Canada‘s largest securities regulator alleged Tuesday that Sino-Forest Corp. and certain former executives inflated timber purchases and sales, capping an 11-month investigation into the troubled forest-products company.
The Ontario Securities Commission signalled last month it would file fraud allegations against the company, after issuing a so-called enforcement notice. A spokesman for Sino-Forest, which conducts most of its business in China, declined to comment.
The allegations mark the latest setback for Sino-Forest, once one of the largest forestry-products companies listed in Canada. Last June, U.S. short-seller Muddy Waters LLC issued a report alleging the company had fraudulently exaggerated the value of its plantation assets. The company denied the allegations, but also said it would probe them.
Amid the internal probe, shareholders abandoned the company, and the OSC started its own investigation. The Toronto Stock Exchange delisted the company and the company sought out bankruptcy-court protection in March.
Last August amid the OSC probe, the regulator said the company and some of its officials appeared to have misrepresented revenue and exaggerated its holdings, which the regulator said may have been false or misleading. The Royal Canadian Mounted Police also opened an investigation.
In a release Tuesday, the OSC said it alleges Sino-Forest and certain former executives, including Allen Chan, the company’s former chairman and chief executive, engaged in “deceitful and dishonest courses of conduct” in connection with “the purported purchase and sale of timber.”
Most recently, Mr. Chan served as Sino-Forest’s founding chairman emeritus, but he resigned from that position last month, at the same time Sino-Forest announced receipt of the OSC’s enforcement notice.
The OSC also alleges Mr. Chan committed fraud in connection with his “undisclosed interest and substantial benefit” in Sino-Forest’s purchase of a controlling interest in Greenheart Group Ltd., a public company listed on the Hong Kong Stock Exchange.
Mr. Chan couldn’t be immediately reached for comment.
The commission also accuses Sino-Forest’s former chief financial officer, David Horsley, of contravening Ontario securities law and acting “contrary to the public interest.”
Mr. Horsley couldn’t be reached for comment.
Last month, Mr. Horsely resigned as chief financial officer, but Sino-Forest said at the time that he continued to work for the company to help with its restructuring under bankruptcy protection.Ben Dummett
Wall Street Journal
- Sino-forest wiping out all traces (chinadailymail.com)
- OSC makes fraud allegations against Sino-Forest (business.financialpost.com)
- Ontario securities regulator accuses Sino-Forest and execs of fraud (calgaryherald.com)
- China’s Hebei to invest $195 million in Canada iron ore miner (chinadailymail.com)
Categories: Crime & Corruption