China publicizes State Security investigation into consulting firm Capvision

Chinese media reports quote State Security organs as saying the firm illegally accessed various types of sensitive data and posed a risk by facilitating overseas access to sensitive Chinese info.

Chinese media on Monday, May 8, publicized in prime time an investigation by the State Security organs into Capvision Partners (Shanghai) Corporation 凯盛融英信息科技(上海)股份有限公司. Below are translations of two reports.

One report by 焦点访谈 Focus/Jiao Dian Fang Tan on CCTV-1/CCTV-13, which is a prime-time show around 7:45 every evening. CCTV=China Central Television, the state broadcaster.

In recent years, certain Western countries have increasingly engaged in intelligence activities aimed at stealing confidential information in key areas such as military, defense industry, economy, and finance in order to implement strategies of containment and suppression against China. state security agencies have uncovered multiple cases involving complex foreign organizations that exploit domestic consulting companies and other industries to evade Chinese laws, regulations, and industry supervision in sensitive sectors, thus acquiring state secrets and intelligence. Some domestic consulting companies, driven by economic interests, have a weak awareness of state security and frequently operate on the fringes of the law.

Recently, the state security agencies, in collaboration with relevant departments, publicly enforced the law against Capvision Partners (Shanghai) Corporation, a leading domestic consulting firm.

A police officer from the Shanghai Municipal Bureau of State Security: "Capvision has over 1,000 clients both domestically and internationally. Their business is divided into three main categories, with expert interviews accounting for 80% of Capvision's total business volume, primarily conducted through expert telephone interviews."

Capvision maintains a massive database of experts, with over 300,000 experts listed. Since the company's business involves international consulting, what is the source of these experts? Are there any restrictions on the selection of experts?

An employee of Capvision surnamed Zhou: "Some publicly available resume channels and official websites, as well as expert recommendations."

In reality, the sources of these experts are not as simple as they claim. In practice, the company's staff specifically selects influential experts in key fields and important industries, such as domestic policy research, national defense and military industry, finance and currency, high-tech industries, energy resources, medicine, and healthcare, among others.

A Police Officer from the Shanghai Municipal Bureau of State Security: "Capvision requires each interviewed expert to sign a business contract containing a 'disclaimer clause,' which stipulates that the expert must fulfill confidentiality obligations and assume legal consequences. These experts are attracted by the generous remuneration offered by consulting firm and consider them to be law-abiding, well-regulated enterprises. As a result, they lower their guard and, in the course of foreign-related consultations, disclose sensitive internal information, state secrets, and intelligence, thus embarking on an illegal and criminal path."

A certain Han, a senior researcher from a large state-owned enterprise in China, was sentenced to six years in prison for crimes involving the theft, espionage, and illegal provision of state secrets and intelligence to foreign entities.

Han held a classified position within his organization and, in accordance with their requirements, was not allowed to engage in external part-time work. However, in 2015, Han accepted the "cordial" invitation from Capvision and became an expert there, providing consultations. During the third consultation, Han's bottom line of confidentiality was challenged.

Han: "During the consultation, it involved the cost, profit margin, and total profit of the product. I mentioned that this information involves trade secrets and I am unwilling to provide it."

Han directly refused when the client asked about sensitive content, but the feedback immediately reached Capvision. Han soon received a phone call from one of their employees.

Han: "They called me and said that if I answered the form they provided, they would pay double the consultation fee."

During Han's consultation process, instead of reminding the experts to maintain confidentiality, the employees of Capvision not only assisted the clients in persuading the experts to disclose sensitive information but also increased their remuneration as an incentive. The state security agencies discovered that within Capvision, increasing the payment to experts was just one of the methods employed by the company.

A police officer from the Shanghai Municipal Bureau of State Security: "To meet the demands of their clients, Capvision even goes as far as to instruct project managers responsible for sensitive consulting projects in the defense industry, cutting-edge technology, and other sensitive fields to send mass emails internally, urging everyone to make phone calls to military-industrial enterprises and secretive research units. They encourage contact and persuasion of experts who possess relevant internal information. The company also advises experts to provide answers to sensitive questions using examples and analogies."

