December 13, 2017

DealBook: Couple Settle Fraud Case Involving Chinese Company

A husband-and-wife team that ran a Chinese maker of pollution control equipment agreed on Wednesday to pay $3.75 million to settle accusations that they had defrauded American investors.

The settlement with the Securities and Exchange Commission came more than two years after the company, Rino International, at one time worth about $500 million on the Nasdaq stock exchange, collapsed after a short seller accused the company of claiming revenue from nonexistent contracts. More than three years ago, the company raised $100 million from American investors in a stock offering.

The S.E.C. complaint said the company; its chief executive, Zou Dejun; and his wife, the chairwoman, Qiu Jianping; kept two sets of books. The Chinese books, which the S.E.C. said were correct, showed total revenue of $31 million from the first quarter of 2008 through the third quarter of 2010. The United States books, which were used in financial statements, showed revenue of $491 million, or about 15 times as much.

The 2009 public offering, which raised $100 million by selling stock and warrants to buy more shares, valued the shares at more than $30 each, and they traded for as much as $34.25 in Nasdaq trading. They were delisted by Nasdaq in 2010 and now trade over the counter for about a nickel.

As part of the settlement, Mr. Zou agreed to pay a penalty of $150,000, and Ms. Qui, $100,000. In addition, they agreed to pay $3.5 million to settle a related class-action suit.

The S.E.C. said that days after the 2009 public offering, the couple, who together controlled 65 percent of the company’s stock, used $3.5 million of the money raised to buy a home for their use in Orange County, Calif., then gave conflicting accounts to auditors regarding how the money was used. They eventually signed notes indicating that they had borrowed the money from the company.

The fraud fell apart in November 2010 after the Muddy Waters research Web site, which seeks out stocks to sell short and has exposed a number of Chinese frauds, released a report saying some of the company’s reported revenue came from fraudulent contracts with purchasers. The company did not deny the report, saying only that it would investigate, and the stock fell sharply.

A few days later the company’s auditors, Frazer Frost, reported that Mr. Zou had admitted that some of the contracts did not exist. The auditors withdrew their previous certifications of the financial results.

On Nov. 30, the company sent a letter to the S.E.C. saying it intended “to file restated audited financial statements” for 2008 and 2009 “as soon as practicable.” It has made no such filings since, and the company’s Web site is no longer available.

Article source: http://dealbook.nytimes.com/2013/05/15/chinese-couple-settle-s-e-c-fraud-case/?partner=rss&emc=rss

DealBook: Chinese Couple Agree to Pay $3.75 Million in Fraud Case

A husband-and-wife team that ran a Chinese maker of pollution control equipment agreed on Wednesday to pay $3.75 million to settle accusations that they had defrauded American investors.

The settlement with the Securities and Exchange Commission came more than two years after the company, Rino International, at one time worth about $500 million on the Nasdaq stock exchange, collapsed after a short seller accused the company of claiming revenue from nonexistent contracts. More than three years ago, the company raised $100 million from American investors in a stock offering.

The S.E.C. complaint said the company; its chief executive, Zou Dejun; and his wife, the chairwoman, Qiu Jianping; kept two sets of books. The Chinese books, which the S.E.C. said were correct, showed total revenue of $31 million from the first quarter of 2008 through the third quarter of 2010. The United States books, which were used in financial statements, showed revenue of $491 million, or about 15 times as much.

The 2009 public offering, which raised $100 million by selling stock and warrants to buy more shares, valued the shares at more than $30 each, and they traded for as much as $34.25 in Nasdaq trading. They were delisted by Nasdaq in 2010 and now trade over the counter for about a nickel.

As part of the settlement, Mr. Zou agreed to pay a penalty of $150,000, and Ms. Qui, $100,000. In addition, they agreed to pay $3.5 million to settle a related class-action suit.

The S.E.C. said that days after the 2009 public offering, the couple, who together controlled 65 percent of the company’s stock, used $3.5 million of the money raised to buy a home for their use in Orange County, Calif., then gave conflicting accounts to auditors regarding how the money was used. They eventually signed notes indicating that they had borrowed the money from the company.

The fraud fell apart in November 2010 after the Muddy Waters research Web site, which seeks out stocks to sell short and has exposed a number of Chinese frauds, released a report saying some of the company’s reported revenue came from fraudulent contracts with purchasers. The company did not deny the report, saying only that it would investigate, and the stock fell sharply.

