{"id":73168,"date":"2016-03-29T03:18:03","date_gmt":"2016-03-29T07:18:03","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=73168"},"modified":"2016-03-29T03:18:03","modified_gmt":"2016-03-29T07:18:03","slug":"mattel-fought-elusive-cyber-thieves-get-3m-china","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2016\/03\/29\/mattel-fought-elusive-cyber-thieves-get-3m-china\/","title":{"rendered":"Mattel fought elusive cyber thieves to get $3M out of China"},"content":{"rendered":"
\"Aerial<\/a>
Aerial view of Mattel headquarters in El Segundo, California. (Wikipedia<\/a> photo)<\/figcaption><\/figure>\n

WENZHOU, China \u2013 The email seemed unremarkable: a routine request by Mattel Inc.\u2019s chief executive for a new vendor payment to China.<\/p>\n

It was well-timed, arriving on Thursday, April 30, during a tumultuous period for the Los-Angeles based maker of Barbie dolls. Barbie was bombing, particularly overseas, and the CEO, Christopher Sinclair, had officially taken over only that month. Mattel had fired his predecessor.<\/p>\n

The finance executive who got the note was naturally eager to please her new boss. She double-checked protocol. Fund transfers required approval from two high-ranking managers. She qualified and so did the CEO, according to a person familiar with the investigation who spoke on condition of anonymity because he was not authorized to speak about the matter. He declined to reveal the finance executive’s name.<\/p>\n

Satisfied, the executive wired over $3 million to the Bank of Wenzhou, in China.<\/p>\n

Hours later, she mentioned the payment to Sinclair.<\/p>\n

But he hadn\u2019t made any such request.<\/p>\n

Frantic, Mattel executives called their U.S. bank, the police and the FBI.<\/p>\n

The response? You\u2019re out of luck. The money\u2019s already in China.<\/p>\n

Mattel\u2019s millions were swept up in a tide of dirty money that passes through China and that Western police are only beginning to understand. The scam the company fell victim to \u2013 known as the fake CEO or fake president scam \u2013 has cost companies, many of them American, over $1.8 billion, according to the FBI. Most of the stolen money passes through banks in China or Hong Kong, the FBI said.<\/p>\n

An Associated Press investigation this week showed that China is emerging as a global hub for money laundering. The dark money that courses through China has long been considered a domestic issue, with Chinese illicitly moving money for other Chinese. That’s no longer the case. Mounting evidence indicates that China is becoming a global banker for the criminal economy, according to interviews with police officials, court records in the U.S. and Europe, and intelligence documents reviewed by the AP.<\/p>\n

Years of mutual mistrust have hindered law enforcement co-operation between China and the West, adding to China\u2019s appeal as a money laundering hub. The U.S. State Department said in a report this month that China has \u201cnot co-operated sufficiently on financial investigations.\u201d China\u2019s inability to enforce U.S. court orders on China-based assets \u201cremains a significant barrier to enhanced U.S.-China co-operation,\u201d it added.<\/p>\n

In a regular briefing with reporters Monday, Chinese Foreign Ministry spokesman Hong Lei said that the government \u201cplaces great emphasis\u201d on fighting crimes such as money laundering and is working to expand international co-operation. \u201cChina is not, has not been, nor will be in the future a centre of global money laundering,\u201d he said.<\/p>\n

Mattel wasn\u2019t going to let go of $3 million without a fight. What the company really needed was luck. And when it came to Mattel\u2019s China operations, luck had been in short supply.<\/p>\n

Mattel\u2019s misadventures in China are so spectacular they\u2019ve become the stuff of business school seminars. In 2007, Mattel recalled 19 million made-in-China toys, including Pixar cars covered in lead paint and Barbie sets embedded with tiny, hazardous magnets. Then, in 2009, Mattel opened the \u201cHouse of Barbie,\u201d a glowing pink, six-story shrine on one of Shanghai\u2019s ritziest shopping boulevards. It had a spiral staircase encased with over 800 Barbie dolls, a spa and a fashion runway. But the flagship flopped, and Mattel closed it after just two years.<\/p>\n

Rising costs and labour shortages weighed on China production, even as the $5.7 billion toy giant limped back into the Chinese market with dolls \u2013 including a Violin Soloist Barbie \u2013 aimed at Chinese \u201ctiger moms.\u201d<\/p>\n

