JD CEO Richard Liu cleared in US but Chinese e-commerce giant still faces challenges ahead

24-Dec-2018 Intellasia | South China Morning Post | 6:00 AM Print This Post

Chinese billionaire Richard Liu Qiangdong will not face felony rape charges in the US as prosecutors announced on Friday that their investigation turned up insufficient evidence to follow through.

Liu, the 45-year-old founder of Beijing-based e-commerce site JD.com, was arrested in Minneapolis, Minnesota, on August 31 after a woman accused him of rape while he was attending a university business programme in August. Liu was released the next day and returned to China hours later.

“It was determined there were profound evidentiary problems which would have made it highly unlikely that any criminal charge could be proven beyond a reasonable doubt,” according to a statement released by Minnesota’s Hennepin County Attorney’s office.

JD.com CEO Richard Liu will not face sexual assault charges in Minnesota

Billionaire Liu would have faced a prison sentence of up to 30 years if he was charged and convicted. JD.com has said Liu was falsely accused. The company’s shares plunged nearly 16 per cent in two days of trading on the NASDAQ exchange after Liu’s arrest, and have since fallen another 24 per cent.

“We are pleased to see this decision,” JD.com said in a statement on its website.

Liu was in Minneapolis to take classes at the University of Minnesota, where he was enrolled at the school’s Carlson School of Management to complete the American residency of a US-China business administration doctorate programme.

Liu’s accuser is a 21-year-old student at the university. She has not been publicly identified.

Liu made the first direct response to the decision on Saturday morning.

“This proves I broke no law. My interactions with this woman, however, have hurt my family greatly, especially my wife,” said Liu in a post on his Chinese social media account. “I feel deep regret and remorse and I hope she can accept my sincere apology. I will continue to try in every possible way to repair the impact on my family and to fulfil my responsibility as a husband.”

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Jill Brisbois, a US-based attorney for Liu, said in a statement that “this confirms our strong belief from the very beginning that my client is innocent”.

“Even though the prosecutor determined no criminal charges were warranted, Liu’s reputation has been damaged like anyone falsely accused of a crime,” said Brisbois.

The comments by Liu’s attorney reflect the reality that even though he has been cleared and a long period of uncertainty brought to an end JD.com faces challenges on several fronts and it will take time to win back the confidence of investors.

JD.com reported lower-than-projected revenues in November and its first sequential fall in annual active customers since listing in New York in 2014. Sales for the third quarter of 2018 were 104.8 billion yuan (US$15.3 billion), a year-on-year increase of 25 per cent.

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The number of customers who bought products or services on JD.com, a statistic referred to as “annual active customers”, fell by 8.6 million between June and September to 305.2 million.

JD.com, which is backed by Walmart, Alphabet’s Google and China’s Tencent Holdings, has already lost nearly half of its market value this year as it fights intense competition for Chinese online consumers.

Executives said slower sales in its core e-commerce business, particularly big-ticket items, dented its third-quarter performance. The company forecast fourth-quarter sales growth between 18 and 23 per cent, below an average analyst estimate of 23.5 per cent.

Chief financial officer Sidney Huang said the “relatively soft” sales forecast was linked to an ongoing consumption slowdown in China, which is currently in talks with the US to de-escalate a damaging trade war.

Meanwhile, the control exerted by founder Liu over China’s second largest e-commerce player was thrown into sharp relief by his US arrest, exposing corporate governance risks at the Beijing-based company, according to some analysts.

Liu receives almost all of his compensation in the form of equity he has a stake of 16 per cent in JD.com stock, but controls 80 per cent of the voting rights.

“Liu has considerable influence over matters such as electing directors and approving material mergers, acquisitions or other business combination transactions,” according to JD.com’s official by-laws.

Moreover, under the current rules of JD.com, “the board of directors will not be able to form a quorum without Liu for so long as Liu remains a director”.

Although many of China’s biggest technology firms tend to be headed by powerful leaders, running elevated levels of “key man risk” in general compared with international peers, JD.com has a very unusual set of rules, according to industry experts.

China’s JD.com misses third-quarter revenue estimates

Liu acknowledged some of the pressures the company has been under since his arrest in his statement.

“During these difficult days, my colleagues at JD.com have been working under pressure. I would like to deeply thank them for remaining focused on our business,” he said. “I sincerely ask you not to blame the many fine and dedicated employees of JD for my personal matters.”



Category: China

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