A few days later the company’s auditors, Frazer Frost, reported that Mr. Zou had admitted that some of the contracts did not exist. The auditors withdrew their previous certifications of the financial results.

On Nov. 30, the company sent a letter to the S.E.C. saying it intended “to file restated audited financial statements” for 2008 and 2009 “as soon as practicable.” It has made no such filings since, and the company’s Web site is no longer available.

Article source: http://dealbook.nytimes.com/2013/05/15/chinese-couple-settle-s-e-c-fraud-case/?partner=rss&emc=rss

Stocks & Bonds: Daily Stock Market Activity

“This is going to destabilize a lot of those funding packages because they are all based on the AAA rating, and now you are going to have AA+ for France and Austria, and maybe down two notches for Italy,” said Alan Valdes, director of floor operations for DME Securities in New York.

The slide on Friday came as investors’ focus shifted back to the euro zone’s debt crisis.

After the markets closed in the United States, S. P. followed through with downgrades of France and Austria as well as seven other members of the 17-nation euro zone.

In recent days, the Standard Poor’s 500-stock index had reached five-month highs on the back of solid economic data in the United States. The tight relationship between American stocks and the euro has broken down in recent weeks, a sign investors have placed less emphasis on the euro zone’s woes.

The Friday sell-off shows Europe’s debt problems can still make American investors skittish, though indexes finished well higher than the day’s lows.

Banks led the decline, as the impending downgrades and lackluster earnings from JPMorgan Chase drove those shares lower. The S. P. financial index fell 0.8 percent, making it the worst performer of the 10 major sectors.

The Dow Jones industrial average dropped 48.96 points, or 0.39 percent, to close at 12,422.06. The S. P. 500 lost 6.41 points, or 0.49 percent, to 1,289.09. The Nasdaq composite index fell 14.03 points, or 0.51 percent, to 2,710.67.

For the week, the Dow rose 0.5 percent, while the S. P. 500 advanced 0.9 percent, and the Nasdaq gained 1.4 percent.

The Treasury’s 10-year note rose 16/32, to 100 5/32. The yield fell to 1.87 percent, from 1.93 percent late Thursday.

Investors will look to earnings next week for insight on how the euro zone’s debt woes may affect profits.

“If you get a weak recession or deep recession in Europe, it is going to hurt our companies and bring our market right back down,” Mr. Valdes said.

JPMorgan Chase slid 2.5 percent, to $35.92 after the bank said that its fourth-quarter profit fell as the European debt crisis weighed on trading and corporate deal-making. Jamie Dimon, its chief executive, expressed renewed concerns about the euro zone debt crisis.

The KBW index of bank stocks slipped 0.4 percent, after a streak of gains. The index was still up more than 10 percent for the year.

Bank of America shares fell 2.7 percent, to $6.61. Goldman Sachs lost 2.2 percent, to $98.96.

Volume was light with about 6.39 billion shares traded on the New York Stock Exchange, N.Y.S.E. Amex and Nasdaq, below the average of 6.68 billion.

The euro fell to a 17-month low on worries of the ratings cuts in the euro zone countries. The downgrade concerns overshadowed a successful sale of Italian debt.

“Things have not been improving in Europe. The timing is not perfect. It is sort of like kicking someone when they are down,” said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Mass.

World stocks as measured by the MSCI World Equity Index slipped 0.6 percent after earlier falling more than 1 percent.

The pan-European FTSEurofirst 300 index of top shares fell 0.1 percent, to close at 1,017.84 points.

Underpinned by a flood of European Central Bank three-year loans to banks, Italy’s three-year debt costs fell below 5 percent for the first time since September in an auction, spurring hopes it would make it through a stretch of looming refinancing.

Gold fell as the dollar surged against the euro.

Spot gold was down 1 percent, to $1,630.40 an ounce.

“The dollar seems to be the main go-to safe-haven play at the moment,” said David Meger, director of metals trading at futures brokerage Vision Financial Markets.

Oil prices also fell. Oil futures for March delivery dropped 43 cents, to $98.88 in New York.

Article source: http://feeds.nytimes.com/click.phdo?i=5df0a44b51da6b0fdd7c4a931c22fdce

Off the Shelf: Of Management and Mosquito Nets

But it’s in the realm of charity, and especially in international aid, where these methods are really succeeding beyond the confines of the corporation, as Alex Perry, chief African correspondent at Time magazine, demonstrates convincingly in “Lifeblood: How to Change the World One Dead Mosquito at a Time” (PublicAffairs, $25.99).

