Arun Sudhaman 14 Jul 2014 // 9:16PM GMT
BEIJING—Edelman has begun an internal investigation into its relationship with detained CCTV anchor Rui Chenggang, who was previously a shareholder in the US firm's Pegasus China subsidiary.
Rui was abruptly detained last week, amid a crackdown on corruption at CCTV. It has since emerged that the prominent CCTV anchor was a co-founder of Pegasus, which was acquired by Edelman in 2007.
Rui retained 7.92% of Pegasus, according to Edelman, until 2010, when his shares were acquired by co-founder Steven Cao, who is now CEO of Edelman parent company DJE in China.
DJE vice-chairman Alan VanderMolen, who inked the Pegasus deal while running the firm's Asia-Pacific operations, told the Holmes Report that Edelman is taking the situation "very seriously."
VanderMolen confirmed that "Pegasus was engaged by corporate sponsors involved in underwriting CCTV’s presence" at the World Economic Forum in Davos in 2009 and 2010. Rui is also a regular on Edelman CEO Richard Edelman's Trust Barometer panel at the annual event.
VanderMolen declined to identify the "corporate sponsors". He added that there was no commercial relationship between CCTV and Pegasus, "to my knowledge", but admitted that the PR agency "presumably" conducted normal editorial affairs with the media company.
"We would have preferred Rui’s shareholding to divest earlier than it did," said VanderMolen. "We weren’t privy to the discussions between the original shareholders. It certainly did not move at the speed with which we understood it would and we desired."
"I never had a business meeting with Rui," said VanderMolen, noting that the CCTV anchor was a "silent, non-activist investor and a minority shareholder."
Nevertheless, the speed with which Edelman has commenced an inquiry into business practices reflects the gravity of the situation. "We will conduct full fact finding and investigation and take whatever actions as are necessary, depending on what we find," said VanderMolen.
Edelman recently restructured its China operation, merging the bulk of Pegasus with its flagship agency.
Most of the major international PR networks have built their China operations via local agency acquisitions. Meanwhile, reports earlier this year suggested a clampdown on foreign consulting companies.