Timber company defrauded, misled investors: court

Timber company Sino-Forest and several of its top executives defrauded investors and misled investigators, the Ontario Securities Commission ruled in one of Canada’s largest corporate fraud cases.

In a nearly 300-page decision released Friday, the regulator said the company as well as former chief executive Allen Chan “engaged in deceitful or dishonest conduct related to Sino-Forest’s standing timber assets and revenue they knew constituted fraud.”

In addition, Albert Ip, Alfred Hung and George Ho were also found to have defrauded investors by overstating the now defunct company’s assets and revenue.

Allegations of fraud against Simon Yeung were dismissed, but the regulator ruled he misled staff during their investigation.

The investigation into SinoForest was triggered in 2011 when Muddy Waters Research’s Carson Block, a short-seller, called the company a Ponzi scheme.

Block cheered the decision Friday.

“We applaud the OSC for persisting through an undoubtedly complex investigation and hearing to see that justice is served,” Block wrote in an email.

“It’s important to remember that our report was initially quite controversial and met with a good deal of hostility at a time when the freedom of speech is under threat, this outcome is a reminder of the value of critical voices and freedom of expression.”

The former executives now face the possibility of being permanently banned from Canada’s capital markets, or fined up to $1 million for each failure to comply with Ontario securities law.

A separate hearing on sanctions and costs has not been set.