For a long time, in pursuit of economic gains, Capvision not only encouraged experts in key fields to disclose confidential information during consultations but also, as a company with extensive overseas consulting operations, claimed to protect client privacy while deliberately withholding the true identities of the clients from the experts.

Han, despite his initial agreement to consult for Capvision, had specifically stated that he would not engage in consultations involving foreign clients. However, Capvision did not honor this commitment, and it was only by chance that Han discovered that his long-term clients were actually overseas clients.

Under the persuasion of Capvision's employees, Han became increasingly bold. Over the course of several years, Han received consulting from Capvision over a hundred times, with over 60% of the consultations involving overseas clients. During this period, in order to earn more consulting fees from Capvision, Han also downloaded classified materials from his organization's internal network.

A police officer from the Zhuzhou Municipal Bureau of state security: "He illegally downloaded nearly 5,000 files through the company's internal network. After being assessed by the state secrecy department, it was determined that Han stole and provided one confidential-level state secret, two secret-level state secrets, 13 pieces of intelligence, and 18 pieces of commercial secrets to foreign entities."

As a leading company in the domestic consulting industry, Capvision has a legal department for its daily operations. According to the company's claimed workflow, when a client submits an outline of the consulting content, the legal department is supposed to review whether the content is sensitive and compliant. They are supposed to reject sensitive questions and pass non-sensitive ones to the employees, who search for experts in their database based on the questions. Once the selected expert is approved by the client, the consultation proceeds. But in practice, does the legal department play its intended role?

An employee of Capvision surnamed Zhao: "There are indeed a lot of demands, and we don't involve the legal department in every case. We make some judgments ourselves, and the project manager usually makes the judgment."

Although Capvision has compliance teams and risk specialists, the actual scrutiny during consultations is superficial.

A police officer from the Shanghai Municipal Bureau of state security: "Capvision does not have any management requirements or compliance audits to fulfill its responsibilities and obligations in maintaining state security, preventing security risks, and evaluating whether specific projects requested by overseas clients may be sensitive or even involve intelligence gathering. These decisions are left to the personal judgments of employees. The legal department and senior management of the company do not actively inquire or supervise. In reality, no one cares; their focus is solely on economic benefits."

During the pursuit of profits, when it came to experts who were not suitable to accept consultations from certain organizations, Capvision allowed them to use aliases and receive payments through the bank accounts of other individuals. It is evident that Capvision prioritizes economic benefits over its responsibility to uphold state security. However, the company's employees insist that they clearly avoid certain projects involving overseas companies. In reality, their expert database contains thousands of experts in the defense industry alone, and the company does not take any measures to avoid using these experts in overseas consultations.

A certain Lei, who previously worked for a major Chinese defense industry enterprise, was charged with illegally providing sensitive information related to the military industry to foreign entities. Lei had worked at a postdoctoral station jointly established by a prestigious university and the defense industry enterprise. In March 2020, after completing his postdoctoral program, Lei detailed his work experience with the defense industry enterprise in an online resume, which caught the attention of Capvision and led to his recruitment as a consulting expert.

After becoming a consulting expert for Capvision, Lei participated in several consultations. However, something unusual happened in July 2020. Capvision had always claimed that, in order to evade legal obligations and regulations, they only facilitated connections between clients and experts, without participating in the specific consultation process. Typically, consultations had to be conducted through Capvision's telephone platform.

However, prior to this particular consultation, Lei was informed by Capvision that, at the client's request, the consultation would take place using a different teleconferencing platform, and Capvision employees would not be involved throughout the process. Despite this abnormal behavior from the company, it did not raise any red flags for Lei. However, the questions posed by the client during the consultation left a lasting impression on him.

