When China Fire
and Security Group Inc. (Nasdaq: CFSG) went public through a reverse merger
in October 2006, Chairman Gangjin Li’s teen-aged son was listed
as the beneficial owner of roughly 10 percent of its shares.
This week, a Securities
and Exchange Commission filing reported that the son had relinquished his
interest in that stock, which has a current market value of more than $30
million.
According to the filing, Gangjin Li now has sole voting
power over the 2.67 million shares, giving him control of 57 percent of China
Fire’s common stock. The filing offered
no explanation for the transfer, the latest in a series of disclosures about
the ownership of large blocks of shares issued when China Fire merged into a
public shell called UniPro Financial Services Inc.
Michael Thieu, a China Fire spokesman, said Gangjin Li
originally gave the shares to his son, Ang Li, to provide for his future. But
the son is about to turn 18 and will no longer be a minor, and his parents are
concerned about what might happen if he gains access to that wealth, Thieu
said.
As a precaution, they decided to reverse the gift and use a
different vehicle, such as a trust, he said.
“This transaction is internal to the Li family,” he said.
“It has no impact on the company’s business operations or financials.”
Sharesleuth reported
last year that the person listed as the beneficial owner of another 2.58
million China Fire shares was the sister-in-law of the company’s chief
executive officer, Brian Lin – a fact not disclosed in any of its SEC filings.
The sister-in-law, who operates natural food stores in
Canada and California, was listed
as the sole shareholder of a British Virgin Islands entity that sold millions
of dollars worth of China Fire stock at the end of 2007.
After our story appeared , China Fire issued a press
release and SEC filing clarifying the actual owners of the shares held by
various British Virgin Islands entities. It said some of the people – including
the sister-in-law — who had been listed as beneficial owners were in fact
nominees standing in for other people.
The new
SEC filing says that Gangjin Li gifted the 2.67 million shares to his son in
August 2006. It said that last Thursday, Ang Li’s mother and legal guardian, Chunfeng
Gao, ” irrevocably disclaimed and renounced any
and all legal and beneficial interest” in the shares on behalf of her son.
Ang Li is a student. He and his mother live in North
Vancouver, British Columbia. When Sharesleuth asked him last year how he came
to be listed as the owner of a big block of China Fire shares, he said he had
seen the documents but was unaware of the details.
Although the reversal of the share gift puts more stock
directly into Gangjin Li’s hands, that could be seen as a positive for the
company and for other investors, said Thieu, a former securities analyst.
“From my view, it actually will provide more stability,” he
said.
China Fire’s stock closed Friday at $11.98 a share.
