News reaches me that Publicis Groupe has raided one of its most important marketing services outlets in China, after corrupt practices came to light.
Betterway/Publicis Dialog, the outlet in question, is China’s largest field marketing network, with offices in Shanghai, Beijing, Chengdu and Guangzhou.
The company is said to have raided its subsidiary last week and to have sent all staff home. Arrests are rumoured, but unconfirmed.
The driving force behind Betterway is CEO York Huang, a former Procter & Gamble executive, who joined the company in 2001. In 2006 PG acquired an 80% stake in Betterway. Huang and junior partner Jenny Zhang remained minority stakeholders.
Two years ago, PG claimed Betterway had 346 full-time employees and 15,000 part-time staff operating in over 100 cities. Principal clients include Wrigley, Kraft, Microsoft, J&J, L’Oréal, Coca-Cola and Samsung. Betterway won a substantial contract from China Mobile and China Telecom to represent them at the high-profile 2010 Shanghai Expo.
What has gone wrong? It seems that despite the Chinese marketing services economy growing at over 10% a year, some just can’t get their hands on enough money. The speculation – and I stress that it’s no more at this stage – is certain senior Betterway executives created a ‘shadow’ agency which then pumped revenues into Betterway in order to inflate revenue, and thereby substantially boost their earnouts.
Publicis has had problems dealing with corrupt practices in its Chinese operations before, of course. Readers of this blog may recall that, in September 2010, it fired Vivaki Exchange’s chief executive Warren Hui and general manager Ye Pengtao .
More on the Betterway story when I have it.