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  1. #1
    Bixbyte's Avatar
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    Default ABC NEWS --> CHINA Bigger Stock Frauds than Madoff

    US Officials: China Refuses To Help Stop Investment Scams - KMBZ

    The Chinese government snubbed a U.S. request for help in cracking down on a string of alleged investment frauds that have cost Americans billions, outgoing Securities and Exchange Commission Chairman Mary Schapiro told ABC News.

    The lack of cooperation has stymied efforts to recoup investor losses, she said, in one of the largest sprees of alleged financial crimes in recent memory -- one that has gone largely unnoticed by most Americans.

    "The consequence is it's very much more difficult for us to prove our cases," Schapiro said in one of her final interviews before leaving the post, which will be broadcast tonight as part of an ABC News investigation airing on World News with Diane Sawyer and Nightline.

    More than 100 China-based companies have now been de-listed, have left the NASDAQ and New York stock exchanges, have been denied listing, or have withdrawn applications, all following allegations of fraud or accounting irregularities, the ABC News investigation found.

    Not every Chinese company was implicated -- many continue to thrive. But experts estimate that Americans -- everyone from small investors to hedge-fund titans -- have lost tens of billions of dollars in the suspect Chinese investments. Prosecutors in the Bernie Madoff case calculated that his investors lost about $20 billion in his decades-long Ponzi scheme.

    Schapiro said the SEC opened 40 cases against Chinese firms during her tenure, financial schemes she described as "brazen" and "extraordinary." Schapiro, who stepped down in December, said that when she asked Chinese Vice Premier Wang Qishan for help during a trip to Beijing in July her requests were rebuffed.

    "We haven't yet achieved a level of cooperation that makes it possible for us to get access to Chinese companies the way we need," Shapiro said. "We will fight hard to try to secure recovery for U.S. investors. But it's harder when we don't have the cooperation of the foreign government."

    The wave of cases is unique because the China-based companies were listed on U.S. stock exchanges, where investors were expecting corporate financial information to be transparent, accurate and verified. In case after case, Schapiro said, questions emerged about the numbers coming from China.

    NASDAQ CEO Robert Greifeld wrote a letter to ABC News in response to questions about the issue, saying the exchange has taken a series of "decisive" steps aimed at protecting investors and removing "bad actors" from the listings.

    "We have taken prompt, appropriate action to protect investors and the market," Greifeld said.

    READ: Letter From NASDAQ CEO Robert Greifeld to ABC News (PDF)

    Later, when ABC News approached NASDAQ officials to address questions on camera about how so many allegedly fraudulent companies came to be listed in the first place, reporters were escorted off of NASDAQ property.

    Experts tell ABC News the frauds were fueled by a burst of interest among U.S. investors in putting money behind the Chinese industrial boom.

    Companies were able to exaggerate and in some cases fabricate their earnings reports, hiding behind an opaque Chinese financial system that made it difficult for auditing firms to verify the numbers. Many of the companies were located in rural parts of China where it could be difficult to verify that factories were actually producing the goods they had been describing to investors on glossy brochures and in presentations at lavish conferences.

    "In 2009, everybody wanted to be in on it," said Dan David, vice president of GeoInvesting, LLC, a firm that monitored the Asian investment craze. "Then we started to see reports from people on these companies that said that there were accounting errors and material misrepresentations. And then it started to grow from there that there was outright fraud."

    David told ABC News that collectively, the epidemic of China-based frauds has grown into one of the most costly crime sprees in history.

    "Billions. Tens of billions -- in just pure, outright [fraud]," he said. "They raised money here, took it, kept the money."

    Among the most notable cases was one involving Puda Coal, a rural Chinese coal company that is alleged to have sold off its coal mine without ever telling investors.

    Another company accused of fraud is China Integrated Energy, a large Chinese energy firm, one of whose biodiesel plants was supposed to be producing fuel at maximum capacity of 100,000 tons a year. Jon Carnes, a so-called short seller, whose investment strategy involves profiting when the value of a company goes down, began to question the company's production reports in 2010 and decided to send investigators with a camera to see what really was occurring where the plant was located, in the remote city of Tongchuan. The resulting time-lapse video appears to show an almost dormant plant, where only six tanker trucks stopped to fill up over the course of four months.

    "During that period, I found that they produced, essentially, nothing," Carnes said.

    Carnes' report sparked a frenzied response in the U.S., as investors began to question the profit statements from the company.

