March 2, 2021

Sino-Forest Corp. Says Its Chief Has Resigned

OTTAWA — The Sino-Forest Corporation, a Chinese company that is the focus of a Canadian securities investigation, said on Sunday that its chairman and chief executive, Allen T.Y. Chan, had resigned.

The announcement came after the Ontario Securities Commission halted trading in the company, which is listed on the Toronto Stock Exchange, on Friday after finding that Sino-Forest might have inflated its revenue and exaggerated the value its timberlands.

In brief statement on Sunday, Sino-Forest said three other employees had been put on “administrative leave” and that the duties of a fourth employee had been restricted.

The securities commission, which is Canada’s top market regulator, initially on Friday ordered Mr. Chan and four other Sino-Forest employees to resign. It withdrew that portion of its order by lunchtime, however, after concluding that such a step could not be taken without a hearing.

Through a representative, Sino-Forest said that Mr. Chan had submitted his resignation to the board “within the past week” and that the four employees were the people named earlier by the securities commission.

The value of Sino-Forest’s shares fell significantly in June after Muddy Waters Research issued an extensive report by a short-seller that called the forestry company an “established institutional fraud.”

In Sunday’s announcement, Sino-Forest said that Mr. Chan had also stepped down as a director but added that he would assume the title of founding chairman emeritus. Mr. Chan will continue to assist a special committee of directors with their investigation into Muddy Water’s accusations, the statement said.

As the company has previously suggested, the special committee’s inquiries have not been going smoothly over the last 10 weeks.

“The company’s business is complex, the scope of the review is significant and there are enormous amounts of data that have been marshaled and are under review,” the announcement said. “In these circumstances, the independent committee has not yet reached any conclusions.”

Earlier this summer, Sino-Forest dismissed the Muddy Waters findings as well as a lengthy report in The Globe and Mail newspaper that reached similar conclusions, if in a less inflammatory manner. On Sunday, Sino-Forest said the accusations by the securities regulator, “while unproven, are of a serious nature.”

Mr. Chan has been succeeded by William E. Ardell, a director who is also leading the independent committee.

Mr. Ardell was formerly the president and chief executive of Southam, once Canada’s largest newspaper publisher. After a holding company controlled by Conrad M. Black completed a gradual takeover of Southam in 1996, Mr. Black fired Mr. Ardell and assumed operating control of the newspaper chain. Southam has since changed hands two more times and no longer exists in its previous corporate form.

Sino-Forest is one of several Chinese companies that came to be listed in Toronto by taking over a dormant Canadian company trading on the exchange.

Such reverse merger companies have become an increasing subject of concern for regulators in both Canada and the United States.

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