The independent committee examining troubled forestry firm Sino-Forest Corp. refutes claims leveled against the firm by short seller, Muddy Waters LLC.
Sino-Forest announced the findings of the independent committee of its board, which validated critical elements of the company’s books, and concluded that it’s not a fraud. “The independent committee report verifies the company’s stated cash balances, confirms registered title or contractual rights to the company’s stated timber assets, as well as the book value of these assets, reconciles reported total revenue and refutes the allegation that Yuda Wood is a subsidiary of the company. We can categorically say Sino-Forest is not the “near total fraud” and “Ponzi scheme” as alleged by Muddy Waters,” said Judson Martin, vice-chair and CEO of the company.
“This has been an intense and challenging process and I am pleased that the independent committee has been able to refute the substance of the allegations made in the Muddy Waters report,” he added.
The committee’s investigation, and other matters arising from the Muddy Waters report, has so far cost the firm approximately $35 million, it said.
The firm also noted that the Ontario Securities Commission’s investigation is ongoing and its cease trade order on the company’s securities remains in effect. The cease trade order is in effect until January 25, 2012.
OSC referred Sino Forest fraud allegations to RCMP
http://www.investmentexecutive.com/-/osc-referred-sino-forest-fraud-allegations-to-rcmp
Martin added that the committee and the board’s audit committee are still verifying information regarding certain relationships with its suppliers and intermediaries, and addressing other issues that must be resolved before the third quarter results can be released. As a result, it is deferring the release of its third quarter results. He said it expects to release its results within the next 30 days, and that the committee’s final report should be released prior to year-end.
“While the investigation has been difficult, we have also learned much through this process, including a better understanding of the way we need to communicate the operational and regulatory complexities of operating in our industry in China in order to give confidence to our international investor community. We also found that the company’s internal processes, infrastructure and breadth of management team have not kept pace with the growth of its operations. These shortcomings will be addressed: we have a plan to improve our governance and processes going forward, and we plan to add further qualified staff. We are also exploring ways to simplify our business structure, which we believe will provide greater comfort to our investors,” he said.
“To say that this has been a tough time for our employees, investors and our company as a whole would be a huge understatement. A great deal of financial and reputational damage has been caused by unfounded accusations made by a short-seller, who we understand personally profited a great deal from the losses of others. Far from being a “near total fraud” and “Ponzi scheme” as alleged by Muddy Waters, Sino-Forest is a real company, with real assets and real revenue. We are reserving our rights to respond to this matter,” he said.