Monday, November 28, 2005
Five Dysfunctions
By Del Jones, USA TODAY Mon Nov 28, 7:36 AM ET
When the Arizona Cardinals NFL team signed two-time most-valuable-player Kurt Warner in the offseason, Josh McCown was relegated to second-string quarterback.
McCown isn't the kind of person to throw a hissy fit, but he could have moped, or worse, been outwardly genial while doing little things to undermine Warner's success and get his job back. That's the passive-aggressive approach that often tempts people who feel snubbed. While there hasn't been much research done on such gridiron behavior, surveys show it to be rampant in offices worldwide.
Corporate leaders have traditionally borrowed from successful sports strategies to run their companies. But lately McCown and others in the NFL are learning a thing or two from a business book about winning tactics in the workplace. Months before being demoted, McCown came across the leadership parable The Five Dysfunctions of a Team at an airport bookstore, which, among other things, stresses the importance of sacrificing personal ambition for the larger goal. (Excerpt: 'The Five Disfunctions of a Team')
"What I had to do was be the best No. 2," says McCown, who became the starting quarterback throughout October and led the Cardinals to two of their three wins so far this 3-8 season while Warner recovered from a groin injury. This month, Warner has been back on the field and McCown back on the bench.
Five Dysfunctions was written for business executives and managers. A football audience was so far from the mind of author Patrick Lencioni that the parable's heroine is a 57-year-old, female CEO named Kathryn who talks about such sappy things as fear of conflict.
Lencioni says he is stunned his book is becoming a must-read for NFL head coaches. But its enthusiasts include:
• San Francisco 49ers coach Mike Nolan, whose wife, Kathy, read it first and gave it to him.
• Oakland Raiders coach Norv Turner, who thinks his copy came by way of his brother-in-law, but he's not sure.
• San Diego Chargers coach Marty Schottenheimer, who was given the book by Rolf Benirschke, the third-most-accurate kicker in NFL history. Benirschke, now retired, has passed out about 60 copies around the league.
• Miami Dolphins rookie coach Nick Saban, who read the book in preparation for his transition from the college game at Louisiana State.
• Cleveland Browns coach Romeo Crennel, who has used it to coordinate his talent scouts, loners who must come together as a team to somehow narrow the 300 best college players down to a handful of draftees.
• Cincinnati Bengals coach Marvin Lewis, who has distributed 20-plus copies to assistant coaches and players and keeps a four-color printout of the book's pyramid on his desk to remind him of the five dysfunctions that can cripple a team.
Why is a business book catching on in the NFL? Partly because these are times when head coaches and CEOs are similarly struggling to maximize teamwork in a world of A-players, rainmakers and would-be hall-of-famers. But it may also be because coaches are closet fans of business leadership/management books, just as executives have long been fans of leadership books written by successful athletes and coaches, such as Wooden on Leadership by former UCLA basketball coach John Wooden.
In 2001, when the Baltimore Ravens won the Super Bowl, then-defensive coordinator Lewis had his players reading Who Moved My Cheese?, a best-selling parable about the inevitability of change that has spun into an industry of workplace workshops. Dolphins coach Saban, who wrote his own book, How Good Do You Want to Be? A Champion's Tips on How to Lead and Succeed at Work and in Life, consumes leadership books that date back to The Art of War by the ancient Chinese general Sun Tzu.
A locker-room chord
But Five Dysfunctions, more than any other leadership book written for the business market, seems to have struck a locker-room chord. Published in 2002, it has not risen to the level of best seller. But demand has grown, and over the past two years it has outsold almost all leadership/management books with a few exceptions, such as Cheese, Good to Great, The 7 Habits of Highly Effective People, The 8th Habit and Now, Discover Your Strengths, according to USA TODAY book sales data.
Potential demand looms large in the football world. Positive Coaching Alliance estimates there are 4 million youth-sports coaches at the high-school level on down, a market that could position Five Dysfunctions to be like a cross-over country song that gets play time on pop radio. So Lencioni, who is busy consulting with corporate clients such as Southwest Airlines and Sam's Club, has licensed materials and methodology for an athletic practice to Pat Richie, the former chaplain of the San Francisco 49ers turned team-building consultant.
NFL coaches are using the book in different ways, some to build cohesion among athletes, others to improve relations among assistant coaches, and some in specialized situations such as when a trade is being considered that will help the offensive line at the expense of the defensive secondary. Trades almost always mean one assistant coach must absorb a sacrifice for the overall team.
"We have people in personnel, coaching, the front office. Everybody should be working toward the same goal," Saban says.
Where it begins
The Five Dysfunctions tale begins as Kathryn comes out of retirement to become CEO at an underperforming Silicon Valley technology company. She soon encounters a talented executive team that goes along to get along even as the company is being beaten by the competition. Kathryn does not back down from difficult decisions, but she first insists on honest and heated debate. Such debate is possible only when trust is established.
Absence of trust is the first and foremost dysfunction of a team. Without trust, team members fear conflict, lack commitment, avoid accountability and do not attend to results, the four other dysfunctions.
Kathryn also teaches that progress comes only when everyone is pulling for team goals, not individual goals. That makes Five Dysfunctions even more NFL-timely following the exit this month of Terrell Owens. The gifted wide receiver made an art of criticizing teammates and causing disruption, and the Philadelphia Eagles decided that team unity was worth booting Owens even if it meant losing a game-breaking talent.
There is a character in Five Dysfunctions named Mikey, who is described as a "brand-building genius" but who has little respect for other executives and rolls her eyes when they make suggestions. Kathryn fires Mikey.
"To be clear, Owens is one of the most talented athletes to come along in a long time," says Lencioni. But he expects that other coaches around the league will be rooting for the Eagles to play better with the wide receiver gone.
Bengals coach Lewis says he has always been willing to let talent go for the sake of the team. "I call it addition by subtraction," he says.
Young football players will follow someone, so selfish players must be removed to get the "impressionable guys to follow a real leader," says Benirschke, the former kicker.
Of course, top-notch players such as Owens are a hot commodity with or without a disruptive track record. That's the kink in the NFL's armor, Cardinals second-string quarterback McCown says: Disruptive players know that some team of the 32 will likely sign them.
Not just football
The popularity of Five Dysfunctions isn't exclusive to NFL coaches. Teams playing everything from cricket in New Zealand to tennis at Northwestern University have employed its lessons. And at the top of former 49ers chaplain Richie's wish list as he looks to target the sporting world: a consulting assignment with the U.S. Olympic basketball team as it prepares to avenge the bronze medal disappointment of 2004.
