The short arm of the SEC: Chinese executives of reverse-merger RINO who inflate revenue 15-fold and exproprirate $100m are given a minor fine of $250,000

May 17, 2013 Leave a comment

The short arm of the SEC

Paul Murphy

| May 16 10:30 | 3 comments | Share

So, there was evidence this week that the US authorities might finally be getting to grips with the Chinese reverse merger scandal, whereby a string of Chinese companies exploited lax listing rules to shake down naive American investors. Executives at RINO International, a steel industry supplier, have been charged by the SEC with inflating revenues 15 fold in their US filings, while some of the proceeds from a reverse merger and $100m cash raising in 2007 were diverted to buy a house in Orange County, two Mercedes Benz cars and also funded shopping trips to the Chanel and Valentino stores in Beverley Hills. Most of the rest of the money was dispatched to China. Chief executive Dejun “David” Zou and chairman Jianping “Amy” Qiu have been charged under 10 sections of the Securities Exchange Act. So will they be looking at jail time? Nope. Without admitting or denying the claims against them, RINO, Zou, and Qiu consented to the entry of a judgment permanently enjoining them from violations of the respective provisions of the Securities Act and Exchange Act. Zou and Qiu agreed to pay civil penalties of $150,000 and $100,000, respectively… In addition, Zou and Qiu consented to entry of an order prohibiting them from serving as officers and directors of a public company for a period of ten years. Separately, Zou and Qiu have agreed to pay back the cash spent on the Orang County house in settlement of class action suite. But that’s it. The $100m has gone and the penalty is a minor fine and a directors’ ban. Quite a few American fraudsters will wish they’d enjoyed similarly benign treatment at the hands of the US authorities. There reality here, of course, is that the SEC will consider itself lucky to have reached any sort of settlement with Zou and Qiu. The regulator’s powers don’t reach as far as it would like the world to think.

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment