By Catherine Cadell
BEIJING (Reuters) - A top Baidu Inc (NASDAQ:BIDU) executive, widely seen as a potential successor to chief executive Robin Li, has resigned after an internal company probe found conflicts of interest involving another firm acquired by the Chinese search engine giant.
Li Mingyuan, 32, known as the "prince" of Baidu within China's tech community, stepped down following the investigation, according to an internal email seen by Reuters and independently confirmed by two people at the firm.
The memo, sent to Baidu employees on Friday evening, said Li had engaged in "huge" economic dealings with a person in charge of a separate company acquired by Baidu. The note did not reveal further details of the transaction or the company involved.
A Baidu spokeswoman declined to comment on the matter.
In a statement posted on his WeChat social networking account, Li said the dealings in question were not "dishonest." Baidu's system for rooting out corruption was fierce, Li said, and he was taking full responsibility for what he called a "misunderstanding."
"Baidu is the company that trained me and the house I grew up in," Li said the posting. "(I) never ever thought of doing anything immoral."
Li, who headed the firm's mobile products and operations, also had private dealings with other firms Baidu had partnered with, the memo said, and had not divulged his shareholding in an external company that had close business dealings with Baidu.
The behavior violated Baidu's rules against conflict of interest, the memo said, adding that Baidu had accepted Li's resignation which would come into immediate effect.
The high-profile departure is the latest in a series of setbacks for Baidu this year. The firm has seen advertising revenues shrink in the wake of new regulations on paid advertisements and real-name identification introduced this year.
Nasdaq-listed Baidu posted its first-ever quarterly sales drop last month and warned that revenues in the fourth quarter of the year could slide further.
The company was the subject of a government investigation in May after the death of a student who had criticized Baidu's system of paid search results for leading him to an unapproved, and ultimately unsuccessful, treatment.
Friday's memo thanked Li, the company's youngest vice president, saying he had made important contributions during his time at the company, but that the conflicts uncovered by the investigation were too egregious to overlook.