China drone maker DJI says $150 million scam involved staff padding parts costs

SHANGHAI (Reuters) - China's SZ DJI Technology Co Ltd, the world's largest maker of consumer drones, said employees inflating the cost of parts for personal gain led to incidents of suspected corruption that may have caused it to suffer a hit of almost $150 million last year.

Privately held DJI said late last week it was "investigating a number of serious cases of corruption at the company leading to losses of more than 1 billion yuan ($147.03 million) for 2018", in one of the largest cases of corruption involving a Chinese technology company.

On Monday, it offered some more details about the cases, pinning the blame on staff for inflating costs of parts. It also said in a statement it "did not incur a full year loss in 2018".

DJI did not respond to further questions about the matter and its earnings.

Founded in 2006, Shenzhen-based DJI is one of a handful of Chinese consumer technology companies to successfully expand overseas, developing North America as its biggest market.

Speaking to Chinese online media outlet The Paper in December, DJI president Luo Zhenhua revealed that the company posted revenue of 18 billion yuan in 2017, 80 percent of which came from outside of China.

According to an internal notice which begun circulating on Chinese social media on Friday, during an overhaul of management procedures DJI discovered that employees in several parts of its supply chain engaged in "corrupt behaviour" that caused prices to rise on an average of 20 percent.

Reuters was unable to independently verify the contents of the document, which also said the company fired 45 individuals, most of whom were in research and development as well as procurement.

There has been a spate of cases in recent months in which Chinese tech companies have fired employees citing corruption.

Earlier this month, Chinese ride-hailing giant Didi Chuxing Technology Co Ltd, which is backed by Japanese investment giant SoftBank Group Corp and U.S. ride-hailing firm Uber Technologies [UBER.UL], announced it had fired over 80 employees as part of a corruption crackdown.

According to Didi the dismissed individuals had primarily engaged in fraud, profiteering, or violating information security regulation.

And the president of Alibaba Group Holding Ltd video streaming service Youku stepped down and is believed to be talking to Chinese authorities as part of a potential corruption case, the company said in December.

(Reporting by Josh Horwitz; Editing by Muralikumar Anantharaman)

By Josh Horwitz