“In mid-September, Framedia Advertisement Ltd. (henceforth referred to as "Framedia") employees reported to us multiple times that their company withheld from them four months' pay. They have twice made requests for their wages with no results. We discovered in our investigation that Framedia is a wholly-owned subsidiary of Focus Media.”
"Yesterday afternoon, this reporter went to the Chizhong Taiyuan branch office on the 9th floor of the Caifu Building on Nanneihuan Street and met with Mr. Qiu, a manager responsible for the situation. After explaining the reason for our visit, Mr. Qiu proceeded to offer an explanation for this “demand for wages situation. According to Mr Qiu, the situation wasn’t all that clear-cut. “Taiyuan Frameworks” was a wholly-owned subsidiary of Focus Media. Several months ago, because of serious operational problems that had occurred at the original managerial levels of Taiyuan Frameworks, in accordance with company regulations and the decision of the shareholders, the original management team headed by a Ms Wang was dismissed. However, this Ms Wang seized the company’s official seals, stamps, business license and other essential documents and materials, refusing to give them back."
(RE: Ms. Wang) "In April of this year, as she was dutifully carrying out her responsibilities under the contract, she discovered some other party doing business under the “Taiyuan Framework” name, and, believing this to be a case of fraud, she contacted the authorities. Once this person was taken into police custody, she was surprised to discover that they produced Focus Media’s “Explanatory Statement.” It was then that she became aware that Focus had used problems in managerial-level operations as an excuse to fire her before the terms of the contract had been fulfilled. Understanding this to be Focus’ one-sided violation of their agreement, she maintained possession of some of the company’s seals and documents as per the arrangements in the contract.”
I don't recall a disclosure regarding this incident.
"We rely on the company seals, financial chops and business licenses of our PRC entities or our legal representatives for entering into contracts, conducting banking business, or taking official corporate action of any sort including registering any change to the composition of the board or management with the relevant PRC authorities. Accordingly, if any of our legal representatives obtained and misused or misappropriated our corporate chops, seals, business licenses or other controlling intangible assets, whether as a result of an employment or other dispute, such person’s malfeasance or any other reason, we could incur economic damage and disruption to our operations that may necessitate corporate or legal action. Such corporate or legal action could involve significant time and resources to resolve while distracting management from our operations. In particular, during any period where we lose effective control of the corporate activities as a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we could lose the economic benefits of that aspect of our business which may negatively impact our business and reputation." http://sec.gov/Archives/edgar/data/1330017/000119312512178463/d306631d20fa.htm
There was a rather ugly incident in this story … with two differing versions.
According to Ms. Wang and her group. “On August 6, seeing that their contracts were about to expire, they finally lost patience and, together with more than 20 other employees who were also owed wages, they headed to Nanneihuan Street, location of the Taiyuan Branch of Shanghai Chizhong Advertising and Media Company (“Chizhong”) to discuss their back pay situation. According to Focus Media’s authorization, following the unforeseen misfortune, Chizhong had become the corporation’s legal and sole entity in the Taiyuan region. However, officials at Chizhong’s Taiyuan branch office denied that they could be held accountable for owing these employees their wages. During these discussions, the employees were threatened by four unidentified individuals, with some of these employees being detained by this gang and not allowed to leave company premises. They had no choice but to call the police, and the detained employees were only freed after police officers from the Yingpan Station arrived on the scene. On August 23, Xiao Bai, Xiao Yan and other representatives of the employees hurried to Shnaghai, heading for Focus Media’s headquarters to discuss their wages situation. In coordination with the local Public Safety and Labor Departments, the corporation’s final response was to request that they return to Taiyuan, report to Chizhong’s Taiyuan branch office and settle matters there. Getting back to Taiyuan, they told the others how things had worked out in Shanghai, but recalling what happened last time, none of them dared to go back to Chizhong again.”
According to Mr. Qiu, “Mr Qiu stated that prior to August 6 he had not received orders from his superiors to handle this matter. As a result, on the afternoon of August 6 when the employees of Taiyuan Frameworks grouped together and carried a protest banner to Chizhong’s Taiyuan branch to demand the wages owed them, he went into discussions with the group, expressing that Chizhong of Taiyuan owed no pay to anyone, and hoped that they would solve the problem elsewhere through the appropriate channels. But, according to Mr Qiu, the group paid him no mind, and since their presence was getting in the way of regular working operations, he had no choice but to call the police and have public security officers come to try and persuade the assembled group to leave. Through police intervention, the situation was settled down.”