Financial (Secret) Services

A conversation with the mysterious Anonymous analysts who are exposing fraud and corruption in Chinese companies -- and taking them down.

Anonymous Analytics (AA), a mysterious group claiming to be a faction of the global hacktivist organization Anonymous, just released its second short-selling report, this time about the multi-billion dollar Chinese company Huabao International.

Entitled "Smoke and Mirrors," it's a comprehensive unraveling of fraud in China's biggest flavor and fragrance provider. It accuses Huabao of lying about its suppliers and grossly overstating its profit margins to enrich the chairwoman and her proxies, to the detriment of shareholders. Since short-seller Muddy Waters released its first report in 2010, many firms have investigated fraud in public Chinese companies, making millions by publishing information that caused companies' stock price to fall. But this is the first time a group as murky as AA has entered the fray.

AA is cagey about most facets of its existence, including its motives. In its disclosure, the group says it holds "no direct or indirect position in any of the securities profiled in the report," but adds that readers should "assume" certain contributors to the report are shorting the stock. They certainly did their homework. At one point, AA claims Huabao used Photoshop to blur the location of one of its facilities, but AA found it anyway -- by travelling to Botswana, where the group says it learned that the base "is used for a different sort of business altogether" but declined to elaborate. Its anonymity allows AA to dangle information; it warns it will release more incriminating details if Huabao threatens anyone involved in producing the report.

The company claims it will respond to these "misleading" allegations and has suspended trading in Hong Kong. The first short-selling report AA released in September contributed to the collapse of one of China's biggest vegetable producers, Chaoda Modern Agriculture, then with a market cap of nearly half a billion dollars; trading of the company's stock remains suspended.

I reached AA through the contact page on its website; the group agreed to an interview but wrote "we generally prefer email correspondence since we can answer with one voice instead of multiple on the cuff." Asked how many people I was speaking with, the response was: "at least one." AA answered all of my questions, with one notable exception: a request for elaboration on their funding and the identity of contributors to their report; to which they responded "as a matter of confidentiality, we don't discuss anything related to our partners/contributors/affiliates/sources."

On the bottom of the first page of its Huabao report, AA appended the slogan "You should have expected us." Here's what to expect next from AA:

Foreign Policy: What inspires your choice of targets? Would you describe there being any ideology behind it? Would you be more inclined to publish a report on say, a Chinese weapons company than a Chinese toy maker, for example?

Anonymous Analytics: Our choice of targets [has] been mostly limited by how much information we believe we can dig up on them. For example, our first report on Chaoda was a complete joke. The company was such an obvious fraud that we didn't really have to put much effort into finding information on them. Everyone already knew it. We just came in and took the last punch. We believe the reason Chaoda no longer trades today has less to do with our report, and more to do with the fact that the company was giving regulators such a headache. If you're going to commit fraud, don't be so obvious.

With Huabao, our most recent target, things about the company just didn't make sense. How did this 36-year-old female who no one had ever heard of manage to become a billionaire overnight, particularly in a notoriously government-controlled and patriarchal industry? This example is a stretch, but helps demonstrate the absurdity of Huabao: Imagine if you had never heard of [CEO Mark] Zuckerberg until after Facebook's IPO. It just didn't make sense.

Then there were the massive insider selling, opaque related-party transactions, etc. These are red flags that we start looking for, but more often than not, it leads down the rabbit hole.

Right now, we have enough tips and more leads and more people helping us that we can be more selective in our targeting process. That said, the industry doesn't really matter as much as the people leading the company. Who would have thought a vegetable producer (Chaoda) would be an ideal vehicle to commit fraud? From a media standpoint, it would be more interesting to take down a weapons manufacturer run by some bald guy sporting a white cat. But that doesn't always turn out to be the case.

FP: Any retribution from Chaoda Modern following your report?

AA: There has been no retribution to date. If there ever is an issue regarding safety, we do have an encrypted insurance file we will release.

FP: What is the relationship between Anonymous and Anonymous Analytics? You say that you're a faction of Anonymous, but what does that mean exactly?

AA: Our members grew up within the Internet subculture and cesspool that is 4chan. We have been active in the Anon community over the last several years in some capacity. Some of us eventually grew up and got jobs in industry and government but we retained the dark humor that is Anonymous. More importantly, we retained the skill to source information and social-engineering capabilities that we honed through our work with Anonymous. This ability has proved useful in our more high-brow work with Anon Analytics.