    The company responded by conducting an internal investigation. "While some issues remain as to production at the Company's Tongchuan biodiesel facility, and while the investigation revealed the need to strengthen internal controls and take similar measures, the primary substance of all other allegations has been proven groundless," the company's report said. In the aftermath of Carnes' report, the company's auditor resigned and NASDAQ moved to remove its listing from the exchange.

    As fraud cases involving China-based firms began to mount over the past three years, the SEC began issuing warning letters to investors about the risks involved. And the two major U.S. stock exchanges began taking steps to address what had clearly emerged as a problem.

    For several years, NASDAQ, NYSE and the exchange it owns that was known as the AMEX had all been allowing Chinese companies to be listed through a process called a "reverse merger" that was quicker than the more traditional approach of an initial public offering. The firms would merge with dormant companies that had already attained an SEC registration, speeding up the path to getting listed on a stock exchange.

    Officials with the New York Stock Exchange noted that the vetting of Chinese firms was the responsibility of multiple parties. "It's easy to focus in on the exchanges, but there's a food chain involved here," an NYSE official told ABC News. "When a company lists, it involves law firms and bankers and regulators. Then you have the accounting firms, who are really critical to this process. When we list a company you need those audited and verified financials. That's what we all depend on."

    Both exchanges have since adopted a seasoning period for new listings, forcing applicants to provide a full year of audited financials before they could trade on the market.

    In response to written questions from ABC News, NASDAQ CEO Greifeld said the seasoning period was one of "a number of decisive and fair steps" taken in 2010, once the markets began seeing evidence of a problem.

    The NASDAQ imposed more stringent qualifying criteria for companies using "reverse mergers" to get listed, Greifeld said. It required listing companies to reconcile their SEC reports with tax filings, and verify their cash balances. It hired an outside investigative firm to look into the background of applicants for listings and had an internal team investigate allegations of financial misstatements or fraud.

    "In the last two years, the efforts of our team has directly led to the delisting of over 40 Chinese companies where there was evidence of fraud, financial misstatement, or other failures to satisfy our listing rules," Greifeld said in his letter to ABC News. "The results speak for themselves."

    By the time some of the precautionary steps took effect at the U.S. exchanges, a great deal of money had already been lost.


    Even some well-known names in the investment world were reported to be victims. The hedge fund run by John Paulson -- who is best known for predicting the collapse of the housing market -- was reported to have lost $468 million on an investment in Sino Forest, a company listed on a Canadian exchange that was accused of exaggerating its timber holdings. Starr International Co., a firm run by former American International Group CEO Maurice "Hank" Greenberg, sued China MediaExpress Holdings Inc. after he said he was deceived by the company's misleading financial statements. He had invested about $13.5 million in the company. Both companies disputed the allegations against them, but lost their stock exchange listings after fraud allegations surfaced.

    Most victims were not Wall Street movers and shakers but small investors who held stock in China-based companies through personal investment accounts, mutual funds or pension funds. Al Smith, 65, the manager of a truck stop in Boise Idaho, told ABC News he lost much of his retirement savings -- about $60,000 -- when he took a chance on Puda Coal, a stock he said he found while researching investment information about Chinese companies.

    He was on vacation when allegations surfaced that the coal company's CEO had sold off the coal mine without telling investors. By the time Smith got back to his computer to sell off his shares, trading in the stock had halted. His money was gone.

    ABC News went to Puda Coal headquarters to attempt to speak with the company's chairman, Ming Zhao, but his assistant told the reporters that he had not been in the office in weeks, and they did not know when he would return. The SEC has also been pursuing Zhao, but has never received a reply, Schapiro said. She said Americans have little legal recourse -- Americans cannot sue companies in Chinese courts, and people like Zhao remain beyond the reach of the American justice system.

    "I think it's astounding that Ö nothing really happens to this person over there," Smith said. "I don't understand that part. I really don't."

    Smith's lawyer, Rob Prongay, who is overseeing a lawsuit against Puda Coal, said he believes a number of entities failed his client.

    "Ultimately, there are a variety of people responsible for the harm investors have suffered as a result of investing in what turned out to be fraudulent Chinese companies," Prongay said. "In our view, the auditors, underwriters, and directors, are also liable for what occurred and we are attempting to maximize any potential recovery for the damaged investors."

    Calls to the Chinese Embassy in Washington and emails sent to Ming Zhao's attorney in Beijing were not returned.

    Schapiro said she too heard little in the way of a response from the Chinese government.

