Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of forest plantation trees, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products.
Sino-Forest receives enforcement notices from OSC
Beleaguered Chinese forestry company Sino-Forest Corp (TSE:TRE) said on Monday that it has received enforcement notices from the Ontario Securities Commission (OSC).
The company, which was accused of misrepresenting its assets in China and of widespread fraud, said it received the enforcement notice from staff of the OSC on Thursday. Notices were also sent to company founder and former CEO Allen Chan, as well as to former top officials Albert Ip, Alfred Hung, George Ho and Simon Yeung, and the company’s chief financial officer, David Horsley.
Ip resigned from Sino-Forest at the end of March, but agreed to serve as a consultant on a part-time basis.
Sino-Forest said these notices are typically issued by staff of the commission at or near the end of an investigation and give recipients a chance to respond before a decision is taken by the OSC to commence formal proceedings.
"The Enforcement Notice received by Sino-Forest...contains allegations of a serious nature consistent with the recitals to the temporary cease trade order...[and] raises conduct issues in relation to the company and in relation to the individuals who also received Enforcement Notices," Sino-Forest said in a statement.
"The company is considering what steps it will take, including in relation to company personnel, as a result of the Enforcement Notice."
The Chinese timber company is fending off allegations of fraud which emerged in June 2011 from independent research firm and short seller Muddy Waters. Shares tanked more than 70 percent before trading was suspended by the OSC in August, reducing the company’s market value by $3.3 billion.
In relation to the cease trade order made in August, the OSC said at the time that Sino-Forest, through its subsidiaries, "appears to have engaged in significant non-arm's length transactions which may have been contrary to Ontario securities laws and the public interest", and that the company and "certain of its officers and directors appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings".
The company once had a market capitalization of over $6 billion, making it Canada's most valuable forestry company listed on the Toronto Stock Exchange.
On Thursday, Sino-Forest announced that Ernst & Young LLP had resigned as its independent auditors over the Chinese company's failure to provide financial statements and to address outstanding issues in relation to Sino-Forest's 2011 results.
TMX Group (TSE:X) also said Monday that it has decided to delist Sino-Forest's shares from the Toronto Stock Exchange at the close of market on May 9, 2012, for failure to meet the continued listing requirements of the exchange.
At the end of March, the timber company filed under the Companies' Creditors Arrangement Act, and put itself up for sale. Its Monitor for the proceedings is FTI Consulting Canada.