FP: You say on your website that "All information presented in our reports is acquired through legal channels." So, no hacking?

AA: We don't hack for information since that would attract all kinds of horrible attention we don't need. Imagine the end result of a group of hackers raiding corporate servers for information, and then compiling that information into market-moving reports. It's a good script for a movie, but it's also good way to invite black helicopters. But then again, if we were hacking, chances are we wouldn't go around talking about it.

FP: What would you say the Holy Grail of corporate exposure would be, in regard to China and the United States?

AA: This is a tough one to answer. In the U.S., the Holy Grail would likely be a major financial institution -- there's certainly enough venom among the U.S. population toward financial institutions. In China, it would likely be a government-controlled entity where management is asset-stripping at the expense of the common people.

FP: How many people were involved with this report? Any plans to publish a version in Chinese or in other languages?

AA: We don't discuss the number of individuals that worked on our report, and it changes from project to project. Multiple languages might be something we look at down the line, but don't expect to happen. There's an issue of costs, time, and our sense of humor not translating well.

FP: I see your Drop Box is closed in part because of a large number of tips. Any hints on what we should expect from you in the coming months?

AA: Hopefully more quality work. We're looking to step away from China. Targeting Chinese companies has become a cliché, which probably explains our self-loathing. At the same time, there are some reasons that these companies have become a target:

First, China's governance and accountability standards have not yet reached the same level as developed markets. In other words, managers of these companies have not yet learned how to properly hide their improprieties.

Second, most Chinese companies are manufacturing- or production-based. This lends itself well to the diligence process. It's easy to go into a factory and take a picture of a production line that's idle. It's a binary decision: Either the company is producing, or it isn't.

When it comes to more established economies, they tend to be service-based. You can't exactly go into the office of Goldman Sachs and take a picture of a stack of papers and some guy playing solitaire at his computer. Contextually, it doesn't translate well into a report.

These are just some of the reasons Chinese companies have become easy targets. That said, we are trying very hard to make our next report ... unique.



Doing Right by the World's Women

A conversation with the first female head of the U.N. Development Program on the most pressing issues for women in the developing world.

When Foreign Policy compiled its list of 25 of the most powerful but least known women in the world for our May/June issue, Helen Clark was a natural pick. A three-term prime minister of New Zealand, she stepped onto the international stage in 2009, when she became administrator of the United Nations Development Program. As the first woman at the helm of the UNDP, she oversees the organization's 8,000-plus employees working in 177 countries to fight poverty and corruption and support vital welfare, health, and environmental programs.

On a visit this past weekend to Washington, D.C., where she attended the World Bank/International Monetary Fund meetings, Clark sat down with Foreign Policy to talk about women's issues in developing countries -- with an eye toward the new governments in several Arab states -- and whether the UNDP is on track to meet its eight Millennium Development Goals by 2015. She also explained why, when it comes to fighting poverty, countries like India and Mexico are getting it right. Despite a dizzying schedule of travel and meetings, Clark says that when her four-year term as administrator ends next spring, "chances are I'll be saying, ‘Well, my work's not done, and I'd love to carry on.'"

Foreign Policy: One of the themes that emerged in the newest issue of Foreign Policy is that women's issues are inseparable from development issues generally. Is that something that's consciously part of the UNDP's philosophy?

Helen Clark: Empowering women and upholding women's rights is part of our mandate, and we start from the assumption that women have equal rights to human rights, and that in terms of development a country will always sell itself short when it's not opening up opportunity for women. If you're going to systematically exclude half your population from development progress, you're never going to be what you could be. So there's both the human rights issues -- that women are entitled to equal rights -- and then also the issue that women being able to exercise equal rights and have access to opportunity of course will not only be empowered themselves, which is good for women as individuals, but they will [also] help propel their country forward. And there's plenty of evidence now ... that the more education a women has, not only the better her own life prospects -- delaying the age of marriage, better spacing of her children for her own health -- but her children themselves will be healthier and have higher aspirations. So any investment you make in women will have multiplier effects. It's one of the most effective investments you can make anywhere.

FP: And a couple of the UNDP Millennium Development Goals specifically address women's issues.