    "We're working hard with the Chinese government to try to secure their cooperation for our enforcement investigations," she said. "But we're not going to wait for their cooperation. We are going to proceed and have proceeded to bring cases against more than 40 individuals and entities for fraud on U.S. investors from Chinese companies."
    I am a pissed off Old Dinosaur.

  2. #2
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    Default

    Here is another huge Chinese Stock Fraud. They used surveillance cameras to expose this company.

    Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date


    Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date
    Our exposure of the fraud perpetrated by Puda Coal (PUDA.OB) and Yuhe (YUII.PK) was ground breaking in that both managements actually admitted their deceit. Likewise, Alfred Little's report on China Integrated Energy (CBEH.PK) was the first to use video surveillance to prove fraud. Today's report on LPH combines these approaches and allows us to make our strongest conclusion of fraud to date. The choice investors are left to make is very simple: Do I hold onto LPH and wait for the rhetoric that its management and its fee collectors will spout or do I sell out prior to what we believe is the inevitable trading halt and delisting, trusting in Geoinvesting's due diligence and track record? The choice is yours and yours alone to make. We have made ours.
    I am a pissed off Old Dinosaur.

  3. #3
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    Default

    Quote Originally Posted by Bixbyte View Post
    Here is another huge Chinese Stock Fraud. They used surveillance cameras to expose this company.

    Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date


    Longwei Petroleum: The Most Brazen China-Based U.S. Listed RTO To Date
    Our exposure of the fraud perpetrated by Puda Coal (PUDA.OB) and Yuhe (YUII.PK) was ground breaking in that both managements actually admitted their deceit. Likewise, Alfred Little's report on China Integrated Energy (CBEH.PK) was the first to use video surveillance to prove fraud. Today's report on LPH combines these approaches and allows us to make our strongest conclusion of fraud to date. The choice investors are left to make is very simple: Do I hold onto LPH and wait for the rhetoric that its management and its fee collectors will spout or do I sell out prior to what we believe is the inevitable trading halt and delisting, trusting in Geoinvesting's due diligence and track record? The choice is yours and yours alone to make. We have made ours.
    LPH trades on the New York Stock Exchange.

    LPH: Summary for Longwei Petroleum Investment Ho- Yahoo! Finance

    Note in the USA the SEC never protects the individual investors.
    And our Politicians are allowed to trade with inside information.
    Our Stock investment system is broken.
    They are waiting for the rich to bail out of their stocks
    before the Chinese Stock Fraud news hits the Fan.
    I am a pissed off Old Dinosaur.

  4. #4
    Bixbyte's Avatar
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    Default American investors lost billions to fraudulent Chinese companies

    10News - Claim alleges American investors lost billions to fraudulent Chinese companies - News Story


    In an interview, Ross spoke with John Carnes, the man who made the video.

    "I filmed about four months and during that period I found that they produced, essentially nothing," Carnes said.

    Ross then said, "There was a bee-hive of activity on one day, the day American investors came for a tour."

    On that day, Carnes said, "for the first time in four months we see tanker trucks show up."

    Ross asked, "But once the investors were gone, so too were the tanker trucks?"

    "Just as dead as before," said Carnes.

    "So this was a complete con job?" Ross asked.

    "Exactly," said Carnes.
    I am a pissed off Old Dinosaur.

  5. #5
    Bixbyte's Avatar
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    Default Stealing Billions US investors Money and Chinese Gov not cooperating

    Chinese Authorities Flout US Fraud Policing Request
    Americans have lost billions of dollars in a string of fraudulent investments. Many are linked to China-based companies that have now been taken off of US stock markets. And according to a report by ABC News, Chinese regulators have not actively helped to stop this.

    In some cases, the Chinese firms were operating with the mindset of "take the money and run". They then disappear with investors' money.

    In most countries, that mentality does not turn into realty, because procedural regulations and government oversight are in place to prevent it. These rules do exist in China too, but they are not always enforced.

    The United States Securities and Exchange Commission, or SEC, have investigated a number of Chinese firms suspected of fraud. But, when they make high-level requests to their counterparts in China, cooperation isnít always forthcoming.

    Former SEC Chairwoman Susan Schapiro recently told ABC News that "We haven't yet achieved a level of cooperation that makes it possible for us to get access to Chinese companies the way we need."

    The overall losses associated with recent Chinese companies defrauding US investors are estimated at tens of billions of dollars. Thatís well over the sums lost in the Bernie Madoff ponzi scheme.

