Last month, Beijing-based financial advisor Jor Law met with the American Union International Investment Group (AUIIG), on behalf of a local textile manufacturer in need of a loan. Soon after, Lor would become the latest whistleblower on a global con involving the theft of private equity firm identities in order to defraud unsuspecting entrepreneurs and investors.
Law, a founding member and executive director of Axiom Group, said that his firm was originally asked only to draw up a formalized business plan for the textile manufacturer, which had already agreed, in principal, to take a loan from AUIIG. Axiom, however, likes to walk clients through the entire financing process, so Law insisted that he first have a due diligence meeting with the prospective lender at AUIIG’s offices in Beijing’s well-known CITIC building (across the street from the St. Regis hotel).
At the AUIIG offices, Law was led through a bullpen-type area with lots of small cubicles until arriving in a conference room. His immediate impression was that he was in some type of “trade negotiation setting,” given the presence of U.S. and China flags on small stands on the tables and a pair of large ones hanging on floor-stands. But it was the actual meeting itself that caused Law to wonder if he was sitting in the middle of a boiler room.
“I was really just looking for a brief introduction, but they were very secretive,” Law recalled. “They refused to provide even basic details… and said that if I didn’t know enough about them, that I could get any information I needed from their Website. Then they handed me a piece of paper with their Website address on it, and that was basically the meeting.”
When Law actually looked up the Website, however, he began to notice that AUIIG’s profile looked suspiciously like that of U.S.-based private equity giant The Carlyle Group, with which Law had an existing relationship.
Most obvious was the profile of “Peter J. Siemens,” who the Website biography identified as having “played a leading role in several of AUIIG’s most successful investments, including Magnavox Electronics, Aviall Inc. and Federal Data Corporation.” This reminded Law of Peter J. Clare, a managing director with Carlyle who also had invested in Magnovox, Aviall and First Data. When he compared the “Peter J. Siemens” bio to that of Peter J. Clare on Carlyle’s Website, he found four virtually identical paragraphs. Even more damning was the claim that “Siemens” had received an MBA from Wharton, which just happened to also be the alma matter of both Law and Clare. After a quick phone call to Philadelphia, it became obvious that “Peter J. Siemens” hadn’t spent much time studying in Center City.
Law immediately contacted Carlyle Group headquarters in Washington, D.C., and sent over as series of screenshots of the offending AUIIG pages. Carlyle, in turn, contacted federal authorities, and unsuccessfully began trying to make contact with AUIIG. Soon after, AUIIG removed some of its more outrageous biographical information (including any mention of “Peter J. Siemens”), and then changed it again once after more plagiarized information was reported by the PE Week Wire (Buyouts sister publication) last Monday. As of press time, however, the www.AUIIG.com site still displays certain graphs and language lifted directly from www.Carlyle.com.
Not An Isolated Situation
What makes the AUIIG situation so troubling to investigators is that it is hardly an anomaly.
Battery Ventures of Wellesley, Mass., for example, recently learned that an organization calling itself “American Battery Investment Group” had launched a Website that featured headshots of Battery Ventures’ partners, an identical investment portfolio and even links to news articles discussing Battery Ventures. Like with AUIIG, ABIG was domiciled in China, but had a California mailing address that investigators believe is one of a series of mail drops around the world.
Mike Kessler, a computer forensics professional retained by Battery Ventures, said that his discussions with Interpol and other law enforcement agencies suggest that ABIG is part of a global con that has defrauded people of billions of dollars. He has not investigated AUIIG, but believes that it is probably part of the same syndicate.
“What they do is charge upfront fees for financing, or for access to an IPO,” Kessler explained from his firm’s New York office. “The IPOs, for example, are for non-existent companies but they are very good at mocking up Websites that make it appear as if they are legitimate transactions.”
Indeed, this is similar to the scam Jor Law believes AUIIG tried to play on his textile client. He says that AUIIG was changing an upfront fee for the loan, and that it then was planning to charge interest so extreme that he described it as “loan sharking.”
While it is easy to characterize victims in these cases as unsophisticated businesspeople, Kessler says that he has seen wire transfers coming from educated individuals who are anything but first-time investors.
John Stark, head of Internet Enforcement for the Securities and Exchange Commission, said that there is no accurate composite for victims. He declined to discuss ongoing investigation-or even confirm that investigations into AUIIG or ABIG existed-but did say that his office has had lots of experience with people mimicking legitimate Websites. Possible changes in such cases, he said, can run the gamut from securities and wire fraud to copyright and trademark fraud.
Both he and Kessler suggest that buyout and venture capital firms do some Internet searching to see if their site is being used in a similar manner. A basic Google search of certain key, firm-specific phrases should work, although it also might be worth doing a Chinese-language translation and running it in Baidu.com.
Stark added that anyone who learns of a mimicked site should contact his office immediately by sending an email to enforcement@sec.gov. “The main way we become aware of these situations is through tips from the public, particularly when we’re dealing with private equity.”
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