Shen Hao, former president of 21st Century Media Co. Ltd., was sentenced to four years in prison on Thursday for blackmailing companies by threatening negative coverage.
Shen was convicted of extortion and forced transactions, among other crimes, the People's Court of Shanghai's Pudong New District said in a statement. Shen was fined 60,000 yuan (9,300 U.S. dollars) and has all his illegal profits confiscated. The media group was fined 9.5 million yuan. Shen said he would not appeal.
In October and November, 30 people from 15 organizations including Shen, were tried in separate cases by the court.
Other media executives including Liu Dong, former president of 21cbh.com; Liu Hui, former editor-in-chief of 21st Century Business Herald; and Xia Ri, former publisher of Money Week -- all under the media group -- were sentenced up to nearly 11 years in prison.
Between Aug. 2009 to Sept. 2014, 21st Century Media and Shen coerced nine companies and organizations, including Sichuan Langjiu Group Co., LTD., into paying more than 7.28 million yuan to cancel negative coverage. The group, via several financial public relations (PR) companies, also coerced 70 companies and organizations into signing advertising contracts worth 19 million yuan to avoid such coverage.
The company capitalized on the fear of negative publicity for companies poised for IPOs. A network of media companies controlled by 21st Century Media participated in the scheme.
CONSCIENCE RUINED FOR PROFIT
"Let the weak be powerful, let the pessimistic keep moving," that was the motto of Shen Hao when he launched the 21 Century Business Herald in 2001. He was 30 and has just left a senior editorial post at the noted Southern Weekly.
"I had been adhering to news values of justice, caring and conscience... I had been doing that so well for a long time," he said.
With these values, Shen's business rose rapidly. In 2007, he founded Money Week and several magazines on business, which formed the 21st century syndicate.
With growing influence, negative reports by 21st Century Media could cause a severe backlash for companies involved. Many companies came to Shen to discuss "cooperation" to stop such reports.
At the beginning, Shen refused to cooperate and kept writers strictly separate from advertising staff. "The news writers were never allowed to do advertising business and the advertising staff could not engage in news writing or editing," said Chen Dongyang, deputy head of the group.
But the "firewall" collapsed as Chen became eager to increase his profits and go public.
Shen's targets were companies preparing to start IPOs. He designed a performance evaluation method, under which staff were given a goal of forcing a certain number of enterprises into "cooperation"-- or no negative reports in the key period for IPOs. Staff were threatened with the sack if they failed to accomplish their goals. Some companies paid to stop such coverage directly, some pre-paid advertising fees to avoid the negative reports.
Shen and 21st Century Media, knowing the power of negative news reports, extracted money from the companies by burying negative news, conduct that qualifies as extortion.
21st Century Media and financial PR companies jointly conducted the crime of forced transactions, threatening clients,and showing them examples of disastrous outcomes, such as failed IPOs, as a result of negative news reports.
JOEONE Co. Ltd., a menswear manufacturer, was one of the victim companies. The firm was contacted by PR company Runyan Investment Consulting shortly after it announced an IPO plan. Via Runyan, JOEONE paid more than 3 million yuan to avoid negative coverage, said Wu Huirong, JOEONE's vice general manager.
"We put huge amounts of money and manpower into the IPO and could not afford negative exposure to result in stock price falls, or a failed IPO," said Wu.
The defendants violated market rules, disrupted market order and harmed the interests of victim companies, the court ruled.
21st Century Media, knowing that the financial PR companies used their news stories to force deals, cooperated with the PR companies in the form of deleting or calling off reports. 21st Century Media and financial PR companies utilized each other and shared interests, so they jointly conducted the crime, the court ruled
The accused individuals and companies in the case were also convicted of a number of other crimes, including bribery, embezzlement, and illegal invoicing.
"It's too late for regrets," Shen told the court, holding a confession of more than 3,000 words. He said the confession process was "very painful."
Shen had paid a big price. The 21st Century Business Herald was ordered by authorities to correct wrongdoings; 21cbh.com, the group's major portal, was suspended and Money Week has had its publication permission revoked.
"As group president, I'm the one to blame," he said.
He admitted he had not balanced the media's public service duty and commercial acts.
He listed harm he had caused the companies, the media industry and
the reporters and said he would like to visit them himself to apologize.
"Law breakers must be punished, and I am willing to receive the punishment. I will strive to atone for my crimes with sincerity," he said.
He asked other media staff to learn from his example and serve the public interests. He finally called on the public to retain trust in the media.
