Arsenal Gets Entangled in Suspected Fraud at Chinese Carmaker

(Bloomberg) -- London soccer club Arsenal got entangled in a suspected fraud involving a Chinese carmaker, which says it was duped by a person posing as an employee who signed unauthorized contracts with advertising partners.

BYD Co., an electric-car maker backed by Warren Buffett, asked the police to investigate a person who it says damaged its reputation and harmed related parties. Arsenal, which announced a pact with BYD in April, says the carmaker informed the English Premier League club that the deal was among those potentially affected by a fraud.

The person isn't an employee and never has been, and BYD hasn't authorized the person to conduct business in its name, the Shenzhen-based company said in a statement to the Hong Kong stock exchange Monday. The carmaker also said it reported to the police a forged company seal, which may have been used to stamp contracts that the person awarded.

Shanghai Public Security Bureau, the Chinese authority that BYD says is looking into the matter, didn't immediately respond to a faxed query.

The person conducted marketing activities in BYD's name over the past three years, and signed deals involving dozens of partners, The Paper reported on July 15. A representative for BYD declined to comment on the report and referred to its statement to the exchange.

BYD originally disclosed some details of the case last month, and on July 12 it said in a statement on Chinese social media that “with the deepening of understanding, BYD believes that this incident has a greater impact on the advertising media industry and will cause greater losses to related companies.”

BYD fell 5.7 percent in Hong Kong, the biggest drop since March 28.

Electric-car makers have been accelerating marketing efforts to help attract consumers in the world's biggest market for such vehicles. BYD signed up Leonardo DiCaprio to represent the company's new-energy vehicles in 2016, and in April, the north London soccer team said the Chinese company became its official global car and bus partner.

The partnership was announced on Arsenal's website, along with a statement that included quotes from the club's chief commercial officer as well as BYD's brand and public relations director. The pact was reported by publications including the South China Morning Post and China Daily.

Then, on July 13, Arsenal said that the carmaker believes it is the victim of a fraud related to various advertising agreements, including the partnership with the club. Arsenal said it is investigating the situation while talking to senior management of BYD. A spokesman for the club declined to comment beyond the statement.

--With assistance from Yan Zhang.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Ville Heiskanen, Christopher Elser

©2018 Bloomberg L.P.

With assistance from Editorial Board