Police investigate reporters, PRs' alleged extortion

An alleged scam in which journalists at a prominent business news website extorted money from companies for positive coverage is now under investigation.

The case involves eight people including journalists, media heads, marketing staff and public relations heads, all of whom have been detained by police.

Police say business news website 21cbh.com and two public relations firms collaborated to extort money from companies in return for favorable coverage and withholding negative news reports on the site. If companies refused, the website would purposely publish negative or malicious information about the company.

They include Liu Dong, president of 21cbh.com, Zhou Bin, the website's editor-in-chief, and reporters and employees of its marketing department, as well as heads of the two PR firms. Together, they have extorted money from more than 100 companies since November 2013, said police.

The list of victims covers many listed companies and famous enterprises from Beijing, Shanghai and Guangdong that are planning to go public, restructuring or making a business transition.

Confessions of the suspects show "too many companies" were 21cbn's victims, but only a few reported it to police.

Having identified these companies as particularly susceptible to media coverage, the suspects targeted them in the name of news reporting. After the companies handed over "huge payments," 21cbh.com released positive stories with exaggerated content about them, police said.

For companies which declined the suspects' solicitation, 21cbh.com published "malicious attacks" on them or the suspects demanded money to ensure the negative stories did not see the light of the day, said police.

The journalists are also suspected of helping to rebut or conceal negative news reports on companies that paid up.

Zhou used to target those companies that had not "established collaborative relations" with 21cbh.com and direct journalists to release negative news reports about them on the site.

When the companies involved came to 21cbh.com themselves or through a PR firm, the website would charge 200,000 to 300,000 yuan (32,500 U.S. dollars) in the form of advertising contracts, in exchange for deleting the negative reports from the site, Zhou said.

These companies were forced to pay in order to "make concessions to avoid trouble," said Liu, the website's president.

Negative news reports harm a company's image and hinder its effort to go public, as China Securities Regulatory Commission would investigate the company or even revoke its listed qualification, Liu said.

Wang Zhuoming, another suspect and a reporter of the website, admitted, "Using negative news reports to extort companies is a hidden rule, and it's a collective action."

They are also under pressures from their parent firm, Guangdong-based 21st Century Media Co., Ltd, who requires the website to sign advertising contracts with 70 to 75 percent of the newly-listed companies annually, said Liu, who also demanded his subordinates to "maximize interests."

He also asked reporters not to cover negative news on the companies that had signed advertising contracts with the website. However, some of the companies were still forced to increase advertising payment after negative news about the companies were again deliberately disclosed.

Police said as of 2010, 21cbh.com signed "advertising contracts" with more than 100 companies annually, with values about hundreds of millions of yuan.

A PR firm based in Shanghai and another based in the southern metropolis of Shenzhen made huge profits as intermediator between 21cbh.com and target companies.

Liu Dong said concealing negative news and misleading readers disturbed market order and dampened investors' confidence.

Tao Kai, the suspect and executive director of Roya Investment Services Limited, the Shanghai-based PR firm, said his action damaged the media sector and professional ethics of journalism.

Under regulations set by the State Administration of Press, Publication, Radio, Film and Television, which manages the practices of all journalists in China, press credentials will be revoked in cases of media organizations acting illegally.

21cbh.com is run by Guangdong-based 21st Century Media Co., Ltd., which claims on its website to be "the largest professional media operator in the Chinese financial and business media industry."

The company's publications include 21st Century Business Herald, Money Week and 21st Century Business Review.

21cbh.com has offices in Shanghai, Beijing and Guangzhou.

Chinese authorities have been stepping up a crackdown on extortion in the media and paid-for news.

They have discovered problems including press cards being issued to people who are not journalists, and newspaper websites being contracted to advertisement or PR agencies.