Betrayed in China: One Entrepreneur's Hard Journey East
From: Adam Kasha
Sent: November 9, 2008
To: Rex Wang
Subject: Please contact Adam and JoeDo you know Joe is sitting on a pile of cash - 4,000,000 RMB, now for two weeks???
Joe needs to hear directly from you that you are alive and not crazy - and then he will send you the money.
Believe it or not, I am your true Brother. If you need anything, I will give it to you. But, I need to hear from you directly...
When Kasha formally brought Wang into the business, in 2004, Akasha's investors hated the idea. Kasha understood that. They simply couldn't appreciate the complexities in China, how many problems Wang would solve. To them, he was simply a stranger.
Here was Kasha's reality: To produce his product line of glass marbles and smooth river rocks, he needed to contract with at least a dozen suppliers all over Jiangsu, a part of the Yangtze River delta a hundred miles outside Shanghai. To eke out a profit from his big-box customers (Pier 1 sold his marbles as vase fillers; Petco sold his pebbles as aquarium rocks; Walmart stocked Akasha goods in the craft, gardening, and pet departments), he needed a local place to package his products and control quality, so everything would arrive in Akasha's American warehouses ready to go and he wouldn't waste money shipping flawed product across the Pacific.
But as a foreigner, he couldn't legally do any of that--couldn't open an assembly warehouse or hire Chinese workers or ship goods out of the country--unless he spent months and thousands of dollars setting up a Chinese corporate entity called a wholly foreign owned enterprise, or WFOE. He would also need an export license.
Wang solved all that. He already had relationships with exporters. He offered to have his brother Bob set up a company in Changzhou, a city in the heart of Jiangsu, where he and Bob would open a facility and hire workers for Akasha. (Bob had few actual duties; it was Rex's show.) For outward appearances, this company, which officially would be registered under the name Bai-Shi Craft, would be called Akasha Crystals China. Akasha would simply pay the Wangs' salaries and reimburse their expenses--no WFOE needed. It made sense.
Better yet, Kasha could already glimpse the greater potential of the relationship. The older man had introduced him to suppliers in Yangtze backwaters who had never met an American. In the boozy banquets Kasha had once found bewildering, Wang revealed the steps of the dance--how he used questions and stories to divine the worthwhile businessmen from the boasters and the frauds, how he charmed the best deals out of the former. He identified the red-flag phrases, such as Mei guanxi! and Mei wenti! (No worries! No problem!), a sure sign the supplier was hiding something. This, Kasha believed, would become his edge. His American competitors outsourced. He would know China.
Kasha crafted a deal he believed aligned their interests. In addition to paying the Wang brothers' salaries and the Changzhou warehouse's costs, Kasha would loan Rex Wang money to buy 10 percent of the U.S. business. That way, their source of profit would be the same.
The investors still opposed him. So he bought two of them out, pushing the deal through. From 2004 to 2008, revenue grew to $10 million.
The downside of this setup was that Kasha had no legal authority in China. Rex and Bob Wang were completely in charge over there, and the stakes rose continually: As Rex found more and better suppliers, he essentially captured Akasha's entire supply chain.
Now, in late 2008, Kasha was beginning to appreciate how much that mattered. Shortly after he sent his message about the pile of cash, he got an email from Wang's girlfriend, Amy Yuan. He had begun sending messages to her as well, hoping to get to Rex that way. He told her he wanted to come to Changzhou and talk with Rex face to face.
"Rex doesn't want to meet you in China, he is waiting for the Wal-mart new order's down payment," she wrote.
At least he's alive, Kasha thought.
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From: Adam Kasha
Sent: November 9, 2008
To: Amy Yuan
Subject: Re:RE:RE:RE:RE Please contact Adam and JoeRex should be holding my hand during these days and working hard with me - not create some imaginary war. I don't know what to do...We should be helping each other, and if there is any problem, talk to each other - that is a Partnership!
