Canadian regulator charges Sino-Forest with fraud - Yahoo! News

 

TORONTO (Reuters) - The Ontario Securities Commission charged Sino-Forest Corp and some of the Chinese forestry company's former executives with fraud on Tuesday, nearly a year after the allegations surfaced and its stock imploded. The OSC, Canada's most powerful securities regulator, said Sino-Forest and former members of its overseas management engaged in numerous "deceitful and dishonest" actions connected with its purported purchase and sale of timber in China. It also said some former company executives attempted to mislead its investigation into Sino-Forest, whose shares were delisted from the Toronto Stock Exchange earlier this month. Sino was the most prominent of a series of North American-listed companies with Chinese operations whose accounting or disclosure practices came under suspicion over the past year. The scandals have hurt investor confidence and led to a sharp declines in the equity valuations of many Chinese companies listed in the United States and Canada. The OSC on Tuesday charged Sino-Forest's founder Allen Chan, along with former executives Albert Ip, Alfred Hung, George Ho and Simon Yeung, with fraud. It also said Sino's former CFO, David Horsley, failed to comply with Ontario securities law and acted contrary to the public interest. "Sino-Forest falsified the evidence of ownership for the vast majority of its timber holdings by engaging in a deceitful documentation process," the regulator said in its statement of allegations. "This is an important first step and our investigation is continuing into this matter, including an examination of the role of the gatekeepers," Tom Atkinson, the OSC's director of enforcement, said in a statement. The OSC did not provide details on which gatekeepers it is investigating. In a recent report, the regulator said that underwriters, auditors and exchanges were not adequately reviewing emerging market companies that were listing in Canada. The OSC initiated the review last year after short-seller Carson Block and his firm Muddy Waters accused Sino-Forest of exaggerating its assets. Short-sellers such as Block borrow stocks and then sell them in the hope they can buy them back later at a lower price and pocket the difference. His allegations, in the report issued by Muddy Waters last June, triggered a collapse of Sino-Forest's share price, along with a rash of lawsuits and probes, including one conducted by the Royal Canadian Mounted Police. Sino initiated own internal probe but said it was unable to address of all of the allegations. (Reporting by Euan Rocha and Jennifer Kwan; Editing by Frank McGurty)