Canadian regulator charges Sino-Forest with fraud

Tue May 22, 2012 4:58pm EDT
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By Euan Rocha and Jennifer Kwan

TORONTO (Reuters) - The Ontario Securities Commission charged Sino-Forest Corp SNOFS.UL 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 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 chief financial officer, David Horsley, failed to comply with Ontario securities law and acted contrary to the public interest.

Spokespersons for Sino and Allen Chan were not immediately available for comment. A lawyer representing Horsley declined to comment.

In its statement of allegations, the regulator said: "Sino-Forest falsified the evidence of ownership for the vast majority of its timber holdings by engaging in a deceitful documentation process."

It also accused the company of hiding weaknesses in its internal controls and of dishonestly concealing its control over suppliers and intermediaries that it had stated it had no control over.   Continued...