Sino-For­est de­frauded in­vestors, OSC rules


Tim­ber com­pany Sino-For­est and sev­eral of its top ex­ec­u­tives de­frauded in­vestors, mis­led in­ves­ti­ga­tors and “en­gaged in deceitful or dishonest con­duct,” 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 and for­mer CEO Allen Chan, as well as Al­bert Ip, Al­fred Hung and George Ho de­frauded in­vestors by over­stat­ing the now de­funct com­pany’s tim­ber as­sets and rev­enue.

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

The in­ves­ti­ga­tion into Sino-For­est was trig­gered in 2011 when short seller Car­son Block of Muddy Waters Re­search pub­lished a scathing re­port ac­cus­ing the com­pany of ex­ag­ger­at­ing its as­sets and fab­ri­cat­ing sales trans­ac­tions in what amounted to “a multi­bil­lion-dol­lar Ponzi scheme.”

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

“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.

Chan’s lawyer, Emily Cole, said her client was dis­ap­pointed and would be go­ing over the de­ci­sion.

Sino-For­est, which was es­tab­lished in 1994, was once the most valu­able forestry com­pany listed on the Toronto Stock Ex­change. Al­though it was based in On­tario, the com­pany con­ducted most of its busi­ness in China un­til it col­lapsed in 2012.

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