Sino-Forest is no "Ponzi" scheme: panel report

Tue Nov 15, 2011 9:12am EST
 
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By Farah Master

HONG KONG (Reuters) - Canada-listed Sino-Forest Corp said an independent committee found no evidence of fraud at the Chinese timber firm following allegations from short-seller Muddy Waters it had exaggerated its assets, although the committee also said it had been unable to verify the company owned all of its forests.

"We can categorically say Sino-Forest is not the 'near total fraud' and 'Ponzi scheme' as alleged by Muddy Waters," CEO Judson Martin said in a statement on the interim report.

Accounting scandals swirling around several China-focused companies listed in North America have prompted trade halts, delistings, lawsuits and regulatory probes. Sino-Forest faces several class-action lawsuits from investors who lost money.

Sino-Forest was the largest forestry company listed on the Toronto Stock Exchange until its shares collapsed in June after the fraud allegations surfaced. The stock is down 80 percent and was suspended in August pending investigations by regulators and, last week, Canadian police.

In the latest twist to the months-long saga, research firm Muddy Waters, founded by Carson Block, said the timing of Sino-Forest's announcement "makes clear that the directors and officers are responding to the criminal investigation announced last week".

"It should be noted that all three directors who oversaw the investigation are defendants in shareholder lawsuits, and one resigned just prior to this release," Muddy Waters said.

"We believe this release has no credibility."

In addition, the report said the committee had been unable to verify that Sino-Forest owned all its forests.   Continued...