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SEC charges top execs in China and the US with accounting fraud
by Joseph Earnest March 12, 2014
Newscast Media WASHINGTON— The Securities and Exchange Commission has charged corporate executives with conducting a massive accounting fraud in which they repeatedly reported fake revenues in order to meet financial targets and prop up the stock price.
The SEC alleges that four executives in China orchestrated the scheme at AgFeed Industries Inc., which was based in China and publicly traded in the U.S. before merging with a U.S. company in September 2010 and spreading its operations between the two countries. With the bulk of its hog production operations in China, the executives used a variety of methods to inflate revenue from 2008 to mid-2011, including fake invoices for the sale of feed and purported sales of hogs that didn’t really exist. They later tried to cover up their actions by saying the fake hogs died. Because fatter hogs bring higher market prices, they also inflated the weights of actual hogs sold and correspondingly inflated the sales revenues for those hogs.
The SEC also charged a company executive and a company director in the U.S. with scheming to avoid or delay disclosure of the accounting fraud once they learned about it in 2011 while engaged in efforts to raise capital for expansion and acquisitions.
"Officers and directors have an obligation to exercise diligence and ensure that their financial reporting is accurate," said Julie Lutz, director of the SEC’s Denver Regional Office. "Despite learning about false and misleading financial information, AgFeed executives failed to come clean with investors or law enforcement."
Click here to read or download entire SEC complaint against fraudsters. (pop-up)
The SEC’s investigation was conducted by Michael Cates, Rachael Clarke, Donna Walker, and Ian Karpel of the Denver Regional Office. The SEC’s litigation will be led by Nancy Gegenheimer and Gregory Kasper. Add Comments>>
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