"It's one of the best books I've ever read," said Gail Goestenkors, coach of the second-ranked Duke University women's basketball team. Her problem is not prima-donna players, she says, but rather unselfish players who would rather not hurt their teammates' feelings even at the expense of the team.
"They avoid conflict as long as possible," Goestenkors says. "Then they explode in stressful situations like when it's a tie game, when you need a cohesive unit." Conflict can be temporarily sidestepped, but then players will decide at the most inopportune time to criticize a teammate for never passing the ball, she says.
Inside the NFL, the Chargers may have embraced Five Dysfunctions more than any other team. Schottenheimer declined to be interviewed, but friend Benirschke says Schottenheimer has undergone a "transformation." Schottenheimer used to have a slacker rule that forbid any player from competing on Sunday if he had not practiced by Friday. But the veteran coach has established trust in an executive committee of players, who are free to approach him to air player concerns. That committee convinced Schottenheimer that it is sometimes in the interest of the team to give a player the full week off to recover from an injury if it gets him healthy to play on Sunday, Benirschke says.
Measuring effectiveness
As with other leadership tools, the trouble with Five Dysfunctions is that it's difficult to measure its effectiveness and know if the NFL coaches who have read the book are winning more games. The Bengals, who Sunday beat the Baltimore Ravens, 42-29, are 8-3 after consecutive 8-8 seasons in Lewis' first two years. The Chargers went 12-4 last year after a 4-12 record in 2003 nearly got Schottenheimer fired. They are 7-4 so far this year.
The Panthers are 8-3 after going 7-9 last year, but three of the seven Five Dysfunctions NFL teams have losing records, including the 2-9 49ers and the Raiders and Browns, both 4-7. Lencioni and others cite the 6-5 New England Patriots as the selfless team that best exemplifies the lessons from the book, but Lencioni says there is no indication that Coach Bill Belichick has read it, nor Philadelphia Eagles Coach Andy Reid, who cut Owens.
Coaches agree that there is a lot that goes into a winning team, and no book will ever play more than a tiny role. But in the NFL, as in business, a slight edge can make the difference.
"We all know at this level you're evaluated by wins and losses, says Turner, coach of the Raiders. "But a big part of coaching is getting people to develop and ultimately perform to the highest level of their potential."
When the Arizona Cardinals NFL team signed two-time most-valuable-player Kurt Warner in the offseason, Josh McCown was relegated to second-string quarterback.
McCown isn't the kind of person to throw a hissy fit, but he could have moped, or worse, been outwardly genial while doing little things to undermine Warner's success and get his job back. That's the passive-aggressive approach that often tempts people who feel snubbed. While there hasn't been much research done on such gridiron behavior, surveys show it to be rampant in offices worldwide.
Corporate leaders have traditionally borrowed from successful sports strategies to run their companies. But lately McCown and others in the NFL are learning a thing or two from a business book about winning tactics in the workplace. Months before being demoted, McCown came across the leadership parable The Five Dysfunctions of a Team at an airport bookstore, which, among other things, stresses the importance of sacrificing personal ambition for the larger goal. (Excerpt: 'The Five Disfunctions of a Team')
"What I had to do was be the best No. 2," says McCown, who became the starting quarterback throughout October and led the Cardinals to two of their three wins so far this 3-8 season while Warner recovered from a groin injury. This month, Warner has been back on the field and McCown back on the bench.
Five Dysfunctions was written for business executives and managers. A football audience was so far from the mind of author Patrick Lencioni that the parable's heroine is a 57-year-old, female CEO named Kathryn who talks about such sappy things as fear of conflict.
Lencioni says he is stunned his book is becoming a must-read for NFL head coaches. But its enthusiasts include:
• San Francisco 49ers coach Mike Nolan, whose wife, Kathy, read it first and gave it to him.
• Oakland Raiders coach Norv Turner, who thinks his copy came by way of his brother-in-law, but he's not sure.
• San Diego Chargers coach Marty Schottenheimer, who was given the book by Rolf Benirschke, the third-most-accurate kicker in NFL history. Benirschke, now retired, has passed out about 60 copies around the league.
• Miami Dolphins rookie coach Nick Saban, who read the book in preparation for his transition from the college game at Louisiana State.
• Cleveland Browns coach Romeo Crennel, who has used it to coordinate his talent scouts, loners who must come together as a team to somehow narrow the 300 best college players down to a handful of draftees.
• Cincinnati Bengals coach Marvin Lewis, who has distributed 20-plus copies to assistant coaches and players and keeps a four-color printout of the book's pyramid on his desk to remind him of the five dysfunctions that can cripple a team.
Why is a business book catching on in the NFL? Partly because these are times when head coaches and CEOs are similarly struggling to maximize teamwork in a world of A-players, rainmakers and would-be hall-of-famers. But it may also be because coaches are closet fans of business leadership/management books, just as executives have long been fans of leadership books written by successful athletes and coaches, such as Wooden on Leadership by former UCLA basketball coach John Wooden.
In 2001, when the Baltimore Ravens won the Super Bowl, then-defensive coordinator Lewis had his players reading Who Moved My Cheese?, a best-selling parable about the inevitability of change that has spun into an industry of workplace workshops. Dolphins coach Saban, who wrote his own book, How Good Do You Want to Be? A Champion's Tips on How to Lead and Succeed at Work and in Life, consumes leadership books that date back to The Art of War by the ancient Chinese general Sun Tzu.
A locker-room chord
But Five Dysfunctions, more than any other leadership book written for the business market, seems to have struck a locker-room chord. Published in 2002, it has not risen to the level of best seller. But demand has grown, and over the past two years it has outsold almost all leadership/management books with a few exceptions, such as Cheese, Good to Great, The 7 Habits of Highly Effective People, The 8th Habit and Now, Discover Your Strengths, according to USA TODAY book sales data.
Potential demand looms large in the football world. Positive Coaching Alliance estimates there are 4 million youth-sports coaches at the high-school level on down, a market that could position Five Dysfunctions to be like a cross-over country song that gets play time on pop radio. So Lencioni, who is busy consulting with corporate clients such as Southwest Airlines and Sam's Club, has licensed materials and methodology for an athletic practice to Pat Richie, the former chaplain of the San Francisco 49ers turned team-building consultant.
NFL coaches are using the book in different ways, some to build cohesion among athletes, others to improve relations among assistant coaches, and some in specialized situations such as when a trade is being considered that will help the offensive line at the expense of the defensive secondary. Trades almost always mean one assistant coach must absorb a sacrifice for the overall team.
