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- Boondock Saints

Monday, August 29, 2011

Sino-Forest CEO Jumps Off

From WSJ:

HONG KONG—Sino-Forest Corp. said its chairman and chief executive resigned and three employees have been temporarily suspended, after Canadian regulators said the company may have committed fraud. 

The forestry company said Sunday that Allen Chan voluntarily stepped down as chairman and CEO pending completion of the company's review of fraud allegations published two months ago by short seller Muddy Waters LLC. 

Mr. Chan will assume the title of founding chairman emeritus of the Chinese-operated company, shares of which are listed in Toronto. He wasn't available for comment.

William Ardell, lead director and chairman of Sino-Forest's independent committee conducting the investigation, will succeed Mr. Chan as chairman. Sino-Forest Vice Chairman Judson Martin, an executive director, will become chief executive. Mr. Martin also is chief executive of Sino-Forest's Greenheart Group Ltd. unit, shares of which are listed in Hong Kong.

Sino-Forest said Mr. Chan would continue to assist the company's internal investigation and that he had planned to resign before the Ontario Securities Commission on Friday ordered a 15-day trading halt for the company's shares. 

The commission issued the order after saying regulators had found that the company may have "misrepresented some of its revenue and/or exaggerated some of its timber holdings." The commission said the company, through its subsidiaries, also "appears to have engaged in significant non-arm's-length transactions which may have been contrary to Ontario securities laws and the public interest."
The commission on Friday ordered executives to resign but revoked the order the same day, saying it would require a hearing.

Sino-Forest's stock is down 72% for the year. The shares took a beating in June when Muddy Waters published its allegations of questionable accounting. The shares closed Thursday at 4.81 Canadian dollars (US$4.90), down 5.7%.

Sino-Forest denied the allegations, including that the company fraudulently exaggerated its tree-plantation assets. 

Sino-Forest said the commission's allegations are "unproven" but "of a serious nature." The company said it is cooperating with regulators. 

The securities commission on Friday ordered the resignations of Mr. Chan; Albert Ip, the head of development and operations; Alfred Hung, the head of corporate planning and banking; George Ho, vice president for finance; and Simon Yeung, vice president for operations. Regulators said Sino-Forest had temporarily suspended Messrs. Hung, Ho and Yeung and temporarily put Mr. Ip on reduced duties. A company spokesman said the executives weren't available for comment.

Sino-Forest on Sunday said it had placed three employees on leave and that a fourth was ordered to act solely on Mr. Martin's instructions to assist the company's investigation. The company didn't identify the employees but a person familiar with the matter said the employees' identities matched those given by the commission.

Sino-Forest said last week that its independent review had been delayed until year-end but that an interim report of its findings is expected to be released in four to six weeks.