The thieves struck as Mattel was aggressively pushing its China business, positioning itself as a child development brand, which helped grow China sales 43 per cent in 2015 over the prior year. They had done their homework, mining social media and likely hacking corporate emails to penetrate Mattel\u2019s corporate hierarchy and payment patterns, according to the person familiar with the investigation.<\/p>\n

The criminals had the $3 million sent to Wenzhou, a gritty enclave on China\u2019s eastern coast that is emerging as a significant transit point in global money laundering networks. The city is the destination for 90 per cent of the funds stolen through fake CEO scams in Europe, according to an intelligence memo reviewed by the AP.<\/p>\n

Wenzhou city officials declined to comment.<\/p>\n

Squeezed by mountains against the sea, Wenzhou is known as the birthplace of underground finance in China.<\/p>\n

Decades of official neglect allowed an unusual, business-oriented culture to thrive here. After Mao\u2019s anti-capitalist rule, a private economy began to re-emerge in Wenzhou in the late 1970s. But those first peasant entrepreneurs \u2013 and the informal financing mechanisms that sprang up around them \u2013 inhabited a legal grey zone, said Chen Zongshi, an assistant sociology professor at Zhejiang University. It would be a decade before Wenzhou was officially authorized to develop private enterprise, according to Zongshi. Those regulations were among the first in China.<\/p>\n

Poverty, underdevelopment and a lack of arable land also made Wenzhou an ideal place to leave. Strivers heading for Europe and North America poured out of Wenzhou, and in their wake, the informal financial systems that served the area\u2019s entrepreneurs went global.<\/p>\n

Today, money that ends up in Wenzhou doesn\u2019t have to stay there \u2013 thanks in part to the pawn shops and corner grocery stores that quietly double as money-transfer agents, said Yan Lixin, the secretary general of the China Center for Anti-Money Laundering Studies at Shanghai\u2019s Fudan University.<\/p>\n

\u201cFrom Wenzhou, the money could scatter to any other place,\u201d he said.<\/p>\n

Luck arrived for Mattel in the form of a bank holiday. Friday, May 1, was Labor Day in China.<\/p>\n

That, crucially, gave Mattel time. The company notified Chinese police, who quickly launched a criminal investigation, according to a letter from Mattel thanking Chinese authorities, which was obtained by the AP.<\/p>\n

When the Bank of Wenzhou opened the following Monday, a China-based anti-fraud executive from Mattel strode past the sculpted lions that flank the entrance to the bank\u2019s headquarters, marched upstairs to the International Business Department and presented a letter from the FBI, according to two people familiar with the investigation who were not authorized to speak publicly.<\/p>\n

Chinese police froze the account that very morning. Two days later, on May 6, Mattel got its money back, according to the letter.<\/p>\n

Mattel wrote that the Wenzhou police \u201cshowed a great sense of responsibility and enforcement capability.\u201d<\/p>\n

\u201cWe hereby reiterate our appreciation,\u201d Mattel wrote. \u201cWe also hope that this case can pave the way for future international co-operation in fighting similar transnational crimes.\u201d<\/p>\n

International co-operation has grown in importance for Beijing. China\u2019s ruling Communist Party is campaigning to purge corruption from its ranks, pursuing officials who have fled overseas with ill-gotten wealth, in an effort to shore up its legitimacy as China\u2019s economy slows.<\/p>\n

\u201cIf we need help getting corrupt officials or bribes back, we need to offer assistance when other countries need it too,\u201d said Huang Feng, Director of the Institute for International Criminal Law at Beijing Normal University. \u201cThe problem is not that the Chinese authorities have been unco-operative, it\u2019s that we don\u2019t have a relevant legal framework to implement.\u201d<\/p>\n

He said Mattel fought the fraud correctly, imploring Chinese authorities to use Chinese law to get the money back.<\/p>\n

The Bank of Wenzhou confirmed that its staff handled Mattel\u2019s case but declined to comment. Police in Wenzhou confirmed that an investigation was ongoing but declined to discuss details. Mattel also declined to comment for this story, citing the ongoing investigation.<\/p>\n

Since its near miss in Wenzhou, Mattel has tracked a dozen more attempted hacks.<\/p>\n

It\u2019s still not clear who was behind the scam.<\/p>\n

___<\/p>\n

Associated Press writer Eric Tucker in Washington and researcher Fu Ting in Shanghai contributed to this report.<\/p>\n","protected":false},"excerpt":{"rendered":"

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