"We have people in personnel, coaching, the front office. Everybody should be working toward the same goal," Saban says.
Where it begins
The Five Dysfunctions tale begins as Kathryn comes out of retirement to become CEO at an underperforming Silicon Valley technology company. She soon encounters a talented executive team that goes along to get along even as the company is being beaten by the competition. Kathryn does not back down from difficult decisions, but she first insists on honest and heated debate. Such debate is possible only when trust is established.
Absence of trust is the first and foremost dysfunction of a team. Without trust, team members fear conflict, lack commitment, avoid accountability and do not attend to results, the four other dysfunctions.
Kathryn also teaches that progress comes only when everyone is pulling for team goals, not individual goals. That makes Five Dysfunctions even more NFL-timely following the exit this month of Terrell Owens. The gifted wide receiver made an art of criticizing teammates and causing disruption, and the Philadelphia Eagles decided that team unity was worth booting Owens even if it meant losing a game-breaking talent.
There is a character in Five Dysfunctions named Mikey, who is described as a "brand-building genius" but who has little respect for other executives and rolls her eyes when they make suggestions. Kathryn fires Mikey.
"To be clear, Owens is one of the most talented athletes to come along in a long time," says Lencioni. But he expects that other coaches around the league will be rooting for the Eagles to play better with the wide receiver gone.
Bengals coach Lewis says he has always been willing to let talent go for the sake of the team. "I call it addition by subtraction," he says.
Young football players will follow someone, so selfish players must be removed to get the "impressionable guys to follow a real leader," says Benirschke, the former kicker.
Of course, top-notch players such as Owens are a hot commodity with or without a disruptive track record. That's the kink in the NFL's armor, Cardinals second-string quarterback McCown says: Disruptive players know that some team of the 32 will likely sign them.
Not just football
The popularity of Five Dysfunctions isn't exclusive to NFL coaches. Teams playing everything from cricket in New Zealand to tennis at Northwestern University have employed its lessons. And at the top of former 49ers chaplain Richie's wish list as he looks to target the sporting world: a consulting assignment with the U.S. Olympic basketball team as it prepares to avenge the bronze medal disappointment of 2004.
"It's one of the best books I've ever read," said Gail Goestenkors, coach of the second-ranked Duke University women's basketball team. Her problem is not prima-donna players, she says, but rather unselfish players who would rather not hurt their teammates' feelings even at the expense of the team.
"They avoid conflict as long as possible," Goestenkors says. "Then they explode in stressful situations like when it's a tie game, when you need a cohesive unit." Conflict can be temporarily sidestepped, but then players will decide at the most inopportune time to criticize a teammate for never passing the ball, she says.
Inside the NFL, the Chargers may have embraced Five Dysfunctions more than any other team. Schottenheimer declined to be interviewed, but friend Benirschke says Schottenheimer has undergone a "transformation." Schottenheimer used to have a slacker rule that forbid any player from competing on Sunday if he had not practiced by Friday. But the veteran coach has established trust in an executive committee of players, who are free to approach him to air player concerns. That committee convinced Schottenheimer that it is sometimes in the interest of the team to give a player the full week off to recover from an injury if it gets him healthy to play on Sunday, Benirschke says.
Measuring effectiveness
As with other leadership tools, the trouble with Five Dysfunctions is that it's difficult to measure its effectiveness and know if the NFL coaches who have read the book are winning more games. The Bengals, who Sunday beat the Baltimore Ravens, 42-29, are 8-3 after consecutive 8-8 seasons in Lewis' first two years. The Chargers went 12-4 last year after a 4-12 record in 2003 nearly got Schottenheimer fired. They are 7-4 so far this year.
The Panthers are 8-3 after going 7-9 last year, but three of the seven Five Dysfunctions NFL teams have losing records, including the 2-9 49ers and the Raiders and Browns, both 4-7. Lencioni and others cite the 6-5 New England Patriots as the selfless team that best exemplifies the lessons from the book, but Lencioni says there is no indication that Coach Bill Belichick has read it, nor Philadelphia Eagles Coach Andy Reid, who cut Owens.
Coaches agree that there is a lot that goes into a winning team, and no book will ever play more than a tiny role. But in the NFL, as in business, a slight edge can make the difference.
"We all know at this level you're evaluated by wins and losses, says Turner, coach of the Raiders. "But a big part of coaching is getting people to develop and ultimately perform to the highest level of their potential."
Tuesday, November 01, 2005
A Business Dispute Between Apex And Sichuan Changhong
The New York Times
November 1, 2005
Rule by Law
Dispute Leaves U.S. Executive in Chinese Legal Netherworld
By JOSEPH KAHN
BEIJING, Oct. 31 - David Ji, a Chinese-American electronics entrepreneur, spent two months in custody enduring all-night interrogation sessions, but his stubbornness and occasional flashes of sarcasm infuriated his Chinese captors.
So in late December last year, according to a person who compiled a record of the encounter, guards emptied his pockets, removed his shoes and socks, and ripped the buttons off his oxford shirt. He was ushered disheveled and barefoot into the office of Zhao Yong, the chief executive of Sichuan Changhong Electric, Mr. Ji's onetime business partner and, more recently, his warden.
"Your only way out is to do what Changhong tells you to do," Mr. Zhao told him. "If I decide today I want you to die, you will be dead tomorrow."
Mr. Ji soon agreed to cooperate with Changhong. But a year after the Chinese police apprehended him in his hotel room during a business trip, he remains in China as a pawn - Mr. Ji's colleagues say a hostage - in a commercial dispute that pits Changhong, China's largest television manufacturer, against Apex Digital, Mr. Ji's electronics trading company based in Los Angeles.
Changhong, which declined repeated requests for comment over several weeks, claims that Apex owes it $470 million. Apex, which recruited Changhong to supply Wal-Mart, Best Buy and Circuit City with inexpensive television sets and DVD players, says it owes less than $150 million. The sums involved are large, but what is more significant about the case is the way Changhong, a major state-owned company in Sichuan Province, deployed the police, prosecutors and judges in a campaign to collect its debt.
China has attracted hundreds of billions of dollars in foreign investment and has become the world's third largest trading power. But its legal system, even when handling nonpolitical business cases, has progressed far more haltingly and still rarely backs investors or ordinary citizens against the state.
