Caixin
Aug 16, 2017 05:05 PM
SOCIETY & CULTURE

Alleged Job-Recruiting Scams in China Turn Deadly

Zhang Chao’s diploma, degree certificate, and materials about his activity as a student leader are displayed. Zhang, 25, was found dead on the side of a rural road in Tianjin on July 14, a death police say was caused by heatstroke, and one of several recent deaths police say are linked to pyramid sales networks. Photo: Yang Yifan/Caixin
Zhang Chao’s diploma, degree certificate, and materials about his activity as a student leader are displayed. Zhang, 25, was found dead on the side of a rural road in Tianjin on July 14, a death police say was caused by heatstroke, and one of several recent deaths police say are linked to pyramid sales networks. Photo: Yang Yifan/Caixin

When a Shandong farmer called her son Zhang Chao and encouraged him to work hard at his new construction job, she didn’t realize the brief conversation would be their last.

“His tone was not like usual. He only answered my questions without mentioning anything himself,” recalled the devastated mother, who asked to be called by only her surname, Hou.

“I didn’t think too much about it.”

The 25-year-old Zhang left home on July 10 to interview for a job he had found online in the port city of Tianjin, about 160 miles southeast of Beijing. Once he arrived, he texted and called his parents to update them.

But on July 14, Zhang was found dead on the side of a rural road in Tianjin. Police say he died of heatstroke.

On the same day, Li Wenxing, 23, was found dead in a pond on the city’s outskirts, 20 kilometers (12.4 miles) away from where Zhang was found. Li, also from Shandong province, had left home in May for a position at a Beijing-based software company. Police say he drowned.

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Just this week, police of Zhongxiang, Hubei province, linked the death of a female university sophomore who had arrived for a summer job at a teahouse to a pyramid scheme. A pyramid group pressured Lin Huarong, 20, to join the purported sales network, police said. On Aug. 4, Lin jumped into a river after becoming emotionally distraught, a police statement said. Police have detained five people in connection with the woman’s death.

Police investigators link the deaths to pyramid sales networks, which raise money primarily through joining fees and sometimes use brainwashing and illegal detention to prevent members from leaving.

One is particularly well-known to police — Diebeilei, which has operated in Tianjin and other Chinese cities for more than 10 years. Police say Li had been duped into thinking he had a job, only to be taken into the Diebeilei organization. Tianjin police have detained five members of Diebeilei allegedly linked to the death of Li, and closed down dozens of its sales groups.

Amid public uproar over the young men’s deaths, Tianjin launched a 20-day campaign against pyramid scams, and job-hunting site Boss Zhipin apologized that a fake recruitment ad on its platform lured Li to the Diebeilei group.

But experts say crackdowns haven’t worked in the past. And opportunities for pyramid scams have only boomed in the internet age.

Pyramid schemes took off in the 1990s

Networks selling products without physical stores first appeared in China around the 1990s as a new marketing approach, led by popular foreign beauty and personal-care direct sellers such as Avon Products Inc. and Mary Kay Inc. But in China, scammers picked up on the idea, morphing it into cultlike networks that fund themselves primarily off high joining fees rather than any actual selling of real products.

In 1998, the State Council and some of its ministries issued policies to ban sales models relying on multilevel networks. Avon and Mary Kay have abandoned their business model in China of relying on levels of distributors’ networks; they set up physical stores and hired professional sales teams to continue their business in China. In 2005, the State Council said direct sales companies are legal when they are officially registered as a business entity and operate a single-level sales network to directly market products to consumers. Most multilevel pyramid networks, mostly without physical business and products, are banned. In 2009, China made it a crime to organize a pyramid network.

Diebeilei, for example, says it sells cosmetic products branded as Diebeilei. But Li Dongmin, legal representative of Guangzhou Diebeilei Fine Chemical Co. — a cosmetic manufacturer that many Diebeilei members claim is the supplier of their products — said the company has never partnered with it nor with any pyramid sales group. The local commerce and quality regulators told Caixin that recent and earlier investigations have found no evidence that Guangzhou Diebeilei was involved in pyramid sales groups.

Chen Wuwen, general manager of Guangzhou Diebeilei, said his company is an outsourcing producer for other cosmetic brands and sells no product branded as Diebeilei.

But scammers have convinced many people that they can earn a fortune by selling “Diebeilei” products. According to the Beijing-based newspaper Legal Daily, police in the eastern province of Shandong cracked down on a major Diebeilei network in 2009 and detained 36 senior group organizers. Police found 500,000 people in 30 cities had signed up to be members and paid a total of 2 billion yuan ($299 million) for nonexistent products.

The Jinghai district in the outskirts of Tianjin, where Li Wenxing’s body was found, has been an epicenter of the Diebeilei sales network over the past decade despite government clampdowns, according to media reports. Documents from China Judgments Online, a database of court verdicts, shows that convictions were secured in 17 illegal-detention cases related to Diebeilei in Jinghai between January 2015 and this March. Two people died in cases during that period.

Zhang and Li Wenxing were found dead only one week after Jinghai police declared they had successfully “rooted out” the Diebeilei network in the region and detained more than 30 of its members. But Jinghai residents interviewed by Caixin said police crackdowns only force pyramid schemes to move from urban area to the vast underdeveloped countryside.

A fatal journey

On May 20, a friend of Li Wenxing received a message from him indicating he was in Jinghai, about 30 kilometers away from the Tianjin Binhai New Area Software Park where he was supposed to take a new job as a software engineer. After that, Li became distant except to occasionally ask family and friends for money.

