In China, Fake Goods are Investigated by Fake Investigators

Foreign companies worried about Chinese companies pirating their goods are spending $10 million a year on private investigators to look into suspected fraud. And what do they get for the money?

The woman called herself Flaming Lee, an English name she picked when she was 10 years old, long before she got into the dirty business of counterfeit goods. Her job as a private investigator sometimes took her to client meetings at Dubai's seven-star Burj Al Arab hotel. Otherwise, she lived in apparent simplicity.

There were few signs of the deception that shaped her life. Officially, Flaming Lee hunted counterfeiters for Swiss power technology giant ABB Asea Brown Boveri Ltd. Unofficially, she herself sold counterfeit ABB circuit breakers for export — the very things ABB was paying her to track down.

It was a classic form of double-dealing in China's murky anti-counterfeiting industry, which is itself plagued with fraud, an Associated Press investigation has found. Some of the cases documented by the AP involved potentially dangerous products: counterfeit auto parts, pharmaceuticals, personal care products and electrical components.

Investigative fraud is a problem few are willing to discuss publicly. Using previously undisclosed records from court cases in China and internal corporate investigations, as well as interviews with people directly involved in events, the AP documented multiple forms of wrongdoing:

— Western firms paid investigators who were themselves manufacturing or selling counterfeit versions of their clients' own goods.
— Investigators doctored documents, fabricating raids that never took place.
— Investigators colluded with factories to make counterfeit goods they could "seize" and present to their Western bosses for payment.

When the whole society is corrupt, it's hard to know where to start in fighting corruption.