NetEase Terminates Manager for Mismanagement and Corruption (NTES)

| About: NetEase, Inc (NTES)
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From fellow China blogger Bill Bishop:

According to this article from February 8, 2006 on the game information site (owned by Sohu), Netease (ticker: NTES) recently fired Huang Hua, the head of marketing for its game division, after an investigation into irregularities at one the its game card manufacturers in Guangzhou. The article includes what its says is the official Netease internal announcement.

According to this report, Huang Hua took kickbacks, secretly owned shares in the game card manufacturer, and mismanaged the relationship with the manufacturer, resulting in at least 11 issues with the game card manufacturer since December 2004. The article goes on to say that the investigation is continuing and that Netease reserves the right to refer the case to the Public Security Bureau for possible prosecution.

There is no mention of what, if any, financial damage Netease has suffered from this problem. It may be immaterial from a revenue perspective, but it is sure to raise red flags with its outside accounting firm. I do not believe Netease has made any English-language disclosures about this problem.

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