Understanding China, One Blog at a Time

An American in China

Archive for December 28th, 2010

The Death Sentence in China

Posted by w_thames_the_d on December 28, 2010


From hindu.com
“At the Law School in Peking University, the delegation learnt from Vice Dean Xixin Wang that normally the death sentence, awarded by a lower court and confirmed by the Supreme People’s Court, would be executed within six weeks. If for some reasons, it could not be executed within this period due to pendency of the pardon application, the two-year limitation would come into operation.”

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Chinese Companies that Have Bilked the US Stockmarket

Posted by w_thames_the_d on December 28, 2010


Yesterday I posted about Chinese companies who have bilked US citizens out of their hard earned money. With the rise of China, more Chinese companies are being listed on the US exchanges…

example
China Energy Savings Technology: This company — the focus of yesterday’s SEC action — billed itself as a manufacturer of “energy savings products.” It agreed to sell $50 million in stock through a PIPE (private investment in a public equity) in January 2006 and soon registered to sell 10 million additional shares in a public offering.

A month later, the company disclosed that the SEC had opened an “informal” inquiry into its operations. Within weeks, many of the top people in the company resigned — directors, executives, all the key participants — and the company went dark in China, SEC records show.

In April 2009, the SEC obtained judgments finding four of the principals liable for fraud, on the basis that they had used a phony shareholder base and phony stock transactions to boost the price of stock that was essentially worthless, pocketing more than $25 million from American investors.

Bodisen Biotech [BBCZ
0.48

UNCH
(0)

] : This maker of organic fertilizers saw its shares delisted from the American Stock Exchange in March 2007, partly based on alleged inaccuracies in its filings regarding the role of stock promoter Benjamin Wey, president of New York Global Group.

Shareholders filed lawsuits accusing Bodisen of securities fraud, but their complaints were dismissed. Wey has claimed that irresponsible short-sellers sent the company into a tailspin. The stock peaked at about $20 in 2006. Its OTC shares traded recently at about 50 cents. Bodisen did not respond to requests for comment.

Shanghai Medical Technology: This operator of dialysis clinics raised $12.5 million in a 2007 PIPE deal. The money never made it to the clinics — it was transferred instead to the personal account of one of the company’s directors, according to a source involved in the deal. The company appears to be defunct. Multiple attempts to reach company officials were unsuccessful.

Fuwei Films [FFHL
3.97

-0.22
(-5.25%)

]: This manufacturer of industrial plastic films went public in 2006 through an IPO on Nasdaq. In 2009, the company disclosed that three executives had been convicted in China on charges that they had illegally taken control of the business there.

Shareholders alleged in a lawsuit that Chinese authorities were investigating the hijacking of the company while stock promoters in the U.S. hyped the new issue. The suit charged that company officials had provided false and misleading information relating to the company’s IPO.

China Yingxia [CYXI
0.0017

UNCH
(0)

] : This health-food company was founded by a nurse-turned-entrepreneur. It reached a market cap of more than $900 million and then in 2009 stopped filing statements to the SEC. Information remains scarce, but according to one person familiar with the company, the nurse is now in jail in China for selling unregistered securities to individuals there, a violation of the country’s securities laws. Attempts to reach the company were unsuccessful.

Asia Time [TYM
0.31

-0.02
(200%)

]: This watchmaker started trading on the American Stock Exchange at $8.50 a share in February 2008. Without warning, the company stopped filing SEC statements a year later, prompting the Amex to delist its stock. It occasionally trades on the Pink Sheets and last traded Nov. 26 for a penny. Attempts to reach the company were unsuccessful.

China Water & Drinks: This bottled-water company merged into a U.S.-listed shell in 2005. Two years later, it was acquired by a special-purpose acquisition company run by Richard Heckmann, a veteran U.S. investor based in Southern California.

Four months after the deal closed, Heckmann charged — a charge repeated in court papers — that the Chinese CEO had embezzled millions of dollars and that the company’s customer list was mostly fiction. The CEO has denied those charges and countered with a lawsuit claiming Heckmann owes him millions.

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Merry Christmas China Style-“Warning Graphic Photos!”

