BEIJING: Missing DJE China Group CEO Steven Cao is cooperating with authorities over a possible investigation into services the agency supplied a Chinese TV station at the World Economic Forum in Davos in 2009 and 2010.
Edelman subsidiary Pegasus Communications was hired by corporate sponsors including Lenovo to "underwrite" state-owned China Central Television (CCTV)’s presence at the World Economic Forum in Davos in 2009 and 2010, to the tune of around $100,000.
"We don’t know where he is and we don’t know the circumstances," said Matt Harrington, global chief operating officer of Edelman. "We only know what we read in the press – we get information from what the media tells us. All we know is that he is cooperating with the authorities’ investigation."
Chinese authorities took famous CCTV news anchor Rui Chenggang into custody on Friday July 11, causing him to miss a live business show he regularly hosts - several of Chenggang’s colleagues at CCTV have also been detained.
Edelman acquired a majority stake in Pegasus Communications in 2007, a PR firm Cao founded in 2002 with Chenggang and another partner. Following the estimated $5 million acquisition, Chenggang’s share in the firm reduced to 7.92 percent, making him a minority, "non-active" investor.
Cao purchased Chenggang’s remaining shares in 2010, expanding his stake from 8.1% to 16.06% in the process, but Pegasus provided services to Chenggang’s employer, CCTV, when he still owned shares in the Beijing-based PR firm.
Asked about the delay between Edelman purchasing Pegasus and Chenggang selling his shares, Harrington said: "I don’t know why it didn’t happen earlier. It’s a lesson learned to make sure all markets are checked at the time of closing a transaction."
In a statement issued on July 25, Pegasus Communications said: "We confirm that China’s relevant authorities visited the Pegasus office in Beijing on July 24. They have asked Pegasus to assist with an investigation. The company is cooperating fully with the authorities. As stated earlier, we have already begun our own internal investigation."
The statement went on to say: "It is our understanding that Steven Cao is cooperating with authorities on the investigation."
Edelman has three offices in China, in Beijing, Shanghai, and Guangzhou, plus the separate Pegasus office in Beijing. The offices employ around 200 people, about 50 of them at Pegasus.
DJE China Group, which employs a total of 300 staff across seven offices, was reorganized on July 1 into four distinct brands. Pegasus Activation was launched as a wholly separate experiential marketing business, predominantly China-facing working with Chinese clients. Pegasus Communications was merged into Edelman’s own operations.
Around 80% of Pegasus’ business is experiential work. Harrington said: "Pegasus has grown up as a PR firm, with a heavy tilt toward events."
In the press release to accompany the revamp, Cao said: "Our new structure will offer our clients more clearly defined marketing solutions to help meet their business goals: flagship brand Edelman for full-service public relations; Edelman Digital for creative digital and social; Zeno for nimble consumer marketing with a digital edge; and newly launched Pegasus Activation for experiential."
He added: "This structure will allow us to increase our partnership with the CMOs of some of our largest clients." Former Jaguar Land Rover PR director and Y&R/Wunderman and Burson-Marsteller executive Leigh Chang joined as managing director of Pegasus Activation in May.
Cao still owns 16.06% of "Pegasus" but, when contacted by PRWeek, Edelman declined to confirm whether this stake was now in the new Pegasus Activation unit or the Pegasus Communications arm that has been merged into Edelman.
Cao reports to Hong Kong-based Bob Grove, managing director of Edelman in North Asia, including China, Japan, Korea, and Taiwan, who was in Beijing last week.
Grove reports to David Brain, president and CEO of Edelman’s Asia Pacific, Middle East & Africa business, which comprises 26 offices across 13 markets and over 1,300 employees. Brain is in Beijing this week.
"There is a very strong senior management in the region and the focus has been on continuing our client work as usual," added Harrington, who noted that Edelman had been in China since its "earliest days."
Pegasus’ statement of July 25 stated: "Our senior China management team is overseeing our operation in the interim in cooperation with regional and firm-wide leadership. Our China teams remain focused on serving our clients in the usual manner."
Harrington explained that Edelman’s finance team is working on making certain the China group has complied with the agency's code of conduct. "Everyone operates globally on a single code of conduct and we make sure our relations with media are appropriately managed," he added. "I presume it will be wrapped up in the next couple of weeks."
A companion practice guide document to Edelman’s Code of Ethics and Business Conduct says the following about pay for play: "Do not compensate members of the media, monetarily or in any other form in return for an expectation of coverage. The only exception would be where the coverage is appropriately accompanied by clear and conspicuous disclosure that it’s sponsored coverage (as in the case of advertorials)."
Harrington reiterated that "we won’t pay for coverage," saying that this is the source of some challenges, especially in India. "We’re not going to compete at that level," he said. "We’ll risk not getting business because of that."
Chinese authorities have been cracking down on corruption and on journalists since President Xi Jinping assumed power in 2012. This culminated in the issue of a set of guidelines at the start of July that ban media from reporting state and commercial secrets and "unpublicized information."
*This story was updated at 4:45pm on August 5 to reflect Edelman's response to requests for clarification of the current shareholding of Steven Cao in its Pegasus subsidiary.