    Fraudulent practices include companies over exaggerating their financial numbers. US investment authorities and stock markets say they will be much more vigilant in the future, to prevent such these types of fraud.

    Shapiro said the SEC will do what it can to recover what has been lost by US investors, but conceded itís difficult without the cooperation of the foreign government.

    Chinese Authorities Flout US Fraud Policing Request --NTDTV.org
    I am a pissed off Old Dinosaur.

  6. #6
    govtstatistic's Avatar
    govtstatistic is offline coverup public corru
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    Default Opinion: Corruption as China's top priority

    Opinion: Corruption as China's top priority

    In several speeches since he took over the reins of the Communist Party last November, he has warned that corruption could lead to "the collapse of the Party and the downfall of the state."

    Xi sees corruption as a threat to the party's legitimacy.

    He exhorted fellow leaders to learn from the experience of other countries where "corruption has played a big role in conflicts that grew over lengthy periods, and ... led to popular discontent, social unrest and the overthrow of the political power."

    BofA director settlement over Merrill triples to $62.5 million - source
    The settlement resolved claims that Bank of America directors including former Chief Executive Kenneth Lewis misled shareholders about Merrill's losses, which peaked at $15.84 billion in the fourth quarter of 2008, and that Merrill was paying $3.6 billion of bonuses at the time.

    Payouts would go to the bank, not to shareholders. Directors of publicly-traded companies typically have liability insurance to cover a variety of payouts in derivative lawsuits.

    and no one goes to jail ? ? ?
    sounds like extortion to me
    what else does someone know
    "IT IS NOT WHAT YOU KNOW,
    IT IS WHO YOU KNOW"
    NO WAY TO RUN A COUNTRY
    I'm sure some of you will insist it is all my fault for strongarming the plumbers, but that is far from the truth.
    ACCOUNTABILITY WE CAN BELIEVE IN
    wanted for conspiring to cover up public corruption
    reward or prosecution inevitable

  7. #7
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    Default

    Latest Chinese Fraud announced today after the stock market closed. CAT takes a $580 Million hit:


    Caterpillar writes off most of China deal after fraud - Yahoo! News Canada


    Caterpillar Inc uncovered "deliberate, multi-year, coordinated accounting misconduct" at a subsidiary of a Chinese company it acquired last summer, leading it to write off most of the value of the deal and wiping out more than half its expected earnings for the fourth quarter of 2012.

    Shares of Caterpillar fell 1.5 percent in afterhours trading following news of the fraud, which was discovered after problems were found with the Chinese company's inventory.

    Caterpillar, the world's largest maker of tractors and excavators, said on Friday it would take a noncash goodwill impairment charge of $580 million, or 87 cents per share, in the quarter.

    Analysts had expected the company to report $1.70 per share when it reports its results on January 28, according to Thomson Reuters I/B/E/S.

    Caterpillar closed the purchase of ERA Mining Machinery Ltd and its subsidiary Siwei last June, paying HK$5.06 billion, or $653.4 million. ERA had been publicly traded in Hong Kong, doing business through Siwei, which is known for making equipment to support roofs in mines.

    A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.

    "It came as a complete surprise to us," the former board member said of the fraud, speaking on condition of anonymity because of the sensitivity of the situation. "It was presented to us as a pretty straightforward transaction. It's a shame. It should have been investigated further."

    The source said the driving force behind the deal was Ed Rapp, the former Caterpillar chief financial officer who now serves as a group president with responsibility for China, among other operations. The source said it was Rapp who presented the deal to the board and pushed for its completion.

    A Caterpillar spokesman declined to comment on Rapp's role in the deal. Rapp could not be immediately located for comment.

    'COMPLETELY UNACCEPTABLE'

    In a statement, Caterpillar said an ongoing investigation launched after the deal closed "determined several Siwei senior managers engaged in deliberate misconduct beginning several years prior to Caterpillar's acquisition of Siwei."

    According to a question-and-answer dialog Caterpillar included in its statement, the company found discrepancies in November between the inventory in Siwei's books and its actual physical inventory, triggering the probe.

    The company also said it had replaced several senior managers at Siwei, adding that their conduct was "offensive and completely unacceptable."

    Representatives for Siwei were not immediately available for comment early on Saturday morning in China. The company employs about 4,000 people in Zhengzhou.

    Representatives for Citigroup and law firm Freshfields Bruckhaus Deringer LLP, which served as financial and legal advisers to Caterpillar on the transaction, could not be immediately reached for comment.
    I am a pissed off Old Dinosaur.

 

 

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