Difficulty enforcing contracts, rampant violations of copyrights and trademarks and protection of domestic industry champions have heightened trade tensions at a time when China is struggling to convince the outside world that its growing economic might poses no threat. Beijing is under heavy pressure to embrace global legal norms with the same fervor with which it has pursued foreign trade.
Courts and arbitration panels do resolve many business conflicts that arise from China's thriving market-oriented economy, and they can rule professionally and impartially. But when the fate of powerful companies like Changhong, which has 36,000 employees, lies in the balance, the judicial system does not act independently and offers no recourse for outsiders like Mr. Ji.
Ultimately, some legal scholars argue, China's legal system may not improve markedly until central and local government officials relinquish some control and stop putting short-term political goals, like protecting influential companies and suppressing dissent, above the law.
Mr. Ji and his Los Angeles-based partner, Ancle Hsu, are ethnic Chinese who became American citizens. They helped Changhong break into the American market, and its products outsold Sony and Panasonic, heralding China's arrival as an electronics powerhouse.
Relations with Changhong soured, however, over quality control problems and unpaid debts. And when they did, Changhong's first response was not to file a lawsuit, but to dispatch the police.
The police from Mianyang, the city in southwestern Sichuan province where Changhong has its headquarters, apprehended Mr. Ji in Shenzhen, near Hong Kong, on Oct. 23, 2004. He entered a legal netherworld in which Changhong decided where he would be held in custody, when to interrogate him, and how he could help Changhong take over Apex, according to court documents, video recordings, and taped witness accounts compiled by people sympathetic to Mr. Ji. The records, which were also submitted to the State Department, were obtained independently by The New York Times.
Mianyang is a company town. The legal ambiguity partly reflects the tight bond between local corporate and government officials. It also reflects a risk of doing business in China that applies mainly to ethnic Chinese, dozens of whom have faced criminal charges after falling out with government-backed business partners. Overseas Chinese are often treated as subject to local authority regardless of their country of citizenship.
But in this case, Changhong did not act like a rogue. It solicited and received financial and political support from the most senior levels of the central government, according to lawyers involved in the matter.
Changhong's executives said they could not discuss a pending legal matter. But Jack C. Auspitz, a lawyer with Morrison & Foerster in New York who represents Changhong in an ongoing court case against Apex, said the California company repeatedly failed to pay for goods Changhong delivered. He said that he did not have detailed information about Mr. Ji's conditions in Chinese custody, but that he had no reason to believe that he had been coerced.
The Chinese police accused Mr. Ji of fraud for writing bad checks to Changhong and have threatened to prosecute him. He has been released on a form of bail, with heavy restrictions on his freedom, while negotiations with Apex proceed. That has left the impression that his legal fate depends on debt talks between the companies.
"We have been doing business there for many years but could never imagine something like this happening," said Mr. Hsu, Mr. Ji's partner, in a recent interview. "They have turned a commercial dispute into a hostage situation and a human rights issue."
Trial and Error
Changhong and Apex seemed, for a time, a brilliant match.
The American company spotted the potential of the DVD player to replace the VCR in American living rooms if the price came down. Japanese makers dominated sales in the late 1990's, but often charged $400 or more, making it a luxury item. Apex thought that with the right Chinese partner it could change that.
The job fell to Mr. Ji, 53, who is also known by his Chinese name, Ji Longfen. He was born in Jiangsu Province in eastern China and learned English at Fudan University in Shanghai before emigrating to California. There he and Mr. Hsu, a native of Taiwan, sold scrap metal and car radios before testing the DVD market.
Retiring by American standards, Mr. Ji projects a polite deference that plays well in China. He wears his hair in a starchy wave, a style popular among Chinese officials. He toured industrial zones and small township enterprises for partners, a trial-and-error process that produced some embarrassing failures. A worker in one plant altered a chip on an Apex DVD player to make a message appear on the screen if a user loaded an X-rated film: "You dirty old man!"
Changhong, once a big defense contractor and now a publicly traded electronics maker, seemed more professional. The company, though majority owned by the Mianyang city and Sichuan provincial governments, had entrepreneurial drive. Under Ni Rongfen, its chief executive, Changhong became China's top television maker. It had its sights set on the American market.
Mr. Ji and Mr. Ni struck a deal in 2001. In the Chinese style, the agreement consisted of a simple three-page purchase order.
Changhong was not Apex's only vendor, but it rapidly became its largest. Its bulk production brought the retail price of its DVD players at Wal-Mart and Circuit City down to $59. In 2002, Apex became the top brand of DVD player in the United States.
Apex also began selling Changhong-made television sets and got the cost of a 27-inch color model below $100, a record. The company's total sales hit $1 billion in 2002 and nearly $2 billion in 2003.
But the two companies were on a collision course. Changhong received far less from its American sales than it initially recorded on its books. Fast growth covered that deficit for a time, but the Chinese company later claimed that half of what it sold ended up as unpaid debt.
The companies have different explanations of what happened. Apex says Changhong mismanaged its business, basing production on price forecasts that proved overly optimistic. It also did not time its shipments well, saddling Apex with high storage costs, the company says. Worse, the California company claims, Changhong provided low-quality goods, including a ill-fated foray into rear-projection televisions, which left Apex to deal with dissatisfied customers and defective products.
Changhong executives have told the Chinese news media that Apex played tricks with its vendors. It persuaded them to finance their own production and wait months for payment. Payments often lagged behind badly, raising suspicions of fraud.
Two other Chinese electronics makers, the Hongtu High Technology Company and the Tianjin Tiancai Company, say Apex owes them money. A third supplier, the China Minmetals Corporation, recently settled a dispute with Apex in arbitration.
Whatever the root causes of the dispute, Apex and Changhong initially tried to keep things on track, including by taking steps that came back to haunt Mr. Ji.
In early 2003, as debts piled up, Mr. Ni, the Changhong boss, came under pressure to explain the shortfall. He leaned on Mr. Ji, who wrote 37 company checks totaling $85 million. Apex said the checks, which do not bear the markings of having been deposited, were meant as promissory notes. It said it honored them and more by paying Changhong $370 million later in 2003.
Even so, Changhong's debt load worsened and its stock price plunged. Chinese state-run banks stopped advancing loans, Chinese news media reports said. That prompted a boardroom coup against Mr. Ni last summer. He was replaced by Zhao Yong, the deputy mayor of Mianyang.
Shortly after he took office, Mr. Zhao sent a mission to Apex's headquarters to demand payment of $470 million, a figure Apex claimed was three times what it owed. The business relationship froze.
