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A Hairdresser’s Investment Gone Wrong

A Hairdresser’s Investment Gone Wrong

Published 3. Jan 2019

written by Risto Rumpunen

all the names and places in this story have been renamed in order to protect victims

Lee knew two Chinese women, who introduced her an idea that together they could start a new business venture in Finland. Lee’s first expression of Mrs. M, who was married to a Finn, was positive. Lee found Mrs. M enthusiastic and trustworthy. Mrs. M suggested to Lee that they should together start a new company, a Chinese hair salon in Helsinki. A third woman DJ was also planned to take part of the business but she was not as active as Mrs. M because unlike the two she had not much experience as a hairdresser. 

 

Lee decided to invest 20 000 euros (150 000 in Chinese currency) into Mrs. M's bank account in Finland in September 2014 to set up a limited company. According to Mrs M’s plans each woman would get percentage of shares from the company according to their individual investments. Mrs. M, who claimed to invest most of the money and work for setting up the company, would get majority of shares 42 % and the third woman DJ would get 33% and Lee would get 25 % of the company’s shares.

 

Mrs. M told Lee that she will use the initial investment for setting up the company, buying furniture, paying out renting deposit and first months’ rent etc. After this was agreed, Mrs. M started to prepare the company and bought an old registered trading name that had been operated a hair salon on good location in Helsinki’s city central.

 

Mrs. M transformed the company’s legal stand and turned it into a private limited company. Minimum starting investment for setting up a limited public shares company in Finland is € 2500. Officially all limited shares companies have to include letter Oy (short version from osakeyhtiö = shares company) in the end of their name.  

 

Unlike Mrs M had told Lee, she didn’t officially place whole amount of the money that she had received from Lee into the company's account. Mrs M listed Lee as an official shareholder with promised 25 % of the total shares, but they were valued according to the minimum investment and meant that Lee’s shares were valued worth only € 625 – not total amount of € 20 000 that Lee thought she had invested into the company’s assets.

 

Mrs. M and the third woman told Lee that in addition to the investment, Lee also has to apply for working permit and make a contract with the new company in spite of the fact that she was already a partner in the company. Lee then signed a contract where she agreed to work 40 hours per week. Her salary was set as €1578 per month.  

 

A new hair salon in central Helsinki

 

Mrs M rented the hair salon in central Helsinki. The street, where it was located, is an excellent place for a hair salon. There are plenty of restaurants and hotels nearby that are busy days and late nights till early hours. It is just few hundred meters away from most popular streets in Helsinki where tourist tend to wonder. 

 

Lee arrived to Finland in August 2014. At first, she worked and lived at the premises of the hair salon until she found an apartment. She served only Chinese clients since she spoke no other languages. From the start she realized that things were not as she had been told by her business partners. She had to do most work and her workload extended easily to double to what had been agreed. She regularly worked up to 80 hours per week. According to Lee her partner in the company and chief owner, Mrs. M was not as good hairdresser as she had claimed to be. The third woman was still learning her craft, so most work load fell to Lee.

 

Mrs. M started complaining how badly business was running and begged Lee to give her more money, often asking her to give her salary back to her in cash. Before setting up the company, Mrs M had described how she would buy new furniture with the initial investment, but what Lee saw in the premises of their hair salon looked like cheap old second-hand stuff. 

 

Lee kept on working for weeks long hours and six days a week without extra payment. Mrs. M was indifferent about this asking Lee to give her more money because business was doing so badly.

 

You are fired, go back to home 

 

Lee had initially received only a yearlong working permit. When her term was coming close to the end, Mrs. M fired Lee on the grounds that there weren't sufficient number of clients to keep the saloon running and profitable. The official reason for firing her was written as "the termination of the contract is done on the basis of production and economic” a sentence commonly used in Finland for terminating an employer’s contract.

 

In this case the wording for terminating Lee’s contract was an odd and hollow explanation. Lee was the hairdressing salon’s only employee, who was actually capable of carrying on with the work, the only qualified hairdressing. Mrs M's skills were poor and the third woman was not that much involved in practical duties of the saloon. According to Lee, she had quickly become popular amongst the salon's mostly Chinese clients.  

 

The timing was handy for Mrs. M because after firing Lee, it would have been very difficult for Lee to renew her working permit and get her investment back. After she had been forced to return back to China, she would have had no chances of getting her investment back. 

 

Searching for a settlement

 

Lee asked help from a representative of SKA (Suomen Kiinalaisten Allianssi ry.) and a meeting was arranged between the two women. At the meeting Mrs. M confessed that she had used the money that Lee had invested for the company for herself as a slump fee for registering and making paper work for setting up the company. In practice this would have meant that her fees for setting it up a company would have been far higher than one of those corporate lawyers’ fees, who dress up in pin stripe suits and set up companies for international clients.

 

When Lee prepared to file a law suit against Mrs. M about her overlong working hours, Mrs. M had to do something. Later Mrs M – according to her own testimony –

she and her bookkeeper worked over the night in fixing or in other words manipulating accounting in order to modify them according to her lies. Mrs M claimed that Lee had not worked as long hours as she claimed to have done. After Mrs M had manipulated her bookkeeping, on paper it looked as if it was reasonable to fire Lee on the grounds that there was not enough business to keep the hair saloon running.

 

At the time Lee also feared that Mrs. M was planning to sell out all her shares from the company to someone else. Lee assumed that Mrs. M had invested all of the money €20 000 that Lee had transferred to her as part of the official initial investment. What Lee didn’t know was that Mrs M had invested only € 625 euros of Lee’s money into the company. This sum gave her 25 % shares of the company and voting rights accordingly but the entire official investment for the new venture was only €2500 nowhere near the sums Lee had invested. 

 

Police investigation was dropped

 

After Lee contacted SKA (Suomen Kiinalaisten Allianssi ry), the organization asked the police to investigate her case. The police dropped the case with conclusion that there was not sufficient evidence to believe that a crime has been made and may still be ongoing. The police did not even pass the report forward to a prosecutor to consider whether or not press charges and the case was dropped. However, we at SKA, fear that this line of practice is common trick how to allure small business owners to investing into western companies and taking their money. 

 

end