Wed, May 16, 2012
Business > Economy

Energy company charged with fraud by US regulator

2012-05-16 00:55:02 GMT2012-05-16 08:55:02(Beijing Time)  Global Times

The US securities regulator charged a Chinese energy company and its chairman for fraud, which could somewhat impact investors' confidence in Chinese concept stocks, analysts told the Global Times yesterday.

The US Securities and Exchange Commission (SEC) late Monday (local time) charged Ji Qin'an, chairman and former CEO of the NASDAQ-listed China Natural Gas Inc, with secretly loaning company funds to benefit his son and nephew while failing to disclose the nature of the loans.

The SEC said in a statement that Ji coordinated two short-term loans totaling more than $14 million in January 2010, of which one went to a property company owned by Ji's son and nephew, and the other was injected into a business partner of the property company.

Ji, who relinquished the position of CEO in October 2011, claimed that the loans were made to third parties, and "lied" about the true borrower to the company's board, investors, and auditors during the company's internal investigation, said the SEC.

"Ji betrayed China Natural Gas investors by misusing company funds to benefit his family and repeatedly lying about it," said John M. McCoy III, associate director at the SEC's Los Angeles Regional Office.

In addition, the SEC said the company, based in Xi'an, Northwest China's Shaanxi Province, did not properly report a $19.6 million acquisition made during the fourth quarter of 2008.

The company's spokeswoman surnamed Xue refused to comment on the allegation when reached by the Global Times.

This is the latest in a series of cases in which the SEC has disclosed irregularities and problems at a US-listed Chinese company.

On May 9, the commission filed an administrative proceeding against Shanghai-based Deloitte Touche Tohmatsu CPA for refusing to provide audit work papers related to a Chinese company under investigation for potential accounting fraud.

"But I think the charge against China Natural Gas, which is a small company in terms of revenue, will only have a marginal impact on investor confidence in Chinese concept stocks," Zhong Rixin, a US stock analyst with imeigu.com, a Beijing-based financial information provider, told the Global Times yesterday.

Zhong said the revelations of accounting scandals had forced some Chinese companies that had problems to delist last year.

"As to those continuing to trade in the US, many Chinese companies' shares are rebounding, such as Baidu, which demonstrates that investor confidence is recovering," said Zhong.

Last year, shares of many US-listed Chinese companies tumbled after short-sellers attacked some companies over fraud.

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