JD.com Averts a Crisis as Billionaire CEO Cleared in Rape Probe

(Bloomberg) -- JD.com Inc. avoided the biggest crisis in its history after U.S. prosecutors decided not to press criminal charges against its billionaire founder, freeing China's No. 2 online retailer to resume pursuing its global ambitions.

Chief Executive Officer Richard Liu won't be charged in connection with a rape investigation in Minneapolis, ending a months-long probe that made global headlines and cast doubt over JD's leadership. On Friday, JD gained 5.9 percent to $21.08 -- still well below roughly $30 before Liu's arrest became public.

Liu, who controls a majority of the $35 billion company's voting rights, was arrested Aug. 31 and accused of raping a 21-year-old female Chinese undergraduate student. The 45-year-old CEO was participating in a University of Minnesota program for executives at the time. The potential charges had wiped out about $15 billion of market value -- almost a third of JD.com's capitalization -- since September. Liu, whose outsized control tied the firm's fate to his own, is regarded as the driving force behind one of China's most successful internet companies.

Formal charges would have made running the company increasingly untenable for Liu, whose business is backed by Tencent Holdings Ltd. Unlike rival Alibaba Group Holding Ltd., which runs a marketplace for merchants, JD earns about 90 percent of its revenue through direct online sales and the CEO regularly travels the world striking agreements with suppliers.

Read more: JD Turns to Google, Walmart to Build Global E-Commerce Empire

“As we reviewed surveillance video, text messages, police body camera video and witness statements, it became clear that we could not meet our burden of proof and, therefore, we could not bring charges,” Hennepin County Attorney Mike Freeman said in a statement Friday. “Because we do not want to re-victimize the young woman, we will not be going into detail.”

The billionaire, who became a household name in his native China and held a keynote panel at this year's World Economic Forum in Davos, was in Minnesota to complete the American residency of a U.S.-China business administration doctorate program at the university's Carlson School of Management.

In China, JD is the equivalent of a combined Amazon, Federal Express and Visa. It has operations in Thailand and Indonesia, and plans to enter Europe. For the U.S. market, Liu has said he wanted to partner with the likes of Google and Walmart. He's avoided speaking in public since the allegations surfaced, skipping events including the Chinese government-backed World Artificial Intelligence Conference, where he was set to be a speaker.

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

Read more: Why a Chinese CEO Was Studying in the U.S. Before His Arrest

Freeman's decision doesn't preclude a civil suit, where the standard of evidence needed is lower for a judgment. Wil Florin, the woman's attorney, blasted Freeman and his prosecutors, saying they never reached out to her or her lawyers during the investigation. In a text message, the lawyer suggested she may pursue a civil suit: “A civil jury will determine whether Mr. Liu, JD.com and their representatives should be held accountable.”

“If anyone cares to know why victims of sexual assault are hesitant and fearful to come forward to authorities seeking justice for what has been done to them, look no further than the manner in which this was handled,” Florin said. “On her behalf, we will not permit her dignity to be simply swept under the rug.”

Read more: JD.com Founder's Rape Accuser Says She Was Lured to Liu Dinner

Liu has consistently denied the accusations. In a blog post, he said the announcement by Freeman's office “proves I broke no law” but apologized to his wife Zhang Zetian, a local social media celebrity dubbed “Sister Milk Tea.”

“My interactions with this woman, however, have hurt my family greatly, especially my wife,” Liu said. “I feel deep regret and remorse and I hope she can accept my sincere apology.”

In documents and text messages, the student said she was invited to a party with Liu and other participants of the executive program where wine flowed freely. Her attorney alleged the student had been coerced into drinking more heavily than intended. The woman and Liu ended up at her home, where he raped her, she alleged. After a call the next morning from a friend of the student, police found the woman and Liu at her apartment, and he was arrested later that day.

Liu's lawyer, Jill Brisbois, said the decision by the county attorney “confirms our strong belief from the very beginning that my client is innocent.”

Liu and Brisbois hadn't previously elaborated on what Liu says happened at the dinner in August. On Friday, Brisbois said all interactions between Liu and the woman were consensual. Though both drank wine, Brisbois said, Liu wasn't drunk and the woman didn't appear intoxicated. After the CEO's arrest, the woman “made repeated demands for money, and threatened to make her allegations public and to sue Richard if her demands were not met.”

Freeman confirmed the account of the dinner. “There were profound evidentiary problems which would have made it highly unlikely that any criminal charge could be proven beyond a reasonable doubt,” he said. The three-month period it took to make a decision had “nothing to do with Liu's status as a wealthy, foreign businessman.”

Liu's arrest triggered a mixed response back home, where his orange jump-suited mug-shot took over social media feeds. Despite a lack of detail, a substantial faction believed the accusations against him were trumped up. Over the weekend, one women's rights organization suggested the CEO remained accountable for his actions.

“Liu did not violate the law, which is the judgment of the legal level,” the China Women's News, affiliated with the All-China Women's Federation, wrote on its WeChat account. “But there is morality behind the law. As a public figure, he should have higher requirements for words and deeds.”

--With assistance from Ken Wang and Gerrit De Vynck.

To contact Bloomberg News staff for this story: Edwin Chan in Hong Kong at echan273@bloomberg.net;David Ramli in Beijing at dramli1@bloomberg.net

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Edwin Chan, Stanley James

©2018 Bloomberg L.P.

With assistance from Bloomberg