Apex still had a sizable business in China. In October 2004, Mr. Ji visited to oversee progress on a Wal-Mart order for portable DVD players. He ignored warnings of a colleague at Apex, who felt the dispute with Changhong had reached a dangerous impasse, and decided to contact Changhong during the trip. He told his family he would be back in a week.
Mr. Ji phoned Changhong after he arrived and said he would like to meet Mr. Zhao after attending to business in Shenzhen. He hung up thinking that a dinner appointment had been arranged.
"I felt very happy because I thought the problem would finally be resolved by one person," Mr. Ji told a colleague.
Pursuit and Capture
Just after breakfast on Oct. 23, he answered his door at the Grand Skylight Hotel in Shenzhen. Seven men in civilian clothes identified themselves as police officers from Sichuan, 500 miles to the west. They interrogated Mr. Ji for most of the day. He was told he had committed fraud, though the charges were not spelled out and they had no warrant, according to the account compiled by people sympathetic with him.
Late that afternoon, Mr. Ji was taken to a private dining room, where a Changhong executive played host for a banquet, complete with champagne and abalone. The Changhong executive raised his glass to the policemen, congratulating them on their "pursuit and apprehension" of Mr. Ji.
Mr. Ji objected, saying he had never been on the run, according to the record of his detention. He was told not to speak for the rest of the meal.
The officers then took him to the airport for a flight to Sichuan. Changhong purchased all eight seats in the first-class section, so the group had the cabin to itself.
In Sichuan, he was handed over to Changhong. The company cordoned off a floor in one of its guesthouses and barred the windows, a makeshift jail. Guards kept watch. A television was left blaring day and night. For four days, Mr. Ji barely slept.
On the fifth day, he was put on the phone with a lawyer named Charlie Wang, known as Wang Xiaolin in Chinese, of Cadwalader, Wickersham & Taft, a white-shoe American law firm that Changhong had retained. Mr. Wang, who was based in Washington, D.C., told Mr. Ji that he had committed fraud and that his only way out was to sign documents that would help Changhong recover missing funds. Exhausted and afraid, Mr. Ji agreed to study the documents, the record of his detention says.
He was then presented with a stack of legal papers the size of a mini-bar. They pledged all of Apex's assets, real property, trademarks and bank accounts as well as Mr. Ji's personal assets to settle the claimed $470 million debt. The documents granted Changhong power of attorney to review Apex's books and remove Mr. Hsu from his position. In effect, he signed away his stake of Apex to Changhong.
Mr. Ji initially balked. A guard then asked, "Do you want this pen, or do you want your hand?" The guard made a motion of chopping off his hand. Mr. Ji took the pen.
'Business as Usual'
Changhong then began an attempt to take over Apex, Apex officials and the record of Mr. Ji's detention say. Mr. Ji was sent to Shanghai by train.
There he stayed in a Changhong-owned residence under guard. But he was instructed to visit Apex offices and act as if he were going about business as usual. He made frequent phone calls back home. As his Changhong guards listened, he repeatedly told Mr. Hsu to execute Changhong's instructions.
The calls did not persuade Mr. Hsu.
"He pretended that nothing was wrong and everything would be worked out," Mr. Hsu recalled. "But we knew he was not himself. Eventually, there was nothing we could say on the phone except, 'Yes David, O.K., yes.' "
Changhong dispatched accountants and investigators to Los Angeles in early December, but Apex refused access, arguing that Changhong lacked legal authority.
It was only then that Changhong took legal action. On Dec. 14, Changhong sued Apex in Los Angeles County Superior Court. The company alleged breach of contract and demanded access to Apex, citing the documents Mr. Ji had signed.
Apex contested the suit. In court documents, it said that Mr. Ji had been abducted and that the documents had been signed under coercion.
Changhong pressed Mr. Ji harder to make Mr. Hsu cooperate. Mr. Ji scoffed, saying he had already "fired" his partner on Changhong's orders so there was little more he could do, according to the record of his detention.
There were constant reminders, however, that his fate hung in the balance. A prosecutor and a judge from Mianyang visited Shanghai to talk with Mr. Ji. They told him that the 37 checks he had written to Changhong in early 2003 constituted a serious crime and that he could get life in prison or even be executed. His only choice was to cooperate with Changhong, the record said.
Changhong submitted the checks as evidence in its American lawsuit. There are no visible markings on the checks to show that they were deposited or sent through the banking system for payment. Apex says that proves Changhong treated the checks as they were intended - as collateral to solve an accounting problem. They became obsolete when Apex made big payments to Changhong in April 2003, the company says.
Mr. Auspitz, Changhong's lawyer in New York, said that despite any other payments Apex may have made in 2003, those checks should have been honored. "There is no question that Apex should have paid and did not," he said.
To counter Apex's argument that Mr. Ji was a hostage, Changhong arranged to have Mr. Ji deposed in Apex's Shanghai offices. Mr. Wang, the Cadwalader lawyer, was present and conducted the videotaped inquiry. Mr. Ji had no lawyer present, and Apex later argued that that raised questions of whether the tape would have any value in an American court.
When taping began, Mr. Ji disputed Changhong's version of events, prompting a heated argument between Mr. Ji and Mr. Wang, according to people who saw the confrontation.
The next day, Mr. Ji was taken to meet Mr. Zhao, Changhong's boss. Buttons and belt removed, he had to hold his pants up with his hands. Mr. Zhao warned him that Changhong controlled the courts in Mianyang, that Mr. Ji would be tried there, and that Changhong would decide if he lived or died.
"Apex must give Changhong all the money. This is your only way out," Mr. Ji was told, according to the record of his detention.
A second taped deposition was arranged. Mr. Ji dressed neatly in a suit. He sat slumped in his chair and smiled wanly. Everything Mr. Wang asked him, he muttered agreement. As the camera rolled, he said Changhong had "invited" him to stay at its apartment in Shanghai while he sorted out the dispute about the checks.
"I am trying to run my company," Mr. Ji says on tape. "I am the majority shareholder and want to use my power to manage this situation."
High-Level Intervention
Changhong's lawsuit has remained unresolved in court in Los Angeles. The taped deposition was never formally submitted, though Apex received a copy. Apex then complained that Changhong's lawyer, Mr. Wang, acted improperly by being a party to the detention of Mr. Ji.
Cadwalader subsequently withdrew from the case and Mr. Wang, who was made a partner just a few months earlier, left the firm. A spokesman for Cadwalader declined to comment on the case or on Mr. Wang, citing client confidentiality. Apex's business deteriorated as suppliers and customers learned of its troubles. Its sales this year are off sharply, and it has teetered on the verge of bankruptcy. It now claims it has no money to pay even the portion of the Changhong debt it acknowledges owing.
