Chinese police arrest Quanjian chief on suspicion of false marketing and running pyramid sales scams

Chinese authorities on Monday announced the arrest of the chief executive of health care product maker Quanjian Group and more than a dozen employees on suspicion of false marketing and operating pyramid schemes.

Shu Yuhui, 51, whose company was accused last month of links to the death of a four-year-old cancer patient, was detained with 17 others, including a doctor from the firm’s tumour hospital, Tianjin police said.

The investigation began on New Year’s Day. Two other detained employees were granted bail, police said on China’s Twitter-like Weibo service.

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The Tianjin-based conglomerate – whose businesses include soccer and equestrian sport – has been under scrutiny since Chinese health website Dingxiang Yisheng – or Doctor Clove – published allegations on December 25 that the company misled the family of a sick girl into giving up other treatments to concentrate on a herbal remedy made by the company.

The girl, Zhou Yang, died in 2015, three years after she was diagnosed with a sacrococcygeal teratoma, a tumour at the base of her spine, and months after she started using the Quanjian remedy.

Her image was used by the company to promote its products, said the girl’s father, who unsuccessfully sued Quanjian for false marketing.

Shu, 51 and a member of China’s top political advisory body, invests in Tianjin Quanjian, a soccer club in the Chinese Super League.

His company, founded in 2004, owns hotels, medical institutes and business education schools, according to its website.

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Quanjian denied accusations in the Doctor Clove article, saying the report was based on “untrue information from the internet” and that it had defamed Quanjian.

The company said it had spent years researching its own products based on traditional Chinese medicine.

Since the scandal broke, many people have taken to the internet to share their experiences with Quanjian products. They said these products included shoe pads the manufacturer said would improve balance, and ionised pads, Quanjian claimed, could cure gynaecological disorders and diseases.

Former employees claimed Quanjian used pyramid schemes promising high returns, with members charged a joining fee and pressed to recruit more investors.

Some of the company’s commercial partners have cut ties. China Railway stripped the firm’s logo from high-speed trains running between Beijing and Shanghai, the China Business Journal reported on Monday.

In a report by news platform Thecover.cn on Sunday, a woman named Zhang Lulu from Luoyang, Henan province, said that after she paid 20,000 yuan (US$2,920) to join the company in 2014 her main job was to persuade other people to buy membership.

Typically, the target was invited to try out free “fire therapies”, free tours of the firm’s headquarters, and free meals. Within months, Zhang developed two “retailers” but was still 10,000 yuan out of pocket, the report said.

“I saw Quanjian donate money to areas suffering natural disasters and engage in other charity work. I thought it was a responsible company,” Zhang was quoted as saying.

Healthcare products maker Quanjian investigated over girl’s death

That view of Quanjian lasted until January 2015, when she was involved in a road accident on her way to the firm’s headquarters in Tianjin for an annual staff gathering.

She and 50 other Quanjian members from Luoyang were on a bus that hit a height clearance bar suspended across a road, killing two and injuring many more.

She was in coma for a week and, by the time she returned home from in hospital, she found she had been removed from the member list.

According to the report in Thecover.cn, Quanjian responded to her request for compensation last week.