chinese government will strike next when it comes to corruption. We all just know that it is striking a lot more often than it used to and striking against a much more varied list of companies (the smaller foreign companies that have gotten hit have for the most part managed to stay out of the news).
  • If you are a foreign company doing business in China in an industry the government deems important or politically sensitive, you should be extra worried/cautious.

And here’s the latest rumor we are getting: China is going to start criminally pursuing those who earn income in China with  independent contractors in China and no company in China and who pay no employer or income taxes in China. For what this situation looks like, please check out my Forbes article, China’s Tax Authorities Want You (written before we started hearing of criminal implications).

So whatever you do, please don’t look away. Better yet, have a full-on audit done of your company to ensure there is nothing lurking there.

For more on the Crown Resorts case and the lessons to be learned from it for anyone doing business in China, check out Doing Something China Doesn’t Like? Don’t Go There and How To Avoid Getting “Detained” in China and Why Your Odds are Worse than you Think.

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Dan Harris

I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.