Internally, however, Changhong may have scored a political touchdown. According to lawyers involved in the case, Changhong submitted a report to Prime Minister Wen Jiabao shortly after it arranged to have Mr. Ji detained. The report claims that a fraud masterminded by Mr. Ji put its business, and its 36,000 workers, in grave peril.
It is unclear if Mr. Wen or other central government officials investigated the matter independently or endorsed Changhong's role in managing Mr. Ji's custody. But the lawyers involved said Changhong had boasted repeatedly about receiving Mr. Wen's support in the form of a three-point written instruction late last fall.
The prime minister praised Changhong's leadership, authorized the company to take legal actions at home and abroad to protect its interests, and ordered state banks to provide emergency financing totaling nearly $1 billion, roughly double the amount Changhong claimed Apex owed it, they said.
The ruling defused the crisis that prompted Changhong to pursue Mr. Ji. But it left the business dispute unresolved. And it left Mr. Ji in legal limbo, facing possible prosecution on the alleged fraud the company described to the leadership.
On May 28, seven months after Mr. Ji was first detained, he was handed over to the Mianyang police for formal arrest on charges of "financial instrument fraud," apparently a reference to the 37 checks he wrote Changhong.
In formal police custody, Mr. Ji's conditions improved, according to the detention record. He has been allowed to visit a hospital to get treatment for hypertension, a kidney problem and a bladder infection. The interrogations ceased. American diplomats have visited him regularly, though they have not spoken publicly about the case.
In June, Apex and Changhong signed a security agreement. Apex acknowledged a $150 million debt. The debt remains unpaid, however. Apex claims it has no money.
In August, the police released Mr. Ji on restricted bail. He is allowed to move around Chengdu, the capital of Sichuan Province, but he is under strict orders not to discuss his case with anyone. The police confiscated his passport and gave him a mobile phone that he must keep with him 24 hours a day. He has not been indicted, but the local authorities frequently remind him that they can prosecute at any time.
"They turned this into a criminal case, and now they don't know how to resolve it," says Mr. Hsu of Apex. "I'm afraid we need government intervention, maybe divine intervention, to help David return home."
* Copyright 2005 The New York Times Company
November 1, 2005
Rule by Law
Dispute Leaves U.S. Executive in Chinese Legal Netherworld
By JOSEPH KAHN
BEIJING, Oct. 31 - David Ji, a Chinese-American electronics entrepreneur, spent two months in custody enduring all-night interrogation sessions, but his stubbornness and occasional flashes of sarcasm infuriated his Chinese captors.
So in late December last year, according to a person who compiled a record of the encounter, guards emptied his pockets, removed his shoes and socks, and ripped the buttons off his oxford shirt. He was ushered disheveled and barefoot into the office of Zhao Yong, the chief executive of Sichuan Changhong Electric, Mr. Ji's onetime business partner and, more recently, his warden.
"Your only way out is to do what Changhong tells you to do," Mr. Zhao told him. "If I decide today I want you to die, you will be dead tomorrow."
Mr. Ji soon agreed to cooperate with Changhong. But a year after the Chinese police apprehended him in his hotel room during a business trip, he remains in China as a pawn - Mr. Ji's colleagues say a hostage - in a commercial dispute that pits Changhong, China's largest television manufacturer, against Apex Digital, Mr. Ji's electronics trading company based in Los Angeles.
Changhong, which declined repeated requests for comment over several weeks, claims that Apex owes it $470 million. Apex, which recruited Changhong to supply Wal-Mart, Best Buy and Circuit City with inexpensive television sets and DVD players, says it owes less than $150 million. The sums involved are large, but what is more significant about the case is the way Changhong, a major state-owned company in Sichuan Province, deployed the police, prosecutors and judges in a campaign to collect its debt.
China has attracted hundreds of billions of dollars in foreign investment and has become the world's third largest trading power. But its legal system, even when handling nonpolitical business cases, has progressed far more haltingly and still rarely backs investors or ordinary citizens against the state.
Difficulty enforcing contracts, rampant violations of copyrights and trademarks and protection of domestic industry champions have heightened trade tensions at a time when China is struggling to convince the outside world that its growing economic might poses no threat. Beijing is under heavy pressure to embrace global legal norms with the same fervor with which it has pursued foreign trade.
Courts and arbitration panels do resolve many business conflicts that arise from China's thriving market-oriented economy, and they can rule professionally and impartially. But when the fate of powerful companies like Changhong, which has 36,000 employees, lies in the balance, the judicial system does not act independently and offers no recourse for outsiders like Mr. Ji.
Ultimately, some legal scholars argue, China's legal system may not improve markedly until central and local government officials relinquish some control and stop putting short-term political goals, like protecting influential companies and suppressing dissent, above the law.
Mr. Ji and his Los Angeles-based partner, Ancle Hsu, are ethnic Chinese who became American citizens. They helped Changhong break into the American market, and its products outsold Sony and Panasonic, heralding China's arrival as an electronics powerhouse.
Relations with Changhong soured, however, over quality control problems and unpaid debts. And when they did, Changhong's first response was not to file a lawsuit, but to dispatch the police.
The police from Mianyang, the city in southwestern Sichuan province where Changhong has its headquarters, apprehended Mr. Ji in Shenzhen, near Hong Kong, on Oct. 23, 2004. He entered a legal netherworld in which Changhong decided where he would be held in custody, when to interrogate him, and how he could help Changhong take over Apex, according to court documents, video recordings, and taped witness accounts compiled by people sympathetic to Mr. Ji. The records, which were also submitted to the State Department, were obtained independently by The New York Times.
Mianyang is a company town. The legal ambiguity partly reflects the tight bond between local corporate and government officials. It also reflects a risk of doing business in China that applies mainly to ethnic Chinese, dozens of whom have faced criminal charges after falling out with government-backed business partners. Overseas Chinese are often treated as subject to local authority regardless of their country of citizenship.
But in this case, Changhong did not act like a rogue. It solicited and received financial and political support from the most senior levels of the central government, according to lawyers involved in the matter.
Changhong's executives said they could not discuss a pending legal matter. But Jack C. Auspitz, a lawyer with Morrison & Foerster in New York who represents Changhong in an ongoing court case against Apex, said the California company repeatedly failed to pay for goods Changhong delivered. He said that he did not have detailed information about Mr. Ji's conditions in Chinese custody, but that he had no reason to believe that he had been coerced.