Clark: Correct. [There is] MDG 3, which deals with a target for representation in legislatures of 30 percent. And a lot of developing countries have been very creative with the use of quotas and other measures to get there. Rwanda's a very, very interesting case with 56 percent of the MPs who are women. Burundi also -- there's so many examples that are really quite exciting. And that goal also deals with gender parity in education. We're reasonably close to gender parity in primary education, but secondary -- no. So there's work to do.

And then there's the MDG 5 on maternal health and access to sexual reproductive health services, and that one is struggling a lot, which speaks to the relative lack of status of women in communities, that these issues haven't been given top priority.

FP: Are you optimistic that about meeting those goals by the target year, 2015?

Clark: MDG 5 is very, very tough, because it called for a three-quarters reduction in maternal mortality between the 1990 baseline figure and 2015. I don't think that will be met. Universal access to sexual reproductive health services -- no, won't be met. But they're very, very critical goals. So whatever happens after 2015, these issues have to continue to have priority.

FP: On the question of women in politics, you said the goal was about 30 percent representation in parliaments, and I think it's about 20 percent right now.

Clark: Yes, it hovers around there. It's inched up slowly. When I first made speeches coming here it was under 18. We're now talking around 20. But it's slow.

FP: Why, from the UNDP's perspective, is it important that women are represented in parliaments?

Clark: You come back to the same two issues. There's an equal right to be represented per gender. But there's also the issues that if you are out of sight, you're out of mind. The issues that women need addressed to advance their own and their families' status and needs are not addressed unless women's voices are there. I saw from the perspective of my own country that it wasn't until there was a critical mass of women that you could really move ahead on a number of issues. Because otherwise it's just, "Oh, there's so-and-so again, and they're going on about early education or whatever." You have to have a critical mass of women to be advocating for the case. And then they have to work with the men in the parliament to get them on board. And when the critical mass is attained, you see quite interesting examples of legislation.

FP: Are there particular regions of the world where the UNDP is focusing its efforts on women?

Clark: Well, we're in every developing country (except maybe Qatar, which is a very high-income country). ... We have worked on women's political participation and economic empowerment and the status of rights issues in many, many, many countries.

Now, with the Arab states' uprisings and transitions, that's raised a number of new issues. New actors have come on the scene in a way that they couldn't before, including political Islam. And obviously there's been quite a lot of debate about what that means for women, because some of the secular but authoritarian regimes had in place a legal framework for women that had some good aspects. So there's been a concern not to go back on that. We worked hard in the Tunisian elections to support women coming forward and being candidates and so on. And in the end the proportion in the parliament didn't lift, but it didn't go down either -- which it could have. ... I recently visited Morocco, and while the language being used is perhaps not the language one would be accustomed to hearing in a discussion around gender rights, nonetheless there was an absolute determination to have equal access to education. The words "women's economic empowerment" were used, universal access to health services. So we have to find ways of working with new actors, which are in line with the conventions and treaties and values that we uphold.

FP: Do you think it's significant that you are a woman as the head of the UNDP, the first?

Clark: Oh yes.

FP: How?

Clark: Well, I think I can be part of making sure that what we do in these areas isn't just a kind of add-on -- that it's implicit in the design of what we do. I come from a government background where, after the 1984 election, my party in government set up a women's affairs ministry with the requirement that it would comment on all government policy papers from a woman's perspective where it saw that was relevant. .... Basically having a gender perspective mainstreamed into every policy is something that's happened in my own country for close to 30 years. So that's the way I see it, as not an optional extra. It's when you're designing a program on democratic governments or recovery from conflict or adaptation to climate change, you've got to look at it through a gender lens.

FP: How was the transition from running a relatively stable, democratic country to running the UNDP?

Clark: Well, I sometimes say that I had more power as prime minister, but I've got more influence in this job. I was the leader of a small country [the population of] which would fit several times into the greater New York area. Now I have the opportunity to work on issues where you can have a global impact in the way issues are approached and designed. It's interesting, different, but it's still a leadership job. It still calls for the same skills. You've got to be interested in people. If you're not interested in people, you shouldn't be able to do any of these jobs.

FP: You've said one of your goals as administrator is also to eradicate extreme poverty worldwide [MDG 1]. Is that still your hope?

