Sino-Forest says panel found no Ponzi scheme

Thu Nov 17, 2011 3:02pm EST
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By Farah Master

HONG KONG (Reuters) - Sino-Forest Corp TRE.TO claims an independent panel found no evidence it was perpetrating a massive investor fraud, but the Chinese forestry company's chief accuser said the probe lacked credibility.

Sino said on Tuesday the panel, commissioned in June, found no basis for a short-seller's allegations that the company was operating a Ponzi scheme, a sham investment operation that produces no real profit.

That said, it conceded the committee's interim report left many of the questions raised by Carson Block and his Muddy Waters firm unanswered.

The panel of independent directors had yet to review all of the documents needed to exonerate Sino from charges that it was exaggerating its forestry assets, the report said.

"We believe this release has no credibility," Block's firm said in a statement.

John Hempton, whose Sydney-based Bronte Capital is a prominent short-seller, said he felt vindicated in his negative view of Sino-Forest after reading the limitations placed on the panel in obtaining information on the company.

Deep in its 111-page report, the committee said it had been barred from seeing databases and discouraged from visiting some Chinese forestry bureaus that hold registration documents.

"Every single meeting with forestry officials to confirm documents purporting to prove ownership of forests was set up by management," Hempton told Reuters.   Continued...