The Financial Times this past weekend wrote an in-depth article on a German-owned advertising company based in Beijing who’s most trusted Chinese managers set up a competing company and siphoned (bone-dry) business from their employer to the new company.

Raiding his own company’s Beijing headquarters with the help of lawyers and a police escort was not what Heinz Zuercher had in mind when he agreed in March to take over as chief executive of Frankfurt-listed Business Media China.

But that is where he found himself in early June as he and another German manager broke into the finance department while a group of his employees barricaded themselves inside and hid under their desks.

The impromptu raid turned up a raft of evidence showing that a group of BMC’s senior Chinese managers had – unbeknown to BMC’s German managers – set up their own company within the advertising and exhibition business and, Mr Zuercher and the rest of the company’s management claim, siphoned off its most lucrative advertising contracts.

“We’d been tipped off anonymously by one of our staff that some executives had set up this secret company and were taking all of our clients,” explains Mr Zuercher, who is due to face shareholders on Wednesday at BMC’s annual meeting.

The case, which is under investigation by the Beijing police, involved at least seven senior executives and has brought to its knees a company that controls billboard advertising at dozens of China’s largest railway stations and airports.”

I agree with one Westerners’ explanation for why such behavior is so prevalent in the Chinese business community:

“There is an attitude among many in the Chinese business community that foreigners are rich and stupid and therefore fair game; that deceiving them is somehow acceptable in a way it wouldn’t be if they were Chinese,” says one intellectual property lawyer who has worked in China for nearly two decades, and who asked not to be named to avoid repercussions for his business.

I also agree with the prognosis of a Chinese staff member:

“He was a vain old man who trusted the wrong people,” says one BMC employee. “They built up a world around him in which he felt safe and he didn’t see the problems in the business because he didn’t want to see them.”

Ultimately, James McGregor, author of One Billion Customers, who was interviewed for the article puts his finger on the issue:

“But what this shows you is you can’t maintain a business by remote control in China and expect other people to run your company in your best interests.”

Read more of A Cautionary Tale from China…