The Chinese police accused Mr. Ji of fraud for writing bad checks to Changhong and have threatened to prosecute him. He has been released on a form of bail, with heavy restrictions on his freedom, while negotiations with Apex proceed. That has left the impression that his legal fate depends on debt talks between the companies.
"We have been doing business there for many years but could never imagine something like this happening," said Mr. Hsu, Mr. Ji's partner, in a recent interview. "They have turned a commercial dispute into a hostage situation and a human rights issue."
Trial and Error
Changhong and Apex seemed, for a time, a brilliant match.
The American company spotted the potential of the DVD player to replace the VCR in American living rooms if the price came down. Japanese makers dominated sales in the late 1990's, but often charged $400 or more, making it a luxury item. Apex thought that with the right Chinese partner it could change that.
The job fell to Mr. Ji, 53, who is also known by his Chinese name, Ji Longfen. He was born in Jiangsu Province in eastern China and learned English at Fudan University in Shanghai before emigrating to California. There he and Mr. Hsu, a native of Taiwan, sold scrap metal and car radios before testing the DVD market.
Retiring by American standards, Mr. Ji projects a polite deference that plays well in China. He wears his hair in a starchy wave, a style popular among Chinese officials. He toured industrial zones and small township enterprises for partners, a trial-and-error process that produced some embarrassing failures. A worker in one plant altered a chip on an Apex DVD player to make a message appear on the screen if a user loaded an X-rated film: "You dirty old man!"
Changhong, once a big defense contractor and now a publicly traded electronics maker, seemed more professional. The company, though majority owned by the Mianyang city and Sichuan provincial governments, had entrepreneurial drive. Under Ni Rongfen, its chief executive, Changhong became China's top television maker. It had its sights set on the American market.
Mr. Ji and Mr. Ni struck a deal in 2001. In the Chinese style, the agreement consisted of a simple three-page purchase order.
Changhong was not Apex's only vendor, but it rapidly became its largest. Its bulk production brought the retail price of its DVD players at Wal-Mart and Circuit City down to $59. In 2002, Apex became the top brand of DVD player in the United States.
Apex also began selling Changhong-made television sets and got the cost of a 27-inch color model below $100, a record. The company's total sales hit $1 billion in 2002 and nearly $2 billion in 2003.
But the two companies were on a collision course. Changhong received far less from its American sales than it initially recorded on its books. Fast growth covered that deficit for a time, but the Chinese company later claimed that half of what it sold ended up as unpaid debt.
The companies have different explanations of what happened. Apex says Changhong mismanaged its business, basing production on price forecasts that proved overly optimistic. It also did not time its shipments well, saddling Apex with high storage costs, the company says. Worse, the California company claims, Changhong provided low-quality goods, including a ill-fated foray into rear-projection televisions, which left Apex to deal with dissatisfied customers and defective products.
Changhong executives have told the Chinese news media that Apex played tricks with its vendors. It persuaded them to finance their own production and wait months for payment. Payments often lagged behind badly, raising suspicions of fraud.
Two other Chinese electronics makers, the Hongtu High Technology Company and the Tianjin Tiancai Company, say Apex owes them money. A third supplier, the China Minmetals Corporation, recently settled a dispute with Apex in arbitration.
Whatever the root causes of the dispute, Apex and Changhong initially tried to keep things on track, including by taking steps that came back to haunt Mr. Ji.
In early 2003, as debts piled up, Mr. Ni, the Changhong boss, came under pressure to explain the shortfall. He leaned on Mr. Ji, who wrote 37 company checks totaling $85 million. Apex said the checks, which do not bear the markings of having been deposited, were meant as promissory notes. It said it honored them and more by paying Changhong $370 million later in 2003.
Even so, Changhong's debt load worsened and its stock price plunged. Chinese state-run banks stopped advancing loans, Chinese news media reports said. That prompted a boardroom coup against Mr. Ni last summer. He was replaced by Zhao Yong, the deputy mayor of Mianyang.
Shortly after he took office, Mr. Zhao sent a mission to Apex's headquarters to demand payment of $470 million, a figure Apex claimed was three times what it owed. The business relationship froze.
Apex still had a sizable business in China. In October 2004, Mr. Ji visited to oversee progress on a Wal-Mart order for portable DVD players. He ignored warnings of a colleague at Apex, who felt the dispute with Changhong had reached a dangerous impasse, and decided to contact Changhong during the trip. He told his family he would be back in a week.
Mr. Ji phoned Changhong after he arrived and said he would like to meet Mr. Zhao after attending to business in Shenzhen. He hung up thinking that a dinner appointment had been arranged.
"I felt very happy because I thought the problem would finally be resolved by one person," Mr. Ji told a colleague.
Pursuit and Capture
Just after breakfast on Oct. 23, he answered his door at the Grand Skylight Hotel in Shenzhen. Seven men in civilian clothes identified themselves as police officers from Sichuan, 500 miles to the west. They interrogated Mr. Ji for most of the day. He was told he had committed fraud, though the charges were not spelled out and they had no warrant, according to the account compiled by people sympathetic with him.
Late that afternoon, Mr. Ji was taken to a private dining room, where a Changhong executive played host for a banquet, complete with champagne and abalone. The Changhong executive raised his glass to the policemen, congratulating them on their "pursuit and apprehension" of Mr. Ji.
Mr. Ji objected, saying he had never been on the run, according to the record of his detention. He was told not to speak for the rest of the meal.
The officers then took him to the airport for a flight to Sichuan. Changhong purchased all eight seats in the first-class section, so the group had the cabin to itself.
In Sichuan, he was handed over to Changhong. The company cordoned off a floor in one of its guesthouses and barred the windows, a makeshift jail. Guards kept watch. A television was left blaring day and night. For four days, Mr. Ji barely slept.
On the fifth day, he was put on the phone with a lawyer named Charlie Wang, known as Wang Xiaolin in Chinese, of Cadwalader, Wickersham & Taft, a white-shoe American law firm that Changhong had retained. Mr. Wang, who was based in Washington, D.C., told Mr. Ji that he had committed fraud and that his only way out was to sign documents that would help Changhong recover missing funds. Exhausted and afraid, Mr. Ji agreed to study the documents, the record of his detention says.
He was then presented with a stack of legal papers the size of a mini-bar. They pledged all of Apex's assets, real property, trademarks and bank accounts as well as Mr. Ji's personal assets to settle the claimed $470 million debt. The documents granted Changhong power of attorney to review Apex's books and remove Mr. Hsu from his position. In effect, he signed away his stake of Apex to Changhong.
