The SEC has filed an administrative proceeding against Chinese company Longtop Financial Technologies, Ltd. (PInk Sheets: LGFTY:PK), saying the company had failed to file its financial report for the year ended March 31, and that its reports for 2008, 2009 and 2010 could no longer be relied upon.
Jadeorstone.com, which bills itself as a “corporate investigator aimed at Chinese companies traded overseas” issued a report on Telestone Technologies Corp., a Beijing telecommunications company whose financial reporting and history were the subject of previous Sharesleuth reports.
- The company’s production capacity is roughly 75 percent below the figure listed in its official statements
- Telestone’s core wireless communications technology – WFDS 1 – is simplistic and easily duplicated.
- There are egregious gaps between Telestone’s reported revenue and income in its Securities and Exchange Commission filings and those in its local
Chinese tax filings.
The California Attorney General’s office has
filed a complaint against Mitchell J. Stein — who was featured in a Sharesleuth
investigation in 2008 — alleging that he and others participated in a scheme to deceive desperate homeowners into paying thousands of dollars each to join dubious lawsuits against their mortgage lenders.
According to the complaint, the lawyers and telemarketers involved in the scheme led the homeowners to believe that the suits would halt foreclosures on their homes, reduce their loan balances, bring them financial settlements, and possibly eliminate their mortgages entirely.
Authorities say the ring solicited homeowners in 17 states and persuaded at least 2,500 of them to pay as much as $10,000 each to join suits, some of which were never filed.
Stein, a Californa-based lawyer, was involved in the creation and development of Recom Managed Systems Inc., a medical device company that went public through a reverse merger. It later changed its name to Signalife Inc., and is currently known as Heart Tronics Inc. (Pink Sheets: HRTT.PK).
The attorney general’s office said in a press release that all of defendants had their assets seized and were enjoined from continuing their activities.
The Securities and Exchange Commission says investors should be “especially careful” given the potential risks of investing in companies that have gone public through reverse mergers, either because they may be undercapitalized or haven’t faced enough scrutiny from regulators. The agency issued an investor bulletin that described problems with some of those companies, including a number of Chinese businesses that used reverse mergers to get listings on U.S. exchanges. ”The S.E.C. has suspended the trading in the shares of at least a dozen such companies,” says Dealbook. ” Some companies, the agency says, file questionable documents, while others file nothing at all for periods of time. Sometimes the risk comes from companies that have been using small accounting firms that cannot handle the workload of auditing a large businesses…”
Robert Khuzami, director of the enforcement division at the Securities and Exchange Commission, talked in a recent speech about some of the ways he thinks defense attorneys cross the line into obstruction. “Mr. Khuzami’s comments sound like a directive for attorneys to exercise greater care in how they interact with the S.E.C.,” says Dealbook. But, contrast that with the government’s attempt to prosecute a GlaxoSmithKline lawyer for obstruction over the way she represented the company. The judge wouldn’t even let the case go to the jury, and acquitted her on the spot.
Muddy Waters LLC said in a research report that Sino-Forest Corp., a Canadian company with extensive timber holdings in China, has substantially overstated the amount of forest land it controls, as well as the amount of wood it has been harvesting.
Trading in the Mississauga, Ontario-based companys stock (TSX: TRE.TO) was halted by the Toronto Stock Exchange after the shares plunged 20 percent in less than 30 minutes.
Muddy Waters said in its 33-page report that the land purchases that Sino-Forest has reported in China did not square with government records, and appear to be overstated by as much as $900 million. The report also included photographs of apartment buildings and other nondescript structures at the addresses listed for some of Sino-Forest’s major customers and financial partners.
Unlike other Chinese businesses that trade on North American exchanges, Sino-Forest has attracted some large, savvy investors, includging Paulson & Co., which has more than $30 billion in assets under management.
The specifics of a new program that rewards whistleblowers for reporting corporate wrongdoing to the Securities and Exchange Commission are taking shape. But for the SEC “it looks to be ‘damned if you do, damned if you don’t,’” says Peter J. Henning in the New York Times. The agency has faced criticism from all sides, he says, and won’t likely be able to please everyone. Most interesting, though, will be how it handles the rules’ most outspoken critics: corporate America.
“‘I don’t think the agency is going to change much because I don’t see anything where people are being held accountable and responsible,’ Rep. Steve Pearce (R-N.M.) said,” according to the Wall Street Journal. The panel investigating the Securities and Exchange Commission’s handling of the Stanford case — the agency knew there were problems with Stanford’s firm as early as 1997 but didn’t act — were told that a former SEC official responsible for blocking attempts to investigate Stanford, former Fort Worth Regional Office Enforcement Chief Spencer Barasch, might become the target of a federal criminal investigation to see if he broke any laws in representing Stanford after he left the agency in 2005.