Posted by w_thames_the_d on December 28, 2010


Merry Christmas China Style-“Warning Graphic Photos!”

December 25, many countries are thinking of Jesus or presents or egg nog, in china, however, their concerns are different. The graphic photos below tell the story of how Christmas played out on Christmas night and the 26th in Yunhui of Zhaiqiao Village in Puqi Town of Yueqing City (photos from chinasmack.com).

A summary of the below is that a man who is a village leader in China died in an alleged traffic accident. Apparently the man was petitioning, which means expressing his dislike for something that the local government is doing, or was doing. While exercising this right, the man met with his untimely death. According to chinasmack, the man was held down and run over, and before this, the surveillance cameras in the area had been disabled.

According to chinasmack:

“A construction truck with the license plate number K5B323 (delivering materials for the Yueqing Lingang Industrial Zone reclamation project) hit Zhaiqiao Village villager Qian Yunhui. When the police rushed to the scene, Qian Yunhui had already passed away. However, some netizens posted completely different information on various well-known discussion forums and microblogs throughout the country claiming that, on the morning of December 25th, Qian Yunhui was held and pressed down to the ground by 5 people along the Zhaiqiao Village section of the Hongnan public road. Then, he was run over by a construction truck, which was driving in the wrong direction. Photographs that were posted afterward showed that there was indeed a construction truck with the license plate K5B323, crushing a man over his neck, the man’s body lay underneath the truck’s tire, a scene too horrifying to look at.

December 26th, this Wenzhou Net reporter contacted the Yueqing City Puqi Town party office by telephone. …. “This is just a traffic accident, but there are people with ulterior motives who are trying to link it with previous petitioning.”

….As of press time, speculation concerning Qian Yunhui’s death on the internet is still spreading. One netizen has posted a comment saying that “on the day of the crime, the surveillance cameras along that section of the road were dismantled”; Another netizen posted saying: “Qian Yunhui, in order to prosecute government officials for misappropriating 146 hectares of their village’s land, has been running around petitioning higher authorities [for redress] for six years, and has suffered imprisonment many times [as a result].” Even more netizens expressed that they hope the relevant departments will announce the results of the investigation as soon as possible.

The following photo was originally posted on this KDS post (Baidu cache) which has since been deleted:

Zhaiqiao village head Qian Yunhui crushed underneath a truck tire.

Additional photos:

Qian Yunhui crushed under a construction truck in Wenzhou, China.

Qian Yunhui crushed under a construction truck in Wenzhou, China.

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China Based Stocks- us Buyers Be Ware…Part 2

Posted by w_thames_the_d on December 28, 2010


In continuation about Chinese listing their companies in the USA and problems it poses….
After living in China, I am amazed that the Chinese are allowed to sell stocks on our stock exchange. Its not that I dont trust them, but I truly dont trust them. At least in the USA we have auditors who can pore through the records in the event that we are cheated, and there is a modicum of oversight. In china, there is no oversight. In a country where quite possibly 30 percent of the economy is hidden due to bribery and under the table dealings, how can we trust what they say here?”’
My take is that this should be read and your portfolios analyzed, I’d hate to see my friends and families eating cat food when their in their ‘golden years’.

excerpt:
“Over the past year, the SEC has received multiple calls for investigation of fraud among China-based stocks. Many investment professionals believe an investigation is due. One is Peter Humphrey, a corporate investigator and due-diligence expert based in Beijing.

Humphrey estimates that as many as a third of Chinese companies listed on major U.S. exchanges — the Nasdaq, Amex and New York Stock Exchange — are likely reporting fictional profits.

…In a letter dated Sept. 9, the House Financial Services Committee complained about a general lack of rigor in the auditing of Chinese companies. Addressed to SEC Chair Mary Schapiro and her counterpart at the Public Company Accounting Oversight Board, the letter asked how the agencies planned to tackle the problem.

…Until now, many investors buying China-based stocks traded on U.S. exchanges have felt abandoned by regulators.

process is

…The process is complex. First, the sponsors find a Chinese company with a plausible growth story and sell the founders on the idea of raising capital in the U.S. They then gain control of a U.S. company that is little more than a shell, but a living shell, with stock that remains listed on a public exchange in the U.S. The U.S. company buys the Chinese company, essentially taking the Chinese company public in the U.S. with little regulatory oversight.