Mr. Ji initially balked. A guard then asked, "Do you want this pen, or do you want your hand?" The guard made a motion of chopping off his hand. Mr. Ji took the pen.
'Business as Usual'
Changhong then began an attempt to take over Apex, Apex officials and the record of Mr. Ji's detention say. Mr. Ji was sent to Shanghai by train.
There he stayed in a Changhong-owned residence under guard. But he was instructed to visit Apex offices and act as if he were going about business as usual. He made frequent phone calls back home. As his Changhong guards listened, he repeatedly told Mr. Hsu to execute Changhong's instructions.
The calls did not persuade Mr. Hsu.
"He pretended that nothing was wrong and everything would be worked out," Mr. Hsu recalled. "But we knew he was not himself. Eventually, there was nothing we could say on the phone except, 'Yes David, O.K., yes.' "
Changhong dispatched accountants and investigators to Los Angeles in early December, but Apex refused access, arguing that Changhong lacked legal authority.
It was only then that Changhong took legal action. On Dec. 14, Changhong sued Apex in Los Angeles County Superior Court. The company alleged breach of contract and demanded access to Apex, citing the documents Mr. Ji had signed.
Apex contested the suit. In court documents, it said that Mr. Ji had been abducted and that the documents had been signed under coercion.
Changhong pressed Mr. Ji harder to make Mr. Hsu cooperate. Mr. Ji scoffed, saying he had already "fired" his partner on Changhong's orders so there was little more he could do, according to the record of his detention.
There were constant reminders, however, that his fate hung in the balance. A prosecutor and a judge from Mianyang visited Shanghai to talk with Mr. Ji. They told him that the 37 checks he had written to Changhong in early 2003 constituted a serious crime and that he could get life in prison or even be executed. His only choice was to cooperate with Changhong, the record said.
Changhong submitted the checks as evidence in its American lawsuit. There are no visible markings on the checks to show that they were deposited or sent through the banking system for payment. Apex says that proves Changhong treated the checks as they were intended - as collateral to solve an accounting problem. They became obsolete when Apex made big payments to Changhong in April 2003, the company says.
Mr. Auspitz, Changhong's lawyer in New York, said that despite any other payments Apex may have made in 2003, those checks should have been honored. "There is no question that Apex should have paid and did not," he said.
To counter Apex's argument that Mr. Ji was a hostage, Changhong arranged to have Mr. Ji deposed in Apex's Shanghai offices. Mr. Wang, the Cadwalader lawyer, was present and conducted the videotaped inquiry. Mr. Ji had no lawyer present, and Apex later argued that that raised questions of whether the tape would have any value in an American court.
When taping began, Mr. Ji disputed Changhong's version of events, prompting a heated argument between Mr. Ji and Mr. Wang, according to people who saw the confrontation.
The next day, Mr. Ji was taken to meet Mr. Zhao, Changhong's boss. Buttons and belt removed, he had to hold his pants up with his hands. Mr. Zhao warned him that Changhong controlled the courts in Mianyang, that Mr. Ji would be tried there, and that Changhong would decide if he lived or died.
"Apex must give Changhong all the money. This is your only way out," Mr. Ji was told, according to the record of his detention.
A second taped deposition was arranged. Mr. Ji dressed neatly in a suit. He sat slumped in his chair and smiled wanly. Everything Mr. Wang asked him, he muttered agreement. As the camera rolled, he said Changhong had "invited" him to stay at its apartment in Shanghai while he sorted out the dispute about the checks.
"I am trying to run my company," Mr. Ji says on tape. "I am the majority shareholder and want to use my power to manage this situation."
High-Level Intervention
Changhong's lawsuit has remained unresolved in court in Los Angeles. The taped deposition was never formally submitted, though Apex received a copy. Apex then complained that Changhong's lawyer, Mr. Wang, acted improperly by being a party to the detention of Mr. Ji.
Cadwalader subsequently withdrew from the case and Mr. Wang, who was made a partner just a few months earlier, left the firm. A spokesman for Cadwalader declined to comment on the case or on Mr. Wang, citing client confidentiality. Apex's business deteriorated as suppliers and customers learned of its troubles. Its sales this year are off sharply, and it has teetered on the verge of bankruptcy. It now claims it has no money to pay even the portion of the Changhong debt it acknowledges owing.
Internally, however, Changhong may have scored a political touchdown. According to lawyers involved in the case, Changhong submitted a report to Prime Minister Wen Jiabao shortly after it arranged to have Mr. Ji detained. The report claims that a fraud masterminded by Mr. Ji put its business, and its 36,000 workers, in grave peril.
It is unclear if Mr. Wen or other central government officials investigated the matter independently or endorsed Changhong's role in managing Mr. Ji's custody. But the lawyers involved said Changhong had boasted repeatedly about receiving Mr. Wen's support in the form of a three-point written instruction late last fall.
The prime minister praised Changhong's leadership, authorized the company to take legal actions at home and abroad to protect its interests, and ordered state banks to provide emergency financing totaling nearly $1 billion, roughly double the amount Changhong claimed Apex owed it, they said.
The ruling defused the crisis that prompted Changhong to pursue Mr. Ji. But it left the business dispute unresolved. And it left Mr. Ji in legal limbo, facing possible prosecution on the alleged fraud the company described to the leadership.
On May 28, seven months after Mr. Ji was first detained, he was handed over to the Mianyang police for formal arrest on charges of "financial instrument fraud," apparently a reference to the 37 checks he wrote Changhong.
In formal police custody, Mr. Ji's conditions improved, according to the detention record. He has been allowed to visit a hospital to get treatment for hypertension, a kidney problem and a bladder infection. The interrogations ceased. American diplomats have visited him regularly, though they have not spoken publicly about the case.
In June, Apex and Changhong signed a security agreement. Apex acknowledged a $150 million debt. The debt remains unpaid, however. Apex claims it has no money.
In August, the police released Mr. Ji on restricted bail. He is allowed to move around Chengdu, the capital of Sichuan Province, but he is under strict orders not to discuss his case with anyone. The police confiscated his passport and gave him a mobile phone that he must keep with him 24 hours a day. He has not been indicted, but the local authorities frequently remind him that they can prosecute at any time.
"They turned this into a criminal case, and now they don't know how to resolve it," says Mr. Hsu of Apex. "I'm afraid we need government intervention, maybe divine intervention, to help David return home."
* Copyright 2005 The New York Times Company