Dior China, grappling with stagnant performance, has launched anti-corruption efforts following a major embezzlement case linked to its parent company, LVMH.
Shanghai’s Jing’an District People’s Court recently convicted three individuals in two embezzlement cases involving LVMH Perfumes & Cosmetics (Shanghai) Co., Ltd. According to court documents (Case Nos. 1037 and 1158, 2024), the defendants received suspended prison sentences ranging from two years to two years and nine months.
The court found that Ying Mou, Dior’s senior training director in China, colluded with training manager Cui Mou between 2015 and 2023 to embezzle over 20 million yuan ($2.8 million) by fabricating expenses, including fake conference fees, consulting services, and translation projects.
The scheme involved a coordinated criminal network: Ying directed Wu Mou, head of a third-party vendor, to create fraudulent invoices, while Cui collaborated with finance employee Hu Mou to approve illegitimate reimbursements. The embezzled funds were primarily spent on personal luxuries, such as overseas travel and elite education for their children.
An audit revealed that LVMH paid 9.44 million yuan ($1.3 million) to shell companies for fictitious services. Of this, 698,755 yuan ($96,500) covered fabricated taxes and fees, while 8.66 million yuan ($1.2 million) was diverted for personal use. Notably, Wu and Hu attempted to forge documents to conceal the fraud when the case surfaced in early 2023.
The scandal highlights severe governance lapses and poses reputational risks to Dior. Data from Fashion Business Daily shows LVMH’s 2024 Asia-Pacific revenue (excluding Japan) fell 10%, while Dior’s fashion and leather goods division reported a 1% organic revenue drop to €41.1 billion ($44.8 billion), with operating profit declining 10%. Fourth-quarter revenue also dipped 1% to €11.1 billion ($12.1 billion).
Analysts warn the case undermines LVMH’s corporate image and internal controls in China, a critical market. To date, LVMH has not commented on the verdict or disclosed corrective actions.
