China’s e-commerce darling Alibaba Group Holding Ltd. is now in hot water after police arrested Patrick Liu, president of the company’s digital entertainment unit.
The company said Friday in a statement on its microblog that Liu, who is also the vice president of Alibaba Group, was taken into custody by the Public Security Bureau for his alleged involvement in a bribery case when he was still employed at Tencent Holdings Ltd.
"We have already taken steps to ensure that the detention will not affect the business of Alibaba Pictures Group Ltd.," the company said, adding that they will cooperate with the authorities and offer legal support to Liu's family.
The statement said that Alibaba supports Tencent's anti-corruption efforts and that Tencent was being "objective and fair" for its report to the police.
Liu joined Alibaba in Aug. 2013, a month after his resignation from Tencent as head of its video department. Liu has been in charge of Alibaba's online literature and Yulebao, the world's first crowdfunding service tailored for movies, according to the China Daily newspaper.
Liu is also an executive director of Alibaba Pictures, in which Alibaba owns a 60-percent stake.
In response to the arrest, Tencent said that Liu was one of five or six individuals who were detained by the police after a graft investigation.
"An internal probe brought to light bribery and corruption among some online video employees. We have already notified the police and are waiting for the results," Tencent said in a statement Thursday.
The arrest comes as Alibaba Pictures increased its efforts to boost its presence in the film industry. In June, the Hong Kong-listed company purchased a major software solution provider in China's film market for $134 million, making Alibaba the first among China's top three Internet companies, (which include rivals Baidu and Tencent) to expand into the movie sector.
"As a veteran in China's Internet sector, Liu is equipped with abundant resources. His detention is a loss to Alibaba and will definitely tarnish its brand to some extent," said Huang Guofeng, an analyst with Internet consultancy Analysys International in Beijing.
"But he doesn't play a very important part in guiding Alibaba's entertainment strategy since most of the company's important movie-related assets have been injected into Alibaba Pictures, an entity in which he has limited say," Huang added.
In April, Alibaba merged its online film-ticketing business Taobao Ticket and movie crowdfunding service Yulebao with Alibaba Pictures to leverage its strength in e-commerce and massive user base with the film unit's production function.
The scandal is not the first time that Chinese Internet companies have conducted internal probes to stamp out corruption in its ranks. In May, search engine Baidu sacked eight employees after its anti-corruption drive found four of its directors and four sales staff accepting bribes.