Fosun Group attempts to explain as high-profile chief detained by China authorities

Shanghai

In a move akin to the U.S. government apprehending Warren Buffett, China authorities have detained the head of Fosun International, the parent of Shanghai Fosun Pharmaceutical Group.

Fosun International Chairman Guo Guangchang

Chairman Guo Guangchang, who models the company on Buffet-style investment techniques, dropped out of sight Thursday afternoon and was incommunicado even with his own executives.

Late Friday, the pharma unit said Guo was "assisting" a legal investigation, remained in guarded contact and that whatever was going on "would not have any significant negative effect" on the drugmaker.

As far as it was concerned, the pharma unit said, "the company operates as normal" without any financial or operational adverse effects, noting that Guo does not participate in the day-to-day running of the firm. The Wall Street Journal reported that Guo appeared at a Fosun Group internal event, citing others who attended, though the company had not made any updates by press time on Monday on the status of the unspecified probe.

Shanghai Fosun Pharma has a wide range of investments and tie ups, including a May deal with a consortium of high-profile Chinese firms to buy San Diego-based biotech Ambrx. It has also taken a lead in stem cell work in China.

Early Friday, shares of Shanghai Fosun Pharma and other major units of the conglomerate either were suspended until Monday or lost heavily in stock declines on the Hong Kong and Shanghai exchanges, Reuters reported.

The biggest loser in share trading was Dirui Industrial, maker of medical equipment. The conglomerate also owns Shanghai Henlius Biotech.

The parent Fosun issued a statement late Friday saying its executives had determined that Guo "is assisting in certain investigations carried out by mainland judiciary authorities." In a conference call Sunday, Fosun President Wang Qunbin said, "It is mostly about his personal affairs," but would not elaborate, calling the investigation "sensitive."

Fosun International CEO Liang Xinjun

Fosun International CEO Liang Xinjun said Guo was helping Shanghai police in a probe, but was not the subject of it.

The BBC quoted a source as saying, "It's very likely he's been asked by the Chinese authorities to co-operate in an investigation. He is not being investigated himself."

Several heads of China companies and government ministries have disappeared in similar ways as President Xi Jinping continues a crackdown against corruption.

On the multinational side, one of the best known came at the beginning of the crackdown two years ago when GlaxoSmithKline ($GSK) executives were arrested and the company paid heavy fines for paying bribes to increase its sales in China. It is only now beginning to rebound.

- here's the Fosun Group trading halt announcement (PDF)
- here's the Fosun Group resumption of trading announcement (PDF)
- and a story from China.org
- and one from China Daily
- a look by the BBC
- and a story from Reuters
- and an update from the Wall Street Journal

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