Police say Li was detained by Diebeilei members after he arrived at Jinghai and transferred to quiet rural areas over the next few days. He paid an unspecified sum to sign up for membership in the network and was allowed to freely interact with other members, police say. It is unclear how he ended up drowning.

Li Ming, who said he also was lured into Diebeilei but successfully fled, told Caixin he met Li Wenxing shortly before his death. Li Ming had stayed in the same location with Li Wenxing for several days in early July, where he saw Li Wenxing under special surveillance by group members. “He was in a poor mood and remained silent all day,” Li Ming told Caixin.

“His face was yellow and lips were dry. There were blisters on his bare feet and he always sat there numb,” said Li Ming, who claims he himself was beaten by group leaders for refusing to pay money.

The last time Li Wenxing’s family heard his voice was on July 8. He called his mother to tell her that he had changed his cellphone number and she should never give in to any requests for money, according to a report by local media.

On July 14, his body was found floating in a shallow pond outside a village. An autopsy indicated he had died around July 11.

Wang Xu, who also claims to have been a victim who escaped Diebeilei, told Caixin that newcomers’ freedoms are restricted by ringleaders and they are punished if they try to alert others for a rescue. “You had to talk exactly the way they told you to,” Wang said of any communication to others outside Diebeilei.

The murky network

Zhou Xin said she fell into Diebeilei around the same time of Li Wenxing, but the 22-year-old graduate was lucky enough to escape after just over a week. Zhou said she received an internship offer of a cost engineering job through an online recruitment ad. When she arrived at the Tianjin railway station on May 19, she went with a woman to a remote suburb, she said. Then two men detained Zhou and took away her cellphone.

Zhou and seven other young people were kept in a shabby house outside a village in Jinghai, about 500 meters (about a third of a mile) away from the pond where Li Wenxing’s body was later found. During the stay, senior members constantly lectured the newcomers that joining the Diebeilei network would be a promising and profitable career.

“Only those who were successfully brainwashed could get a cellphone and move freely to develop new members. Otherwise, you couldn’t leave,” Zhou told Caixin.

The Diebeilei network has a complicated, multilevel structure. Each group is called a “home” and group leaders are the “trainers,” while newcomers could become “boss” after paying to become a member of the network.

The identities of the most senior leaders of Diebeilei are kept secret, according to Wang Chun, a former trainer-level member. The groups were carefully managed, and members are frequently transferred to prevent them from getting to know each other well, Wang told Caixin.

Although senior members repeatedly marketed what they referred to as Diebeilei cosmetic products and encouraged new members to promote such products to their families and friends, nobody had ever seen an actual cosmetic product, according to Zhou and other Diebeilei members interviewed by Caixin.

In order to become a member, each newcomer is required to pay 2,900 yuan for what they are told will pay for a set of Diebeilei products. Zhou said she raised the money from relatives to buy the products under pressure by higher-ups after five days at the “home.” Zhou and several others fled the site on May 27.

“No one has ever seen the products (they bought). It is just a number,” Zhou said.

Caixin visited the place where Zhou says she was kept in early August and found the house empty. A notebook left behind showed that midlevel group members such as trainers need to pay for three to 64 sets of Diebeilei products, while senior members had to pay for 65 to 392 sets of the products.

An expert who has studied pyramid scams told Caixin that the money collected from new recruits is distributed among Diebeilei members, with those at the highest levels getting more.

A villager who lives near the abandoned house said it and the neighboring forest were often filled with young people of the network. “Most are in 20s. Sometimes as many as three batches of people arrived by taxi from the railway station in one day,” the villager said. Lookout posts were placed in nearby fields to stop members from fleeing and to watch for police, the villager said.

A gas company employee said he has frequently seen groups of young people gathered in nearby forests over the past two years, “giving lectures and chanting slogans.” Whenever police raided the forest, they fled.

Thriving underground

A Jinghai resident told Caixin that pyramid scams were common in town more than 10 years ago. With authorities’ intensifying crackdown efforts, the groups have moved further to rural areas and continued thriving at the countryside.

Experts blame the scams to lax law enforcement. A source from Tianjin’s judicial system said pyramid scheme members are frequently seen in public in Jinghai and are easily identified, but “no one is willing to take action as it is a thankless task.”

Others said pyramid scams can only be contained by tougher punishment. Under the current law, pyramid sales organizers of a network with more than three levels and 30 people face, if convicted, up to 10 years in prison. Scammers skirt the law by breaking up their network into smaller groups.

Most convicted pyramid scammers end up being punished under crimes of illegal detention, assault or murder, said a source from the Tianjin judicial system.

Liang Zhiyi, deputy director of Foshan city’s public security bureau in Guangdong province, suggested lowering the threshold of the crime of organizing pyramid scam while expanding punishment to lower-level participants.

Under current law and regulations, most pyramid scheme members at low levels are subject only to fines, but punishments are difficult to carry out since most of them are poor people and can’t afford the fines, Liang said.

The Ministry of Public Security in January released a draft revision to the Public Security Administration Punishments Law in which people repeatedly participating pyramid schemes or introducing others into them will be subject to up to 15 days of detention. It is unclear what the timetable is for the revision.

The deaths of Zhang and Li Wenxing alerted their neighbor villagers. Many of them have warned their young children to be careful when hunting for jobs.

Contact reporter Han Wei (weihan@caixin.com)

Cai Jiaxin, Zhang Nanqian, Ren Fangyan, Shan Xiaoyu, Wang Mingting, Xu Zhuang and Wang Yifei contributed to the story.

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