Some Asian Internet companies are criminal operations
It's a tangled Web they thieve
Who lurks there? ... all manner of unsavoury types, according to Kroll. Photo: AP
By KIRSTY NEEDHAM
Arms dealers, convicted criminals, smugglers and thieves make up the managements of some Internet companies in Asia, according to corporate security firm Kroll.
Two potential dot com investors in the US were found murdered.
The scoundrels uncovered in a global survey by Kroll make the drug dealing and sexual misdemeanours of some of Australia's pioneering dot com chiefs look almost benign.
The detective agency concludes that Internet executives are four times more likely to have "unsavoury backgrounds" as those in any other industry.
Prompted by anecdotes of higher levels of misconduct in the sector, Kroll investigated 70 Internet companies between June and August, with close to 40 per cent found to be problematic.
"In Asia, the uncertain valuation methods and lack of transparency make Internet companies attractive to money laundering," was the summary of Hong Kong-based Kroll director Mr James Tunkey, who undertook due diligence on 20 companies in Asia, Australia and New Zealand for the global report.
Among the "bad characters" Mr Tunkey uncovered were an alleged arms dealer hired by an Internet company to run its operations across two Asian countries and a convicted criminal hired by another.
A further three new media companies in the region had appointed managers who had "narrowly escaped" convictions, while two start-ups had links with organised crime.
Other executives had been involved in smuggling and the theft of intellectual property.
"Some had misled investors about the general strength of their Internet business," said Mr Tunkey.
Most of the cases Kroll identified in the United States did not concern inexperienced young dot com founders but the "grey beards" brought in to add besuited stature to the company, the Financial Times reported.
Mr Ernie Brod, executive managing director of Kroll's New York office, said: "I refer to these people as vampire investors.
"Maybe they put a couple of bucks in, then they lick their lips at the opportunity and suck exorbitant consulting fees out of them, or put their relatives on the payroll."
Other problems found in the US included violations of Securities and Exchange Commission rules, insurance fraud and undisclosed bankruptcies.
One of the most extreme cases concerned a dot com company which had received an unsolicited investment offer and wanted to know more about the two potential backers.
"Then the people who offered to invest were murdered. In the course of the law enforcement investigation they found the two were connected to penny stocks promotional scams and with organised crime," Mr Brod said.
Mr Ben Derwent, a recruitment agent specialising in placing senior management into dot com start-ups for venture capital firms in Sydney, said the scramble to hire staff in the past 12 months has meant the screening procedures regularly used by recruitment firms were often bypassed.
"All too often these Internet companies are growing very quickly and throw caution to the wind. They hire just because someone is available."
But as funding for new Internet ventures tightened, prudence was coming back into vogue, Mr Derwent said.
Kroll's Mr Tunkey said Asian Internet executives were less experienced than their US counterparts, and less concerned about security. "That lack of experience will mean that in the next few years there will be a much larger run of problems."
Kroll said it was not surprised by the findings.
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