SHANGHAI -- A Briton and an American were sentenced to prison Friday on charges of illegally trading in the personal details of Chinese citizens after they testified they bought such information to help companies combat fraud.
Peter Humphrey and Yingzeng Yu, a married couple, operated a firm in Shanghai that helped companies screen potential business partners and employees. Their arrest last August sent a chill through foreign businesses. It came as Beijing tightened controls over information and prompted warnings that investigation of legitimate matters might be curtailed.
After a one-day trial, Humphrey was sentenced by the Shanghai No. 1 Intermediate Court to 2½ years in prison to be followed by expulsion from China. Yu was sentenced to two years.
Humphrey was also fined $32,000, and Yu was fined $25,000. The maximum possible penalty for illegally selling or providing personal information about Chinese citizens is three years in prison plus fines.
The judge, Yu Jian, said the defendants have 10 days to appeal once a written verdict is issued.
"Very sad about the court's verdict, but I hope that the authorities will take into account their poor health condition," the couple's 19-year-old son, Harvey, told reporters outside the courthouse.
Humphrey and Yu acknowledged having obtained personal details about Chinese nationals but said legal restrictions on such information were unclear.
Testifying in court Friday, Yu said 90 to 95 percent of the data they obtained came from household registrations that list family members and their birth dates.
Yu said such information was useful in revealing misconduct such as an employee setting up a competing company under a relative's name. She said the firm was paid $3,200 to $32,000 per case.
"The purpose of our obtaining individual information was to help prevent and fight corporate internal corruption," Yu said, according to a transcript released by the court.
Shanghai police have said reports prepared by Humphrey and Yu for clients "seriously violated the legitimate rights of citizens." They contained home addresses and information on family members, real estate and vehicles. Clients included manufacturers, law firms and financial institutions.
Such information can make clear who controls a company or can reveal family ties that might lead to conflicts of interest in a secretive Chinese business world. The ability of investigators to reveal such links can alarm political leaders who want to hide wealth amassed by their family and business figures who profit from ties to the ruling Communist Party.
Humphrey and Yu worked under contract for British pharmaceutical giant GlaxoSmithKline, which is accused in a separate case of bribing Chinese doctors and hospitals to use its products. Authorities have not indicated whether the two cases are linked.
Earlier Friday, Harvey Humphrey criticized GlaxoSmithKline, which he said made trouble for his parents by hiring them for an investigation that "trod on several powerful toes."
"The root of the problem really, from where I'm sitting, is the way GSK behaved in this matter," he told London-based broadcaster Sky News.
GlaxoSmithKline has said it hired the couple to investigate a security breach but not bribery allegations.
In July, Humphrey said on state television that he felt "betrayed and used" by GlaxoSmithKline. He said he found out during his investigation that the bribery claims were true and said he would not have carried out the probe if he had known about them earlier.
Humphrey and Yu's firm, ChinaWhys Ltd., said on its website it specialized in "discreet risk mitigation solutions" and investigations "walking multinationals through the labyrinth of opportunity, risk and unfamiliar cultural environment."
At the time of their Aug. 16 arrest last year, Shanghai police said they were investigating 126 people on suspicion of improperly gathering personal information and had detained 35. Few details of the other cases have been released.
Beijing began tightening control over corporate information in early 2012 after Chinese companies were hit by disclosures about possible financial misconduct.
Regulations issued in February 2012 prohibit government agencies from disclosing financial or commercial information about a company without its permission. That made it harder for companies to investigate potential partners or acquisition targets to find liabilities or conflicts of interest. Known as "due diligence," it is a common practice in other countries.
Friday's verdict identified three Chinese investigators from whom Humphrey said he purchased information. He said they obtained it from law firms and other sources.
Yu said that since 2011, the firm had significantly reduced the amount of personal information it gathered.
Yu went to the United States in 1981 at age 28 and later became an American citizen.
Humphrey, a former reporter for the Reuters news agency, has worked as an investigator for the past 14 years in Asia, according to his company's website.
The site said Yu has worked for or advised companies in the United States, Hong Kong and China over a 25-year business career.
Information for this article was contributed by Wayne Zhang, Sylvia Hui and Zhao Liang of The Associated Press.
A Section on 08/09/2014