The sponsors and company founders can then use optimistic growth projections to float new issues of stock among American investors eager to participate in the economic miracle of China.

…..A distance of 8,000 miles, together with formidable language and cultural barriers, makes it tough for any investor to get to the bottom of a business scenario in China. Even sophisticated investment professionals spending millions on due diligence have been duped.

For the moment, the frequent lack of transparency between the two countries is seen as camouflage for stock cheats. But recurring allegations of fraud and new stock blow-ups have raised questions about the reliability of accounting practices at China-based companies generally.”

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China Based Stocks- us Buyers Be Ware…Part 1

Posted by w_thames_the_d on December 28, 2010


After living in China, I am amazed that the Chinese are allowed to sell stocks on our stock exchange. Its not that I dont trust them, but I truly dont trust them. At least in the USA we have auditors who can pore through the records in the event that we are cheated, and there is a modicum of oversight. In china, there is no oversight. In a country where quite possibly 30 percent of the economy is hidden due to bribery and under the table dealings, how can we trust what they say here?
Dont get me wrong, the US also has insider trading , but at least and we have bodies who were formed to combat this sort of thing. In china fraud and deception are the norm. The typical American who has never been here nor worked with them will have a hard time fathoming how this country operates. I would be dollars to doughnuts, however, that 99.% of all those who have worked at a real job in China, would shy away from 99.9% of all Chinese stocks.

excerpt:
“In some quarters, China-based stocks are now discussed with near scorn. Famed hedge-fund manager Jim Chanos, who uncovered the accounting fraud at Enron nearly a decade ago, says that accounting irregularities are more the norm than the exception at the Chinese companies researched by his firm, Kynikos Associates.
Chanos has been a vocal critic of China stocks. During an investment conference in New York in October, Chanos argued that investment bankers with strong links to China tend to view U.S. investors as a short-term source of capital, not as long-term partners.

Chanos has described Chinese stocks as a “short seller’s dream.”

The SEC’s interest follows a host of damaging accusations by short-sale investors — those who sell borrowed shares and later profit from a decline in a stock’s price. The shorts routinely publish damaging research on the Internet, sometimes causing steep declines in the prices of stocks and occasionally provoking charges of stock manipulation from investors with long positions in those same stocks.

As one Chinese small-cap after another has imploded, the resulting profits have allowed short investors to redouble their efforts. They have been developing databases, scheduling regular trips to China, and hiring experts in forensic accounting.

Their work has been aided by the adroit use of computer technology. Where cultural, language, and legal barriers have prevented U.S. regulatory authorities from knitting together a complete picture of a company’s activities, the shorts have succeeded, on occasion, using Internet portals and emails to obtain photocopies of documents filed with Chinese authorities, then comparing those documents with documents filed in the U.S.”

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Take out Doggie Burgers in China- WTF??

Posted by w_thames_the_d on December 28, 2010


In China they do eat dog, but this cart may not be what you think. No, it is not a take out doggie burger cart, I hope…. I think it is some mobile dog grooming service….

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A Remark about my Damned Typos and Comments

Posted by w_thames_the_d on December 28, 2010


Just an fyi, I live in China so cannot access wordpress at the moment, not that it matters, uncle chicom has me blocked anyway. But the service that I am using which allows me to access wordpress is down, thus for a week or so I will only be able to respond to them with posts. Oh yeah, I also do my blogging via email and the spell checker on it is not as good as that of wordpress so I’m liable to have a butt-load of typos in the interim as well, so be patient…

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“Accounting Irregularities Are the Norm in Chinese Companies Listed in the USA”

Posted by w_thames_the_d on December 28, 2010


File this under, “Not shit? As if I couldn’t figure this out”. China is the land of deceit and bribes, so why should it not be true in Chinese companies listed in the USA?

excerpt:

Jim Chanos, who uncovered the accounting fraud at Enron nearly a decade ago, says that accounting irregularities are more the norm than the exception at the Chinese companies researched by his firm, Kynikos Associates.”

I recommend checking your portfolio for any Chinese companies and do your due diligence.

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