Clark: Well, I can't do it single-handed! But, you know, the MDGs set a target between 1990 and 2015 of halving the numbers of people living in extreme poverty. Well, that's great if you're in the half that got out of it but horrible if you're in the half that didn't. So I really hope with the post-2015 agenda that the world will be a little more ambitious and talk about eradicating extreme poverty. You will never eradicate relative poverty; in every society you have people who are relatively poor -- in the U.S., Brazil, wherever. But you can absolutely eradicate extreme poverty. It's going to take a mixture of economic growth, which is able to spread the benefits more widely, including through measures which will grow the number of jobs, extend social protection systems, and so on -- it's complex policies, but it can be done.

I mean, look at India, which won't meet MDG 1 by 2015, but its prime minister said to me he thought by 2020 they could make very substantial progress on reducing extreme poverty. Now, why does he say that? Because they've introduced this Mahatma Gandhi National Rural Employment Guarantee Act, which gives eligible rural poor a guarantee of 100 days work a year at a minimum-wage rate. ... And that is now reaching 55 million households. Well, multiply by six, and you're talking probably a quarter of India's poorest people who've been lifted up. And so initiatives like that which create work are really making an incredible difference. It can be done; when governments are determined to tackle extreme poverty, it can be done. And it's being done in a very interesting way because the work that is selected to be eligible for this program -- the selection is made by the village council, and on the village council by law since the 1990s 30 percent of members have to be women, and it's often up to 50 percent now. And in the objectives of the program are conservation and environmental protection and water infrastructure and so on. When I went to rural Rajasthan to have a good look at this program and how it was operating over two days, I saw precisely women working -- 30 percent of the workers have to be women too, and that's gotten to near half -- digging up the pond for conservation and those kinds of things. It was tough work but important work.

FP: Worldwide would you put a target year on that goal?

Clark: Well, I think if the world was being really ambitious, it would say: Take 10 years from 2015 and go for it, and just say it's not acceptable for people to be living under that $1.25 a day mark. It's just not acceptable. So what can we do to change that? Apart from government policies needing to be clear-headed, there's a range of other things that will help -- if there's significant climate finance coming down the stream, which will help countries make investments in climate-resilient agriculture, for example. Positive outcomes from the world trade rounds would help. I think making official development assistance very catalytic and impactful, so that it focuses on what's important, would help.

But then the other thing that would help is an end to war and armed violence, because how do we eradicate extreme poverty in the center or south of Somalia if it's embroiled in conflict? Conflict de-develops. And if you look at the problem of armed violence now in parts of the Latin American Caribbean region, it's very alarming. And then the way the organized crime and drug trade is trans-shipping from there into very fragile countries like Guinea-Bissau, which has just had another coup. I mean, how do countries ever get a clear run at tackling extreme poverty if they're just drowned by these basic problems of peace and security?

FP: Is there a particular message you're bringing this weekend to the World Bank/IMF meetings?

Clark: The Development Committee of the World Bank meets this afternoon, and we [the UNDP] get called on to speak. ... The key point on the agenda today is around social protection systems. So I will make the point that social protection systems are absolutely critical in every country, because they stop people and countries from losing the ground they've made on development. If you don't have a social protection, a safety net, when a shock comes along -- whether it's an economic shock or it's a natural disaster -- people get knocked over. And that may be a loss of human well-being that is never made up again. ... I often point out that in countries we regard as some of the most developed -- like yours, like mine, European countries -- we introduced these systems not when we were rich but when we were poor, as a response to the Great Depression, because it was considered so shocking to see people slip below any decent standard of living into outright destitution. But only about 20 percent of working-age people in the world today are covered by social protection schemes, so there's a way to go.

But in terms of effectiveness -- and I'll mention this in my brief comments today -- take a scheme like the Mexican one, Oportunidades, which is targeted at poor families. That scheme stopped the impact of the global crisis destroying living standards for the poor in Mexico. So even though Mexico's GDP contracted quite severely with the spillover from what had happened in the markets to the north, they cushioned the poor from it. And these schemes are quite affordable; we say in the range of 1 to 2 percent of GDP -- I don't even think it cost that in Mexico. ... And there's quite a number of these now: Brazil's Bolsa Familia, Chile's got one. So we're really pushing this quite hard.

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