Tag Archives: accounting fraud

A Sign of the Times, Perhaps, Buried in the WSJ?

30 Jun

Buried at the bottom of an article in this past Tuesday’s WSJ about due diligence firms sprouting up to investigate Chinese companies for hedge funds and other Western investors was a little tidbit it seems everyone either didn’t read, or felt comfortable ignoring regardless. The WSJ – investigating Deloitte’s resignation as Longtop Financial’s auditor – seems to have encountered a not-unsubstantial speed bump which I’m afraid may be indicative of far larger and more troubling problems:

A spokeswoman for Deloitte’s global network referred questions to its Chinese affiliate. Efforts to reach the Chinese firm were unsuccessful.

There are two largely distinct possibilities here: First, the WSJ reporters are not very good/diligent investigators/researchers, or second, Deloitte’s Chinese JV is in more trouble than we thought, in the wake of its involvement in frauds like CCME and Longtop.  Ordinarily, I’d simply put a call into Deloitte’s offices in Shanghai myself (it took me about 90 seconds to find a phone number), but its now ~3am local time, and I have no desire to leave a voicemail and wait for a callback that very well may never come.  Giving the reporters at the WSJ the benefit of the doubt that they – having been given the contact information for Deloitte’s China office by Deloitte global – would be able to figure out how to get at least a “no comment” out of someone there, leads me to believe there may be something amiss.*  Seeing as I have no other information upon which to base this concern, I’m not putting too much credence in it, but it is something upon which I’ll be keeping an eye going forward.  Nothing really surprises me in China anymore.

 

*Of course it is entirely possible “efforts to reach the Chinese firm were unsuccessful” means the reporters gave up, or otherwise mangled the effort.

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Hold The Presses: China MediaExpress Holdings Gets Coveted AAA Rating!!!!!

21 Apr

Who cares if a firm’s auditor resigns when said firm is awarded a magic AAA credit rating!!?!?!  All you CCME longs who’ve been waiting for some news, any news, let alone good news may finally have your day (h/t @jcom67):

Who is Beijing ZhongKeJingXie Credit Assessment Center Co., Ltd., you ask?  I have absolutely no idea.  All I do know is that (via google translate), their website looks semi-shady, and on its contact page, includes an email address not @zxxp.net (matching their website) but “yongfeng82000@126.com”. I’m not sure how things work in China, but in the U.S., Europe, and most of the rest of the developed World, this doesn’t exactly support the credibility of said “AAA” rating.

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The China MediaExpress Holdings Saga Continues

21 Mar

Bronte Capital (h/t Dutch Book) posted the lawsuit against CCME (and the CEO/CFO) by Hank Greenberg’s CV Starr (& affiliate) funds.  Effectively, Starr admits the extent of the diligence behind their 1.5 million+ share (with warrants/etc) investment in CCME was based solely upon information provided by management, either directly and/or through regulatory filings.  All-in, if memory serves correctly, Starr’s investment represented >10% of the company, valuing its holdings therein at over $60 million at the peak.  One would think it’d be worth spending a few thousand dollars up-front to hire a 3rd party to conduct due diligence (see Roddy Boyd’s great investigative piece for an example) that could, or in this case likely would, have saved Starr tens of millions of dollars, no?

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China MediaExpress Holdings: Excuse My Continued Lack of Shock

17 Mar

When you – in this case, CV Starr and affiliated funds – buy a large chunk of a Chinese Reverse Merger company, like, oh, I dunno, China MediaExpress Holdings, and you get a board seat, perhaps you should insist your “man on the ground” is on the Audit, not Compensation committee.  And perhaps you should do a little more independent due diligence, instead of meeting management and reviewing documents they supply.    Just sayin…

Otherwise, don’t be surprised when your Auditor and CFO resign, and your board member steps down citing “in particular, irregularities in the bank account balances of CCME’s PRC subsidiaries.

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