This little gem of a book heartens the reader by showing how eagerly an array of American billionaires, including Bill Gates and the New Jersey investor Ray Chambers (the book’s protagonist), are using concepts of efficient management to improve the rest of the world. “Lifeblood” nominally chronicles the global effort to eradicate malaria, but it is really about changes that Mr. Chambers, Mr. Gates and others are bringing to the chronically mismanaged system of foreign aid, especially in Africa.

Much has been written about how the Wall Street boom of the 1980s and the Internet mania of the 1990s made certain American investors extremely rich. Less has been written about how some of them, inspired in part by Mr. Gates, have used that wealth to improve conditions in the third world. Total private foreign aid from Americans, Mr. Perry writes, reached $37.3 billion in 2008, or “$10 billion more than the U.S. government sent overseas.”

The new philanthropists have realized, however, that money alone wasn’t helping. Much foreign aid can simply be stolen by corrupt third-world bureaucrats, — a chronic problem that the aid world, from the United Nations to nongovernmental organizations, seemed unable to resolve.

Enter Mr. Chambers. Having made his fortune pioneering leveraged buyouts in the 1980s — he and William E. Simon, the former Treasury secretary, completed an early whopper of a deal for Gibson Greetings — Mr. Chambers grew disenchanted with Wall Street and, during the ’90s, threw himself into efforts to improve the city of Newark. The city, while still struggling today, would probably be far worse off if not for his work.

He gave millions, it was true, but his genius was in building what Mr. Perry calls “the Newark triangle,” that is, uniting political leadership, business leadership and the media to confront the city’s ills. “Everything Ray went on to do in malaria,” an aide says, “was built on what he did in Newark.”

When Mr. Chambers, searching for a new challenge, discovered the antimalaria movement about five years ago, he found an effort in disarray. Few Americans appreciate how devastating malaria is to the third world. AIDS gets more press, but malaria — and, to a lesser extent, tuberculosis — have also killed huge numbers of Africans and crippled development efforts. As a result of DDT, mosquito-borne malaria was all but eliminated by the 1960s, but then complacency set in, and the disease came back stronger than ever.

Clearly, malaria is far easier to combat than, say, AIDS. Rates can be cut at least in half by something as simple as handing out pesticide-laden nets for people to place over their beds. In the late 1990s, Exxon Mobil, which has vast operations in Africa, became the first major company to announce widespread efforts to combat the disease, after finding that it was devastating the productivity of the company’s workers.

Malaria’s “defeatability” made the disease an attractive opponent for the Bush administration and scores of charities. Too many, in fact. When Mr. Chambers came along, he found them working at cross-purposes, throwing money (that all too often disappeared) at third-world governments.

Mr. Perry tells the story of how Mr. Chambers united the diverse efforts, brought in the White House to hold antimalaria conferences and then rallied the media. The most important media effort came from, of all sources, “American Idol,” whose “Idol Gives Back” specials did wonders to raise money and awareness.

“Ray approaches social issues like a C.E.O. approaches a company,” one aide tells Mr. Perry. “He breaks it down into supply chains, investment decisions, sales and marketing, accountancy.” Mr. Chambers was so effective that he was named a United Nations special envoy for malaria eradication. He set a goal: to eliminate malaria by 2015. Then he hired a small team of corporate and aid veterans to buy and distribute millions of mosquito nets to the seven African countries hit hardest by the disease.

It’s hard to say which was tougher: herding thousands of bureaucrats toward a single goal or getting all those nets into the hands of so many of the poor, especially in remote areas of Congo, Nigeria and what is now South Sudan. Though the campaign did not meet its every goal, it proved astoundingly successful. Nearly 300 million nets were distributed. Where the nets were used, malaria rates fell like a stone.

At 229 pages — including notes — “Lifeblood” is more like an oversized magazine article. But it has an important story to tell, and Mr. Perry tells it with precision and gusto. The book opens and closes with a visit to Apac, a Ugandan village at the heart of “the most malarious place on earth,” as Mr. Perry calls it. Before the Chambers-led drive, Apac was a ghost town, and the only residents on its streets, the book says, were three naked, staggering “zombies” suffering from malarial brain damage.

Afterward, well, let us just say the transformation is as dramatic as anything you will read in fiction.

Article source: http://feeds.nytimes.com/click.phdo?i=d9cd439e90ecdb1a53fb6b1ef83b3fd4