Lei: "They asked about the inventory of a military aircraft model."

Instead of avoiding such sensitive questions, Lei, driven by a sense of recklessness and a desire to show off, proceeded to disclose a significant amount of sensitive information to the client.

After assessment by the state secrecy department, it was determined that Lei provided three confidential-level state secrets and three secret-level state secrets to the client. The state security agencies' investigations have revealed that Capvision extensively accepted consulting projects from overseas companies in sensitive industries, some of which have close ties to foreign governments, military, and intelligence agencies. From 2017 to 2020 alone, Capvision received over 2,000 remittances from over a hundred overseas companies, amounting to more than 70 million US dollars. In recent times, state security agencies have taken lawful measures to handle the involved enterprise(s) and, in the case of individuals suspected of violating the law, a thorough investigation will be conducted to determine their legal responsibilities.

State security is the foundation of national rejuvenation and directly impacts the fundamental interests and well-being of the people. Some consulting companies, in pursuit of market dominance and financial gain, disregard state security risks. They meticulously select, lure, and deceive experts and scholars in sensitive industries, enticing them to disclose internal or classified information. This poses significant threats to our country's industrial development and economic security, ultimately making them accessories to foreign espionage, bribery, and intelligence collection. The Chinese government supports the growth of the consulting industry and encourages international trade. It is hoped that consulting companies strictly adhere to their responsibility of reviewing and screening projects, that experts and scholars fulfill their obligations of security and confidentiality during consultations, and that relevant entities strengthen supervision and management over their personnel engaged in consulting activities.

The other was by the Jiangsu Provincial broadcaster

Recently, Suzhou State Security Bureau, in conjunction with the (Suzhou) Municipal Bureau of Market Supervision and Administration and the (Suzhou) Municipal Bureau of Statistics, carried out joint enforcement actions against the consulting enterprise 凯盛融英信息科技(上海)股份有限公司苏州分公司 Suzhou Branch of Capvision Partners (Shanghai) Corporation Limited.

In recent years, the rapid development of the domestic consulting industry, in the service of the country's economic and social development of high quality, also brought about a series of questions. Some consulting and investigation company/companies unilaterally pursued the rapid growth of their/its businesses, but ignored the possible state security risks, did not seriously fulfill the responsibility and obligation of counter-espionage. They/It developed "consulting experts" in our Party and government organs and classified units to provide sensitive consulting to their/its customers, endangering our state security and development interests.

Suzhou State Security Bureau, (Suzhou) Municipal Market Supervision Administration, and (Suzhou) Municipal Bureau of Statistics formed a joint law enforcement team to carry out on-site law enforcement at the Suzhou branch of Capvision Partners (Shanghai) Corporation Limited.

In the enforcement process, the relevant departments questioned the company's personnel according to the law, and checked and inspected the available items.

It has been learned that the joint law enforcement operation was deployed by the relevant State department(s) and carried out simultaneously in Shanghai, Beijing, Suzhou, Shenzhen, and other places.

At present, the state security organs have dealt with the enterprise(s) involved in accordance with the law and urged the enterprise(s) to conscientiously fulfill their obligations in counter-espionage. security, and in conjunction with the relevant departments will further strengthen the supervision and guidance over the industry, regulate corporate behavior, and promote the healthy development of the consulting industry.

A police officer with Suzhou State Security Bureau said: these consulting and investigation companies, in the process of undertaking foreign-related consulting projects, frequently contact with personnel involved in state secrecy in our Party and government organs and in important national defense and science industries. They offered high compensation in the name of hiring industry consulting experts, illegally accessed various types of sensitive data in our country, and posed a major hidden danger to our state security. The state security organs will work together with relevant departments to increase law enforcement efforts against suspected consulting and other activities in violation of laws and regulations that endanger state security in accordance with the laws and regulations of the People's Republic of China, such as the Anti-Espionage Law, and pursue the legal responsibilities of the companies and personnel involved in the case in accordance with the law.