Staff Writer
Columbus CEO

c.2013 New York Times News Service

SHANGHAI — Police in Shanghai have arrested a British investigator who specialized in advising foreign investors on fraud, cheating and other business risks in China, a spokeswoman for the British Embassy in Beijing said Wednesday.

The investigator, Peter Humphrey, has been held by the Shanghai police since early July. He is managing director of ChinaWhys, a risk management consulting firm that has done work for GlaxoSmithKline, the British pharmaceutical group that is facing graft and bribery allegations in China, raising speculation that his detention might be linked to that case.

A spokeswoman for the British Embassy, Hannah Oussedik, would say only that he had been formally arrested. “We can confirm the arrest of a British national, Peter Humphrey, in Shanghai, China, on Monday, 19th August,” Oussedik said in a brief telephone interview. “We are providing consular assistance to the family.”

The Wall Street Journal, which first reported Humphrey’s arrest, said that his wife, Yu Yingzeng, was also formally arrested in Shanghai, and that the couple are both accused of illegally purchasing information about people. Oussedik could not confirm those details. Yu is a U.S. citizen. U.S. officials in Beijing and Shanghai declined to comment Wednesday.

The formal arrest means police have more time to pursue their investigation of the couple before deciding to drop the case or seek an indictment.

China’s rough-and-tumble commercial environment, in which laws and rules are often arbitrarily enforced or ignored, can make for risky work in private corporate investigations. But Humphrey, a former journalist for Reuters, had worked in the area for over a decade. He co-founded ChinaWhys in 2003, and Yu is a co-founder and general manager, according to the company’s website.

One person who knows Humphrey and who asked not to be identified said he appears to have been arrested in connection with his work for GlaxoSmithKline.

The government has detained four of the drugmaker’s Chinese executives in connection with an investigation into bribery and tax fraud. GlaxoSmithKline distanced itself from some of the former executives after investigators said the executives confessed to fraud.

Officials at multinational corporations operating in China have complained in recent weeks that the Chinese government is using law enforcement to weaken international competitors in commercial sectors where Chinese companies are not strong or have spent very little money to develop their own products.

“It’s a hugely political thing. They’re just using him as a lever to force the pharmaceutical industry to lower prices,” said the person who knows Humphrey.

The person added that although Humphrey had worked for GlaxoSmithKline, it was not clear whether Humphrey was doing so at the time of his detention last month.

The detention of Humphrey and Yu is even more politically sensitive because Yu is part of a well-connected Chinese family. She is the daughter of a prominent Chinese scientist who played a central role in the development of China’s nuclear weapons program.