You Can’t Make This Stuff Up
Apr 14, 2011
Posted by Jody Eisenman | Filed under Uncategorized
After my post Sunday on the spate of Chinese accounting fraud, this weeks’ action takes the cake. First, one of the companies I mentioned, RINO International, which last traded on the pink sheets at $1.75, was suspended from trading. According to the SEC, the allegations are that there is a lack of financial information available. Specifically, the outside law firm and forensic accountants that were hired by the audit committee, had resigned after submitting their report. In addition, the chairman of the audit committee also resigned. Furthermore, the SEC seems to feel that the company has two different sets of books. Is this a publicly traded company, or some corner candy store that deals in cash? Insane.
However, another Chinese company took the cake. It seems that Puda Coal had a small problem. PUDA owns an operating subsidiary called Shanxi Coal, which comprises the vast majority of the company’s business. Unbeknownst to the shareholders, the chairman of the company secretly transferred control to a Chinese investment trust and himself back in 2009. Somehow, the auditors never figured this out. In addition, the company had 2 underwritings in 2010 for over an aggregate $100 million. It seems the underwriters couldn’t catch this either. The chairman, Ming Zhao, resigned after the company announced that evidence shows that the company’s disclosures were “inconsistent in its’ public security filings”. Translation: We have been lying through our teeth, and no one is really sure what the company actually owns at this point. PUDA, who’s shares were as high as 17 this past year, closed at 6 on Friday. Trading has been halted, and there is no timetable as to when these shares will trade again. Of course, they are now the subject of class action lawsuits and the inevitable SEC investigation.
Like I said, you just can’t make this stuff up!
